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Dreyfus Variable Investment Fund

Filed: 9 Aug 21, 3:14pm

 

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 number811-05125
  
 BNY Mellon Variable Investment Fund 
 (Exact name of Registrant as specified in charter) 
   
 

 

c/o BNY Mellon Investment Adviser, Inc.

240 Greenwich Street

New York, New York 10286

 
 (Address of principal executive offices)        (Zip code) 
   
 

Deirdre Cunnane, Esq.

240 Greenwich Street

New York, New York 10286

 
 (Name and address of agent for service) 
 
Registrant's telephone number, including area code:  (212) 922-6400
  

Date of fiscal year end:

 

12/31 
Date of reporting period:

6/30/2021

 

 
       

 

 

 
 

 

FORM N-CSR

Item 1.Reports to Stockholders.

 

BNY Mellon Variable Investment Fund, Appreciation Portfolio

 

SEMIANNUAL REPORT

June 30, 2021

 
 

Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes.

 

The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds.

 

Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value

 

Contents

THE FUND

  

Discussion of Fund Performance

2

Understanding Your Fund’s Expenses

5

Comparing Your Fund’s Expenses
With Those of Other Funds

5

Statement of Investments

6

Statement of Investments
in Affiliated Issuers

9

Statement of Forward Foreign
Currency Exchange Contracts

10

Statement of Assets and Liabilities

11

Statement of Operations

12

Statement of Changes in Net Assets

13

Financial Highlights

14

Notes to Financial Statements

16

Information About the Renewal of
the Fund’s Investment Advisory and
Sub-Investment Advisory Agreements

27

Liquidity Risk Management Program

31

FOR MORE INFORMATION

 

Back Cover

 

DISCUSSION OF FUND PERFORMANCE (Unaudited)

For the period from January 1, 2021 through June 30, 2021, as provided by portfolio managers Alan Christensen, Catherine Crain, Gentry Lee, Christopher Sarofim, Charles Sheedy and Fayez Sarofim of Fayez Sarofim & Co., Sub-Investment Adviser

Market and Fund Performance Overview

For the six-month period ended June 30, 2021, BNY Mellon Variable Investment Fund, Appreciation Portfolio’s Initial shares achieved a total return of 14.69%, and its Service shares achieved a total return of 14.54%.1 In comparison, the fund’s benchmark, the S&P 500® Index (the “Index”), produced a total return of 15.25% for the same period.2

The theme of economic recovery propelled the U.S. market in the first half of 2021. The fund underperformed its benchmark largely due to inopportune stock selection in the financials and industrials sectors, as well as unfavorable asset allocation and stock selection in the energy sector.

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

Economic Recovery Drove the Market

Economic recovery, accommodative government policies, and continued vaccination progress in the US propelled the market ahead by 15.25% in the first half of 2021. The strong performance is attributable to stimulus policies and vaccination progress, which worked in tandem to support a rapid recovery in spending and business activity. The $1.9 trillion American Rescue Plan, along with previous stimulus bills, helped consumers and businesses with additional stimulus that led to positive spending and retail sales data. Vaccination progress reduced infection rates, allowing states to accelerate the reopening. The Index constituents reported better-than-expected earnings results for fourth quarter of 2020 and first quarter of 2021, echoing these themes. The American consumer was back, with pent-up demand to spend on everything from gasoline to new homes.

Volatility was prevalent in the market, driven by factors that could potentially derail the recovery, including the discovery of new virus variants and fear of rising inflation. New

2

 

variants were discovered in countries around the world, prompting shutdowns and travel restrictions, which worried investors.

The return of the consumers with pent-up demand and global supply-chain disruptions created the perfect storm of inflation. Gasoline, automotive and home prices are rising, driven by strong demand from reopening and supply chain disruptions, leading to investor concerns about inflation and the possibility that the Federal Reserve (the “Fed”) will have to raise interest rates to temper it. The subsequent higher interest rates could hinder the economic recovery because it would slow consumer spending and business investment. Fed officials have reiterated their belief that inflation is transitory in nature and signaled no plans to raise interest rates or start tapering, but markets remained sensitive to data showing the prices of essentials climbing. Toward the end of the period, investors became more comfortable with the transitory inflation message as policymakers promised to address supply imbalances.

Value outperformed growth in the first quarter, but growth outperformed value in the second quarter of the year, carrying the Index to record highs at the end of the period. With oil above $70 per barrel, the energy sector rebounded, with increased travel demand, to lead all sectors, while utilities and consumer staples were relative laggards.

Stock Selection and Asset Allocation Hindered Performance

The fund slightly trailed the Index by 10 basis points in the first half of 2021, driven by a negative stock selection effect. Disadvantageous stock selection within the financials sector negatively impacted portfolio results in the period as the fund’s insurance holdings lagged the major banks and the broader sector. Inopportune stock selection combined with an underweight allocation to the top-performing energy sector contributed negatively to performance for the period. Within the industrials sector, the negative impact of inopportune stock selection held back results for the period. The top detractors from relative performance included Verisk Analytics, Masimo, Marriott International, Coca-Cola, and Walt Disney.

Conversely, strong stock selection in the communication services sector contributed positively to results, driven by holdings Facebook and Alphabet, which reported better-than-expected earnings in the period. Adept stock selection within the information technology sector was a positive contributor to results as holdings in the hardware, software and semiconductor industries delivered strong results in the period. Within the consumer staples sector, performance was driven by strategic holdings in the personal products and tobacco industries. The fund’s underweight in the utilities sector added value to the portfolio for the period. The top contributors to relative performance included Alphabet, Microsoft, Facebook, ASML Holding and Texas Instruments.

Focused on Quality Businesses over the Long Term

As we enter a period of economic recovery and growth, the fund’s investment approach remains focused on the long term with an emphasis on companies with resilient cash flows, solid balance sheets and geographically diverse revenue streams. Those characteristics may offer protection against uncertainty associated with additional waves of infections, while positioning us to benefit from a sustained period of economic recovery and growth. We continue to monitor important issues, including inflation, fiscal policy and regulatory

3

 

DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)

developments. While the economy is strengthening due to the reopening, there is still friction in the economy with supply-chain issues, supply-demand imbalances and shortages in certain areas. Those issues are holding back certain areas of the economy despite reopening. The portfolio’s simultaneous focus on quality businesses operating in attractive, growing industries and led by adept management teams position the fund to benefit from a period of sustained economic growth.

July 15, 2021

1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. 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 BNY Mellon Variable Investment Fund, Appreciation Portfolio made available through insurance products may be similar to those of other funds managed by BNY Mellon Investment Adviser, Inc. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other BNY Mellon fund.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.

The fund may, but is not required to, use derivative instruments. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets.

Investing in foreign denominated and/or domiciled securities involves special risks, including changes in currency exchange rates, political, economic, and social instability, limited company information, differing auditing and legal standards, and less market liquidity. These risks generally are greater with emerging market countries.

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 BNY Mellon Variable Investment Fund, Appreciation Portfolio from January 1, 2021 to June 30, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

     

Expenses and Value of a $1,000 Investment

 

Assume actual returns for the six months ended June 30, 2021

 

 

 

 

 

 

 

 

Initial Shares

Service Shares

 

Expenses paid per $1,000

$4.31

$5.64

 

Ending value (after expenses)

$1,146.90

$1,145.40

 

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, 2021

 

 

 

 

 

 

 

 

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, 2021 (Unaudited)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 99.8%

     

Banks - 2.3%

     

JPMorgan Chase & Co.

   

70,725

 

 11,000,567

 

Capital Goods - 1.1%

     

Otis Worldwide

   

22,150

 

1,811,206

 

Raytheon Technologies

   

38,200

 

3,258,842

 
    

5,070,048

 

Commercial & Professional Services - 1.9%

     

Clarivate

   

60,000

a 

1,651,800

 

IHS Markit

   

32,350

 

3,644,551

 

Verisk Analytics

   

21,265

 

3,715,421

 
    

9,011,772

 

Consumer Durables & Apparel - 4.3%

     

Hermes International

   

1,877

 

2,734,214

 

LVMH

   

13,350

 

10,468,222

 

NIKE, Cl. B

   

47,090

 

7,274,934

 
    

20,477,370

 

Consumer Services - 2.8%

     

Marriott International, Cl. A

   

41,925

a 

5,723,601

 

McDonald's

   

31,925

 

7,374,356

 
    

13,097,957

 

Diversified Financials - 6.7%

     

BlackRock

   

14,850

 

12,993,305

 

Intercontinental Exchange

   

71,450

 

8,481,115

 

S&P Global

   

24,900

 

10,220,205

 
    

31,694,625

 

Energy - 1.4%

     

Chevron

   

65,125

 

 6,821,193

 

Food, Beverage & Tobacco - 7.4%

     

Altria Group

   

81,300

 

3,876,384

 

Nestle, ADR

   

56,250

 

7,016,625

 

PepsiCo

   

45,025

 

6,671,354

 

Philip Morris International

   

94,050

 

9,321,296

 

The Coca-Cola Company

   

150,875

 

8,163,846

 
    

35,049,505

 

Health Care Equipment & Services - 6.7%

     

Abbott Laboratories

   

82,650

 

9,581,615

 

Intuitive Surgical

   

7,375

a 

6,782,345

 

Masimo

   

13,375

a 

3,242,769

 

UnitedHealth Group

   

29,950

 

11,993,178

 
    

31,599,907

 

Household & Personal Products - 3.5%

     

The Estee Lauder Companies, Cl. A

   

51,925

 

 16,516,304

 

6

 
        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 99.8% (continued)

     

Insurance - 1.9%

     

The Progressive

   

89,875

 

 8,826,624

 

Materials - 3.9%

     

Air Products & Chemicals

   

40,675

 

11,701,384

 

The Sherwin-Williams Company

   

23,925

 

6,518,366

 
    

18,219,750

 

Media & Entertainment - 13.7%

     

Alphabet, Cl. C

   

10,144

a 

25,424,110

 

Comcast, Cl. A

   

174,465

 

9,947,994

 

Facebook, Cl. A

   

78,835

a 

27,411,718

 

The Walt Disney Company

   

12,605

a 

2,215,581

 
    

64,999,403

 

Pharmaceuticals Biotechnology & Life Sciences - 2.7%

     

Novo Nordisk, ADR

   

102,400

 

8,578,048

 

Roche Holding, ADR

   

91,075

 

4,279,614

 
    

12,857,662

 

Retailing - 5.8%

     

Amazon.com

   

7,900

a 

 27,177,264

 

Semiconductors & Semiconductor Equipment - 6.0%

     

ASML Holding

   

17,000

 

11,744,280

 

Texas Instruments

   

87,225

 

16,773,367

 
    

28,517,647

 

Software & Services - 18.4%

     

Adobe

   

14,650

a 

8,579,626

 

Automatic Data Processing

   

13,665

 

2,714,142

 

Broadridge Financial Solutions

   

15,575

 

2,515,830

 

Gartner

   

6,800

a 

1,646,960

 

Intuit

   

16,300

 

7,989,771

 

Mastercard, Cl. A

   

13,850

 

5,056,497

 

Microsoft

   

144,285

 

39,086,806

 

ServiceNow

   

3,000

a 

1,648,650

 

Visa, Cl. A

   

76,425

b 

17,869,693

 
    

87,107,975

 

Technology Hardware & Equipment - 6.3%

     

Apple

   

216,325

 

 29,627,872

 

Transportation - 3.0%

     

Canadian Pacific Railway

   

81,200

 

6,245,092

 

Union Pacific

   

36,925

 

8,120,915

 
    

14,366,007

 

Total Common Stocks (cost $148,830,450)

   

472,039,452

 

7

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

        
 

Description

 

1-Day
Yield (%)

 

Shares

 

Value ($)

 

Investment Companies - .6%

     

Registered Investment Companies - .6%

     

Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares
(cost $2,792,799)

 

0.05

 

2,792,799

c 

 2,792,799

 

Total Investments (cost $151,623,249)

 

100.4%

 

474,832,251

 

Liabilities, Less Cash and Receivables

 

(.4%)

 

(1,783,817)

 

Net Assets

 

100.0%

 

473,048,434

 

ADR—American Depository Receipt

a Non-income producing security.

b Security, or portion thereof, on loan. At June 30, 2021, the value of the fund’s securities on loan was $17,690,821 and the value of the collateral was $18,209,961, consisting of U.S. Government & Agency securities.

c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.

  

Portfolio Summary (Unaudited)

Value (%)

Information Technology

30.7

Communication Services

13.7

Consumer Discretionary

12.9

Consumer Staples

10.9

Financials

10.9

Health Care

9.4

Industrials

6.0

Materials

3.9

Energy

1.4

Investment Companies

.6

 

100.4

 Based on net assets.

See notes to financial statements.

8

 

STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)

       

Investment Companies

Value
12/31/20($)

Purchases($)

Sales ($)

Value
6/30/21($)

Net
Assets(%)

Dividends/
Distributions($)

Registered Investment Companies;

    

Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares

1,537,249

21,133,722

(19,878,172)

2,792,799

.6

359

Investment of Cash Collateral for
Securities Loaned;

  

Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares

-

7,913,825

(7,913,825)

-

-

11,937††

Total

1,537,249

29,047,547

(27,791,997)

2,792,799

.6

12,296

 Inclusive reinvested dividends/distributions.

††  Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

See notes to financial statements.

9

 

STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS June 30, 2021 (Unaudited)

      

Counterparty/ Purchased
Currency

Purchased Currency
Amounts

Currency
Sold

Sold
Currency
Amounts

Settlement Date

Unrealized Appreciation ($)

Morgan Stanley

United States Dollar

81,045

Euro

68,155

7/1/2021

228

Gross Unrealized Appreciation

  

228

See notes to financial statements.

10

 

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2021 (Unaudited)

       

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Statement of Investments
(including securities on loan, valued at $17,690,821)—Note 1(c):

 

 

 

Unaffiliated issuers

148,830,450

 

472,039,452

 

Affiliated issuers

 

2,792,799

 

2,792,799

 

Cash denominated in foreign currency

 

 

80,805

 

80,815

 

Receivable for shares of Beneficial Interest subscribed

 

714,408

 

Receivable for investment securities sold

 

609,961

 

Dividends and securities lending income receivable

 

368,509

 

Tax reclaim receivable—Note 1(b)

 

108,128

 

Unrealized appreciation on forward foreign
currency exchange contracts—Note 4

 

228

 

Prepaid expenses

 

 

 

 

3,187

 

 

 

 

 

 

476,717,487

 

Liabilities ($):

 

 

 

 

Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b)

 

245,252

 

Due to Fayez Sarofim & Co.

 

 

 

 

83,362

 

Payable for investment securities purchased

 

3,042,031

 

Payable for shares of Beneficial Interest redeemed

 

242,865

 

Trustees’ fees and expenses payable

 

1,471

 

Other accrued expenses

 

 

 

 

54,072

 

 

 

 

 

 

3,669,053

 

Net Assets ($)

 

 

473,048,434

 

Composition of Net Assets ($):

 

 

 

 

Paid-in capital

 

 

 

 

125,650,830

 

Total distributable earnings (loss)

 

 

 

 

347,397,604

 

Net Assets ($)

 

 

473,048,434

 

    

Net Asset Value Per Share

Initial Shares

Service Shares

 

Net Assets ($)

329,043,031

144,005,403

 

Shares Outstanding

6,781,399

3,009,240

 

Net Asset Value Per Share ($)

48.52

47.85

 

 

 

 

 

See notes to financial statements.

 

 

 

11

 

STATEMENT OF OPERATIONS

Six Months Ended June 30, 2021 (Unaudited)

       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Income:

 

 

 

 

Cash dividends (net of $94,136 foreign taxes withheld at source):

 

Unaffiliated issuers

 

 

3,340,983

 

Affiliated issuers

 

 

359

 

Income from securities lending—Note 1(c)

 

 

11,937

 

Total Income

 

 

3,353,279

 

Expenses:

 

 

 

 

Investment advisory fee—Note 3(a)

 

 

1,181,640

 

Sub-investment advisory fee—Note 3(a)

 

 

482,642

 

Distribution fees—Note 3(b)

 

 

171,349

 

Professional fees

 

 

57,858

 

Prospectus and shareholders’ reports

 

 

20,659

 

Trustees’ fees and expenses—Note 3(c)

 

 

12,276

 

Custodian fees—Note 3(b)

 

 

10,657

 

Chief Compliance Officer fees—Note 3(b)

 

 

7,862

 

Loan commitment fees—Note 2

 

 

6,302

 

Shareholder servicing costs—Note 3(b)

 

 

1,263

 

Miscellaneous

 

 

10,980

 

Total Expenses

 

 

1,963,488

 

Investment Income—Net

 

 

1,389,791

 

Realized and Unrealized Gain (Loss) on Investments—Note 4 ($):

 

 

Net realized gain (loss) on investments and foreign currency transactions

23,852,264

 

Net realized gain (loss) on forward foreign currency exchange contracts

(889)

 

Net Realized Gain (Loss)

 

 

23,851,375

 

Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions

36,446,388

 

Net change in unrealized appreciation (depreciation) on
forward foreign currency exchange contracts

228

 

Net Change in Unrealized Appreciation (Depreciation)

 

 

36,446,616

 

Net Realized and Unrealized Gain (Loss) on Investments

 

 

60,297,991

 

Net Increase in Net Assets Resulting from Operations

 

61,687,782

 

 

 

 

 

 

 

 

See notes to financial statements.

     

12

 

STATEMENT OF CHANGES IN NET ASSETS

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30, 2021 (Unaudited)

 

Year Ended
December 31, 2020

 

Operations ($):

 

 

 

 

 

 

 

 

Investment income—net

 

 

1,389,791

 

 

 

2,840,348

 

Net realized gain (loss) on investments

 

23,851,375

 

 

 

44,313,337

 

Net change in unrealized appreciation
(depreciation) on investments

 

36,446,616

 

 

 

39,126,298

 

Net Increase (Decrease) in Net Assets
Resulting from Operations

61,687,782

 

 

 

86,279,983

 

Distributions ($):

 

Distributions to shareholders:

 

 

 

 

 

 

 

 

Initial Shares

 

 

(31,484,801)

 

 

 

(24,163,384)

 

Service Shares

 

 

(14,100,431)

 

 

 

(10,803,682)

 

Total Distributions

 

 

(45,585,232)

 

 

 

(34,967,066)

 

Beneficial Interest Transactions ($):

 

Net proceeds from shares sold:

 

 

 

 

 

 

 

 

Initial Shares

 

 

5,338,945

 

 

 

8,597,229

 

Service Shares

 

 

3,756,691

 

 

 

15,542,813

 

Distributions reinvested:

 

 

 

 

 

 

 

 

Initial Shares

 

 

31,484,801

 

 

 

24,163,384

 

Service Shares

 

 

14,100,431

 

 

 

10,803,682

 

Cost of shares redeemed:

 

 

 

 

 

 

 

 

Initial Shares

 

 

(17,578,856)

 

 

 

(42,643,713)

 

Service Shares

 

 

(14,731,657)

 

 

 

(35,436,301)

 

Increase (Decrease) in Net Assets
from Beneficial Interest Transactions

22,370,355

 

 

 

(18,972,906)

 

Total Increase (Decrease) in Net Assets

38,472,905

 

 

 

32,340,011

 

Net Assets ($):

 

Beginning of Period

 

 

434,575,529

 

 

 

402,235,518

 

End of Period

 

 

473,048,434

 

 

 

434,575,529

 

Capital Share Transactions (Shares):

 

Initial Shares

 

 

 

 

 

 

 

 

Shares sold

 

 

113,654

 

 

 

212,187

 

Shares issued for distributions reinvested

 

 

715,424

 

 

 

746,129

 

Shares redeemed

 

 

(373,038)

 

 

 

(1,036,750)

 

Net Increase (Decrease) in Shares Outstanding

456,040

 

 

 

(78,434)

 

Service Shares

 

 

 

 

 

 

 

 

Shares sold

 

 

80,055

 

 

 

412,412

 

Shares issued for distributions reinvested

 

 

325,031

 

 

 

339,325

 

Shares redeemed

 

 

(316,669)

 

 

 

(867,172)

 

Net Increase (Decrease) in Shares Outstanding

88,417

 

 

 

(115,435)

 

 

 

 

 

 

 

 

 

 

 

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. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. 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, 2021

 

Year Ended December 31,

(Unaudited)

 

2020

2019

2018

2017

2016

Per Share Data ($):

      

Net asset value, beginning of period

47.18

42.76

35.84

44.71

41.01

45.23

Investment Operations:

      

Investment income—neta

.16

.33

.43

.53

.56

.68

Net realized and unrealized
gain (loss) on investments

6.24

7.99

11.58

(3.27)

9.55

2.48

Total from Investment Operations

6.40

8.32

12.01

(2.74)

10.11

3.16

Distributions:

      

Dividends from
investment income—net

(.16)

(.33)

(.46)

(.52)

(.57)

(.69)

Dividends from net realized
gain on investments

(4.90)

(3.57)

(4.63)

(5.61)

(5.84)

(6.69)

Total Distributions

(5.06)

(3.90)

(5.09)

(6.13)

(6.41)

(7.38)

Net asset value, end of period

48.52

47.18

42.76

35.84

44.71

41.01

Total Return (%)

14.69b

23.69

36.10

(6.86)

27.33

7.91

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

.81c

.81

.81

.81

.81

.82

Ratio of net investment income
to average net assets

.70c

.80

1.10

1.30

1.35

1.64

Portfolio Turnover Rate

2.67b

8.82

6.71

6.50

3.97

4.19

Net Assets,
end of period ($ x 1,000)

329,043

298,456

273,832

225,631

271,790

238,340

a Based on average shares outstanding.

b Not annualized.

c Annualized.

See notes to financial statements.

14

 
                
        
 

Six Months Ended

  

Service Shares

June 30, 2021

 

Year Ended December 31,

(Unaudited)

 

2020

2019

2018

2017

2016

Per Share Data ($):

       

Net asset value, beginning of period

46.60

42.29

35.49

44.34

40.72

44.96

 

Investment Operations:

       

Investment income—neta

.10

.22

.33

.42

.46

.57

 

Net realized and unrealized
gain (loss) on investments

6.15

7.89

11.46

(3.25)

9.46

2.46

 

Total from Investment Operations

6.25

8.11

11.79

(2.83)

9.92

3.03

 

Distributions:

       

Dividends from
investment income—net

(.10)

(.23)

(.36)

(.41)

(.46)

(.58)

 

Dividends from net realized
gain on investments

(4.90)

(3.57)

(4.63)

(5.61)

(5.84)

(6.69)

 

Total Distributions

(5.00)

(3.80)

(4.99)

(6.02)

(6.30)

(7.27)

 

Net asset value, end of period

47.85

46.60

42.29

35.49

44.34

40.72

 

Total Return (%)

14.54b

23.38

35.78

(7.10)

27.00

7.64

 

Ratios/Supplemental Data (%):

       

Ratio of total expenses
to average net assets

1.06c

1.06

1.06

1.06

1.06

1.07

 

Ratio of net investment income
to average net assets

.46c

.55

.85

1.05

1.11

1.41

 

Portfolio Turnover Rate

2.67b

8.82

6.71

6.50

3.97

4.19

 

Net Assets,
end of period ($ x 1,000)

144,005

136,119

128,404

112,387

145,485

161,440

 

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:

Appreciation Portfolio (the “fund”) is a separate diversified series of BNY Mellon Variable Investment Fund (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering four series, including the fund. The fund is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The fund’s investment objective is to seek long-term capital growth consistent with the preservation of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Fayez Sarofim & Co. (the “Sub-Adviser”), serves as the fund’s sub-investment adviser.

BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares, which are sold 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 Trust 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 SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.

16

 

The Trust 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 equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid

17

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.

Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.

Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.

When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Trust’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 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, 2021 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 - Common Stocks

472,039,452

-

 

-

472,039,452

 

Investment Companies

2,792,799

-

 

-

2,792,799

 

Other Financial Instruments:

  

Forward Foreign Currency Exchange Contracts††

-

228

 

-

228

 

 See Statement of Investments for additional detailed categorizations, if any.

†† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchanged traded and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.

(b) 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.

Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of June 30, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.

19

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.

Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on 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, 2021, The Bank of New York Mellon earned $1,628 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.

(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.

(e) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-

20

 

wide.  Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.

(f) 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.

(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 and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.

As of and during the period ended June 30, 2021, 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, 2021, the fund did not incur any interest or penalties.

Each tax year in the three-year period ended December 31, 2020 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, 2020 was as follows: ordinary income $2,791,417 and long-term capital gains $32,175,649. The tax character of current year distributions will be determined at the end of the current fiscal year.

21

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

NOTE 2—Bank Lines of Credit:

The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended June 30, 2021, 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 the Adviser, 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 the Sub-Adviser, the fund pays the Sub-Adviser 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, 2021, Service shares were charged $171,349 pursuant to the Distribution Plan.

The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting

22

 

purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.

The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.

The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $1,119 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.

The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2021, the fund was charged $10,657 pursuant to the custody agreement.

During the period ended June 30, 2021, the fund was charged $7,862 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.

The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $204,094, Distribution Plan fees of $29,236, custodian fees of $3,600, Chief Compliance Officer fees of $7,862 and transfer agency fees of $460.

(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended June 30, 2021, amounted to $11,842,271 and $32,658,645, respectively.

23

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its over-the counter (“OTC”) derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.

Each type of derivative instrument that was held by the fund during the period ended June 30, 2021 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, 2021 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

24

 

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, 2021, derivative assets and liabilities (by type) on a gross basis are as follows:

      

Derivative Financial Instruments:

 

Assets ($)

 

Liabilities ($)

 

Forward contracts

 

228

 

-

 

Total gross amount of derivative

 

 

 

 

 

assets and liabilities in the

 

 

 

 

 

Statement of Assets and Liabilities

 

228

 

-

 

Derivatives not subject to

 

 

 

 

 

Master Agreements

 

-

 

-

 

Total gross amount of assets

 

 

 

 

 

and liabilities subject to

 

 

 

 

 

Master Agreements

 

228

 

-

 

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, 2021:

       

 

 

 

Financial

 

 

 

 

 

 

Instruments

 

 

 

 

 

 

and Derivatives

 

 

 

 

Gross Amount of

 

Available

Collateral

 

Net Amount of

Counterparty

Assets ($)

1 

for Offset ($)

Received ($)

  

Assets ($)

Morgan Stanley

228

 

-

-

 

228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2021:

   

 

 

Average Market Value ($)

Forward contracts

 

11,545

At June 30, 2021, accumulated net unrealized appreciation on investments inclusive of derivative contracts was $323,209,230, consisting of $323,529,664 gross unrealized appreciation and $320,434 gross unrealized depreciation.

25

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

At June 30, 2021, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).

26

 

INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)

At a meeting of the fund’s Board of Trustees held on March 8-9, 2021, the Board considered the renewal of the fund’s Investment Advisory Agreement pursuant to which the Adviser 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 the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.

Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.

The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s 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 based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Initial shares with the performance of a group of large-cap core funds underlying variable insurance products (“VIPs”) selected by Broadridge as comparable to the fund (the “Performance Group”) and with a

27

 

INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)

broader group of funds consisting of all large-cap core funds underlying VIPs (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all large-cap core funds underlying VIPs with similar 12b-1/non-12b-1 structures, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.

Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Subadviser 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, except the ten-year period when performance was at the Performance Group median, ranking first in the Performance Group and in the first quartile of the Performance Universe for all periods except the ten-year period. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.

Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management and sub-advisory services provided by the Adviser and the Subadviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets 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 higher than the Expense Group median contractual management fee, the fund’s actual management fee was higher than the Expense Group median and the Expense Universe median actual management fee and the fund’s total expenses were higher than the Expense Group median and the Expense Universe median total expenses.

Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid to the Adviser 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

28

 

management fee. Representatives of the Adviser noted that there were no other funds advised or administered by the Adviser that are in the same Lipper category as the fund.

The Board considered the fee payable to the Subadviser in relation to the fee payable to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser.

Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.

The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser 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. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser 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 the Adviser and the Subadviser are adequate and appropriate.

29

 

INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)

· The Board was satisfied with the fund’s performance.

· The Board concluded that the fees paid to the Adviser 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 the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser 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 the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.

30

 

LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited)

Effective June 1, 2019, the fund adopted a liquidity risk management program (the “Liquidity Risk Management Program”) pursuant to the requirements of Rule 22e-4 under the Investment Company Act of 1940, as amended. Rule 22e-4 requires registered open-end funds, including mutual funds and exchange-traded funds but not money market funds, to establish liquidity risk management programs in order to effectively manage fund liquidity and shareholder redemptions. The rule is designed to mitigate the risk that a fund could not meet redemption requests without significantly diluting the interests of remaining investors.

The rule requires the fund to assess, manage and review their liquidity risk at least annually considering applicable factors such as investment strategy and liquidity during normal and foreseeable stressed conditions, including whether the strategy is appropriate for an open-end fund and whether the fund has a relatively concentrated portfolio or large positions in particular issuers. The fund must also assess its use of borrowings and derivatives, short-term and long-term cash flow projections in normal and stressed conditions, holdings of cash and cash equivalents, and borrowing arrangements and other funding sources.

The rule also requires the fund to classify its investments as highly liquid, moderately liquid, less liquid or illiquid based on the number of days the fund expects it would take to liquidate the investment, and to review these classifications at least monthly or more often under certain conditions. The periods range from three or fewer business days for a highly liquid investment to greater than seven calendar days for settlement of a less liquid investment. Illiquid investments are those a fund does not expect to be able to sell or dispose of within seven calendar days without significantly changing the market value. The fund is prohibited from acquiring an investment if, after the acquisition, its holdings of illiquid assets will exceed 15% of its net assets. In addition, if a fund permits redemptions in-kind, the rule requires the fund to establish redemption in-kind policies and procedures governing how and when it will engage in such redemptions.

Pursuant to the rule’s requirements, the Liquidity Risk Management Program has been reviewed and approved by the Board. Furthermore, the Board has received a written report prepared by the Program’s Administrator that addresses the operation of the Program, assesses its adequacy and effectiveness and describes any material changes made to the Program.

Assessment of Program

In the opinion of the Program Administrator, the Program approved by the Board continues to be adequate for the fund and the Program has been implemented effectively. The Program Administrator has monitored the fund’s liquidity risk and the liquidity classification of the securities held by the fund and has determined that the Program is operating effectively.

During the period from January 1, 2020 to December 31, 2020, there were no material changes to the Program and no material liquidity events that impacted the fund. During the period, the fund held sufficient highly liquid assets to meet fund redemptions.

Under normal expected foreseeable fund redemption forecasts and foreseeable stressed fund redemption forecasts, the Program Administrator believes that the fund maintains sufficient highly liquid assets to meet expected fund redemptions.

31

 

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32

 

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33

 
For More Information

BNY Mellon Variable Investment Fund, Appreciation Portfolio

240 Greenwich Street

New York, NY 10286

Adviser

BNY Mellon Investment Adviser, Inc.

240 Greenwich Street

New York, NY 10286

Sub-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

BNY Mellon Transfer, Inc.

240 Greenwich Street

New York, NY 10286

Distributor

BNY Mellon Securities Corporation

240 Greenwich Street

New York, NY 10286


Telephone 1-800-258-4260 or 1-800-258-4261

Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department

E-mail Send your request to info@bnymellon.com

Internet Information can be viewed online or downloaded at www.im.bnymellon.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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.

  

© 2021 BNY Mellon Securities Corporation
0112SA0621

 

BNY Mellon Variable Investment Fund, Government Money Market Portfolio

 

SEMIANNUAL REPORT

June 30, 2021

 
 

Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes.

 

The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds.

 

Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value

 

Contents

THE FUND

  

Understanding Your Fund’s Expenses

2

Comparing Your Fund’s Expenses
With Those of Other Funds

2

Statement of Investments

3

Statement of Assets and Liabilities

6

Statement of Operations

7

Statement of Changes in Net Assets

8

Financial Highlights

9

Notes to Financial Statements

10

Information About the Renewal of
the Fund’s Investment Advisory
Agreement

16

FOR MORE INFORMATION

 

Back Cover

 

UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)

As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads), redemption fees and expenses associated with variable annuity or insurance contracts, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Variable Investment Fund, Government Money Market Portfolio from January 1, 2021 to June 30, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

    

Expenses and Value of a $1,000 Investment

 

Assume actual returns for the six months ended June 30, 2021

 

 

 

 

 

 

 

 

 

Expenses paid per $1,000

$.20

 

Ending value (after expenses)

$1,000.10

 

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, 2021

 

 

 

 

 

 

 

 

 

Expenses paid per $1,000

$.20

 

Ending value (after expenses)

$1,024.60

 

Expenses are equal to the fund’s annualized expense ratio of .04%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

2

 

STATEMENT OF INVESTMENTS

June 30, 2021 (Unaudited)

       
 

U.S. Government Agencies Obligations - 14.8%

Annualized
Yield (%)

 

Principal
Amount ($)

 

Value ($)

 

Federal Farm Credit Banks:

     

7/1/2021, 3 Month SOFR +.04%

0.09

 

5,000,000

a 

5,000,000

 

Federal Home Loan Banks:

     

7/1/2021, 3 Month SOFR +.02%

0.07

 

25,000,000

a 

25,000,000

 

7/1/2021, 3 Month SOFR +.04%

0.09

 

3,000,000

a 

3,000,000

 

Federal National Mortgage Association:

     

7/1/2021, 3 Month SOFR +.19%

0.24

 

5,000,000

a,b 

5,000,000

 

Total U.S. Government Agencies Obligations

(cost $38,000,000)

    

38,000,000

 

U.S. Treasury Bills - 9.7%


 


   

12/30/2021
(cost $24,992,733)

0.06

 

25,000,000

c 

24,992,733

 

U.S. Treasury Notes - 10.6%


 


   

9/15/2021

2.75

 

5,000,000

 

5,027,271

 

10/31/2021

2.00

 

22,068,000

 

22,209,962

 

Total U.S. Treasury Notes

(cost $27,237,233)

    

27,237,233

 

U.S. Treasury Floating Rate Notes - 8.6%


 


   

7/7/2021, 3 Month U.S. T-BILL +.03%

0.08

 

10,000,000

a 

10,000,000

 

7/7/2021, 3 Month U.S. T-BILL +.06%

0.11

 

7,000,000

a 

7,000,757

 

7/7/2021, 3 Month U.S. T-BILL +.22%

0.27

 

5,000,000

a 

5,000,010

 

Total U.S. Treasury Floating Rate Notes

(cost $22,000,767)

    

22,000,767

 

Repurchase Agreements - 64.7%


 


   

ABN Amro Bank, Tri-Party Agreement thru BNY Mellon, dated 6/30/2021, due at 7/1/2021 in the amount of $40,000,056 (fully collateralized by: U.S. Treasuries (including strips), 0.38%-4.38%, due 1/31/2024-5/15/2047, valued at $40,800,002)

0.05

 

40,000,000

 

40,000,000

 

3

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

       
 

Repurchase Agreements - 64.7%(continued)

Annualized
Yield (%)

 

Principal
Amount ($)

 

Value ($)

 

Bank of Montreal, Tri-Party Agreement thru BNY Mellon, dated 6/30/2021, due at 7/1/2021 in the amount of $52,000,072 (fully collateralized by: Federal Home Loan Mortgage Corp Agency Collateralized Mortgage Obligation, 4.00%-5.88%, due 2/15/2027-12/15/2043, Federal Home Loan Mortgage Corp Agency Debentures and Agency Strips, 1.50%-5.96%, due 2/15/2038-6/25/2051, Federal National Mortgage Association Agency Collateralized Mortgage Obligation, 0.15%-6.11%, due 2/25/2027-6/25/2051, Federal National Mortgage Association Agency Mortgage-Backed Securities, 1.91%-4.50%, due 5/1/2026-7/1/2051, Government National Mortgage Association Agency Collateralized Mortgage Obligation, 0.01%-6.66%, due 3/20/2040-12/20/2070, Government National Mortgage Association Agency Mortgage-Backed Securities, 2.00%-6.50%, due 3/20/2036-2/20/2051, U.S. Treasuries (including strips), 0.00%, due 10/7/2021, valued at $55,070,081)

0.05

 

52,000,000

 

52,000,000

 

HSBC Securities USA, Tri-Party Agreement thru BNY Mellon, dated 6/30/2021, due at 7/1/2021 in the amount of $26,000,032 (fully collateralized by: U.S. Treasuries (including strips), 0.00%-7.63%, due 8/15/2021-8/15/2050, valued at $26,520,000)

0.05

 

26,000,000

 

26,000,000

 

4

 
       
 

Repurchase Agreements - 64.7%(continued)

Annualized
Yield (%)

 

Principal
Amount ($)

 

Value ($)

 

ING Financial Markets, Tri-Party Agreement thru BNY Mellon, dated 6/30/2021, due at 7/1/2021 in the amount of $48,000,067 (fully collateralized by: U.S. Treasuries (including strips), 0.00%-5.50%, due 7/15/2021-2/15/2051, valued at $48,960,005)

0.05

 

48,000,000

 

48,000,000

 

Total Repurchase Agreements

(cost $166,000,000)

    

166,000,000

 

Total Investments (cost $278,230,733)

 

108.4%

 

278,230,733

 

Liabilities, Less Cash and Receivables

 

(8.4%)

 

(21,675,215)

 

Net Assets

 

100.0%

 

256,555,518

 

SOFR—Secured Overnight Financing Rate

U.S. T-BILL—U.S. Treasury Bill Money Market Yield

a Variable rate security—interest rate resets periodically and 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. Security description also includes the reference rate and spread if published and available.

b 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.

c Security is a discount security. Income is recognized through the accretion of discount.

  

Portfolio Summary (Unaudited)

Value (%)

Repurchase Agreements

64.7

U.S. Treasury Securities

28.9

U.S. Government Agencies Obligations

14.8

 

108.4

 Based on net assets.

See notes to financial statements.

5

 

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2021 (Unaudited)

       

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Statement of Investments
(including repurchase agreements of $166,000,000)
—Note 1(b)

278,230,733

 

278,230,733

 

Cash

 

 

 

 

2,882,949

 

Receivable for shares of Beneficial Interest subscribed

 

627,971

 

Interest receivable

 

123,022

 

Due from BNY Mellon Investment Adviser, Inc. and affiliates—Note 2(b)

 

5,576

 

Prepaid expenses

 

 

 

 

1,286

 

 

 

 

 

 

281,871,537

 

Liabilities ($):

 

 

 

 

Payable for investment securities purchased

 

24,992,733

 

Payable for shares of Beneficial Interest redeemed

 

293,799

 

Trustees’ fees and expenses payable

 

983

 

Other accrued expenses

 

 

 

 

28,504

 

 

 

 

 

 

25,316,019

 

Net Assets ($)

 

 

256,555,518

 

Composition of Net Assets ($):

 

 

 

 

Paid-in capital

 

 

 

 

256,557,116

 

Total distributable earnings (loss)

 

 

 

 

(1,598)

 

Net Assets ($)

 

 

256,555,518

 

     

Shares Outstanding

 

 

(unlimited number of $.001 par value shares of Beneficial Interest authorized)

256,525,842

 

Net Asset Value Per Share ($)

 

1.00

 

 

 

 

 

 

See notes to financial statements.

 

 

  

 

6

 

STATEMENT OF OPERATIONS

Six Months Ended June 30, 2021 (Unaudited)

       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Interest Income

 

 

68,503

 

Expenses:

 

 

 

 

Investment advisory fee—Note 2(a)

 

 

699,518

 

Professional fees

 

 

47,899

 

Chief Compliance Officer fees—Note 2(b)

 

 

7,862

 

Prospectus and shareholders’ reports

 

 

6,956

 

Trustees’ fees and expenses—Note 2(c)

 

 

6,688

 

Custodian fees—Note 2(b)

 

 

6,201

 

Shareholder servicing costs—Note 2(b)

 

 

298

 

Miscellaneous

 

 

4,069

 

Total Expenses

 

 

779,491

 

Less—reduction in expenses due to undertaking—Note 2(a)

 

 

(725,081)

 

Net Expenses

 

 

54,410

 

Investment Income—Net, representing net increase in
net assets resulting from operations

 

 

14,093

 

 

 

 

 

 

 

 

See notes to financial statements.

     

7

 

STATEMENT OF CHANGES IN NET ASSETS

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30, 2021 (Unaudited)

 

Year Ended
December 31, 2020

 

Operations ($):

 

 

 

 

 

 

 

 

Investment Income—Net, representing net
increase in net assets resulting from operations

14,093

 

 

 

414,281

 

Distributions ($):

 

Distributions to shareholders

 

 

(14,093)

 

 

 

(414,281)

 

Beneficial Interest Transactions ($1.00 per share):

 

Net proceeds from shares sold

 

 

642,756,374

 

 

 

889,695,845

 

Distributions reinvested

 

 

14,093

 

 

 

414,281

 

Cost of shares redeemed

 

 

(627,484,786)

 

 

 

(830,774,471)

 

Increase (Decrease) in Net Assets
from Beneficial Interest Transactions

15,285,681

 

 

 

59,335,655

 

Total Increase (Decrease) in Net Assets

15,285,681

 

 

 

59,335,655

 

Net Assets ($):

 

Beginning of Period

 

 

241,269,837

 

 

 

181,934,182

 

End of Period

 

 

256,555,518

 

 

 

241,269,837

 

 

 

 

 

 

 

 

 

 

 

See notes to financial statements.

        

8

 

FINANCIAL HIGHLIGHTS

The following table describes the performance for the fiscal periods indicated. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. 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, 2021

Year Ended December 31,

(Unaudited)

2020

2019

2018

2017

2016

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

.000a

.002

.017

.013

.003

.000a

Distributions:

      

Dividends from
investment income—net

(.000)a

(.002)

(.017)

(.013)

(.003)

(.000)a

Net asset value, end of period

1.00

1.00

1.00

1.00

1.00

1.00

Total Return (%)

.01b

.21

1.67

1.28

.34

.02

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

.56c

.56

.58

.58

.58

.62

Ratio of net expenses
to average net assets

.04c

.26

.57

.58

.57

.39

Ratio of net investment income
to average net assets

.01c

.17

1.65

1.26

.37

.01

Net Assets, end of period ($ x 1,000)

256,556

241,270

181,934

181,596

196,347

148,659

a Amount represents less than $.001 per share.

b Not annualized.

c Annualized.

See notes to financial statements.

9

 

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Government Money Market Portfolio (the “fund”) is a separate diversified series of BNY Mellon Variable Investment Fund (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering four series, including the fund. The fund is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The fund’s investment objective is to seek as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The fund is managed by Dreyfus Cash Investment Strategies, a division of BNY Mellon Investment Adviser, Inc. (the “Adviser”), the fund’s investment adviser and a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”). BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of BNY Mellon, is the distributor of the fund’s shares, which are sold to the public 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 Trust 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 SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.

The Trust enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The

10

 

fund does not anticipate recognizing any loss related to these arrangements.

(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. If amortized cost is determined not to approximate fair market value, the fair value of the portfolio securities will be determined by procedures established by and under the general oversight of the Trust’s Board of Trustees (the “Board”).

The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.

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.

11

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

The following is a summary of the inputs used as of June 30, 2021 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:

  

Short-Term Investments

-

278,230,733

 

-

278,230,733

 

 See Statement of Investments for additional detailed categorizations, if any.

(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. 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 the Adviser, 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 funds managed by the Adviser 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) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming

12

 

increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.

(d) 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 capital loss carryovers, it is the policy of the fund not to distribute such gains.

(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.

As of and during the period ended June 30, 2021, 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, 2021, the fund did not incur any interest or penalties.

Each tax year in the three-year period ended December 31, 2020 remains subject to examination by the Internal Revenue Service and state taxing authorities.

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.

13

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

The fund has an unused capital loss carryover of $1,598 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to December 31, 2020. These short-term losses can be carried forward for an unlimited period.

The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2020 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, 2021, 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).

(f) New accounting pronouncements: In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), and in January 2021, the FASB issued Accounting Standards Update 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates as of the end of 2021. The temporary relief provided by ASU 2020-04 and ASU 2021-01 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 and ASU 2021-01 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform. Management is also currently actively working with other financial institutions and counterparties to modify contracts as required by applicable regulation and within the regulatory deadlines.

NOTE 2―Investment Adivsory Fee and Other Transactions with Affiliates:

(a) Pursuant to an investment advisory agreement with the Adviser, 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.

The Adviser has undertaken to waive receipt of the investment advisory fee and/or reimburse operating expenses in order to facilitate a daily yield at or above a certain level which may change from time to time. This undertaking is voluntary and not contractual, and may be terminated at any time. The reduction in expenses, pursuant to the undertaking, amounted to $725,081 during the period ended June 30, 2021.

14

 

(b) The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.

The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.

The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $252 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.

The fund compensates The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, 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, 2021, the fund was charged $6,201 pursuant to the custody agreement.

During the period ended June 30, 2021, the fund was charged $7,862 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.

The components of “Due from BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $111,537, custodian fees of $2,938, Chief Compliance Officer fees of $7,862 and transfer agency fees of $106, which are offset against an expense reimbursement currently in effect in the amount of $128,019.

(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

15

 

INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited)

At a meeting of the fund’s Board of Trustees held on March 8-9, 2021, the Board considered the renewal of the fund’s Investment Advisory Agreement pursuant to which the Adviser 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 representatives of the Adviser. In considering the renewal of the Agreement, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.

Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.

The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures.

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 based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Initial shares with the performance of a group of US government money market funds underlying variable insurance products (“VIPs”) selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all money market instrument funds underlying VIPs (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all money market instrument funds underlying VIPs and US government money market funds underlying VIPs with similar 12b-

16

 

1/non-12b-1 structures, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Performance Group and Performance Universe comparisons were provided based on both “gross” (i.e., without including fees and expenses) and “net” (i.e., including fees and expenses) total returns. The Adviser 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.

Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser the results of the comparisons and considered that the fund’s gross total return performance was at or above the Performance Group and Performance Universe medians for all periods, except the ten-year period when it was two basis points below the Performance Universe median. The Board also considered that the fund’s net total return performance was below the Performance Group and Performance Universe medians for all periods, although they noted the relative proximity of the fund’s net total return performance to the Performance Group and/or Performance Universe medians in certain periods and that the fund’s net total return performance ranked in the third quartile of the Performance Universe in each period shown.

Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which included reductions for a fee waiver arrangement in place that reduced the management fee paid to the Adviser. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets 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 higher than the Expense Group median contractual management fee, the fund’s actual management fee was equal to the Expense Group median and higher than the Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group median and higher than the Expense Universe median total expenses.

Representatives of the Adviser stated that, for the past fiscal year, the Adviser had limited fund expenses to maintain a minimum yield pursuant to a voluntary undertaking by the Adviser in effect during the period. This undertaking is voluntary, not contractual, and may be terminated by the Adviser at any time.

Representatives of the Adviser noted that there were no other funds advised or administered by the Adviser that are in the same Lipper category as the fund or separate

17

 

INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)

accounts and/or other types of client portfolios advised by the Adviser that are considered to have similar investment strategies and policies as the fund.

Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also considered the expense limitation arrangement and its effect on the profitability of the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.

The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration 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 the Adviser are adequate and appropriate.

· The Board was satisfied with the fund’s gross performance.

· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.

· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been

18

 

adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and 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 the fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreement.

19

 

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20

 

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21

 
For More Information

BNY Mellon Variable Investment Fund, Government Money Market Portfolio

240 Greenwich Street

New York, NY 10286

Adviser

BNY Mellon Investment Adviser, Inc.

240 Greenwich Street

New York, NY 10286

Custodian

The Bank of New York Mellon

240 Greenwich Street

New York, NY 10286

Transfer Agent &
Dividend Disbursing Agent

BNY Mellon Transfer, Inc.

240 Greenwich Street

New York, NY 10286

Distributor

BNY Mellon Securities Corporation

240 Greenwich Street

New York, NY 10286

  
  

Telephone Call your representative or 1-800-373-9387

Mail BNY Mellon Family of Funds to: BNY Mellon Institutional Services, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144

E-mail Send your request to instserv@bnymellon.com

Internet Access Dreyfus Money Market Funds 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 for a period of five months. The fund files a monthly schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-MFP. The fund’s Forms N-MFP are available on the SEC’s website at www.sec.gov.

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 1-800-373-9387

  

© 2021 BNY Mellon Securities Corporation
0117SA0621

 

BNY Mellon Variable Investment Fund, Growth and Income Portfolio

 

SEMIANNUAL REPORT

June 30, 2021

 
 

Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes.

 

The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds.

 

Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value

 

Contents

THE FUND

  

Discussion of Fund Performance

2

Understanding Your Fund’s Expenses

5

Comparing Your Fund’s Expenses
With Those of Other Funds

5

Statement of Investments

6

Statement of Investments
in Affiliated Issuers

11

Statement of Assets and Liabilities

12

Statement of Operations

13

Statement of Changes in Net Assets

14

Financial Highlights

15

Notes to Financial Statements

17

Information About the Renewal and
Approval of the Fund’s Investment
Advisory Agreement and Approval of
Sub-Investment Advisory Agreement

26

Liquidity Risk Management Program

33

FOR MORE INFORMATION

 

Back Cover

 

DISCUSSION OF FUND PERFORMANCE (Unaudited)

For the period from January 1, 2021 through June 30, 2021, as provided by John Bailer, CFA, David Intoppa, Leigh N. Todd, CFA and Brian Ferguson, Portfolio Managers

Market and Fund Performance Overview

For the six-month period ended June 30, 2021, BNY Mellon Variable Investment Fund, Growth and Income Portfolio’s Initial shares achieved a total return of 15.96%, and its Service shares achieved a total return of 15.78%.1 In comparison, the fund’s benchmark, the S&P 500® Index (the “Index”), produced a total return of 15.25% for the same period.2

U.S. stocks rose during the reporting period as the economy continued to recover from the COVID-19 pandemic. The fund outperformed the Index largely due to successful security selections in the materials and communication services 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.

Market Rebound Continues, Inflation Concerns Emerge

Early in the reporting period, stocks benefited from a number of factors. With the approval of multiple COVID-19 vaccines in November 2020, investor sentiment improved, and the global economic outlook brightened. Returns were also boosted by interest rates, which remained low, and by the stimulus package approved by Congress, which provided support to consumers, small businesses and the economy generally. Investors also began to factor the likelihood of additional stimulus and infrastructure spending into their calculations.

2

 

As government lockdowns were eased, businesses that had been hard hit by the pandemic began to show signs of recovery. Businesses also became more confident and increased their capital spending. In addition, inventory shortages began to appear, providing another catalyst to economic growth. With the end of the pandemic in view and continued economic rebound likely, investors began to shift away from growth-oriented stocks and into value-oriented stocks. This shift persisted into early 2021.

Toward the end of the reporting period, the economic rebound continued, but combined with the Federal Reserve’s (the “Fed”) indications that it would tolerate higher inflation rates until the economy fully recovered, this led to a rise in inflation expectations. As a result, yields at the long end of the Treasury yield curve began to increase. These higher interest rates weighed heavily on the stock market performance, especially that of technology and other growth-oriented stocks.

Later, investors became concerned that the Fed would tighten monetary policy sooner than expected, potentially slowing the economy. This resulted in somewhat of a shift back to growth-oriented stocks.

Stock Selection in the Materials and Communication Services Sectors Were Beneficial

The fund benefited from both the shift to value-oriented stocks early in the reporting period and the shift back toward growth-oriented stocks that occurred later. The fund’s relative performance was driven largely by successful stock selection in two sectors, materials and communication services. In the materials sector, a position in CF Industries Holdings, an agricultural chemicals company, benefited from higher commodity prices and improved pricing, and shares rose more than 35%. A position in Freeport-McMoRan, a copper mining company, was also advantageous. Shares rose not only because of a surge in commodity prices in response to inflationary pressures, but also due to growing long-term demand for copper from the electric vehicle industry. In the communication services sector, the fund benefited from its lack of exposure to Disney and Netflix, both of which saw their shares fall following strong performances in 2020 due to the pandemic. In addition, the fund’s position in Alphabet (parent of Google) was advantageous as the company benefited not only from the shift to growth stocks but also from strong advertising revenues related to the travel and leisure industries.

On the other hand, the fund’s performance was hindered by certain asset allocation and stock selection decisions. The fund’s overweight position in the health care sector was detrimental as this sector lagged the Index. In addition, a position in Sarepta Therapeutics, a biotech company, hindered performance as its shares fell due to disappointing trial data on one of its products. In the industrial sector, the fund���s position in Array Technologies, which makes solar energy equipment, hampered returns as the company encountered higher input costs.

3

 

DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)

Positioned for Further Economic Recovery

While growth-oriented stocks performed well during the reporting period, we believe they are unlikely to repeat their performance in 2021. Looking ahead, the fund has increased its overweight to the energy sector and has lessened its exposure to the information technology sector. The fund has also increased its positions in the health care sector from neutral to overweight and has shifted from an overweight position to an underweight position in the materials sector.

July 15, 2021

1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. 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. The fund’s returns reflect the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through April 30, 2022, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower.

2 Source: Lipper Inc. — The 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.

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 BNY Mellon Variable Investment Fund, Growth and Income Portfolio made available through insurance products may be similar to those of other funds managed or advised by BNY Mellon Investment Adviser, Inc. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other BNY Mellon fund.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.

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 BNY Mellon Variable Investment Fund, Growth and Income Portfolio from January 1, 2021 to June 30, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

     

Expenses and Value of a $1,000 Investment

 

Assume actual returns for the six months ended June 30, 2021

 

 

 

 

 

 

 

 

Initial Shares

Service Shares

 

Expenses paid per $1,000

$4.28

$5.62

 

Ending value (after expenses)

$1,159.60

$1,157.80

 

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, 2021

 

 

 

 

 

 

 

 

Initial Shares

Service Shares

 

Expenses paid per $1,000

$4.01

$5.26

 

Ending value (after expenses)

$1,020.83

$1,019.59

 

Expenses are equal to the fund’s annualized expense ratio of .80% for Initial Shares and 1.05% for Service Shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

5

 

STATEMENT OF INVESTMENTS

June 30, 2021 (Unaudited)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 98.2%

     

Automobiles & Components - 1.6%

     

General Motors

   

7,336

a 

434,071

 

Tesla

   

1,957

a 

1,330,173

 
    

1,764,244

 

Banks - 4.8%

     

Bank of America

   

38,811

 

1,600,178

 

JPMorgan Chase & Co.

   

12,830

 

1,995,578

 

Truist Financial

   

6,715

 

372,682

 

U.S. Bancorp

   

12,777

 

727,906

 

Wells Fargo & Co.

   

11,741

 

531,750

 
    

5,228,094

 

Capital Goods - 7.9%

     

AMETEK

   

6,134

 

818,889

 

Armstrong World Industries

   

4,558

 

488,891

 

Carrier Global

   

9,838

 

478,127

 

Eaton

   

6,679

 

989,694

 

Howmet Aerospace

   

15,890

a 

547,728

 

Hubbell

   

2,522

 

471,210

 

Ingersoll Rand

   

16,167

a 

789,111

 

L3Harris Technologies

   

6,308

 

1,363,474

 

Northrop Grumman

   

1,457

 

529,518

 

Quanta Services

   

5,692

 

515,524

 

Rockwell Automation

   

2,478

b 

708,758

 

Trane Technologies

   

4,600

 

847,044

 
    

8,547,968

 

Consumer Durables & Apparel - .7%

     

VF

   

9,018

 

 739,837

 

Consumer Services - 2.4%

     

Aramark

   

23,215

 

864,759

 

Booking Holdings

   

410

a 

897,117

 

Las Vegas Sands

   

5,045

a 

265,821

 

Wynn Resorts

   

4,689

a 

573,465

 
    

2,601,162

 

Diversified Financials - 8.3%

     

Ally Financial

   

10,705

 

533,537

 

Ameriprise Financial

   

7,172

 

1,784,967

 

Berkshire Hathaway, Cl. B

   

5,508

a 

1,530,783

 

Capital One Financial

   

8,319

 

1,286,866

 

Equitable Holdings

   

8,638

 

263,027

 

Morgan Stanley

   

9,701

 

889,485

 

The Charles Schwab

   

18,742

 

1,364,605

 

The Goldman Sachs Group

   

947

 

359,415

 

6

 
        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 98.2% (continued)

     

Diversified Financials - 8.3% (continued)

     

Voya Financial

   

16,195

b 

995,992

 
    

9,008,677

 

Energy - 5.3%

     

Devon Energy

   

34,382

 

1,003,611

 

EQT

   

27,890

a 

620,831

 

Exxon Mobil

   

24,355

 

1,536,313

 

Hess

   

9,989

 

872,239

 

Marathon Petroleum

   

18,269

 

1,103,813

 

Valero Energy

   

8,061

 

629,403

 
    

5,766,210

 

Food & Staples Retailing - .5%

     

Sysco

   

7,470

 

 580,792

 

Food, Beverage & Tobacco - 2.1%

     

Mondelez International, Cl. A

   

12,246

 

764,640

 

PepsiCo

   

3,513

 

520,521

 

Philip Morris International

   

10,007

 

991,794

 
    

2,276,955

 

Health Care Equipment & Services - 9.7%

     

Anthem

   

1,375

 

524,975

 

Becton Dickinson & Co.

   

2,254

 

548,150

 

CVS Health

   

12,157

 

1,014,380

 

Danaher

   

4,407

 

1,182,663

 

DexCom

   

1,433

a 

611,891

 

Edwards Lifesciences

   

5,578

a 

577,713

 

HCA Healthcare

   

2,066

 

427,125

 

Intuitive Surgical

   

1,100

a 

1,011,604

 

Masimo

   

1,857

a 

450,230

 

McKesson

   

1,692

 

323,578

 

Medtronic

   

13,075

 

1,623,000

 

Teleflex

   

1,822

 

732,061

 

UnitedHealth Group

   

956

 

382,821

 

Zimmer Biomet Holdings

   

6,406

 

1,030,213

 
    

10,440,404

 

Insurance - 2.1%

     

Aon, Cl. A

   

2,918

b 

696,702

 

Assurant

   

9,721

 

1,518,226

 
    

2,214,928

 

Materials - 2.2%

     

CF Industries Holdings

   

16,132

 

829,991

 

Freeport-McMoRan

   

11,210

 

416,003

 

Newmont

   

14,555

 

922,496

 

Vulcan Materials

   

1,483

 

258,146

 
    

2,426,636

 

7

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 98.2% (continued)

     

Media & Entertainment - 9.6%

     

Alphabet, Cl. A

   

1,303

a 

3,181,652

 

Alphabet, Cl. C

   

1,093

a 

2,739,408

 

Comcast, Cl. A

   

14,378

 

819,834

 

Facebook, Cl. A

   

4,468

a 

1,553,568

 

Match Group

   

2,575

a,b 

415,219

 

Pinterest, Cl. A

   

11,294

a 

891,661

 

Snap, Cl. A

   

11,950

a 

814,273

 
    

10,415,615

 

Pharmaceuticals Biotechnology & Life Sciences - 5.7%

     

AbbVie

   

19,938

 

2,245,816

 

Eli Lilly & Co.

   

9,090

 

2,086,337

 

Horizon Therapeutics

   

6,901

a 

646,210

 

Organon & Co.

   

11,184

a 

338,428

 

Seagen

   

3,109

a 

490,849

 

Viatris

   

25,578

 

365,510

 
    

6,173,150

 

Retailing - 4.1%

     

Amazon.com

   

1,185

a 

4,076,590

 

Farfetch, Cl. A

   

7,781

a 

391,851

 
    

4,468,441

 

Semiconductors & Semiconductor Equipment - 7.0%

     

Applied Materials

   

13,579

 

1,933,650

 

Marvell Technology

   

11,008

 

642,097

 

Microchip Technology

   

4,260

 

637,892

 

NVIDIA

   

2,531

 

2,025,053

 

ON Semiconductor

   

13,282

a 

508,435

 

Qualcomm

   

12,711

 

1,816,783

 
    

7,563,910

 

Software & Services - 12.8%

     

Ansys

   

1,728

a 

599,720

 

Crowdstrike Holdings, CI. A

   

2,336

a 

587,060

 

Dolby Laboratories, Cl. A

   

3,450

 

339,100

 

HubSpot

   

1,283

a 

747,630

 

Medallia

   

10,962

a,b 

369,967

 

Microsoft

   

15,784

 

4,275,886

 

PayPal Holdings

   

4,657

a 

1,357,422

 

salesforce.com

   

4,582

a 

1,119,245

 

Snowflake, Cl. A

   

1,805

a 

436,449

 

Square, Cl. A

   

3,526

a 

859,639

 

Twilio, Cl. A

   

1,475

a 

581,386

 

Visa, Cl. A

   

8,026

b 

1,876,639

 

Zoom Video Communications, CI. A

   

1,653

a 

639,761

 
    

13,789,904

 

8

 
        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 98.2% (continued)

     

Technology Hardware & Equipment - 6.3%

     

Apple

   

29,283

 

4,010,600

 

Cisco Systems

   

20,537

 

1,088,461

 

Corning

   

17,165

 

702,048

 

Zebra Technologies, Cl. A

   

1,869

a 

989,617

 
    

6,790,726

 

Telecommunication Services - .7%

     

Vodafone Group, ADR

   

41,274

b 

 707,024

 

Transportation - 1.5%

     

FedEx

   

1,152

 

343,676

 

Uber Technologies

   

14,009

a 

702,131

 

Union Pacific

   

2,699

 

593,591

 
    

1,639,398

 

Utilities - 2.9%

     

Clearway Energy, Cl. C

   

18,113

 

479,632

 

Exelon

   

27,689

 

1,226,900

 

NextEra Energy Partners

   

8,452

 

645,395

 

PPL

   

9,348

 

261,464

 

The AES

   

17,816

 

464,463

 
    

3,077,854

 

Total Common Stocks (cost $66,904,945)

   

106,221,929

 
  

1-Day
Yield (%)

     

Investment Companies - 2.1%

     

Registered Investment Companies - 2.1%

     

Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares
(cost $2,270,993)

 

0.05

 

2,270,993

c 

 2,270,993

 

9

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

        
 

Description

 

1-Day
Yield (%)

 

Shares

 

Value ($)

 

Investment of Cash Collateral for Securities Loaned - .7%

     

Registered Investment Companies - .7%

     

Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares
(cost $715,068)

 

0.01

 

715,068

c 

 715,068

 

Total Investments (cost $69,891,006)

 

101.0%

 

109,207,990

 

Liabilities, Less Cash and Receivables

 

(1.0%)

 

(1,048,438)

 

Net Assets

 

100.0%

 

108,159,552

 

ADR—American Depository Receipt

a Non-income producing security.

b Security, or portion thereof, on loan. At June 30, 2021, the value of the fund’s securities on loan was $5,378,149 and the value of the collateral was $5,502,601, consisting of cash collateral of $715,068 and U.S. Government & Agency securities valued at $4,787,533.

c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.

  

Portfolio Summary (Unaudited)

Value (%)

Information Technology

26.0

Health Care

15.4

Financials

15.2

Communication Services

10.3

Industrials

9.4

Consumer Discretionary

8.9

Energy

5.3

Utilities

2.9

Investment Companies

2.8

Consumer Staples

2.6

Materials

2.2

 

101.0

 Based on net assets.

See notes to financial statements.

10

 

STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)

       

Investment Companies

Value
12/31/20 ($)

Purchases ($)

Sales ($)

Value
6/30/21 ($)

Net
Assets (%)

Dividends/
Distributions ($)

Registered Investment Companies;

    

Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares

1,591,806

10,715,386

(10,036,199)

2,270,993

2.1

566

Investment of Cash Collateral for Securities Loaned;

   

Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares

567,336

3,522,960

(3,375,228)

715,068

.7

2,229††

Total

2,159,142

14,238,346

(13,411,427)

2,986,061

2.8

2,795

 Includes reinvested dividends/distributions.

†† Represents securities lending income earned from reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borowers of securities.

See notes to financial statements.

11

 

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2021 (Unaudited)

       

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Statement of Investments
(including securities on loan, valued at $5,378,149)—Note 1(c):

 

 

 

Unaffiliated issuers

66,904,945

 

106,221,929

 

Affiliated issuers

 

2,986,061

 

2,986,061

 

Receivable for investment securities sold

 

505,048

 

Dividends and securities lending income receivable

 

67,293

 

Receivable for shares of Beneficial Interest subscribed

 

39

 

Prepaid expenses

 

 

 

 

1,266

 

 

 

 

 

 

109,781,636

 

Liabilities ($):

 

 

 

 

Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b)

 

64,243

 

Cash overdraft due to Custodian

 

 

 

 

2,714

 

Payable for investment securities purchased

 

787,035

 

Liability for securities on loan—Note 1(c)

 

715,068

 

Payable for shares of Beneficial Interest redeemed

 

9,813

 

Trustees’ fees and expenses payable

 

543

 

Other accrued expenses

 

 

 

 

42,668

 

 

 

 

 

 

1,622,084

 

Net Assets ($)

 

 

108,159,552

 

Composition of Net Assets ($):

 

 

 

 

Paid-in capital

 

 

 

 

58,534,501

 

Total distributable earnings (loss)

 

 

 

 

49,625,051

 

Net Assets ($)

 

 

108,159,552

 

    

Net Asset Value Per Share

Initial Shares

Service Shares

 

Net Assets ($)

102,931,621

5,227,931

 

Shares Outstanding

2,675,768

135,601

 

Net Asset Value Per Share ($)

38.47

38.55

 

 

 

 

 

See notes to financial statements.

 

 

 

12

 

STATEMENT OF OPERATIONS

Six Months Ended June 30, 2021 (Unaudited)

       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Income:

 

 

 

 

Cash dividends (net of $126 foreign taxes withheld at source):

 

Unaffiliated issuers

 

 

656,815

 

Affiliated issuers

 

 

566

 

Income from securities lending—Note 1(c)

 

 

2,229

 

Total Income

 

 

659,610

 

Expenses:

 

 

 

 

Investment advisory fee—Note 3(a)

 

 

383,213

 

Professional fees

 

 

54,633

 

Prospectus and shareholders’ reports

 

 

9,077

 

Chief Compliance Officer fees—Note 3(b)

 

 

7,862

 

Distribution fees—Note 3(b)

 

 

6,220

 

Custodian fees—Note 3(b)

 

 

4,384

 

Trustees’ fees and expenses—Note 3(c)

 

 

3,030

 

Loan commitment fees—Note 2

 

 

1,364

 

Shareholder servicing costs—Note 3(b)

 

 

420

 

Registration fees

 

 

4

 

Miscellaneous

 

 

9,673

 

Total Expenses

 

 

479,880

 

Less—reduction in expenses due to undertaking—Note 3(a)

 

 

(63,658)

 

Net Expenses

 

 

416,222

 

Investment Income—Net

 

 

243,388

 

Realized and Unrealized Gain (Loss) on Investments—Note 4 ($):

 

 

Net realized gain (loss) on investments

10,898,260

 

Net change in unrealized appreciation (depreciation) on investments

4,024,827

 

Net Realized and Unrealized Gain (Loss) on Investments

 

 

14,923,087

 

Net Increase in Net Assets Resulting from Operations

 

15,166,475

 

 

 

 

 

 

 

 

See notes to financial statements.

     

13

 

STATEMENT OF CHANGES IN NET ASSETS

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30, 2021 (Unaudited)

 

Year Ended
December 31, 2020

 

Operations ($):

 

 

 

 

 

 

 

 

Investment income—net

 

 

243,388

 

 

 

631,905

 

Net realized gain (loss) on investments

 

10,898,260

 

 

 

6,549,576

 

Net change in unrealized appreciation
(depreciation) on investments

 

4,024,827

 

 

 

12,103,813

 

Net Increase (Decrease) in Net Assets
Resulting from Operations

15,166,475

 

 

 

19,285,294

 

Distributions ($):

 

Distributions to shareholders:

 

 

 

 

 

 

 

 

Initial Shares

 

 

(6,769,878)

 

 

 

(6,409,913)

 

Service Shares

 

 

(337,757)

 

 

 

(336,298)

 

Total Distributions

 

 

(7,107,635)

 

 

 

(6,746,211)

 

Beneficial Interest Transactions ($):

 

Net proceeds from shares sold:

 

 

 

 

 

 

 

 

Initial Shares

 

 

1,534,091

 

 

 

1,960,181

 

Service Shares

 

 

4,702

 

 

 

193,323

 

Distributions reinvested:

 

 

 

 

 

 

 

 

Initial Shares

 

 

6,769,878

 

 

 

6,409,913

 

Service Shares

 

 

337,757

 

 

 

336,298

 

Cost of shares redeemed:

 

 

 

 

 

 

 

 

Initial Shares

 

 

(4,854,975)

 

 

 

(10,813,413)

 

Service Shares

 

 

(286,679)

 

 

 

(841,513)

 

Increase (Decrease) in Net Assets
from Beneficial Interest Transactions

3,504,774

 

 

 

(2,755,211)

 

Total Increase (Decrease) in Net Assets

11,563,614

 

 

 

9,783,872

 

Net Assets ($):

 

Beginning of Period

 

 

96,595,938

 

 

 

86,812,066

 

End of Period

 

 

108,159,552

 

 

 

96,595,938

 

Capital Share Transactions (Shares):

 

Initial Shares

 

 

 

 

 

 

 

 

Shares sold

 

 

41,416

 

 

 

70,955

 

Shares issued for distributions reinvested

 

 

190,742

 

 

 

279,286

 

Shares redeemed

 

 

(129,706)

 

 

 

(364,347)

 

Net Increase (Decrease) in Shares Outstanding

102,452

 

 

 

(14,106)

 

Service Shares

 

 

 

 

 

 

 

 

Shares sold

 

 

126

 

 

 

6,673

 

Shares issued for distributions reinvested

 

 

9,502

 

 

 

14,719

 

Shares redeemed

 

 

(7,670)

 

 

 

(28,426)

 

Net Increase (Decrease) in Shares Outstanding

1,958

 

 

 

(7,034)

 

 

 

 

 

 

 

 

 

 

 

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. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. 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, 2021

Year Ended December 31,

Initial Shares

(Unaudited)

2020

2019

2018

2017

2016

Per Share Data ($):

      

Net asset value,
beginning of period

35.68

31.82

28.03

32.72

28.81

29.98

Investment Operations:

      

Investment income—neta

.09

.23

.30

.27

.26

.33

Net realized and unrealized
gain (loss) on investments

5.38

6.17

7.36

(1.66)

5.22

2.27

Total from Investment Operations

5.47

6.40

7.66

(1.39)

5.48

2.60

Distributions:

      

Dividends from
investment income—net

(.09)

(.23)

(.33)

(.26)

(.23)

(.34)

Dividends from net realized
gain on investments

(2.59)

(2.31)

(3.54)

(3.04)

(1.34)

(3.43)

Total Distributions

(2.68)

(2.54)

(3.87)

(3.30)

(1.57)

(3.77)

Net asset value, end of period

38.47

35.68

31.82

28.03

32.72

28.81

Total Return (%)

15.96b

24.63

29.12

(4.68)

19.71

10.04

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

.93c

.93

.93

.93

.90

.90

Ratio of net expenses
to average net assets

.80c

.82

.93

.93

.90

.90

Ratio of net investment income
to average net assets

.49c

.77

1.00

.87

.85

1.17

Portfolio Turnover Rate

28.61b

66.45

61.08

63.89

61.00

64.41

Net Assets, end of period ($ x 1,000)

102,932

91,818

82,328

69,774

82,070

74,797

a Based on average shares outstanding.

b Not annualized.

c Annualized.

See notes to financial statements.

15

 

FINANCIAL HIGHLIGHTS (continued)

       
 

Six Months Ended

 
 

June 30, 2021

Year Ended December 31,

Service Shares

(Unaudited)

2020

2019

2018

2017

2016

Per Share Data ($):

      

Net asset value,
beginning of period

35.76

31.88

28.08

32.76

28.85

30.01

Investment Operations:

      

Investment income—neta

.04

.16

.22

.19

.18

.25

Net realized and unrealized
gain (loss) on investments

5.38

6.19

7.37

(1.65)

5.22

2.29

Total from Investment Operations

5.42

6.35

7.59

(1.46)

5.40

2.54

Distributions:

      

Dividends from
investment income—net

(.04)

(.16)

(.25)

(.18)

(.15)

(.27)

Dividends from net
realized gain on investments

(2.59)

(2.31)

(3.54)

(3.04)

(1.34)

(3.43)

Total Distributions

(2.63)

(2.47)

(3.79)

(3.22)

(1.49)

(3.70)

Net asset value, end of period

38.55

35.76

31.88

28.08

32.76

28.85

Total Return (%)

15.78b

24.33

28.79

(4.90)

19.38

9.78

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

1.18c

1.18

1.18

1.18

1.15

1.15

Ratio of net expenses
to average net assets

1.05c

1.07

1.18

1.18

1.15

1.15

Ratio of net investment income
to average net assets

.24c

.52

.76

.62

.60

.92

Portfolio Turnover Rate

28.61b

66.45

61.08

63.89

61.00

64.41

Net Assets, end of period ($ x 1,000)

5,228

4,778

4,484

4,039

5,306

5,283

a Based on average shares outstanding.

b Not annualized.

c Annualized.

See notes to financial statements.

16

 

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Growth and Income Portfolio (the “fund”) is a separate non-diversified series of BNY Mellon Variable Investment Fund (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering four series, including the fund. The fund is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The fund’s investment objective is to seek long-term capital growth, current income and growth of income consistent with reasonable investment risk. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.

On February 10, 2021, BNY Mellon Investment Management announced its intention to realign several of its investment firms. As a result of this realignment, which is scheduled to occur, subject to regulatory requirements, in the third quarter of 2021 (the “Effective Date”), portfolio managers responsible for managing the fund’s investments who are employees of Mellon Investments Corporation (“Mellon”) in a dual employment arrangement with the Adviser, will become employees of Newton Investment Management North America, LLC (“Newton”), which, like Mellon, will be an affiliate of the Adviser, and will no longer be employees of Mellon. Consequently, as of the Effective Date and subject to the approval of the Trust’s Board of Trustees (the “Board”), the Adviser will engage Newton to serve as the fund’s sub-adviser, pursuant to a sub-investment advisory agreement between the Adviser and Newton. As the fund’s sub-adviser, Newton will provide the day-to-day management of the fund’s investments, subject to the Adviser’s supervision and approval. It is currently anticipated that the fund’s portfolio managers who are responsible for the day-to-day management of the fund’s investments will continue to manage the fund’s investments as of the Effective Date. It is also currently anticipated that there will be no material changes to the fund’s investment objective, strategies or policies, no reduction in the nature or level of services provided to the fund, and no increase in the management fee payable by the fund as a result of the engagement of Newton as the fund’s sub-adviser. The Adviser (and not the fund) will pay Newton for its sub-advisory services.

BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares, which are sold without a sales charge. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the

17

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

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 Trust 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 SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.

The Trust 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.

18

 

Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:

Level 1—unadjusted quoted prices in active markets for identical investments.

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).

Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:

Investments in equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset 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

19

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

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 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, 2021 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 - Common Stocks

106,221,929

-

 

-

106,221,929

 

Investment Companies

2,986,061

-

 

-

2,986,061

 

 See Statement of Investments for additional detailed categorizations, if any.

(b) Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of June 30, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.

(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.

20

 

Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended June 30, 2021, The Bank of New York Mellon earned $303 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.

(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.

(e) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the

21

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.

(f) 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.

(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 and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.

As of and during the period ended June 30, 2021, 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, 2021, the fund did not incur any interest or penalties.

Each tax year in the three year period ended December 31, 2020 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, 2020 was as follows: ordinary income $630,155 and long-term capital gains $6,116,056. 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 long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an

22

 

amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended June 30, 2021, 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 the Adviser, 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. The Adviser has contractually agreed, from January 1, 2021 through April 30, 2022, 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 .80% of the value of the fund’s average daily net assets. On or after April 30, 2022, the Adviser may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $63,658 during the period ended June 30, 2021.

(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, 2021, Service shares were charged $6,220 pursuant to the Distribution Plan.

The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.

23

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.

The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $365 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.

The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2021, the fund was charged $4,384 pursuant to the custody agreement.

During the period ended June 30, 2021, the fund was charged $7,862 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.

The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $65,922, Distribution Plan fees of $1,062, custodian fees of $2,100, Chief Compliance Officer fees of $7,862 and transfer agency fees of $144, which are offset against an expense reimbursement currently in effect in the amount of $12,847.

(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2021, amounted to $28,681,822 and $32,514,873, respectively.

At June 30, 2021, accumulated net unrealized appreciation on investments was $39,316,984, consisting of $39,930,658 gross unrealized appreciation and $613,674 gross unrealized depreciation.

24

 

At June 30, 2021, 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 AND APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT AND APPROVAL OF SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited)

At a meeting of the fund’s Board of Trustees held on March 8-9, 2021 (the “15(c) Meeting”), the Board considered the renewal of the fund’s Investment Advisory Agreement pursuant to which the Adviser 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 (the “1940 Act”)) of the fund (the “Independent Trustees”), were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser. In considering the renewal of the Agreement, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.

Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the 15(c) Meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.

The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.

Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Initial shares with the performance of a group of multi-cap core funds underlying variable insurance products (“VIPs”) selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all large-cap core funds underlying VIPs (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the fund’s actual and contractual management fees and total expenses with those of the

26

 

same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all large-cap core funds underlying VIPs and multi-cap core funds underlying VIPs with similar 12b-1/non-12b-1 structures, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.

Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser 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 highest in the Performance Group for the one-, two- and three-year periods, highest in the Performance Universe for the three-year period and in the first quartile of the Performance Group and the Performance Universe for all periods). The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.

Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year, which included reductions for a fee waiver arrangement in place that reduced the management fee paid to the Adviser. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets 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 higher than the Expense Group median contractual management fee, the fund’s actual management fee was slightly higher than the Expense Group median and higher the Expense Universe median actual management fee and the fund’s total expenses were higher than the Expense Group median and Expense Universe median total expenses.

Representatives of the Adviser stated that the Adviser has contractually agreed, until April 30, 2022, 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, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 0.80% of the fund’s average daily net assets.

Representatives of the Adviser noted that there were no other funds advised or administered by the Adviser that are in the same Lipper category as the fund or separate accounts and/or other types of client portfolios advised by the Adviser that are considered to have similar investment strategies and policies as the fund.

27

 

INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT AND APPROVAL OF SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)

Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also considered the expense limitation arrangement and its effect on the profitability of the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.

The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.

· The Board concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate.

· The Board was satisfied with the fund’s performance.

· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.

28

 

· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and 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 the fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreement.

***************************************************

At a meeting of the fund’s Board of Trustees held on May 11, 2021 (the “Meeting”), the Board discussed with representatives of the Adviser plans to realign Mellon Investments Corporation’s (“Mellon”) equities and multi-asset capabilities with Newton Investment Management North America, LLC (“Newton US”) (the “Firm Realignment”), with such realignment scheduled to occur, subject to regulatory requirements, in the third quarter of 2021 (the “Effective Date”). The Adviser noted that, as a result of the Firm Realignment, the portfolio managers who are currently responsible for managing the investments of the fund as employees of Mellon in a dual employment arrangement with the Adviser, will become employees of Newton US as of the Effective Date. Consequently, the Adviser proposed to engage Newton US to serve as the fund’s sub-investment adviser, pursuant to a sub-investment advisory agreement between the Adviser and Newton US (the “New Sub-Advisory Agreement”), to be effective on the Effective Date. In addition, the Adviser proposed amending the Fund’s current investment advisory agreement (the “Current Investment Advisory Agreement”) to reflect the engagement of Newton US as sub-investment adviser to the fund (as proposed to be amended, the “Amended Investment Advisory Agreement”), to be effective on the Effective Date.

29

 

INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT AND APPROVAL OF SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)

At the Meeting, the Adviser recommended the approval of the New Sub-Advisory Agreement, pursuant to which Newton US would serve as sub-investment adviser to the fund, and the Amended Investment Advisory Agreement. The recommendation for the approval of the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement was based on the following considerations, among others: (i) approval of the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement would permit the fund’s current portfolio managers to continue to be responsible for the day-to-day management of the Fund’s portfolio after the Effective Date as employees of Newton US; (ii) there will be no material changes to the fund’s investment objective, strategies or policies, no reduction in the nature or level of services provided to the fund, and no increases in the management fee payable by the fund as a result of the proposed changes to the investment advisory arrangements; and (iii) the Adviser (and not the fund) will pay Newton US for its sub-investment advisory services. The Board also considered the fact that the Adviser stated that it believes there are no material changes to the information the Board had previously considered at the 15(c) Meeting, at which the Board re-approved the Current Investment Advisory Agreement for the ensuing year, other than the information about the Firm Realignment and Newton US.

At the Meeting, the Board members, all of whom are Independent Trustees, considered and approved the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement. In determining whether to approve the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement, the Board considered the materials prepared by the Adviser received in advance of the Meeting and other information presented at the Meeting, which included: (i) a form of the New Sub-Advisory Agreement and a form of the Amended Investment Advisory Agreement; (ii) information regarding the Firm Realignment and how it is expected to enhance investment capabilities; (iii) information regarding Newton US; and (iv) an opinion of counsel that the proposed changes to the investment advisory arrangements would not result in an “assignment” of the Current Investment Advisory Agreement under the 1940 Act and the Investment Advisers Act of 1940, as amended, and, therefore, do not require the approval of fund shareholders. The Board also considered the substance of discussions with representatives of the Adviser at the Meeting and the 15(c) Meeting.

Nature, Extent and Quality of Services to be Provided. In examining the nature, extent and quality of the services that were expected to be provided by Newton US to the fund under the New Sub-Advisory Agreement, the Board considered: (i) Newton US’s organization, qualification and background, as well as the qualifications of its personnel; (ii) the expertise of the personnel providing portfolio management services, which would remain the same after the Effective Date; and (iii) the investment strategy for the fund, which would remain the same after the Effective Date. The Board also considered the review process undertaken by the Adviser and the Adviser’s favorable assessment of the nature and quality of the sub-investment advisory services expected to be provided to the fund by Newton US after the Effective Date. Based on their consideration and review of the foregoing information, the Board concluded that the nature, extent and quality of the sub-investment advisory services to be provided by Newton US under the

30

 

New Sub-Advisory Agreement, as well as Newton US’s ability to render such services based on its resources and the experience of the investment team, which will include the fund’s current portfolio managers, were adequate and appropriate for the fund in light of the fund’s investment objective, and supported a decision to approve the New Sub-Advisory Agreement. The Board also considered, as it related to the Amended Investment Advisory Agreement, that the nature, extent and quality of the services that are provided by the Adviser are expected to remain the same, including the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the fund’s portfolio management personnel.

Investment Performance. The Board had considered the fund’s investment performance and that of the investment team managing the fund’s portfolio at the 15(c) Meeting (including comparative data provided by Broadridge). The Board considered the performance and that the same investment professionals would continue to manage the fund’s assets after the Effective Date, as factors in evaluating the services to be provided by Newton US under the New Sub-Advisory Agreement after the Effective Date, and determined that these factors, when viewed together with the other factors considered by the Board, supported a decision to approve the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement.

Costs of Services to be Provided and Profitability. The Board considered the proposed fee payable under the New Sub-Advisory Agreement, noting that the proposed fee would be paid by the Adviser and, thus, would not impact the fees paid by the fund or the Adviser’s profitability. The Board considered the fee payable to Newton US in relation to the fee paid to the Adviser by the fund and the respective services provided by Newton US and the Adviser. The Board recognized that, because Newton US’s fee would be paid by the Adviser, and not the fund, an analysis of profitability was more appropriate in the context of the Board’s consideration of the fund’s Current Investment Advisory Agreement, and that the Board had received and considered a profitability analysis of the Adviser and its affiliates, including Newton US, at the 15(c) Meeting. The Board concluded that the proposed fee payable to Newton US by the Adviser was appropriate and the Adviser’s profitability was not excessive in light of the nature, extent and quality of the services to be provided to the fund by the Adviser under the Amended Investment Advisory Agreement and Newton US under the New Sub-Advisory Agreement.

Economies of Scale to be Realized. The Board recognized that, because the fee payable to Newton US would be paid by the Adviser, and not the fund, an analysis of economies of scale was more appropriate in the context of the Board’s consideration of the Current Investment Advisory Agreement, which had been done at the 15(c) Meeting. At the 15(c) Meeting, the Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Current Investment Advisory Agreement and that, to the extent in the future it were determined that material economies of scale had not

31

 

INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT AND APPROVAL OF SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)

been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board also considered whether there were any ancillary benefits that would accrue to Newton US as a result of its relationship with the fund, and such ancillary benefits, if any, were determined to be reasonable.

In considering the materials and information described above, the Independent Trustees received assistance from, and met separately with, their independent legal counsel, and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to the approval of investment advisory and sub-investment advisory agreements.

After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board members, all of whom are Independent Trustees, with the assistance of independent legal counsel, approved the New Sub-Advisory Agreement and Amended Investment Advisory Agreement for the fund effective as of the Effective Date.

32

 

LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited)

Effective June 1, 2019, the fund adopted a liquidity risk management program (the “Liquidity Risk Management Program”) pursuant to the requirements of Rule 22e-4 under the Investment Company Act of 1940, as amended. Rule 22e-4 requires registered open-end funds, including mutual funds and exchange-traded funds but not money market funds, to establish liquidity risk management programs in order to effectively manage fund liquidity and shareholder redemptions. The rule is designed to mitigate the risk that a fund could not meet redemption requests without significantly diluting the interests of remaining investors.

The rule requires the fund to assess, manage and review their liquidity risk at least annually considering applicable factors such as investment strategy and liquidity during normal and foreseeable stressed conditions, including whether the strategy is appropriate for an open-end fund and whether the fund has a relatively concentrated portfolio or large positions in particular issuers. The fund must also assess its use of borrowings and derivatives, short-term and long-term cash flow projections in normal and stressed conditions, holdings of cash and cash equivalents, and borrowing arrangements and other funding sources.

The rule also requires the fund to classify its investments as highly liquid, moderately liquid, less liquid or illiquid based on the number of days the fund expects it would take to liquidate the investment, and to review these classifications at least monthly or more often under certain conditions. The periods range from three or fewer business days for a highly liquid investment to greater than seven calendar days for settlement of a less liquid investment. Illiquid investments are those a fund does not expect to be able to sell or dispose of within seven calendar days without significantly changing the market value. The fund is prohibited from acquiring an investment if, after the acquisition, its holdings of illiquid assets will exceed 15% of its net assets. In addition, if a fund permits redemptions in-kind, the rule requires the fund to establish redemption in-kind policies and procedures governing how and when it will engage in such redemptions.

Pursuant to the rule’s requirements, the Liquidity Risk Management Program has been reviewed and approved by the Board. Furthermore, the Board has received a written report prepared by the Program’s Administrator that addresses the operation of the Program, assesses its adequacy and effectiveness and describes any material changes made to the Program.

Assessment of Program

In the opinion of the Program Administrator, the Program approved by the Board continues to be adequate for the fund and the Program has been implemented effectively. The Program Administrator has monitored the fund’s liquidity risk and the liquidity classification of the securities held by the fund and has determined that the Program is operating effectively.

During the period from January 1, 2020 to December 31, 2020, there were no material changes to the Program and no material liquidity events that impacted the fund. During the period, the fund held sufficient highly liquid assets to meet fund redemptions.

Under normal expected foreseeable fund redemption forecasts and foreseeable stressed fund redemption forecasts, the Program Administrator believes that the fund maintains sufficient highly liquid assets to meet expected fund redemptions.

33

 
For More Information

BNY Mellon Variable Investment Fund, Growth and Income Portfolio

240 Greenwich Street

New York, NY 10286

Adviser

BNY Mellon Investment Adviser, Inc.

240 Greenwich Street

New York, NY 10286

Custodian

The Bank of New York Mellon

240 Greenwich Street

New York, NY 10286

Transfer Agent &
Dividend Disbursing Agent

BNY Mellon Transfer, Inc.

240 Greenwich Street

New York, NY 10286

Distributor

BNY Mellon Securities Corporation

240 Greenwich Street

New York, NY 10286


Telephone 1-800-258-4260 or 1-800-258-4261

Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department

E-mail Send your request to info@bnymellon.com

Internet Information can be viewed online or downloaded at www.im.bnymellon.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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.

  

© 2021 BNY Mellon Securities Corporation
0108SA0621

 

BNY Mellon Variable Investment Fund, Opportunistic Small Cap Portfolio

 

SEMIANNUAL REPORT

June 30, 2021

 
 

Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes.

 

The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds.

 

Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value

 

Contents

THE FUND

  

Discussion of Fund Performance

2

Understanding Your Fund’s Expenses

4

Comparing Your Fund’s Expenses
With Those of Other Funds

4

Statement of Investments

5

Statement of Investments
in Affiliated Issuers

9

Statement of Assets and Liabilities

10

Statement of Operations

11

Statement of Changes in Net Assets

12

Financial Highlights

13

Notes to Financial Statements

15

Information About the Renewal and
Approval of the Fund’s Investment
Advisory Agreement and Approval of
Sub-Investment Advisory Agreement

24

Liquidity Risk Management Program

31

FOR MORE INFORMATION

 

Back Cover

 

DISCUSSION OF FUND PERFORMANCE (Unaudited)

For the period from January 1, 2021 through June 30, 2021, as provided by Patrick Kent and James Boyd, Portfolio Managers

Market and Fund Performance Overview

For the six-month period ended June 30, 2021, BNY Mellon Variable Investment Fund, Opportunistic Small Cap Portfolio’s Initial shares produced a total return of 15.85%, and its Service shares produced a total return of 15.72%.1 In comparison, the Russell 2000® Index (the “Index”), the fund’s benchmark, produced a total return of 17.54% for the same period.2

Small-cap stocks rose over the reporting period, as the economy recovered in response to easing government shutdowns and the prospect of COVID-19 vaccines. The fund lagged the Index, mainly due to a decision to avoid exposure to stocks driven by speculative buying.

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 Rebound Continues, Inflation Concerns Emerge

Early in the reporting period, stocks benefited from a number of factors. With the approval of multiple COVID-19 vaccines in November 2020, investor sentiment improved, and the global economic outlook brightened. Returns were also boosted by interest rates, which remained low, and by the stimulus package approved by Congress, which provided support to consumers, small businesses and the economy generally. Investors also began to factor the likelihood of additional stimulus and infrastructure spending into their calculations.

As government lockdowns were eased, businesses that had been hard hit by the pandemic began to show signs of recovery. Businesses also became more confident and increased their capital spending. In addition, inventory shortages began to appear, providing another catalyst to economic growth. With the end of the pandemic in view and continued economic rebound likely, investors began to shift away from growth-oriented stocks and into value-oriented stocks. This shift persisted into early 2021.

Toward the end of the reporting period, the economic rebound continued, but combined with the Federal Reserve’s (the “Fed”) indications that it would tolerate higher inflation rates until the economy fully recovered, this led to a rise in inflation expectations. As a result, yields at the long end of the Treasury yield curve began to increase. These higher interest rates weighed heavily on the stock market performance, especially that of technology and other growth-oriented stocks.

Later, investors became concerned that the Fed would tighten monetary policy sooner than expected, potentially slowing the economy. This resulted in somewhat of a shift back to growth-oriented stocks.

Security Selection Decisions Hindered Fund Performance

The fund’s performance versus the Index was primarily the result of stock selection decisions. The fund, which focuses on fundamentals and intrinsic value, chose not to invest in AMC Entertainment

2

 

Holdings and GameStop, two stocks whose performance has been driven by speculative buying, not fundamentals. In addition, the fund’s position in Paya Holdings, an electronic payments company, hindered performance. Despite the company’s strong fundamentals, shares declined as part of a more generalized sell-off in companies recently taken public via special purpose companies (SPACs). A position in Array Technologies, a solar energy company, also hampered performance as the company encountered higher input costs. AdaptHealth, a home medical equipment company, also detracted from performance. Shares declined in response to a personal scandal involving the CEO.

On a more positive note, certain stock selections proved favorable. Raven Industries, a maker of precision agricultural equipment performed well because the company was purchased at a premium by CNH Industrial. Shares of Louisiana-Pacific, a maker of particle board, also contributed positively to performance. Shares approximately doubled during the reporting period, and the fund exited its position. In addition, Houghton-Mifflin Harcourt, a publishing company, also added to returns. A turnaround play, the shares approximately tripled during the period.

An Optimistic Outlook for Small-Cap Stocks

The backdrop for small-cap equities remains favorable, given the improving economy and accommodative policies of central banks around the world. Growth-oriented stocks overtook value-oriented stocks late in the period, and this may continue, given the possibility of a slowdown in the economy due to tightening of monetary policy by the Fed or to a resurgence in COVID-19. Nevertheless, stocks that are more dependent on a continued economic recovery could also continue to perform well, as many have in the first half of the year, and we continue to look for opportunities in industries that will benefit from the continued economic recovery.

July 15, 2021

¹ DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. 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 BNY Mellon Variable Investment Fund, Opportunistic Small Cap Portfolio made available through insurance products may be similar to those of other funds managed or advised by BNY Mellon Investment Adviser, Inc. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other BNY Mellon fund.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.

3

 

UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)

As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads), redemption fees and expenses associated with variable annuity or insurance contracts, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Variable Investment Fund, Opportunistic Small Cap Portfolio from January 1, 2021 to June 30, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

     

Expenses and Value of a $1,000 Investment

 

Assume actual returns for the six months ended June 30, 2021

 

 

 

 

 

 

 

 

Initial Shares

Service Shares

 

Expenses paid per $1,000

$4.44

$5.78

 

Ending value (after expenses)

$1,158.50

$1,157.20

 

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, 2021

 

 

 

 

 

 

 

 

Initial Shares

Service Shares

 

Expenses paid per $1,000

$4.16

$5.41

 

Ending value (after expenses)

$1,020.68

$1,019.44

 

Expenses are equal to the fund’s annualized expense ratio of .83% for Initial Shares and 1.08% for Service Shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

4

 

STATEMENT OF INVESTMENTS

June 30, 2021 (Unaudited)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 97.2%

     

Automobiles & Components - .5%

     

Thor Industries

   

15,952

 

 1,802,576

 

Banks - 9.4%

     

BankUnited

   

141,522

 

6,041,574

 

Essent Group

   

109,397

 

4,917,395

 

First Bancorp

   

510,751

 

6,088,152

 

First Interstate BancSystem, Cl. A

   

94,550

 

3,955,026

 

First Merchants

   

83,315

 

3,471,736

 

Silvergate Capital, Cl. A

   

20,601

a 

2,334,505

 

Synovus Financial

   

123,209

 

5,406,411

 
    

32,214,799

 

Capital Goods - 16.2%

     

Array Technologies

   

269,553

a,b 

4,205,027

 

EnerSys

   

55,093

 

5,384,239

 

Fluor

   

257,374

a 

4,555,520

 

Gibraltar Industries

   

55,653

a 

4,246,880

 

GrafTech International

   

485,243

 

5,638,524

 

Matrix Service

   

203,995

a 

2,141,947

 

Maxar Technologies

   

104,680

 

4,178,826

 

Raven Industries

   

29,931

a 

1,731,508

 

Rexnord

   

97,309

 

4,869,342

 

Terex

   

54,764

 

2,607,862

 

Titan Machinery

   

93,618

a 

2,896,541

 

Valmont Industries

   

16,344

 

3,858,001

 

Wabash National

   

266,491

 

4,263,856

 

WESCO International

   

48,548

a 

4,991,705

 
    

55,569,778

 

Commercial & Professional Services - 3.5%

     

Covanta Holding

   

296,427

 

5,220,079

 

The Brink's Company

   

47,719

 

3,666,728

 

U.S. Ecology

   

80,928

a 

3,036,419

 
    

11,923,226

 

Consumer Durables & Apparel - 1.4%

     

Callaway Golf

   

143,983

a 

 4,856,547

 

Consumer Services - 6.2%

     

Bloomin‘ Brands

   

177,750

a 

4,824,135

 

Cracker Barrel Old Country Store

   

10,417

 

1,546,508

 

Houghton Mifflin Harcourt

   

829,923

a 

9,162,350

 

OneSpaWorld Holdings

   

142,944

a,b 

1,385,127

 

Papa John's International

   

42,370

 

4,425,123

 
    

21,343,243

 

5

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 97.2% (continued)

     

Diversified Financials - 1.2%

     

PJT Partners, Cl. A

   

59,841

 

 4,271,451

 

Energy - 4.0%

     

CNX Resources

   

362,828

a 

4,956,230

 

PBF Energy, Cl. A

   

393,344

a 

6,018,163

 

Viper Energy Partners

   

138,892

 

2,615,336

 
    

13,589,729

 

Food & Staples Retailing - 1.4%

     

The Chefs' Warehouse

   

148,455

a 

 4,725,323

 

Health Care Equipment & Services - 9.4%

     

Acadia Healthcare

   

73,665

a 

4,622,479

 

Apria

   

181,007

a 

5,068,196

 

Health Catalyst

   

105,270

a,b 

5,843,538

 

ModivCare

   

18,397

a 

3,128,778

 

NuVasive

   

52,168

a 

3,535,947

 

Privia Health Group

   

82,777

a,b 

3,672,815

 

R1 RCM

   

126,316

a 

2,809,268

 

SOC Telemed

   

614,069

a,b 

3,494,053

 
    

32,175,074

 

Insurance - 2.1%

     

BRP Group, Cl. A

   

119,986

a 

3,197,627

 

The Hanover Insurance Group

   

29,290

 

3,972,896

 
    

7,170,523

 

Materials - 6.1%

     

Alamos Gold, Cl. A

   

670,610

 

5,130,166

 

IAMGOLD

   

752,140

a,b 

2,218,813

 

Largo Resources

   

98,778

a 

1,539,949

 

MP Materials

   

132,122

a,b 

4,870,017

 

Summit Materials, Cl. A

   

119,346

a 

4,159,208

 

Tronox Holdings, Cl. A

   

134,371

 

3,009,910

 
    

20,928,063

 

Media & Entertainment - 4.5%

     

Cardlytics

   

27,655

a,b 

3,510,249

 

Eventbrite, Cl. A

   

295,199

a,b 

5,608,781

 

EverQuote, Cl. A

   

112,838

a 

3,687,546

 

TrueCar

   

479,994

a 

2,711,966

 
    

15,518,542

 

Pharmaceuticals Biotechnology & Life Sciences - 5.5%

     

Alkermes

   

193,578

a 

4,746,533

 

Arena Pharmaceuticals

   

43,118

a 

2,940,648

 

FibroGen

   

39,776

a 

1,059,235

 

Generation Bio

   

64,396

a,b 

1,732,252

 

PTC Therapeutics

   

17,937

a 

758,197

 

Ultragenyx Pharmaceutical

   

24,409

a 

2,327,398

 

6

 
        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 97.2% (continued)

     

Pharmaceuticals Biotechnology & Life Sciences - 5.5% (continued)

     

uniQure

   

34,732

a 

1,069,746

 

Xenon Pharmaceuticals

   

156,632

a 

2,916,488

 

Zogenix

   

71,216

a,b 

1,230,612

 
    

18,781,109

 

Real Estate - 2.1%

     

Colliers International Group

   

63,087

b 

 7,064,482

 

Retailing - 2.9%

     

Party City Holdco

   

807,581

a 

7,534,731

 

Sally Beauty Holdings

   

106,929

a 

2,359,923

 
    

9,894,654

 

Semiconductors & Semiconductor Equipment - 2.1%

     

Diodes

   

65,588

a 

5,231,955

 

MaxLinear

   

44,058

a 

1,872,024

 
    

7,103,979

 

Software & Services - 10.2%

     

ChannelAdvisor

   

294,217

a 

7,211,259

 

Cloudera

   

109,471

a 

1,736,210

 

Everbridge

   

35,721

a,b 

4,860,914

 

Medallia

   

181,486

a 

6,125,152

 

Paya Holdings, CI. A

   

682,988

a,b 

7,526,528

 

Vonage Holdings

   

128,732

a 

1,855,028

 

Zuora, Cl. A

   

328,382

a 

5,664,589

 
    

34,979,680

 

Technology Hardware & Equipment - 3.5%

     

ADTRAN

   

283,275

 

5,849,629

 

Arlo Technologies

   

320,002

a 

2,166,414

 

Extreme Networks

   

286,780

a 

3,200,465

 

Ondas Holdings

   

96,791

a,b 

768,521

 
    

11,985,029

 

Transportation - 2.1%

     

SkyWest

   

168,847

a 

 7,272,240

 

Utilities - 2.9%

     

Clearway Energy, Cl. C

   

163,010

 

4,316,505

 

NextEra Energy Partners

   

74,639

 

5,699,434

 
    

10,015,939

 

Total Common Stocks (cost $271,427,308)

   

333,185,986

 

7

 

STATEMENT OF INVESTMENTS (Unaudited) (continued)

        
 

Description

   

Shares

 

Value ($)

 

Exchange-Traded Funds - .9%

     

Registered Investment Companies - .9%

     

iShares Russell 2000 ETF
(cost $3,005,588)

   

13,611

b 

 3,121,955

 
  

1-Day
Yield (%)

     

Investment Companies - 1.1%

     

Registered Investment Companies - 1.1%

     

Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares
(cost $3,675,821)

 

0.05

 

3,675,821

c 

 3,675,821

 
        

Investment of Cash Collateral for Securities Loaned - 4.6%

     

Registered Investment Companies - 4.6%

     

Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares
(cost $15,851,472)

 

0.01

 

15,851,472

c 

 15,851,472

 

Total Investments (cost $293,960,189)

 

103.8%

 

355,835,234

 

Liabilities, Less Cash and Receivables

 

(3.8%)

 

(12,928,049)

 

Net Assets

 

100.0%

 

342,907,185

 

ETF—Exchange-Traded Fund

a Non-income producing security.

b Security, or portion thereof, on loan. At June 30, 2021, the value of the fund’s securities on loan was $41,668,682 and the value of the collateral was $42,875,855, consisting of cash collateral of $15,851,472 and U.S. Government & Agency securities valued at $27,024,383.

c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.

  

Portfolio Summary (Unaudited)

Value (%)

Industrials

21.8

Information Technology

15.8

Health Care

14.9

Financials

12.7

Consumer Discretionary

11.0

Investment Companies

6.6

Materials

6.1

Communication Services

4.5

Energy

4.0

Utilities

2.9

Real Estate

2.1

Consumer Staples

1.4

 

103.8

 Based on net assets.

See notes to financial statements.

8

 

STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)

          

Investment Companies

Value
12/31/20 ($)

Purchases ($)

Sales ($)

Value
6/30/21 ($)

Net
Assets(%)

Dividends/
Distributions ($)

Registered Investment Companies;

Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares

7,330,027

51,265,230

(54,919,436)

3,675,821

1.1

1,581

Investment of Cash Collateral for Securities Loaned;

Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares

11,599,220

79,611,768

(75,359,516)

15,851,472

4.6

82,798††

Total

18,929,247

130,876,998

(130,278,952)

19,527,293

5.7

84,379

 Included reinvested dividends/distributions.

†† Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

See notes to financial statements.

9

 

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2021 (Unaudited)

       

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Statement of Investments
(including securities on loan, valued at $41,668,682)—Note 1(c):

 

 

 

Unaffiliated issuers

274,432,896

 

336,307,941

 

Affiliated issuers

 

19,527,293

 

19,527,293

 

Receivable for investment securities sold

 

4,540,989

 

Dividends and securities lending income receivable

 

85,290

 

Receivable for shares of Beneficial Interest subscribed

 

29,248

 

Tax reclaim receivable—Note 1(b)

 

920

 

Prepaid expenses

 

 

 

 

5,680

 

 

 

 

 

 

360,497,361

 

Liabilities ($):

 

 

 

 

Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b)

 

227,831

 

Liability for securities on loan—Note 1(c)

 

15,851,472

 

Payable for investment securities purchased

 

1,000,769

 

Payable for shares of Beneficial Interest redeemed

 

447,928

 

Trustees’ fees and expenses payable

 

3,198

 

Other accrued expenses

 

 

 

 

58,978

 

 

 

 

 

 

17,590,176

 

Net Assets ($)

 

 

342,907,185

 

Composition of Net Assets ($):

 

 

 

 

Paid-in capital

 

 

 

 

226,178,476

 

Total distributable earnings (loss)

 

 

 

 

116,728,709

 

Net Assets ($)

 

 

342,907,185

 

    

Net Asset Value Per Share

Initial Shares

Service Shares

 

Net Assets ($)

320,779,916

22,127,269

 

Shares Outstanding

5,582,146

405,584

 

Net Asset Value Per Share ($)

57.47

54.56

 

 

 

 

 

See notes to financial statements.

 

 

 

10

 

STATEMENT OF OPERATIONS

Six Months Ended June 30, 2021 (Unaudited)

       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Income:

 

 

 

 

Cash dividends (net of $12,404 foreign taxes withheld at source):

 

Unaffiliated issuers

 

 

928,897

 

Affiliated issuers

 

 

1,581

 

Income from securities lending—Note 1(c)

 

 

82,798

 

Total Income

 

 

1,013,276

 

Expenses:

 

 

 

 

Investment advisory fee—Note 3(a)

 

 

1,249,378

 

Professional fees

 

 

55,045

 

Distribution fees—Note 3(b)

 

 

26,997

 

Prospectus and shareholders’ reports

 

 

26,051

 

Trustees’ fees and expenses—Note 3(c)

 

 

10,223

 

Chief Compliance Officer fees—Note 3(b)

 

 

7,862

 

Custodian fees—Note 3(b)

 

 

7,635

 

Loan commitment fees—Note 2

 

 

4,326

 

Shareholder servicing costs—Note 3(b)

 

 

683

 

Miscellaneous

 

 

15,553

 

Total Expenses

 

 

1,403,753

 

Investment (Loss)—Net

 

 

(390,477)

 

Realized and Unrealized Gain (Loss) on Investments—Note 4 ($):

 

 

Net realized gain (loss) on investments

59,719,955

 

Net change in unrealized appreciation (depreciation) on investments

(11,442,396)

 

Net Realized and Unrealized Gain (Loss) on Investments

 

 

48,277,559

 

Net Increase in Net Assets Resulting from Operations

 

47,887,082

 

 

 

 

 

 

 

 

See notes to financial statements.

     

11

 

STATEMENT OF CHANGES IN NET ASSETS

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30, 2021 (Unaudited)

 

Year Ended
December 31, 2020

 

Operations ($):

 

 

 

 

 

 

 

 

Investment income (loss)—net

 

 

(390,477)

 

 

 

342,943

 

Net realized gain (loss) on investments

 

59,719,955

 

 

 

2,161,849

 

Net change in unrealized appreciation
(depreciation) on investments

 

(11,442,396)

 

 

 

49,035,655

 

Net Increase (Decrease) in Net Assets
Resulting from Operations

47,887,082

 

 

 

51,540,447

 

Distributions ($):

 

Distributions to shareholders:

 

 

 

 

 

 

 

 

Initial Shares

 

 

(342,095)

 

 

 

(1,469,047)

 

Service Shares

 

 

-

 

 

 

(66,238)

 

Total Distributions

 

 

(342,095)

 

 

 

(1,535,285)

 

Beneficial Interest Transactions ($):

 

Net proceeds from shares sold:

 

 

 

 

 

 

 

 

Initial Shares

 

 

7,576,747

 

 

 

13,882,857

 

Service Shares

 

 

744,094

 

 

 

1,214,440

 

Distributions reinvested:

 

 

 

 

 

 

 

 

Initial Shares

 

 

342,095

 

 

 

1,469,047

 

Service Shares

 

 

-

 

 

 

66,238

 

Cost of shares redeemed:

 

 

 

 

 

 

 

 

Initial Shares

 

 

(17,831,979)

 

 

 

(36,150,285)

 

Service Shares

 

 

(1,657,872)

 

 

 

(2,247,850)

 

Increase (Decrease) in Net Assets
from Beneficial Interest Transactions

(10,826,915)

 

 

 

(21,765,553)

 

Total Increase (Decrease) in Net Assets

36,718,072

 

 

 

28,239,609

 

Net Assets ($):

 

Beginning of Period

 

 

306,189,113

 

 

 

277,949,504

 

End of Period

 

 

342,907,185

 

 

 

306,189,113

 

Capital Share Transactions (Shares):

 

Initial Shares

 

 

 

 

 

 

 

 

Shares sold

 

 

135,706

 

 

 

409,112

 

Shares issued for distributions reinvested

 

 

6,297

 

 

 

51,564

 

Shares redeemed

 

 

(323,836)

 

 

 

(927,661)

 

Net Increase (Decrease) in Shares Outstanding

(181,833)

 

 

 

(466,985)

 

Service Shares

 

 

 

 

 

 

 

 

Shares sold

 

 

14,173

 

 

 

36,881

 

Shares issued for distributions reinvested

 

 

-

 

 

 

2,444

 

Shares redeemed

 

 

(31,437)

 

 

 

(61,128)

 

Net Increase (Decrease) in Shares Outstanding

(17,264)

 

 

 

(21,803)

 

 

 

 

 

 

 

 

 

 

 

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. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. 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, 2021

Year Ended December 31,

Initial Shares

(Unaudited)

2020

2019

2018

2017

2016

Per Share Data ($):

      

Net asset value, beginning of period

49.66

41.78

41.20

60.91

49.44

46.02

Investment Operations:

      

Investment income (loss)—neta

(.06)

.06

.26

(.06)

(.12)

(.02)

Net realized and unrealized
gain (loss) on investments

7.93

8.07

8.35

(9.48)

12.21

7.07

Total from Investment Operations

7.87

8.13

8.61

(9.54)

12.09

7.05

Distributions:

      

Dividends from investment
income-net

(.06)

(.25)

-

-

-

-

Dividends from net realized
gain on investments

-

-

(8.03)

(10.17)

(.62)

(3.63)

Total distributions

(.06)

(.25)

(8.03)

(10.17)

(.62)

(3.63)

Net asset value, end of period

57.47

49.66

41.78

41.20

60.91

49.44

Total Return (%)

15.85b

19.89

21.78

(19.08)

24.69

17.07

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

.83c

.85

.84

.84

.85

.86

Ratio of net investment income
(loss) to average net assets

(.22)c

.16

.64

(.12)

(.22)

(.05)

Portfolio Turnover Rate

46.06b

68.67

65.42

67.90

70.11

88.08

Net Assets, end of period ($ x 1,000)

320,780

286,250

260,321

146,730

189,582

162,171

a Based on average shares outstanding.

b Not annualized.

c Annualized.

See notes to financial statements.

13

 

FINANCIAL HIGHLIGHTS (continued)

       
 

Six Months Ended

 
 

June 30, 2021

Year Ended December 31,

Service Shares

(Unaudited)

2020

2019

2018

2017

2016

Per Share Data ($):

      

Net asset value, beginning of period

47.15

39.65

39.53

58.98

48.01

44.90

Investment Operations:

      

Investment income (loss)—neta

(.12)

(.03)

.16

(.19)

(.25)

(.13)

Net realized and unrealized
gain (loss) on investments

7.53

7.68

7.99

(9.09)

11.84

6.87

Total from Investment Operations

7.41

7.65

8.15

(9.28)

11.59

6.74

Distributions:

      

Dividends from investment
income-net

-

(.15)

-

-

-

-

Dividends from net realized
gain on investments

-

-

(8.03)

(10.17)

(.62)

(3.63)

Total distributions

-

(.15)

(8.03)

(10.17)

(.62)

(3.63)

Net asset value, end of period

54.56

47.15

39.65

39.53

58.98

48.01

Total Return (%)

15.72b

19.58

21.49

(19.29)

24.37

16.79

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

1.08c

1.10

1.09

1.09

1.10

1.11

Ratio of net investment income
(loss) to average net assets

(.47)c

(.09)

.41

(.37)

(.47)

(.30)

Portfolio Turnover Rate

46.06b

68.67

65.42

67.90

70.11

88.08

Net Assets, end of period ($ x 1,000)

22,127

19,939

17,628

15,291

20,322

17,353

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:

Opportunistic Small Cap Portfolio (the “fund”) is a separate diversified series of BNY Mellon Variable Investment Fund (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering four series, including the fund. The fund is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The fund’s investment objective is to seek capital growth. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.

On February 10, 2021, BNY Mellon Investment Management announced its intention to realign several of its investment firms. As a result of this realignment, which is scheduled to occur, subject to regulatory requirements, in the third quarter of 2021 (the “Effective Date”), portfolio managers responsible for managing the fund’s investments who are employees of Mellon Investments Corporation (“Mellon”) in a dual employment arrangement with the Adviser, will become employees of Newton Investment Management North America, LLC (“Newton”), which, like Mellon, will be an affiliate of the Adviser, and will no longer be employees of Mellon. Consequently, as of the Effective Date and subject to the approval of the Trust’s Board of Trustees (the “Board”), the Adviser will engage Newton to serve as the fund’s sub-adviser, pursuant to a sub-investment advisory agreement between the Adviser and Newton. As the fund’s sub-adviser, Newton will provide the day-to-day management of the fund’s investments, subject to the Adviser’s supervision and approval. It is currently anticipated that the fund’s portfolio managers who are responsible for the day-to-day management of the fund’s investments will continue to manage the fund’s investments as of the Effective Date. It is also currently anticipated that there will be no material changes to the fund’s investment objective, strategies or policies, no reduction in the nature or level of services provided to the fund, and no increase in the management fee payable by the fund as a result of the engagement of Newton as the fund’s sub-adviser. The Adviser (and not the fund) will pay Newton for its sub-advisory services.

BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares, which are sold to the public without a sales charge. 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

15

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

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 Trust 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 SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.

The Trust 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.

16

 

Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:

Level 1—unadjusted quoted prices in active markets for identical investments.

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).

Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:

Investments in equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset 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

17

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

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 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, 2021 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 - Common Stocks

333,185,986

-

 

-

333,185,986

 

Exchange-Traded Funds

3,121,955

-

 

-

3,121,955

 

Investment Companies

19,527,293

-

 

-

19,527,293

 

 See Statement of Investments for additional detailed categorizations, if any.

(b) Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of June 30, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.

(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

18

 

amortization of premium on investments, is recognized on the accrual basis.

Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended June 30, 2021, The Bank of New York Mellon earned $11,286 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.

(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.

(e) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide.  Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the

19

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.

(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 and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.

As of and during the period ended June 30, 2021, 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, 2021, the fund did not incur any interest or penalties.

Each tax year in the three-year period ended December 31, 2020 remains subject to examination by the Internal Revenue Service and state taxing authorities.

The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.

The fund has an unused capital loss carryover of $3,896,783 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to December 31, 2020. These long-term losses can be carried forward for an unlimited period.

The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2020 was as follows: ordinary income $1,535,285. 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 long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended June 30, 2021, 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 the Adviser, 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, 2021, Service shares were charged $26,997 pursuant to the Distribution Plan.

The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.

The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances

21

 

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.

The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $589 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.

The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2021, the fund was charged $7,635 pursuant to the custody agreement.

During the period ended June 30, 2021, the fund was charged $7,862 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.

The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $212,149, Distribution Plan fees of $4,560, custodian fees of $3,000, Chief Compliance Officer fees of $7,862 and transfer agency fees of $260.

(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2021, amounted to $149,828,518 and $160,359,362, respectively.

At June 30, 2021, accumulated net unrealized appreciation on investments was $61,875,045, consisting of $73,734,484 gross unrealized appreciation and $11,859,439 gross unrealized depreciation.

22

 

At June 30, 2021, 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).

23

 

INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT AND APPROVAL OF SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited)

At a meeting of the fund’s Board of Trustees held on March 8-9, 2021 (the “15(c) Meeting”), the Board considered the renewal of the fund’s Investment Advisory Agreement pursuant to which the Adviser 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 (the “1940 Act”)) of the fund (the “Independent Trustees”), were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser. In considering the renewal of the Agreement, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.

Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the 15(c) Meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.

The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.

Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Initial shares with the performance of a group of small-cap core funds underlying variable insurance products (“VIPs”) selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all small-cap core funds underlying VIPs (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the fund’s actual and contractual management fees and total expenses with those of the

24

 

same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all small-cap core funds underlying VIPs with similar 12b-1/non-12b-1 structures, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.

Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser 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, except the three-year period when performance was at and below the Performance Group and Performance Universe medians, respectively. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.

Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets 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 lower than the Expense Group median contractual management fee, the fund’s actual management fee was lower than the Expense Group median and Expense Universe median actual management fee and the fund’s total expenses were equal to the Expense Group median and slightly higher than the Expense Universe median total expenses.

Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid to the Adviser, or the primary employer of the fund’s primary portfolio manager(s) that is affiliated with the Adviser, for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no other funds advised or administered by the Adviser that are in the same Lipper category as the fund.

25

 

INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT AND APPROVAL OF SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)

Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.

The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.

At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.

· The Board concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate.

· The Board was satisfied with the fund’s performance.

· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.

26

 

· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and 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 the fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreement.

*************************************************

At a meeting of the fund’s Board of Trustees held on May 11, 2021 (the “Meeting”), the Board discussed with representatives of the Adviser plans to realign Mellon Investments Corporation’s (“Mellon”) equities and multi-asset capabilities with Newton Investment Management North America, LLC (“Newton US”) (the “Firm Realignment”), with such realignment scheduled to occur, subject to regulatory requirements, in the third quarter of 2021 (the “Effective Date”). The Adviser noted that, as a result of the Firm Realignment, the portfolio managers who are currently responsible for managing the investments of the fund as employees of Mellon in a dual employment arrangement with the Adviser, will become employees of Newton US as of the Effective Date. Consequently, the Adviser proposed to engage Newton US to serve as the fund’s sub-investment adviser, pursuant to a sub-investment advisory agreement between the Adviser and Newton US (the “New Sub-Advisory Agreement”), to be effective on the Effective Date. In addition, the Adviser proposed amending the Fund’s current investment advisory agreement (the “Current Investment Advisory Agreement”) to reflect the engagement of Newton US as sub-investment adviser to the fund (as proposed to be amended, the “Amended Investment Advisory Agreement”), to be effective on the Effective Date.

27

 

INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT AND APPROVAL OF SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)

At the Meeting, the Adviser recommended the approval of the New Sub-Advisory Agreement, pursuant to which Newton US would serve as sub-investment adviser to the fund, and the Amended Investment Advisory Agreement. The recommendation for the approval of the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement was based on the following considerations, among others: (i) approval of the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement would permit the fund’s current portfolio managers to continue to be responsible for the day-to-day management of the Fund’s portfolio after the Effective Date as employees of Newton US; (ii) there will be no material changes to the fund’s investment objective, strategies or policies, no reduction in the nature or level of services provided to the fund, and no increases in the management fee payable by the fund as a result of the proposed changes to the investment advisory arrangements; and (iii) the Adviser (and not the fund) will pay Newton US for its sub-investment advisory services. The Board also considered the fact that the Adviser stated that it believes there are no material changes to the information the Board had previously considered at the 15(c) Meeting, at which the Board re-approved the Current Investment Advisory Agreement for the ensuing year, other than the information about the Firm Realignment and Newton US.

At the Meeting, the Board members, all of whom are Independent Trustees, considered and approved the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement. In determining whether to approve the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement, the Board considered the materials prepared by the Adviser received in advance of the Meeting and other information presented at the Meeting, which included: (i) a form of the New Sub-Advisory Agreement and a form of the Amended Investment Advisory Agreement; (ii) information regarding the Firm Realignment and how it is expected to enhance investment capabilities; (iii) information regarding Newton US; and (iv) an opinion of counsel that the proposed changes to the investment advisory arrangements would not result in an “assignment” of the Current Investment Advisory Agreement under the 1940 Act and the Investment Advisers Act of 1940, as amended, and, therefore, do not require the approval of fund shareholders. The Board also considered the substance of discussions with representatives of the Adviser at the Meeting and the 15(c) Meeting.

Nature, Extent and Quality of Services to be Provided. In examining the nature, extent and quality of the services that were expected to be provided by Newton US to the fund under the New Sub-Advisory Agreement, the Board considered: (i) Newton US’s organization, qualification and background, as well as the qualifications of its personnel; (ii) the expertise of the personnel providing portfolio management services, which would remain the same after the Effective Date; and (iii) the investment strategy for the fund, which would remain the same after the Effective Date. The Board also considered the review process undertaken by the Adviser and the Adviser’s favorable assessment of the nature and quality of the sub-investment advisory services expected to be provided to the fund by Newton US after the Effective Date. Based on their consideration and review of the foregoing information, the Board concluded that the nature, extent and quality of the sub-investment advisory services to be provided by Newton US under the

28

 

New Sub-Advisory Agreement, as well as Newton US’s ability to render such services based on its resources and the experience of the investment team, which will include the fund’s current portfolio managers, were adequate and appropriate for the fund in light of the fund’s investment objective, and supported a decision to approve the New Sub-Advisory Agreement. The Board also considered, as it related to the Amended Investment Advisory Agreement, that the nature, extent and quality of the services that are provided by the Adviser are expected to remain the same, including the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the fund’s portfolio management personnel.

Investment Performance. The Board had considered the fund’s investment performance and that of the investment team managing the fund’s portfolio at the 15(c) Meeting (including comparative data provided by Broadridge). The Board considered the performance and that the same investment professionals would continue to manage the fund’s assets after the Effective Date, as factors in evaluating the services to be provided by Newton US under the New Sub-Advisory Agreement after the Effective Date, and determined that these factors, when viewed together with the other factors considered by the Board, supported a decision to approve the New Sub-Advisory Agreement and the Amended Investment Advisory Agreement.

Costs of Services to be Provided and Profitability. The Board considered the proposed fee payable under the New Sub-Advisory Agreement, noting that the proposed fee would be paid by the Adviser and, thus, would not impact the fees paid by the fund or the Adviser’s profitability. The Board considered the fee payable to Newton US in relation to the fee paid to the Adviser by the fund and the respective services provided by Newton US and the Adviser. The Board recognized that, because Newton US’s fee would be paid by the Adviser, and not the fund, an analysis of profitability was more appropriate in the context of the Board’s consideration of the fund’s Current Investment Advisory Agreement, and that the Board had received and considered a profitability analysis of the Adviser and its affiliates, including Newton US, at the 15(c) Meeting. The Board concluded that the proposed fee payable to Newton US by the Adviser was appropriate and the Adviser’s profitability was not excessive in light of the nature, extent and quality of the services to be provided to the fund by the Adviser under the Amended Investment Advisory Agreement and Newton US under the New Sub-Advisory Agreement.

Economies of Scale to be Realized. The Board recognized that, because the fee payable to Newton US would be paid by the Adviser, and not the fund, an analysis of economies of scale was more appropriate in the context of the Board’s consideration of the Current Investment Advisory Agreement, which had been done at the 15(c) Meeting. At the 15(c) Meeting, the Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Current Investment Advisory Agreement and that, to the extent in the future it were determined that material economies of scale had not

29

 

INFORMATION ABOUT THE RENEWAL AND APPROVAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT AND APPROVAL OF SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)

been shared with the fund, the Board would seek to have those economies of scale shared with the fund.

The Board also considered whether there were any ancillary benefits that would accrue to Newton US as a result of its relationship with the fund, and such ancillary benefits, if any, were determined to be reasonable.

In considering the materials and information described above, the Independent Trustees received assistance from, and met separately with, their independent legal counsel, and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to the approval of investment advisory and sub-investment advisory agreements.

After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board members, all of whom are Independent Trustees, with the assistance of independent legal counsel, approved the New Sub-Advisory Agreement and Amended Investment Advisory Agreement for the fund effective as of the Effective Date.

30

 

LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited)

Effective June 1, 2019, the fund adopted a liquidity risk management program (the “Liquidity Risk Management Program”) pursuant to the requirements of Rule 22e-4 under the Investment Company Act of 1940, as amended. Rule 22e-4 requires registered open-end funds, including mutual funds and exchange-traded funds but not money market funds, to establish liquidity risk management programs in order to effectively manage fund liquidity and shareholder redemptions. The rule is designed to mitigate the risk that a fund could not meet redemption requests without significantly diluting the interests of remaining investors.

The rule requires the fund to assess, manage and review their liquidity risk at least annually considering applicable factors such as investment strategy and liquidity during normal and foreseeable stressed conditions, including whether the strategy is appropriate for an open-end fund and whether the fund has a relatively concentrated portfolio or large positions in particular issuers. The fund must also assess its use of borrowings and derivatives, short-term and long-term cash flow projections in normal and stressed conditions, holdings of cash and cash equivalents, and borrowing arrangements and other funding sources.

The rule also requires the fund to classify its investments as highly liquid, moderately liquid, less liquid or illiquid based on the number of days the fund expects it would take to liquidate the investment, and to review these classifications at least monthly or more often under certain conditions. The periods range from three or fewer business days for a highly liquid investment to greater than seven calendar days for settlement of a less liquid investment. Illiquid investments are those a fund does not expect to be able to sell or dispose of within seven calendar days without significantly changing the market value. The fund is prohibited from acquiring an investment if, after the acquisition, its holdings of illiquid assets will exceed 15% of its net assets. In addition, if a fund permits redemptions in-kind, the rule requires the fund to establish redemption in-kind policies and procedures governing how and when it will engage in such redemptions.

Pursuant to the rule’s requirements, the Liquidity Risk Management Program has been reviewed and approved by the Board. Furthermore, the Board has received a written report prepared by the Program’s Administrator that addresses the operation of the Program, assesses its adequacy and effectiveness and describes any material changes made to the Program.

Assessment of Program

In the opinion of the Program Administrator, the Program approved by the Board continues to be adequate for the fund and the Program has been implemented effectively. The Program Administrator has monitored the fund’s liquidity risk and the liquidity classification of the securities held by the fund and has determined that the Program is operating effectively.

During the period from January 1, 2020 to December 31, 2020, there were no material changes to the Program and no material liquidity events that impacted the fund. During the period, the fund held sufficient highly liquid assets to meet fund redemptions.

Under normal expected foreseeable fund redemption forecasts and foreseeable stressed fund redemption forecasts, the Program Administrator believes that the fund maintains sufficient highly liquid assets to meet expected fund redemptions.

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For More Information

BNY Mellon Variable Investment Fund, Opportunistic Small Cap Portfolio

240 Greenwich Street

New York, NY 10286

Adviser

BNY Mellon Investment Adviser, Inc.

240 Greenwich Street

New York, NY 10286

Custodian

The Bank of New York Mellon

240 Greenwich Street

New York, NY 10286

Transfer Agent &
Dividend Disbursing Agent

BNY Mellon Transfer, Inc.

240 Greenwich Street

New York, NY 10286

Distributor

BNY Mellon Securities Corporation

240 Greenwich Street

New York, NY 10286


Telephone 1-800-258-4260 or 1-800-258-4261

Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department

E-mail Send your request to info@bnymellon.com

Internet Information can be viewed online or downloaded at www.im.bnymellon.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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.

  

© 2021 BNY Mellon Securities Corporation
0121SA0621

 

 

 

 

 

 
 

 

 

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 period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

 
 
Item 12.Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

Not applicable.

Item 13.Exhibits.

(a)(1) 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.

BNY Mellon Variable Investment Fund

 

By: /s/ David DiPetrillo
        David DiPetrillo
        President (Principal Executive Officer)

 

Date: August 5, 2021

 

 

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/ David DiPetrillo
        David DiPetrillo
        President (Principal Executive Officer)

 

Date: August 5, 2021

 

 

By: /s/ James Windels
       James Windels
       Treasurer (Principal Financial Officer)

 

Date: August 5, 2021

 

 

 

 
 

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)