UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR-A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-5125
DREYFUS VARIABLE INVESTMENT FUND
(Exact name of Registrant as specified in charter)
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
(Address of principal executive offices) (Zip code)
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 922-6000
Date of fiscal year end: December 31st
Date of reporting period: June 20, 2003
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
Dreyfus Variable
Investment Fund,
Appreciation Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
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2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
14 Financial Highlights
16 Notes to Financial Statements
22 Proxy Results
FOR MORE INFORMATION
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Back Cover
The Portfolio
Dreyfus Variable Investment Fund, Appreciation Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Appreciation
Portfolio covers the six-month period from January 1, 2003, through June 30,
2003. Inside, you'll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with the portfolio
manager, Fayez Sarofim, of Fayez Sarofim & Co., the portfolio's sub-investment
adviser.
The first half of 2003 was a time of long-awaited recovery for the U.S. stock
market. Despite continued volatility leading up to the war in Iraq, stocks began
to rally as the fighting wound down and investors turned their attention back to
the prospects for the U.S. economy. Apparently, they liked what they saw.
Despite current economic weakness, investors appear to be focused on the
possibility of better economic times ahead.
If these trends persist, 2003 could mark the first positive calendar year for
stocks since 1999. In our view, investors who have the potential to benefit most
are those who steadfastly maintained their equity exposure during the bear
market. In contrast, we believe investors who avoided stocks may have missed the
market's recent gains, a timely reminder that patience, discipline and a
long-term perspective are fundamental principles that may lead to successful
investing.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Fayez Sarofim, Portfolio Manager Fayez Sarofim & Co., Sub-Investment Adviser
How did Dreyfus Variable Investment Fund, Appreciation Portfolio perform
relative to its benchmark?
For the six-month period ended June 30, 2003, the portfolio's Initial shares
produced a total return of 8.50%, and its Service shares produced a total return
of 8.35%.(1) For the same period, the total return of the portfolio's benchmark,
the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"), was
11.75%.(2)
The portfolio and U.S. stock market benefited from improving investor sentiment
during the reporting period as attention shifted from the war in Iraq to the
likelihood of stronger economic growth. The portfolio's returns trailed that of
the S& P 500 Index, primarily because lower-quality, more speculative stocks
provided stronger performance than the higher-quality, blue-chip stocks in which
the portfolio invests.
What is the portfolio's investment approach?
The portfolio invests primarily in large, well-established multinational growth
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. We focus on purchasing reasonably
priced growth stocks of fundamentally sound companies in economic sectors that
we believe will expand over the next three to five years.
At the same time, we manage the portfolio with long-term investors in mind. Our
investment approach is based on targeting long-term growth rather than
short-term profit.
What other factors influenced the portfolio's performance?
The portfolio and stock market benefited during the first six months of 2003 as
investors' economic expectations improved. During the first calendar quarter of
2003, investors focused on the persistently sluggish
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
economy and impending war with Iraq, and stocks were volatile, hitting their
lows for the reporting period in March. For the second calendar quarter of 2003,
as the fighting in Iraq wound down, investors shifted their attention from
geopolitical issues to the prospects for an improving U.S. economy and corporate
earnings. Expectations of stronger economic growth were fueled by the Federal
Reserve Board's accommodative monetary policy, including a reduction in
short-term interest rates of 25 basis points in late June, and the Bush
Administration's stimulative fiscal policies, including reductions in the tax
rates for capital gains and dividends.
Unfortunately, the stocks that benefited most during the rally were not the
types of companies in which the portfolio typically invests. Companies that are
more economically sensitive, including a number of relatively speculative stocks
in the previously beaten-down technology group, tended to post the largest
gains. In contrast, the portfolio focuses on high-quality, blue-chip companies
that, in our view, can grow their earnings steadily and consistently across
different economic climates.
For example, the consumer staples group has long represented the largest area of
investment for the portfolio. While most of the portfolio's holdings in this
area remained fundamentally sound, they did somewhat lag during the reporting
period as traders shifted assets away from these relatively conservative issues
toward more speculative stocks. Conversely, the portfolio's relatively light
exposure to the technology group prevented it from participating fully in the
economically sensitive sector's gains. The portfolio's relative performance also
was hindered by its heavier than average exposure to large pharmaceutical
companies, which were hurt during the reporting period by concerns that a
possible Medicare prescription benefit might lead to greater regulatory
oversight of drug prices.
On the other hand, the portfolio received positive contributions to relative
performance from the industrials group, where the portfolio's second largest
holding, General Electric, posted impressive gains. Gains
4
from individual stocks such as micro-chip giant Intel and pharmaceutical leader
Pfizer also benefited the portfolio' s return, despite relatively lackluster
contributions to performance from their industry groups.
What is the portfolio's current strategy?
Our stock selection strategy continues to maintain a long-term perspective and
with an emphasis on quality. We believe that investors' recent preference for
more speculative stocks will prove to be temporary, and investors are likely to
favor larger, steadily growing companies as they increasingly recognize that the
economy is likely to expand at a relatively modest pace. We eliminated the
portfolio' s position in regional telephone company Verizon Communications
because of our belief that earnings growth for the company and its industry is
likely to be relatively modest. We believe that our longstanding, conservative
approach will position the portfolio well for an economic environment that, in
our view, is likely to be characterized by moderate growth, low inflation and
low interest rates.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, APPRECIATION PORTFOLIO MADE AVAILABLE THROUGH INSURANCE
PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS.
HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN,
AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE
DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED
IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL
REDUCE RETURNS.
(2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500 COMPOSITE
STOCK PRICE INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK
MARKET PERFORMANCE.
The Portfolio 5
STATEMENT OF INVESTMENTS
June 30, 2003 (Unaudited)
COMMON STOCKS--98.4% Shares Value ($)
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APPAREL--.8%
Christian Dior 80,000 3,201,490
Polo Ralph Lauren 150,000 3,868,500
7,069,990
AUTOMOBILES & COMPONENTS--.1%
Ford Motor 50,094 (a) 550,533
BANKING--7.8%
Bank of America 150,108 11,863,035
Federal Home Loan Mortgage 260,000 13,200,200
Federal National Mortgage Association 360,000 24,278,400
SunTrust Banks 275,000 16,318,500
65,660,135
CAPITAL GOODS--5.9%
Emerson Electric 180,000 9,198,000
General Electric 1,150,000 32,982,000
Honeywell International 270,000 7,249,500
49,429,500
DIVERSIFIED FINANCIALS--7.5%
American Express 330,000 13,797,300
Citigroup 620,124 26,541,307
JP Morgan Chase & Co 475,000 16,235,500
Merrill Lynch 140,000 6,535,200
63,109,307
ENERGY--10.6%
BP, ADR 460,000 19,329,200
ChevronTexaco 220,000 15,884,000
Exxon Mobil 1,235,664 44,372,694
Royal Dutch Petroleum, ADR 212,000 9,883,440
89,469,334
FOOD, BEVERAGE & TOBACCO--15.9%
Altria Group 975,000 44,304,000
Anheuser-Busch Cos. 270,000 13,783,500
Coca-Cola 640,000 29,702,400
Kraft Foods 275,000 8,951,250
Nestle, ADR 300,000 15,534,375
PepsiCo 480,000 21,360,000
133,635,525
6
COMMON STOCKS (CONTINUED) Shares Value ($)
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FOOD & STAPLES RETAILING--5.8%
Wal-Mart Stores 530,000 28,445,100
Walgreen 670,000 20,167,000
48,612,100
HEALTH CARE--16.4%
Abbott Laboratories 370,000 16,191,200
Johnson & Johnson 625,000 32,312,500
Lilly (Eli) & Co. 270,000 18,621,900
Merck & Co. 400,000 24,220,000
Pfizer 1,300,000 44,395,000
Roche Holding, ADR 33,000 2,584,313
138,324,913
HOTEL RESTAURANTS & LEISURE--.9%
McDonald's 360,000 7,941,600
HOUSEHOLD & PERSONAL PRODUCTS--5.1%
Colgate-Palmolive 180,000 10,431,000
Estee Lauder Cos, Cl. A 150,000 5,029,500
Procter & Gamble 310,000 27,645,800
43,106,300
INSURANCE--5.9%
American International Group 209,220 11,544,760
Berkshire Hathaway, Cl. A 220 (b) 15,950,000
Berkshire Hathaway, Cl. B 15 (b) 36,450
Marsh & McLennan Cos. 430,000 21,960,100
49,491,310
MEDIA--4.5%
AOL Time Warner 275,000 (b) 4,424,750
Fox Entertainment Group, Cl. A 230,000 (b) 6,619,400
McGraw-Hill Cos. 275,000 17,050,000
News Corp, ADR 5,000 151,350
Viacom, Cl. B 225,000 (b) 9,823,500
38,069,000
RETAILING--1.2%
Target 270,000 10,216,800
SEMICONDUCTOR EQUIPMENT--3.2%
Intel 1,300,000 27,019,200
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
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SOFTWARE & SERVICES--2.1%
Microsoft 700,000 17,927,000
TECHNOLOGY HARDWARE & EQUIPMENT--2.1%
International Business Machines 220,000 18,150,000
TELECOMMUNICATION SERVICES--1.3%
BellSouth 210,000 5,592,300
SBC Communications 210,544 5,379,399
10,971,699
TRANSPORTATION--1.3%
United Parcel Service, Cl. B 167,700 10,682,490
TOTAL COMMON STOCKS
(cost $784,761,147) 829,436,736
PREFERRED STOCKS--1.0%
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AUTOMOBILES & COMPONENTS--.5%
Ford Motor Capital Trust ll, Conv., 6.50% 100,000 4,345,000
MEDIA--.5%
News, ADR, Cum., $.4428 175,000 4,383,750
TOTAL PREFERRED STOCKS
(cost $9,386,056) 8,728,750
OTHER INVESTMENTS--.6%
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REGISTERED INVESTMENT COMPANIES:
Dreyfus Institutional Cash Advantage Fund 1,654,666 (c) 1,654,666
Dreyfus Institutional Cash Advantage Plus Fund 1,654,667 (c) 1,654,667
Dreyfus Intitutional Preferred Plus Money Market Fund 1,654,667 (c) 1,654,667
TOTAL OTHER INVESTMENTS
(cost $4,964,000) 4,964,000
8
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--.1% Shares Value ($)
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REGISTERED INVESTMENT COMPANY;
Dreyfus Institutional Preferred Money Market Fund
(cost $601,128) 601,128 601,128
TOTAL INVESTMENTS (cost $799,712,331) 100.1% 843,730,614
LIABILITIES, LESS CASH AND RECEIVABLES (.1%) (754,390)
NET ASSETS 100.0% 842,976,224
(A) ALL OF THIS SECURITY IS ON LOAN. AT JUNE 30, 2003, THE MARKET VALUE OF THE
PORTFOLIO'S SECURITY ON LOAN IS $550,533 AND THE TOTAL MARKET VALUE OF THE
COLLATERAL HELD BY THE PORTFOLIO IS $601,128.
(B) NON-INCOME PRODUCING.
(C) INVESTMENTS IN AFFILIATED MONEY MARKET MUTUAL FUNDS--SEE NOTE 3(D).
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 9
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- ----------------------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of Investments
(including securities loaned valued at $550,533)--Note 1(c) 799,712,331 843,730,614
Cash 355,790
Dividends and interest receivable 1,313,074
Receivable for shares of Beneficial Interest subscribed 266,473
Prepaid expenses 112,588
845,778,539
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 330,755
Due to Fayez Sarofim & Co. 226,507
Payable for shares of Beneficial Interest redeemed 1,577,254
Liability for securities loaned--Note 1(c) 601,128
Accrued expenses 66,671
2,802,315
NET ASSETS ($) 842,976,224
COMPOSITION OF NET ASSETS ($):
Paid-in capital 836,979,947
Accumulated undistributed investment income--net 5,622,592
Accumulated net realized gain (loss) on investments (43,644,400)
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions 44,018,085
NET ASSETS ($) 842,976,224
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NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- -----------------------------------------------------------------------------------------
Net Assets ($) 768,930,400 74,045,824
Shares Outstanding 24,627,558 2,380,719
NET ASSET VALUE PER SHARE ($) 31.22 31.10
SEE NOTES TO FINANCIAL STATEMENTS.
10
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
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INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $116,540 foreign taxes withheld at source) 8,825,277
Interest 26,631
Income from securities lending 5,243
TOTAL INCOME 8,857,151
EXPENSES:
Investment advisory fee--Note 3(a) 1,688,394
Sub-investment advisory fee--Note 3(a) 1,242,093
Distribution fees--Note 3(b) 81,817
Prospectus and shareholders' reports 71,207
Professional fees 39,496
Trustees' fees and expenses--Note 3(c) 38,158
Custodian fees--Note 3(b) 28,942
Shareholder servicing costs--Note 3(b) 27,338
Registration fees 3,696
Loan commitment fees--Note 2 3,352
Interest expense--Note 2 1,450
Miscellaneous 6,741
TOTAL EXPENSES 3,232,684
INVESTMENT INCOME--NET 5,624,467
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments and foreign currency
transactions (7,322,529)
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions 66,624,276
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 59,301,747
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 64,926,214
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
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OPERATIONS ($):
Investment income--net 5,624,467 9,681,414
Net realized gain (loss) on investments (7,322,529) (27,979,711)
Net unrealized appreciation
(depreciation) on investments 66,624,276 (151,359,434)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 64,926,214 (169,657,731)
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (158,452) (8,946,481)
Service shares (14,557) (621,059)
TOTAL DIVIDENDS (173,009) (9,567,540)
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 58,468,693 427,717,878
Service shares 12,675,332 43,495,934
Dividends reinvested:
Initial shares 158,452 8,946,481
Service shares 14,557 621,059
Cost of shares redeemed:
Initial shares (71,460,132) (443,174,541)
Service shares (4,912,258) (8,270,390)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (5,055,356) 29,336,421
TOTAL INCREASE (DECREASE) IN NET ASSETS 59,697,849 (149,888,850)
NET ASSETS ($):
Beginning of Period 783,278,375 933,167,225
END OF PERIOD 842,976,224 783,278,375
Undistributed investment income--net 5,622,592 171,134
12
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
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CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 1,998,043 12,639,241
Shares issued for dividends reinvested 5,609 305,917
Shares redeemed (2,482,837) (13,500,595)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (479,185) (555,437)
SERVICE SHARES
Shares sold 438,657 1,344,961
Shares issued for dividends reinvested 517 21,304
Shares redeemed (168,218) (277,641)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 270,956 1,088,624
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 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 portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended
June 30, 2003 Year Ended December 31,
----------------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998
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PER SHARE DATA ($):
Net asset value,
beginning of period 28.79 34.98 38.91 39.87 36.11 27.91
Investment Operations:
Investment income--net .21(a) .36(a) .30(a) .27(a) .25(a) .20
Net realized and unrealized
gain (loss) on investments 2.23 (6.19) (3.93) (.52) 3.88 8.21
Total from Investment
Operations 2.44 (5.83) (3.63) (.25) 4.13 8.41
Distributions:
Dividends from
investment income--net (.01) (.36) (.30) (.26) (.22) (.20)
Dividends from net realized
gain on investments -- -- -- (.45) (.01) (.01)
Dividends in excess of net
realized gain on investments -- -- -- -- (.14) --
Total Distributions (.01) (.36) (.30) (.71) (.37) (.21)
Net asset value, end of period 31.22 28.79 34.98 38.91 39.87 36.11
TOTAL RETURN (%) 8.50(b) (16.71) (9.31) (.65) 11.46 30.22
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .40(b) .78 .78 .78 .78 .80
Ratio of interest expense and
loan commitment fees
to average net assets .00(b,c) .00(c) .00(c) .00(c) .00(c) .01
Ratio of net investment income
to average net assets .72(b) 1.10 .84 .67 .64 .84
Portfolio Turnover Rate 1.86(b) 6.61 4.19 6.15 3.87 1.34
Net Assets, end of period
($ x 1,000) 768,930 722,706 897,535 1,009,713 1,027,797 673,835
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) NOT ANNUALIZED.
(C) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
14
Six Months Ended
June 30, 2003 Year Ended December 31,
---------------------------------------------
SERVICE SHARES (Unaudited) 2002 2001 2000(a)
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PER SHARE DATA ($):
Net asset value, beginning of period 28.71 34.89 38.91 38.91
Investment Operations:
Investment income--net .17(b) .29(b) .18(b) --
Net realized and unrealized
gain (loss) on investments 2.23 (6.17) (3.94) --
Total from Investment Operations 2.40 (5.88) (3.76) --
Distributions:
Dividends from investment income--net (.01) (.30) (.26) --
Net asset value, end of period 31.10 28.71 34.89 38.91
TOTAL RETURN (%) 8.35(c) (16.89) (9.63) --
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .53(c) 1.02 1.10 --
Ratio of net investment income
to average net assets .60(c) .91 .53 --
Portfolio Turnover Rate 1.86(c) 6.61 4.19 6.15
Net Assets, end of period ($ x 1,000) 74,046 60,572 35,632 1
(A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the Appreciation Portfolio (the "portfolio"). The portfolio is
only offered to separate accounts established by insurance companies to fund
variable annuity contracts and variable life insurance policies. The portfolio
is a diversified series. The portfolio's investment objective is to provide
long-term capital growth consistent with the preservation of capital. The
Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser.
Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A. ("Mellon"), which is a
wholly-owned subsidiary of Mellon Financial Corporation. Fayez Sarofim & Co.
("Sarofim") serves as the portfolio's sub-investment adviser.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
Dreyfus, is the distributor of the portfolio's shares, which are sold without a
sales charge. The portfolio 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(a) Portfolio valuation: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last
16
sales price on the national securities market. Effective April 14, 2003, the
portfolio began pricing securities traded on the NASDAQ stock market using the
NASDAQ official closing price. 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, except for
open short positions, where the asked price is used for valuation purposes. Bid
price is used when no asked price is available. Securities for which there are
no such valuations are valued at fair value as determined in good faith under
the direction of the Board of Trustees. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward currency exchange contracts are valued at the forward rate.
(b) Foreign currency transactions: The portfolio 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 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 and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the portfolio's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value
of assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the
The Portfolio 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
terms of the custody agreement, the portfolio receives net earnings credits
based on available cash balances left on deposit.
The portfolio may lend securities to qualified institutions. At origination, all
loans are secured by cash 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 will be
maintained at all times. Cash collateral is invested in certain money market
mutual funds managed by Dreyfus as shown in the portfolio's Statement of
Investments. The portfolio will be entitled to receive all income on securities
loaned, in addition to income earned as a result of the lending transaction.
Although each security loaned is fully collateralized, the portfolio would bear
the risk of delay in recovery of, or loss of rights in, the securities loaned
should a borrower fail to return the securities in a timely manner.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain, if any, are normally declared and paid annually, but the portfolio 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 gain can be offset by capital loss
carryovers, it is the policy of the portfolio not to distribute such gain.
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from generally accepted accounting principles.
(e) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $29,611,332 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, $6,595,648 of
the carryover expires in fiscal 2009 and $23,015,684 expires in fiscal 2010.
18
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002 was as follows: ordinary income $9,567,540. The tax
character of current year distributions will be determined at the end of the
current fiscal year.
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the portfolio at rates based on
prevailing market rates in effect at the time of borrowings.
The average daily amount of borrowings outstanding during the period ended June
30, 2003 was approximately $171,300, with a related weighted average annualized
interest rate of 1.68%.
NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other
Transactions With Affiliates:
(a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment
advisory fee is based on the value of the portfolio's average daily net assets
and is computed at the following annual rates: .55 of 1% of the first $150
million; .50 of 1% of the next $150 million; and .375 of 1% over $300 million.
The fee is payable monthly. Pursuant to a Sub-Investment Advisory Agreement with
Sarofim, the sub-investment advisory fee is based upon the value of the
portfolio' s average daily net assets and is computed at the following annual
rates: .20 of 1% of the first $150 million; .25 of 1% of the next $150 million;
and .375 of 1% over $300 million. The fee is payable monthly.
(b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of
The Portfolio 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
.. 25 of 1% 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 Plan are payable without regard to actual
expenses incurred. During the period ended June 30, 2003, Service shares were
charged $81,817 pursuant to the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $439 pursuant to the
transfer agency agreement.
The portfolio compensates Mellon under a custody agreement to provide custodial
services for the portfolio. During the period ended June 30, 2003, the portfolio
was charged $28,942 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group.
The Chairman of the Board receives an additional 25% of such compensation.
Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if
any, receive 50% of the annual retainer fee and per meeting fee paid at the time
the Board member achieves emeritus status.
(d) Pursuant to an exemptive order from the Securities and Exchange Commission,
the portfolio invests its available cash in affiliated money market mutual funds
as shown in the portfolio's Statement of Investments. Management fees are not
charged to these accounts. The portfolio derived $20,380 in income from these
investments, which is included as interest income in the portfolio's Statement
of Operations.
20
(e) During the period ended June 30, 2003, the portfolio incurred total
brokerage commissions of $53,870 of which $1,200 was paid to Harborside Plus
Inc., a wholly-owned subsidiary of Mellon Financial Corporation.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended June 30, 2003, amounted to
$19,894,618 and $14,499,580, respectively.
At June 30, 2003, accumulated net unrealized appreciation on investments was
$44,018,283, consisting of $99,473,028 gross unrealized appreciation and
$55,454,745 gross unrealized depreciation.
At June 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Portfolio 21
PROXY RESULTS (Unaudited)
The fund held a special meeting of shareholders on December 18, 2002. The
proposal considered at the meeting, and the results, are as follows:
Shares
----------------------------------------------------------------
For Against Abstained
----------------------------------------------------------------
To approve changes to certain
of the portfolio's fundamental
policies and investment restrictions
to permit participation in a portfolio
securities lending program 22,404,234 2,382,107 1,989,095
NOTES
For More Information
Dreyfus Variable
Investment Fund,
Appreciation Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Advisor
Fayez Sarofim & Co.
Two Houston Center
Suite 2907
Houston, TX 77010
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call
1-800-554-4611 or
516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 112SA0603
Dreyfus Variable
Investment Fund,
Balanced Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
14 Statement of Assets and Liabilities
15 Statement of Operations
16 Statement of Changes in Net Assets
18 Financial Highlights
20 Notes to Financial Statements
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Balanced Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Balanced Portfolio
covers the six-month period from January 1, 2003, through June 30, 2003. Inside,
you' ll find valuable information about how the portfolio was managed during the
reporting period, including a discussion with Douglas D. Ramos, CFA, who manages
the equity component of the portfolio, and Gerald E. Thunelius, Director of the
Dreyfus Taxable Fixed Income Team that manages the fixed-income component of the
portfolio.
The first half of 2003 was a time of long-awaited recovery for the U.S. stock
market. Despite continued volatility leading up to the war in Iraq, stocks began
to rally as the fighting wound down and investors turned their attention back to
the prospects for the U.S. economy. Apparently, they liked what they saw.
Despite current economic weakness, investors appear to be focused on the
possibility of better economic times ahead.
If these trends persist, 2003 could mark the first positive calendar year for
stocks since 1999. In our view, investors who have the potential to benefit most
are those who steadfastly maintained their equity exposure during the bear
market. In contrast, we believe investors who avoided stocks may have missed the
market' s recent gains, a timely reminder that patience, discipline and a
long-term perspective are fundamental principles that may lead to successful
investing.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Douglas D. Ramos, CFA, Portfolio Manager
Gerald E. Thunelius, Director, Dreyfus Taxable Fixed Income Team
How did Dreyfus Variable Investment Fund, Balanced Portfolio perform relative to
its benchmark?
For the six-month period ended June 30, 2003, the portfolio's total returns were
8.46% for its Initial shares and 8.40% for its Service shares.(1) In comparison,
the portfolio's new benchmark, a hybrid index composed of 60% Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index") and 40% Lehman Brothers
Aggregate Bond Index (the "Lehman Aggregate Index"), achieved a total return of
8.62% for the reporting period.(2) The portfolio's former benchmark, also a
hybrid index composed of 60% Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500 Index") and 40% Lehman Brothers Intermediate Government/Credit
Bond Index (the "Lehman Gov't/Credit Bond Index"), provided a total return of
8.76% for the reporting period.(3)
We attribute these results primarily to the easing of war-related concerns and
greater economic optimism in the stock market, and to the effects of lower
interest rates and the improved financial condition of many issuers in the bond
market. The portfolio' s returns were slightly lower than the return of its
blended benchmark, primarily the result of weaker performance than that of the
benchmark in stocks that was partially offset by stronger performance in bonds.
What is the portfolio's investment approach?
The portfolio seeks long-term capital growth and current income. To pursue this
goal, the portfolio invests in a diversified mix of stocks and bonds of both
U.S. and foreign issuers. The portfolio' s normal asset allocation is
approximately 60% stocks and 40% bonds. However, the portfolio is permitted to
invest up to 75%, and as little as 40%, of its assets in stocks, and up to 60%,
and as little as 25%, of its assets in bonds.
The portfolio' s stock investments may include common stocks, preferred stocks
and convertible securities, including those purchased in initial public
offerings or shortly thereafter.
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
In allocating assets between stocks and bonds, the portfolio managers assess the
relative return and risks of each asset class, analyzing several factors,
including interest-rate-adjusted price/earnings ratios, the valuation and
volatility levels of stocks relative to bonds, and other economic factors, such
as interest dates.
What other factors influenced the portfolio's performance?
In light of improving prospects for the U.S. economy, the portfolio maintained
relatively heavy exposure to stocks and lighter exposure to bonds during the
reporting period. On average, stocks delivered higher returns than bonds. The
portfolio's greatest gains were concentrated in consumer discretionary stocks,
such as cruise line operator Carnival, fast-service food chain McDonald's,
electronics retailer Best Buy and investor information provider InterActiveCorp.
The portfolio also benefited from relatively strong stock selections in the
health care and materials and processing areas.
On the other hand, equity performance fell short of the benchmark in the
technology and telecommunications groups, where the market's rise was led by
stocks we considered more speculative. Since many such stocks failed to meet our
investment criteria, the portfolio's equity holdings delivered slightly weaker
returns than the benchmark's equities overall.
Among bonds, the portfolio's slight overweight on corporate securities, and its
relatively light holdings of mortgage-backed securities and U.S. government
agency debentures, enabled it to provide higher returns than its benchmark.
Investors apparently felt more comfortable investing in corporate bonds after
many companies strengthened their balance sheets in the wake of 2002's corporate
governance scandals. Among more interest-rate-sensitive bonds, the portfolio
received strong returns from its holdings of Treasury Inflation Protected
Securities ("TIPS"). In addition, the portfolio successfully avoided the brunt
of weakness among mortgage-backed securities, which were hurt by a surge in
mortgage prepayments amid a wave of refinancing, and U.S. government agency
debt, which was subject to concerns regarding the accounting practices of the
Federal Home Loan Mortgage Corporation, also known as Freddie Mac.
What is the portfolio's current strategy?
We believe that positive long-term prospects for economic growth currently
support a cautiously favorable environment for equities. Accordingly, the
portfolio continues to emphasize stocks over bonds. Among stocks, we have
emphasized technology and consumer discretionary stocks that appear
well-positioned to benefit from an economic recovery. We have de-emphasized the
traditionally defensive consumer staples and industrials groups.
On the fixed-income side, we have begun to trim the portfolio's holdings of
corporate bonds and TIPS, taking profits after strong rallies made their
valuations richer. We have increased the portfolio's exposure to mortgage-backed
securities, bringing their representation closer to levels we consider neutral
relative to the portfolio's benchmark.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, BALANCED PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS
MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER,
THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT
BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE
DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED
IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL
REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO
EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT
THROUGH DECEMBER 31, 2003, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR
MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS
WOULD HAVE BEEN LOWER.
(2) SOURCE: LIPPER INC. -- REFLECTS THE REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500 COMPOSITE
STOCK PRICE INDEX ("S&P 500 INDEX") IS A WIDELY ACCEPTED, UNMANAGED INDEX
OF U.S. STOCK MARKET PERFORMANCE. THE LEHMAN BROTHERS AGGREGATE BOND INDEX
IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN INDEX OF CORPORATE, U.S.
GOVERNMENT AND U.S. GOVERNMENT AGENCY DEBT INSTRUMENTS, MORTGAGE-BACKED
SECURITIES AND ASSET-BACKED SECURITIES WITH AN AVERAGE MATURITY OF 1-10
YEARS.
(3) SOURCE: LIPPER, INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500 COMPOSITE
STOCK PRICE INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK
MARKET PERFORMANCE. THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CREDIT BOND
INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF GOVERNMENT AND CORPORATE
BOND MARKET PERFORMANCE COMPOSED OF U.S. GOVERNMENT, TREASURY AND AGENCY
SECURITIES, FIXED-INCOME SECURITIES AND NONCONVERTIBLE INVESTMENT-GRADE
CORPORATE DEBT, WITH AN AVERAGE MATURITY OF 1-10 YEARS.
The Portfolio 5
June 30, 2003 (Unaudited)
STATEMENT OF INVESTMENTS
COMMON STOCKS--65.2% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--9.0%
AOL Time Warner 26,500 (a) 426,385
Best Buy 10,000 (a) 439,200
Carnival 19,500 633,945
Clear Channel Communications 12,000 (a) 508,680
Comcast, Cl. A 12,537 (a) 378,367
Ford Motor 16,000 175,840
General Motors 5,000 180,000
Hilton Hotels 13,000 166,270
Home Depot 18,700 619,344
InterActiveCorp 14,400 (a) 569,808
Lamar Advertising 10,000 (a) 352,100
Liberty Media, Cl. A 30,000 (a) 346,800
McDonald's 25,000 551,500
Staples 9,000 (a) 165,150
TJX Cos. 31,000 584,040
Target 19,300 730,312
Viacom, Cl. B 19,000 (a) 829,540
Westwood One 6,700 (a) 227,331
7,884,612
CONSUMER STAPLES--5.4%
Altria Group 16,000 727,040
Coca-Cola 14,200 659,022
Kraft Foods, Cl. A 15,000 488,250
PepsiCo 14,300 636,350
Procter & Gamble 11,600 1,034,488
Wal-Mart Stores 22,200 1,191,474
4,736,624
ENERGY--3.9%
Devon Energy 11,178 596,905
Exxon Mobil 41,400 1,486,674
Schlumberger 12,000 570,840
XTO Energy 35,166 707,188
3,361,607
FINANCIALS--12.9%
ACE 8,000 274,320
American Express 11,000 459,910
American International Group 21,200 1,169,816
6
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIALS (CONTINUED)
Bank of America 9,900 782,397
Bank of New York 19,300 554,875
Bank One 8,000 297,440
Citigroup 37,900 1,622,120
Countrywide Financial 4,000 278,280
Fannie Mae 11,200 755,328
FleetBoston Financial 10,000 297,100
Freddie Mac 9,000 456,930
Goldman Sachs Group 2,700 226,125
J.P. Morgan Chase & Co. 11,700 399,906
MBNA 27,250 567,890
Marsh & McLennan Cos. 8,000 408,560
Morgan Stanley 12,000 513,000
St. Paul Cos. 8,700 317,637
Travelers Property Casualty, Cl. A 27,767 441,495
Travelers Property Casualty, Cl. B 3,630 57,245
U.S. Bancorp 12,000 294,000
Washington Mutual 7,000 289,100
Wells Fargo & Co. 15,400 776,160
11,239,634
HEALTH CARE--9.6%
Abbott Laboratories 8,500 371,960
Amgen 10,600 (a) 704,264
Anthem 5,000 (a) 385,750
Bard (C.R.) 3,000 213,930
Becton, Dickinson & Co. 7,000 271,950
Biovail 5,000 (a) 235,300
Bristol-Myers Squibb 10,500 285,075
Johnson & Johnson 14,100 728,970
Lilly (Eli) & Co. 7,000 482,790
Merck & Co. 17,200 1,041,460
Novartis, ADR 7,000 278,670
Pfizer 48,300 1,649,445
Teva Pharmaceutical Industries, ADR 9,000 512,370
WellPoint Health Networks 6,200 (a) 522,660
Wyeth 14,000 637,700
8,322,294
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--6.3%
CSX 10,000 300,900
Caterpillar 7,000 389,620
Danaher 7,000 476,350
Deere & Co. 7,000 319,900
Emerson Electric 6,000 306,600
General Electric 59,800 1,715,064
L-3 Communications Holdings 4,600 (a) 200,054
Lockheed Martin 4,000 190,280
Norfolk Southern 12,000 230,400
Northrop Grumman 3,000 258,870
3M 2,200 283,756
Tyco International 15,000 284,700
United Technologies 3,800 269,154
Waste Management 12,000 289,080
5,514,728
INFORMATION TECHNOLOGY--12.3%
Accenture, Cl. A 15,000 (a) 271,350
Applied Materials 16,000 (a) 253,760
Cisco Systems 66,400 (a) 1,108,216
Computer Sciences 10,000 (a) 381,200
Dell Computer 14,100 (a) 450,636
EMC 36,000 (a) 376,920
First Data 11,000 455,840
Hewlett-Packard 13,727 292,385
Intel 43,600 906,183
International Business Machines 11,700 965,250
Jabil Circuit 18,000 (a) 397,800
Microsoft 74,600 1,910,506
Motorola 38,000 358,340
NVIDIA 11,000 (a) 253,110
National Semiconductor 10,000 (a) 197,200
Nokia, ADR 17,000 279,310
Novellus Systems 9,000 (a) 329,589
Oracle 47,500 (a) 570,950
SAP, ADR 9,000 262,980
Teradyne 11,900 (a) 205,989
8
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (CONTINUED)
VeriSign 20,000 (a) 276,600
Xilinx 10,000 (a) 253,100
10,757,214
MATERIALS--2.5%
Air Products & Chemicals 5,000 208,000
Alcoa 11,100 283,050
duPont (E.I.) deNemours & Co. 5,000 208,200
International Paper 11,000 393,030
PPG Industries 7,000 355,180
Praxair 7,300 438,730
Weyerhaeuser 6,000 324,000
2,210,190
TELECOMMUNICATION SERVICES--2.0%
BellSouth 13,600 362,168
SBC Communications 16,100 411,355
Telefonos de Mexico, Cl. L, ADR 9,000 282,780
Verizon Communications 18,000 710,100
1,766,403
UTILITIES--1.3%
Exelon 6,000 358,860
FPL Group 4,000 267,400
Progress Energy 5,000 219,500
TXU 12,000 269,400
1,115,160
TOTAL COMMON STOCKS
(cost $56,525,531) 56,908,466
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
BONDS AND NOTES--35.5% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED CERTIFICATES--.3%
MBNA Credit Card Master Note Trust,
Ser. 2002-C1, Cl. C1, 6.80%, 7/15/2014 233,000 254,972
AUTOMOBILES--.3%
Ford Motor, Notes,
7.45%, 7/16/2031 82,000 75,326
General Motors, Debs.,
8.375%, 7/15/2033 190,000 187,019
262,345
The Portfolio 9
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
BANKS--.1%
Dresdner Funding Trust I, Bonds,
8.151%, 6/30/2031 46,000 (b) 50,894
COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--1.0%
Chase Commercial Mortgage Securities,
Ser. 2001-245, Cl. A1, 6.1731%, 2/12/2016 335,808 (b,c) 370,595
1211 Finance,
Ser. 2000-1211, Cl. A, 7.745%, 4/11/2035 400,000 (b) 485,813
856,408
COMMERCIAL SERVICES & SUPPLIES--.3%
Pitney Bowes, Notes,
4.75%, 5/15/2018 300,000 306,895
COMPUTERS & PERIPHERALS--.4%
Hewlett-Packard, Notes,
5.75%, 12/15/2006 198,000 220,783
International Business Machines, Notes,
4.75%, 11/29/2012 135,000 142,164
362,947
ELECTRICAL EQUIPMENT--.1%
Emerson Electric, Bonds,
4.50%, 5/1/2013 120,000 124,090
FINANCIAL SERVICES--.2%
SLM, Notes,
Ser. A, 3.625%, 3/17/2008 179,000 183,918
FOREST PRODUCTS & PAPER--.1%
Weyerhaeuser, Notes,
6.75%, 3/15/2012 120,000 136,453
INDUSTRIAL CONGLOMERATES--.2%
General Electric, Notes,
5%, 2/1/2013 144,000 152,391
INSURANCE--.4%
MetLife, Sr. Notes,
5.375%, 12/15/2012 110,000 118,743
New York Life Insurance, Notes,
5.875%, 5/15/2033 200,000 (b) 210,653
329,396
10
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
MINING & METALS--.2%
Alcoa, Notes,
6%, 1/15/2012 137,000 154,582
PHARMACEUTICALS--.2%
Lilly (Eli) & Co., Notes,
4.50%, 3/15/2018 193,000 195,401
RETAIL--.3%
Sears, Roebuck Acceptance, Notes,
7%, 6/1/2032 14,000 15,711
Toys R Us, Notes,
7.625%, 8/1/2011 70,000 75,178
Wal-Mart Stores, Notes,
4.55%, 5/1/2013 155,000 161,561
252,450
STRUCTURED INDEX--5.1%
Morgan Stanley Tracers:
Bonds,
6.799%, 6/15/2012 1,230,000 (b,d) 1,432,729
Notes,
7.252%, 9/15/2011 1,920,000 (b,d) 2,270,195
Targeted Return Index Securities Trust,
Ser. L-2002, 7.754%, 11/15/2031 576,400 (b,d) 713,428
4,416,352
TELECOMMUNICATION SERVICES--.3%
British Telecommunications, Notes,
8.125%, 12/15/2010 59,000 74,746
France Telecom, Notes,
7.75%, 3/1/2011 43,000 54,212
Verizon Florida, Debs.,
Ser. F, 6.125%, 1/15/2013 143,000 162,275
291,233
UTILITIES/GAS & ELECTRIC--.4%
Consolidated Edison Co. of New York, Debs.,
4.875%, 2/1/2013 205,000 216,559
Public Service of Colorado, First Mtg.,
4.875%, 3/1/2013 101,000 (b) 105,186
321,745
The Portfolio 11
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCIES--25.6%
Federal National Mortgage Association:
Mortgage Backed:
5.50% 770,000 (e) 795,987
6.20%, 1/1/2011 653,605 756,420
6.88%, 2/1/2028 752,891 872,646
6%, 6/1/2033 864,938 899,467
Government National Mortgage Association I:
Mortgage Backed:
5% 736,000 (e) 753,936
5.50% 517,000 (e) 538,326
6%, 3/15/2029 750,282 787,796
6%, 6/15/2029 111,786 117,270
6%, 12/15/2031 669,428 702,264
6%, 2/15/2032 867,005 909,540
6%, 3/15/2032 131,247 137,685
6%, 4/15/2032 114,616 120,239
6%, 5/15/2032 123,561 129,622
6%, 12/15/2032 140,959 147,873
5.50%, 4/15/2033 1,178,851 1,230,426
Tennessee Valley Authority,
Valley Indexed-Principal Securities,
3.375%, 1/15/2007 193,000 (f) 243,278
U.S. Treasury Notes:
3.25%, 5/31/2004 467,000 476,573
1.25%, 5/31/2005 4,901,000 4,901,000
1.125%, 6/30/2005 1,540,000 1,534,707
2%, 5/15/2006 6,124,000 6,190,984
3.625%, 5/15/2013 115,000 116,006
22,362,045
TOTAL BONDS AND NOTES
(cost $30,435,559) 31,014,517
12
Principal
SHORT-TERM INVESTMENTS--5.5% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS:
1.10%, 7/24/2003 29,000 28,986
.85%, 9/25/2003 1,236,000 1,233,553
.77%, 10/23/2003 546,000 544,635
.80%, 11/20/2003 546,000 543,952
.84%, 12/18/2003 2,448,000 2,437,278
TOTAL SHORT-TERM INVESTMENTS
(cost $4,789,687) 4,788,404
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $91,750,777) 106.2% 92,711,387
LIABILITIES, LESS CASH AND RECEIVABLES (6.2%) (5,441,350)
NET ASSETS 100.0% 87,270,037
(A) NON-INCOME PRODUCING.
(B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2003,
THESE SECURITIES AMOUNTED TO $5,639,493 OR 6.5% OF NET ASSETS.
(C) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(D) SECURITY LINKED TO A PORTFOLIO OF INVESTMENT GRADE DEBT SECURITIES.
(E) PURCHASED ON A FORWARD COMMITMENT BASIS.
(F) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES IN THE CONSUMER PRICE INDEX.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 13
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--
See Statement of Investments 91,750,777 92,711,387
Receivable for investment securities sold 2,392,356
Dividends and interest receivable 238,202
Receivable for shares of Beneficial Interest subscribed 69,311
Prepaid expenses 1,689
95,412,945
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 63,672
Cash overdraft due to Custodian 697,205
Payable for investment securities purchased 7,267,455
Payable for shares of Beneficial Interest redeemed 79,964
Payable for futures variation margin--Note 4 3,580
Loan commitment fees payable--Note 2 300
Accrued expenses 30,732
8,142,908
- --------------------------------------------------------------------------------
NET ASSETS ($) 87,270,037
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 109,556,367
Accumulated undistributed investment income--net 117,765
Accumulated net realized gain (loss) on investments (23,364,705)
Accumulated net unrealized appreciation
(depreciation) on investments 960,610
- --------------------------------------------------------------------------------
NET ASSETS ($) 87,270,037
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- --------------------------------------------------------------------------------
Net Assets ($) 64,471,449 22,798,588
Shares Outstanding 5,414,962 1,916,299
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 11.91 11.90
SEE NOTES TO FINANCIAL STATEMENTS.
14
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Interest 444,520
Cash dividends (net of $1,116 foreign taxes withheld at source) 475,676
TOTAL INCOME 920,196
EXPENSES:
Investment advisory fee--Note 3(a) 315,575
Distribution fees--Note 3(b) 27,447
Auditing fees 22,510
Prospectus and shareholders' reports 10,005
Custodian fees--Note 3(b) 8,070
Legal fees 6,066
Trustees' fees and expenses--Note 3(c) 4,334
Shareholder servicing costs--Note 3(b) 2,993
Loan commitment fees--Note 2 369
Miscellaneous 2,802
TOTAL EXPENSES 400,171
Less--waiver of fees due to undertakings--Note 3(a) (14,861)
NET EXPENSES 385,310
INVESTMENT INCOME--NET 534,886
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (3,408,844)
Net realized gain (loss) on financial futures 83,642
NET REALIZED GAIN (LOSS) (3,325,202)
Net unrealized appreciation (depreciation) on
investments (including $33,687 net unrealized
appreciation on financial futures) 9,600,829
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 6,275,627
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 6,810,513
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 534,886 1,558,955
Net realized gain (loss) on investments (3,325,202) (6,908,383)
Net unrealized appreciation
(depreciation) on investments 9,600,829 (12,301,018)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 6,810,513 (17,650,446)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (611,437) (1,255,175)
Service shares (203,233) (315,892)
TOTAL DIVIDENDS (814,670) (1,571,067)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 1,084,706 1,588,382
Service shares 1,078,763 12,449,678
Dividends reinvested:
Initial shares 611,437 1,255,175
Service shares 203,233 315,892
Cost of shares redeemed:
Initial shares (6,494,034) (18,911,664)
Service shares (2,114,717) (2,257,348)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (5,630,612) (5,559,885)
TOTAL INCREASE (DECREASE) IN NET ASSETS 365,231 (24,781,398)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 86,904,806 111,686,204
END OF PERIOD 87,270,037 86,904,806
Undistributed investment income--net 117,765 397,549
16
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 95,554 130,803
Shares issued for dividends reinvested 54,298 106,943
Shares redeemed (583,540) (1,604,864)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (433,688) (1,367,118)
- --------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 96,676 1,001,066
Shares issued for dividends reinvested 18,079 27,232
Shares redeemed (187,057) (194,351)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (72,302) 833,947
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 17
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31,
June 30, 2003 --------------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001(a) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 11.09 13.34 15.00 16.02 15.94 14.04
Investment Operations:
Investment income--net .07(b) .19(b) .27(b) .52(b) .47(b) .43
Net realized and unrealized
gain (loss) on investments .86 (2.25) (1.65) (.97) .80 2.67
Total from Investment Operations .93 (2.06) (1.38) (.45) 1.27 3.10
Distributions:
Dividends from investment
income--net (.11) (.19) (.28) (.48) (.46) (.43)
Dividends from net realized
gain on investments -- -- -- (.09) (.73) (.77)
Total Distributions (.11) (.19) (.28) (.57) (1.19) (1.20)
Net asset value, end of period 11.91 11.09 13.34 15.00 16.02 15.94
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 8.46(c) (15.48) (9.12) (2.98) 8.13 22.34
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to
average net assets .44(c) .85 .85 .85 .86 .87
Ratio of net investment income
to average net assets .65(c) 1.58 1.92 3.35 2.94 2.98
Portfolio Turnover Rate 211.53(c) 388.26 128.44 111.66 98.61 111.75
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 64,471 64,865 96,290 105,569 90,130 59,841
(A) AS REQUIRED, EFFECTIVE JANUARY 1, 2001, THE PORTFOLIO HAS ADOPTED THE
PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES
AND BEGAN AMORTIZING DISCOUNT AND PREMIUM ON DEBT SECURITIES ON A
SCIENTIFIC BASIS AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME.
THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED DECEMBER 31, 2001 WAS TO
DECREASE NET INVESTMENT INCOME PER SHARE BY $.01, INCREASE NET REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY $.01, AND DECREASE THE
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 2.02% TO 1.92%.
PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1,
2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
18
Six Months Ended Year Ended December 31,
June 30, 2003 -----------------------------------------------
SERVICE SHARES (Unaudited) 2002 2001(a) 2000(b)
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 11.08 13.33 15.00 15.00
Investment Operations:
Investment income--net .07(c) .17(c) .22(c) --
Net realized and unrealized
gain (loss) on investments .86 (2.24) (1.63) --
Total from Investment Operations .93 (2.07) (1.41) --
Distributions:
Dividends from investment income--net (.11) (.18) (.26) --
Net asset value, end of period 11.90 11.08 13.33 15.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 8.40(d) (15.63) (9.31) --
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .50(d) 1.00 1.00 --
Ratio of net investment income
to average net assets .59(d) 1.45 1.66 --
Decrease reflected in above expense
ratios due to undertakings
by The Dreyfus Corporation .07(d) .09 .16 --
Portfolio Turnover Rate 211.53(d) 388.26 128.44 111.66
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 22,799 22,040 15,396 --(e)
(A) AS REQUIRED, EFFECTIVE JANUARY 1, 2001, THE PORTFOLIO HAS ADOPTED THE
PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES
AND BEGAN AMORTIZING DISCOUNT AND PREMIUM ON DEBT SECURITIES ON A
SCIENTIFIC BASIS AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME.
THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED DECEMBER 31, 2001 WAS TO
DECREASE NET INVESTMENT INCOME PER SHARE BY $.01, INCREASE NET REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY $.01, AND DECREASE THE
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 1.77% TO 1.66%.
PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1,
2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION.
(B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(D) NOT ANNUALIZED.
(E) AMOUNT REPRESENTS LESS THAN $1,000.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 19
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the Balanced Portfolio (the "portfolio"). The portfolio is
only offered to separate accounts established by insurance companies to fund
variable annuity contracts and variable life insurance policies. The portfolio
is a diversified series. The portfolio' s investment objective is long-term
capital growth and current income. To pursue this goal, the portfolio invests in
a diversified mix of stocks and bonds. The portfolio's normal asset allocation
is approximately 60% stocks and 40% bonds. The Dreyfus Corporation (the "
Manager" ) serves as the portfolio' s investment adviser. The Manager is a
wholly-owned subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned
subsidiary of Mellon Financial Corporation.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
the Manager, is the distributor of the portfolio's shares, which are sold
without a sales charge. The portfolio 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(A) PORTFOLIO VALUATION: Most debt securities are valued each business day by an
independent pricing service (the "Service") approved by the Board of Trustees.
Effective April 14, 2003, the portfolio began pricing
20
securities traded on the NASDAQ stock market using the NASDAQ official closing
price. Debt securities for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other debt
securities are carried at fair value as determined by the Service, based on
methods which include consideration of: yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. Other securities (including financial
futures) are valued at the last sales price on the securities exchange on which
such securities are primarily traded, or at the last sales price on the national
securities market. 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. Bid price is used
when no asked price is available. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Trustees. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
(B) FOREIGN CURRENCY TRANSACTIONS: The portfolio 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 market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the portfolio's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value
of assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
The Portfolio 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the terms of the custody agreement, the portfolio
receives net earnings credits based on available cash balances left on deposit.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are declared and paid quarterly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the portfolio 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 gain can be offset by
capital loss carryovers, it is the policy of the portfolio not to distribute
such gain. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from generally accepted accounting
principles.
(E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $19,377,780 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, $657,546 of
the carryover expires in fiscal 2008, $10,430,864 expires in fiscal 2009 and
$8,289,370 expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002, was as follows: ordinary income $1,571,067. The tax
character of current year distributions will be determined at the end of the
current fiscal year.
22
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the portfolio based on
prevailing market rates in effect at the time of borrowings. During the period
ended June 30, 2003, the portfolio did not borrow under the Facility.
NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates:
(A) Pursuant to an Investment Advisory Agreement with the Manager, the
investment advisory fee is computed at the annual rate of .75 of 1% of the value
of the portfolio's average daily net assets and is payable monthly.
The Manager has agreed, from January 1, 2003 to December 31, 2003, to waive
receipt of its fees and/or assume the expenses of the portfolio so that the
expenses of neither class, exclusive of taxes, brokerage fees, interest on
borrowings, commitment fees and extraordinary expenses, exceed 1% of the value
of the average daily net assets of their class. During the period ended June 30,
2003, the Manager waived receipt of fees of $14,861 pursuant to the undertaking.
(B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% 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 Plan
The Portfolio 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
are payable without regard to actual expenses incurred. During the period ended
June 30, 2003, Service shares were charged $27,447 pursuant to the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $32 pursuant to the
transfer agency agreement.
The portfolio compensates Mellon under a custody agreement for providing
custodial services for the portfolio. During the period ended June 30, 2003, the
portfolio was charged $8,070 pursuant to the custody agreement.
(C) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each-in person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund' s relative net assets. The Chairman of the Board
receives an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the annual
retainer fee and per meeting fee paid at the time the Board member achieves
emeritus status.
(D) Commencing June 13, 2002, pursuant to an exemptive order from the Securities
and Exchange Commission, the portfolio may invest its available cash balances in
affiliated money market mutual funds. Management fees are not charged to these
accounts. During the period ended June 30, 2003, the portfolio derived $37,650
in income from these investments, which is included in dividend income in the
portfolio's Statement of Operations.
24
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities and financial futures during the period ended June 30,
2003, amounted to $175,374,178 and $181,127,017, respectively.
The portfolio may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The portfolio is exposed
to market risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the portfolio to "mark to
market" on a daily basis, which reflects the change in the market value of the
contracts at the close of each day' s trading. Typically, variation margin
payments are received or made to reflect daily unrealized gains or losses. When
the contracts are closed, the portfolio recognizes a realized gain or loss.
These investments require initial margin deposits with a custodian or broker,
which consist of cash or cash equivalents, up to approximately 10% of the
contract amount. The amount of these deposits is determined by the exchange or
Board of Trade on which the contract is traded and is subject to change. At June
30, 2003, there were no financial futures contracts outstanding.
At June 30, 2003, accumulated net unrealized appreciation on investments was
$960,610, consisting of $5,577,069 gross unrealized appreciation and $4,616,459
gross unrealized depreciation.
At June 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Portfolio 25
For More Information
Dreyfus Variable Investment Fund,
Balanced Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call 1-800-554-4611 or 516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 154SA0603
Dreyfus Variable
Investment Fund,
Disciplined Stock
Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
11 Statement of Assets and Liabilities
12 Statement of Operations
13 Statement of Changes in Net Assets
15 Financial Highlights
17 Notes to Financial Statements
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Disciplined Stock Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Disciplined Stock
Portfolio covers the six-month period from January 1, 2003, through June 30,
2003. Inside, you' ll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with the portfolio
manager, Gary Richardson.
The first half of 2003 was a time of long-awaited recovery for the U.S. stock
market. Despite continued volatility leading up to the war in Iraq, stocks began
to rally as the fighting wound down and investors turned their attention back to
the prospects for the U.S. economy. Apparently, they liked what they saw.
Despite current economic weakness, investors appear to be focused on the
possibility of better economic times ahead.
If these trends persist, 2003 could mark the first positive calendar year for
stocks since 1999. In our view, investors who have the potential to benefit most
are those who steadfastly maintained their equity exposure during the bear
market. In contrast, we believe investors who avoided stocks may have missed the
market' s recent gains, a timely reminder that patience, discipline and a
long-term perspective are fundamental principles that may lead to successful
investing.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Gary Richardson, Portfolio Manager
How did Dreyfus Variable Investment Fund, Disciplined Stock Portfolio perform
relative to its benchmark?
For the six-month period ended June 30, 2003, the portfolio's total returns were
8.57% for its Initial shares and 8.46% for its Service shares.(1) For the same
period, the total return of the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500 Index"), the portfolio's benchmark, was 11.75%.(2)
We attribute these results to a markedly positive shift in favor of stocks
driven by decisive U.S. and U.K. military action in Iraq. Virtually all market
sectors rose during the second quarter of 2003 on a wave of optimism generated
by these developments. However, the greatest gains were concentrated in the
areas of technology and telecommunications, particularly among the more
speculative issues with weaker fundamentals. Since our disciplined investment
approach steers us away from such speculative investments, the portfolio's
returns trailed the return of the S&P 500 Index.
What is the portfolio's investment approach?
The portfolio seeks investment returns (consisting of capital appreciation and
income) that are greater than the total return performance of stocks represented
by the S& P 500 Index. The portfolio invests in a diversified array of large
companies chosen through a disciplined investment process that combines computer
modeling techniques, fundamental analysis and risk management. We identify
potential investments through a quantitative analytic process that sifts through
a universe of approximately 2,000 stocks in search of those that are not only
undervalued according to our criteria but also exhibit what we believe to be
higher than expected earnings potential and financial health. A team of
experienced analysts examines the fundamentals of what we believe are the top
candidates. The portfolio manager then decides which stocks to purchase and
whether any current holdings should be sold.
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
In addition to identifying attractive investment opportunities, our approach is
designed to limit the risks associated with market timing and sector and
industry exposure. Market timing refers to the practice of attempting to benefit
from gains and declines in the overall market by adjusting the percentage of a
portfolio' s assets that are invested in the market at any one time. We do not
believe that the advantages of attempting to time the market or rotate in and
out of various industry sectors outweigh the risks of such moves. Instead, our
goal typically is to look to remain neutral to the sector allocations of the S&P
500 Index. The result has been a broadly diversified portfolio of carefully
selected stocks.
What other factors influenced the portfolio's performance?
The portfolio's stock selection process enabled it to achieve gains in all major
industry groups. Performance proved particularly robust among financial and
health care holdings. In the financial area, top performers included
money-center banks, such as J.P. Morgan Chase & Co.; brokerage firms, such as
Goldman Sachs Group; and credit card issuers, such as MBNA. Such holdings more
than compensated for isolated financial-sector disappointments, such as the
decline in Freddie Mac (Federal Home Loan Mortgage Corporation), which was
caused by unexpected accounting problems. In the health care area, the
portfolio' s biotechnology investments such as Amgen and Genzyme-General
Division, delivered the greatest gains. Pharmaceutical stocks, such as Wyeth,
and medical equipment holdings, such as Boston Scientific, boosted performance
as well.
The portfolio's stock selections in technology and services proved more
problematic. Technology holdings such as Cisco Systems and Intel produced
positive returns. However, as mentioned earlier, those returns failed to match
that of the technology portion of the benchmark. That's because many technology
stocks that failed to meet our strict investment criteria rose sharply when many
investors turned toward stocks that had been hurt severely in the bear market.
Similarly, in the services area, fundamentally weak telecommunications stocks
enjoyed steep climbs, while the portfolio's more conservative telecommunications
holdings, such as Vodafone Group, ADR, achieved more modest success.
A small number of individual stocks in other areas also produced disappointing
results. Kraft Foods, which was one of the portfolio's larger holdings during
the reporting period, declined when the company announced weaker than expected
earnings. AT& T, another significant holding, lost ground as a result of
competitive pressures and an industry-wide surplus of capacity.
What is the portfolio's current strategy?
We continue to invest one stock at a time, focusing on companies with solid
balance sheets and consistent histories of performance. This strategy has
resulted in a slightly greater percentage of assets committed to growth stocks
than value stocks as of the end of the reporting period. This allocation of
assets is consistent with our view that current conditions favor a slow,
sustained economic recovery. However, we would like to emphasize the fact that
we have based our investment decisions on each stock' s individual
characteristics rather than our opinion regarding the economy's prospects
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, DISCIPLINED STOCK PORTFOLIO MADE AVAILABLE THROUGH INSURANCE
PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS.
HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN,
AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE
DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED
IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL
REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO
EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT
THROUGH DECEMBER 31, 2003, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR
MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS
WOULD HAVE BEEN LOWER.
(2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500 COMPOSITE
STOCK PRICE INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK
MARKET PERFORMANCE.
The Portfolio 5
June 30, 2003 (Unaudited)
STATEMENT OF INVESTMENTS
COMMON STOCKS--99.2% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ALCOHOL & TOBACCO--.7%
Anheuser-Busch Cos. 15,500 791,275
CONSUMER CYCLICAL--10.4%
Abercrombie & Fitch, Cl. A 18,900 (a) 536,949
Best Buy 16,600 (a) 729,072
CVS 20,000 560,600
Darden Restaurants 24,610 467,098
Harley-Davidson 8,900 354,754
Home Depot 53,900 1,785,168
International Game Technology 5,600 573,048
Johnson Controls 8,900 761,840
Kohl's 13,500 (a) 693,630
Lear 8,500 (a) 391,170
Lowe's Cos. 20,200 867,590
NIKE, Cl. B 5,100 272,799
TJX Cos. 20,400 384,336
Wal-Mart Stores 52,900 2,839,143
Wendy's International 17,300 501,181
11,718,378
CONSUMER STAPLES--6.3%
Coca-Cola 38,180 1,771,934
Fortune Brands 8,500 443,700
Kimberly-Clark 10,800 563,112
Kraft Foods, Cl. A 17,600 572,880
Newell Rubbermaid 13,700 383,600
PepsiCo. 33,830 1,505,435
Procter & Gamble 21,360 1,904,885
7,145,546
ENERGY RELATED--7.1%
Apache 8,600 559,516
ChevronTexaco 8,428 608,501
ConocoPhillips 19,000 1,041,200
Devon Energy 7,690 410,646
Dominion Resources 14,200 912,634
Exxon Mobil 57,430 2,062,311
Halliburton 23,100 531,300
Nabors Industries 6,700 (a) 264,985
Noble 7,500 (a) 257,250
6
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY RELATED (CONTINUED)
Occidental Petroleum 16,240 544,852
Schlumberger 7,100 337,747
Valero Energy 11,800 428,694
7,959,636
HEALTH CARE--15.1%
AmerisourceBergen 8,320 576,992
Amgen 24,100 (a) 1,601,204
Boston Scientific 16,090 (a) 983,099
Forest Laboratories 4,020 (a) 220,095
Genzyme--General Division 8,200 (a) 342,760
HCA 10,500 336,420
Johnson & Johnson 43,900 2,269,630
Medtronic 19,100 916,227
Merck & Co. 28,700 1,737,785
Novartis, ADR 8,300 330,423
Pfizer 135,204 4,617,217
UnitedHealth Group 16,400 824,100
Varian Medical Systems 2,900 (a) 166,953
WellPoint Health Networks 3,800 (a) 320,340
Wyeth 38,170 1,738,643
16,981,888
INTEREST SENSITIVE--23.7%
Allstate 15,100 538,315
American International Group 39,201 2,163,111
Bank of America 33,000 2,607,990
Bear Stearns Cos. 6,500 470,730
Capital One Financial 13,400 659,012
Charter One Financial 15,211 474,279
Citigroup 82,666 3,538,105
Countrywide Financial 7,600 528,732
Fannie Mae 15,600 1,052,064
First Tennessee National 10,000 439,100
Freddie Mac 16,000 812,320
General Electric 90,550 2,596,974
Goldman Sachs Group 13,500 1,130,625
J.P. Morgan Chase & Co. 59,000 2,016,620
Lehman Brothers Holdings 10,100 671,448
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
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INTEREST SENSITIVE (CONTINUED)
MBNA 19,700 410,548
Merrill Lynch 23,200 1,082,976
National City 15,300 500,463
Radian Group 6,300 230,895
RenaissanceRe Holdings 8,300 377,816
SouthTrust 16,000 435,200
Travelers Property Casualty, Cl. A 52,024 827,182
U.S. Bancorp 49,042 1,201,529
Wells Fargo & Co. 31,500 1,587,600
XL Capital, Cl. A 4,000 332,000
26,685,634
INTERNET RELATED--.4%
eBay 4,000 (a) 416,720
PRODUCER GOODS--9.7%
Air Products & Chemicals 14,890 619,424
Deere & Co. 12,600 575,820
duPont(E.I.) deNemours & Co. 28,450 1,184,658
Fluor 8,000 269,120
Freeport-McMoRan Copper & Gold, Cl. B 25,400 622,300
ITT Industries 4,800 314,208
Ingersoll-Rand, Cl. A 12,600 596,232
International Paper 18,400 657,432
Lockheed Martin 7,250 344,882
Masco 25,100 598,635
Norfolk Southern 25,100 481,920
Northrop Grumman 4,300 371,047
PPG Industries 11,890 603,299
Pentair 9,400 367,164
Stanley Works 11,700 322,920
3M 6,860 884,803
Union Pacific 8,300 481,566
United Parcel Service, Cl. B 13,200 840,840
United Technologies 12,000 849,960
10,986,230
SERVICES--7.0%
Affiliated Computer Services, Cl. A 5,800 (a) 265,234
Clear Channel Communications 8,500 (a) 360,315
8
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
SERVICES (CONTINUED)
Comcast, Cl. A 36,100 (a) 1,089,498
First Data 24,100 998,704
Fox Entertainment Group, Cl. A 21,200 (a) 610,136
Gannett 6,800 522,308
Manpower 9,200 341,228
McGraw-Hill Cos. 8,200 508,400
Tribune 11,300 545,790
Viacom, Cl. B 33,926 (a) 1,481,209
Vodafone Group, ADR 21,300 418,545
Walt Disney 35,100 693,225
7,834,592
TECHNOLOGY--14.3%
Cisco Systems 76,100 (a) 1,270,109
Dell Computer 50,600 (a) 1,617,176
Intel 47,300 983,083
International Business Machines 16,710 1,378,575
Intuit 10,900 (a) 485,377
KLA-Tencor 13,100 (a) 609,019
Lexmark International 8,400 (a) 594,468
Linear Technology 16,400 528,244
Maxim Integrated Products 12,000 410,280
Microsoft 145,300 3,721,133
Nokia, ADR 22,000 361,460
Oracle 83,900 (a) 1,008,478
QUALCOMM 17,000 607,750
QLogic 9,800 (a) 473,634
Symantec 13,200 (a) 578,952
Taiwan Semiconductor Manufacturing, ADR 40,900 (a) 412,272
Texas Instruments 41,200 725,120
UTStarcom 9,970 (a) 354,633
16,119,763
UTILITIES--4.5%
BellSouth 39,200 1,043,896
Entergy 11,000 580,580
Exelon 13,500 807,435
FPL Group 7,700 514,745
PPL 13,500 580,500
The Portfolio 9
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES (CONTINUED)
SBC Communications 40,626 1,037,994
Telefonos de Mexico, Cl. L, ADR 14,500 455,590
5,020,740
TOTAL COMMON STOCKS
(cost $95,701,025) 111,660,402
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Principal
SHORT-TERM INVESTMENTS--1.2% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT;
Greenwich Capital Markets, Tri-Party
Repurchase Agreement, 1.10%, dated
6/30/2003, due 7/1/2003, in the amount of
$1,363,042 (fully collateralized by $960,000
U.S. Treasury Bonds, 7.875%, 2/15/2021,
value $1,391,691)
(cost $1,363,000) 1,363,000 1,363,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $97,064,025) 100.4% 113,023,402
LIABILITIES, LESS CASH AND RECEIVABLES (.4%) (454,727)
NET ASSETS 100.0% 112,568,675
(A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--
See Statement of Investments--Note 1(b) 97,064,025 113,023,402
Cash 6,467
Dividends and interest receivable 97,003
Receivable for shares of Beneficial Interest subscribed 1,901
Prepaid expenses 2,295
113,131,068
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 77,212
Payable for shares of Beneficial Interest redeemed 454,386
Accrued expenses 30,795
562,393
- --------------------------------------------------------------------------------
NET ASSETS ($) 112,568,675
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 142,068,301
Accumulated undistributed investment income--net 429,829
Accumulated net realized gain (loss) on investments (45,888,832)
Accumulated net unrealized appreciation
(depreciation) on investments 15,959,377
- --------------------------------------------------------------------------------
NET ASSETS ($) 112,568,675
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- --------------------------------------------------------------------------------
Net Assets ($) 102,988,277 9,580,398
Shares Outstanding 5,914,436 551,468
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 17.41 17.37
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 11
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $3,055 foreign taxes withheld at source) 902,492
Interest 4,505
TOTAL INCOME 906,997
EXPENSES:
Investment advisory fee--Note 3(a) 410,399
Professional fees 23,630
Prospectus and shareholders' reports 12,643
Custodian fees--Note 3(b) 12,038
Distribution fees--Note 3(b) 11,440
Trustees' fees and expenses--Note 3(c) 5,591
Shareholder servicing costs--Note 3(b) 4,161
Loan commitment fees--Note 2 488
Interest expense--Note 2 60
Miscellaneous 1,291
TOTAL EXPENSES 481,741
Less--waiver of fees due to undertaking--Note 3(a) (5,002)
NET EXPENSES 476,739
INVESTMENT INCOME--NET 430,258
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (3,954,898)
Net unrealized appreciation (depreciation) on investments 12,400,617
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 8,445,719
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 8,875,977
SEE NOTES TO FINANCIAL STATEMENTS.
12
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 430,258 929,559
Net realized gain (loss) on investments (3,954,898) (16,790,199)
Net unrealized appreciation
(depreciation) on investments 12,400,617 (23,777,252)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 8,875,977 (39,637,892)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (28,354) (845,999)
Service shares (2,608) (57,796)
TOTAL DIVIDENDS (30,962) (903,795)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 1,335,411 13,518,697
Service shares 792,055 5,016,958
Dividends reinvested:
Initial shares 28,354 845,999
Service shares 2,608 57,796
Cost of shares redeemed:
Initial shares (12,868,861) (42,354,467)
Service shares (1,119,968) (1,277,753)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (11,830,401) (24,192,770)
TOTAL INCREASE (DECREASE) IN NET ASSETS (2,985,386) (64,734,457)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 115,554,061 180,288,518
END OF PERIOD 112,568,675 115,554,061
Undistributed investment income--net 429,829 30,533
The Portfolio 13
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 79,139 756,678
Shares issued for dividends reinvested 1,786 51,798
Shares redeemed (798,899) (2,426,524)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (717,974) (1,618,048)
- --------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 48,616 262,421
Shares issued for dividends reinvested 165 3,547
Shares redeemed (68,552) (74,798)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (19,771) 191,170
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 portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended
June 30, 2003 Year Ended December 31,
-----------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 16.04 20.89 24.19 26.92 22.95 18.30
Investment Operations:
Investment income--net .06(a) .12(a) .09(a) .06(a) .11(a) .08
Net realized and unrealized
gain (loss) on investments 1.31 (4.84) (3.30) (2.53) 4.12 4.80
Total from Investment Operations 1.37 (4.72) (3.21) (2.47) 4.23 4.88
Distributions:
Dividends from
investment income--net (.00)(b) (.13) (.09) (.05) (.10) (.09)
Dividends from net realized
gain on investments -- -- -- (.21) (.16) (.14)
Total Distributions (.00)(b) (.13) (.09) (.26) (.26) (.23)
Net asset value, end of period 17.41 16.04 20.89 24.19 26.92 22.95
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 8.57(c) (22.61) (13.27) (9.14) 18.45 26.72
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses
to average net assets .43(c) .83 .81 .81 .81 .88
Ratio of net investment income
to average net assets .40(c) .64 .40 .21 .45 .53
Portfolio Turnover Rate 29.74(c) 47.47 48.22 51.44 48.95 56.28
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 102,988 106,404 172,360 222,920 214,296 140,897
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended
June 30, 2003 Year Ended December 31,
------------------------------------------
SERVICE SHARES (Unaudited) 2002 2001 2000(a)
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 16.02 20.86 24.19 24.19
Investment Operations:
Investment income--net .05(b) .09(b) .05(b) --
Net realized and unrealized
gain (loss) on investments 1.30 (4.83) (3.30) --
Total from Investment Operations 1.35 (4.74) (3.25) --
Distributions:
Dividends from investment income--net (.00)(c) (.10) (.08) --
Net asset value, end of period 17.37 16.02 20.86 24.19
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 8.46(d) (22.72) (13.46) --
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .50(d) 1.00 1.00 --
Ratio of net investment income
to average net assets .33(d) .49 .26 --
Decrease reflected in above expense
ratios due to undertaking by
The Dreyfus Corporation .05(d) .06 .13 --
Portfolio Turnover Rate 29.74(d) 47.47 48.22 51.44
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 9,580 9,150 7,929 1
(A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
16
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the Disciplined Stock Portfolio (the "portfolio" ). The
portfolio is only offered to separate accounts established by insurance
companies to fund variable annuity contracts and variable life insurance
policies. The portfolio is a diversified series. The portfolio's investment
objective is to provide investment returns (consisting of capital appreciation
and income) that are greater than the total return performance of stocks
represented by the Standard & Poor' s 500 Composite Stock Price Index. The
Dreyfus Corporation (the "Manager" ) serves as the portfolio' s investment
adviser. The Manager is a wholly-owned subsidiary of Mellon Bank, N.A.
("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
the Manager, is the distributor of the portfolio's shares, which are sold
without a sales charge. The portfolio 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
The Portfolio 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(a) Portfolio valuation: Investments in securities are valued at the last sales
price on the securities exchange on which such securities are primarily traded
or at the last sales price on the national securities market. Effective April
14, 2003, the portfolio began pricing securities traded on the NASDAQ stock
market using the NASDAQ official closing price. 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. Bid price is used when no asked price is available. Securities for which
there are no such valuations are valued at fair value as determined in good
faith under the direction of the Board of Trustees.
(b) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the terms of the custody agreement, the portfolio
receives net earnings credits based on available cash balances left on deposit.
The portfolio may enter into repurchase agreements with financial institutions,
deemed to be creditworthy by the Manager, subject to the seller's agreement to
repurchase and the portfolio's agreement to resell such securities at a mutually
agreed upon price. Securities purchased subject to repurchase agreements are
deposited with the portfolio' s custodian and, pursuant to the terms of the
repurchase agreement, must have an aggregate market value greater than or equal
to 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 portfolio 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 portfolio maintains the
right to sell the underlying securities at market value and may claim any
resulting loss against the seller.
18
(c) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain, if any, are normally declared and paid annually, but the portfolio 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 gain can be offset by capital loss
carryovers, it is the policy of the portfolio not to distribute such gain.
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from generally accepted accounting principles.
(d) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $38,136,602 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, $21,752,976 of
the carryover expires in fiscal 2009 and $16,383,626 expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002 was as follows: ordinary income $903,795. The tax
character of current year distributions will be determined at the end of the
current fiscal year.
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the portfolio based on
prevailing market rates in effect at the time of borrowings.
The Portfolio 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
The average daily amount of borrowings outstanding under the Facility during the
period ended June 30, 2003 was approximately $7,200, with a related weighted
average annualized interest rate of 1.68%.
NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to an Investment Advisory Agreement with the Manager, the
investment advisory fee is computed at the annual rate of .75 of 1% of the value
of the portfolio' s average daily net assets and is payable monthly.
The Manager has undertaken, from January 1, 2003 to December 31, 2003, to waive
receipt of its fees and/or assume the expenses of the portfolio so that the
expenses of neither class, exclusive of taxes, brokerage fees, interest on
borrowings, commitment fees and extraordinary expenses, exceed an annual rate of
1% of the value of the average daily net assets of their class. During the
period ended June 30, 2003, the Manager waived receipt of fees of $5,002,
pursuant to the undertaking.
(b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% 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 Plan are
payable without regard to actual expenses incurred. During the period ended June
30, 2003, Service shares were charged $11,440 pursuant to the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $123 pursuant to the
transfer agency agreement.
20
The portfolio compensates Mellon under a custody agreement for providing
custodial services for the portfolio. During the period ended June 30, 2003, the
portfolio was charged $12,038 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in-person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund' s relative net assets. The Chairman of the Board
receives an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the annual
retainer fee and per meeting fee paid at the time the Board member achieves
emeritus status.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended June 30, 2003, amounted to
$32,517,112 and $44,180,087, respectively.
At June 30, 2003, accumulated net unrealized appreciation on investments was
$15,959,377, consisting of $18,694,503 gross unrealized appreciation and
$2,735,126 gross unrealized depreciation.
At June 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Portfolio 21
For More Information
Dreyfus Variable Investment Fund,
Disciplined Stock Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call 1-800-554-4611 or
516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 150SA0603
Dreyfus Variable
Investment Fund,
Growth and Income
Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
11 Statement of Securities Sold Short
12 Statement of Assets and Liabilities
13 Statement of Operations
14 Statement of Changes in Net Assets
16 Financial Highlights
18 Notes to Financial Statements
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Growth and Income Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Growth and Income
Portfolio covers the six-month period from January 1, 2003, through June 30,
2003. Inside, you' ll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with the fund's
portfolio manager, Douglas D. Ramos, CFA.
The first half of 2003 was a time of long-awaited recovery for the U.S. stock
market. Despite continued volatility leading up to the war in Iraq, stocks began
to rally as the fighting wound down and investors turned their attention back to
the prospects for the U.S. economy. Apparently, they liked what they saw.
Despite current economic weakness, investors appear to be focused on the
possibility of better economic times ahead.
If these trends persist, 2003 could mark the first positive calendar year for
stocks since 1999. In our view, investors who have the potential to benefit most
are those who steadfastly maintained their equity exposure during the bear
market. In contrast, we believe investors who avoided stocks may have missed the
market' s recent gains, a timely reminder that patience, discipline and a
long-term perspective are fundamental principles that may lead to successful
investing.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Douglas D. Ramos, CFA, Portfolio Manager
How did Dreyfus Variable Investment Fund, Growth and Income Portfolio perform
relative to its benchmark?
For the six-month period ended June 30, 2003, the portfolio's total returns were
10.73% for its Initial shares and 10.60% for its Service shares.(1) For the same
period, the total return of the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500 Index"), the portfolio's benchmark, was 11.75%.(2)
We attribute the portfolio' s performance primarily to a favorable shift in
investor sentiment that began in mid-March 2003. This shift, prompted by
decisive military action in Iraq and improving prospects for domestic economic
growth, drove most stock prices sharply higher during the second half of the
reporting period. The portfolio participated in the stock market's rise to a
significant degree. However, the market's greatest gains were concentrated in
stocks of previously beaten-down technology companies. Largely because the
portfolio' s disciplined investment approach generally steered it away from such
investments, the portfolio's total returns slightly lagged its benchmark's
return.
What is the portfolio's investment approach?
The portfolio seeks long-term capital growth, current income and growth of
income consistent with reasonable investment risk. To pursue this goal, the
portfolio invests in stocks, bonds and money market instruments of domestic and
foreign issuers. The portfolio's stock investments may include common stocks,
preferred stocks and convertible securities, including those purchased in
initial public offerings or shortly thereafter.
The portfolio focuses primarily on low- and moderately priced stocks with market
capitalizations of $1 billion or more at the time of purchase. We use
fundamental analysis to create a broadly diversified, value-tilted portfolio,
typically with a weighted average price-to-earn
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
ings ratio less than, and long-term projected earnings growth rate greater than,
those of the S&P 500 Index.
We typically measure a stock's relative value by looking at its price in
relation to the company's business prospects and intrinsic worth, as measured by
a wide range of financial and business data. In examining each company's
fundamentals, together with economic and industry trends, we typically look for
factors that could trigger a rise in a stock's price, such as new competitive
opportunities or internal operational improvements. The result of our approach
during the reporting period was a portfolio containing stocks from a variety of
different market sectors and industries.
What other factors influenced the portfolio's performance?
Performance benefited from the portfolio's focus on stocks we believed were well
positioned for an economic upturn. In particular, we invested a greater than
average percentage of the portfolio's assets in consumer discretionary stocks,
most of which delivered above-average returns during the reporting period. Top
performers included media and entertainment holdings such as InterActiveCorp;
retailers such as Target; leisure and travel companies such as Carnival; and
food service providers such as McDonald's.
In the health care and materials and processing areas, strong individual stock
selections boosted performance relative to the S& P 500 Index. Health care
standouts included drug manufacturers such as Teva Pharmaceuticals; medical
equipment suppliers such C. R. Bard; health services companies such as Anthem;
and biotechnology concerns such as Amgen. In the materials and processing area,
a timely transaction in DuPont stock and a few strong holdings among aluminum
producers, such as Alcoa, helped generate higher returns than the S&P 500
Index's materials and processing group.
The portfolio's returns were enhanced by its relatively large position in
technology stocks, where it benefited from holdings of equipment manufacturers
such as Jabil Circuit; computer storage companies such as EMC; and semiconductor
makers such as Analog Devices. However,
4
these gains fell short of the returns registered by the S&P 500 Index's
technology group, which included what we regarded as several high-flying,
speculative stocks with poor fundamentals that the portfolio avoided. In
addition, a few individual holdings in various other areas further undermined
the portfolio's performance compared to its benchmark. For example, Kraft Foods
declined when the company revealed unexpectedly high pension-related costs
What is the portfolio's current strategy?
As of the end of the reporting period, we believe the U.S. economy appears
poised for continuing gradual growth, and we continue to find attractively
valued investment opportunities among high-quality stocks that appear well
positioned to benefit from a continuing economic recovery. In particular, we are
emphasizing technology and consumer discretionary stocks. On the other hand, we
are finding relatively few opportunities in the traditionally defensive areas of
consumer staples and industrials, which we believe are less likely to benefit
during the current stage of the economic cycle.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO MADE AVAILABLE THROUGH INSURANCE
PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS.
HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN,
AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE
DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED
IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL
REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO
EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT
THROUGH DECEMBER 31, 2003, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR
MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS
WOULD HAVE BEEN LOWER.
(2) SOURCE: LIPPER INC. -- REFLECTS THE REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500 COMPOSITE
STOCK PRICE INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK
MARKET PERFORMANCE.
The Portfolio 5
STATEMENT OF INVESTMENTS
June 30, 2003 (Unaudited)
COMMON STOCKS--99.1% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--14.3%
AOL Time Warner 119,000 (a) 1,914,710
Best Buy 39,000 (a) 1,712,880
Carnival 100,000 3,251,000
Clear Channel Communications 58,080 (a) 2,462,011
Comcast, Cl. A 62,541 (a) 1,887,487
Ford Motor 67,000 736,330
General Motors 21,000 756,000
Hilton Hotels 55,000 703,450
Home Depot 82,000 2,715,840
InterActiveCorp 86,800 (a,b) 3,434,676
Lamar Advertising 36,200 (a) 1,274,602
Liberty Media 185,000 (a) 2,138,600
McDonald's 111,000 2,448,660
Staples 37,500 (a) 688,125
TJX Cos. 123,000 2,317,320
Target 99,000 3,746,160
Viacom, Cl. B 67,096 (a) 2,929,412
35,117,263
CONSUMER STAPLES--6.9%
Altria Group 73,000 3,317,120
Coca-Cola 66,000 3,063,060
Kraft Foods 75,700 2,464,035
PepsiCo 69,000 3,070,500
Procter & Gamble 40,000 3,567,200
UST 38,000 1,331,140
16,813,055
ENERGY--6.0%
Devon Energy 49,094 2,621,620
Exxon Mobil 186,446 6,695,276
Schlumberger 53,000 2,521,210
XTO Energy 144,500 2,905,895
14,744,001
FINANCIAL--21.3%
ACE 22,000 754,380
American Express 56,700 2,370,627
American International Group 134,891 7,443,286
Bank of America 40,900 3,232,327
6
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Bank of New York 97,000 2,788,750
Bank One 33,000 1,226,940
Citigroup 176,535 7,555,698
Countrywide Financial 17,000 1,182,690
Federal Home Loan Mortgage 36,600 1,858,182
Federal National Mortgage Association 45,400 3,061,776
Fleet Boston Financial 41,588 1,235,579
Goldman Sachs Group 24,000 2,010,000
J.P. Morgan Chase & Co. 48,600 1,661,147
MBNA 78,000 1,625,520
Marsh & McLennan Cos. 34,000 1,736,380
Morgan Stanley 74,200 3,172,050
St. Paul Cos. 33,900 1,237,689
Travelers Property Casualty, Cl. A 114,799 1,825,304
Travelers Property Casualty, Cl. B 16,025 252,714
U.S. Bancorp 51,000 1,249,500
Washington Mutual 29,000 1,197,700
Wells Fargo 72,000 3,628,800
52,307,039
HEALTH CARE--14.3%
Abbott Laboratories 32,000 1,400,320
Amgen 38,000 (a) 2,524,720
Anthem 18,800 (a) 1,450,420
Bard (C.R.) 11,000 784,410
Becton, Dickinson & Co. 26,000 1,010,100
Biovail 25,000 (a) 1,176,500
Bristol-Myers Squibb 46,000 1,248,900
Eli Lilly & Co. 29,000 2,000,130
Johnson & Johnson 63,000 3,257,100
Merck & Co. 79,000 4,783,450
Novartis, ADR 30,000 1,194,300
Pfizer 196,300 6,703,645
Teva Pharmaceutical Industries, ADR 38,000 2,163,340
WellPoint Health Networks 31,200 (a) 2,630,160
Wyeth 60,000 2,733,000
35,060,495
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS--8.7%
CSX 42,000 1,263,780
Danaher 25,000 1,701,250
Deere & Co. 26,000 1,188,200
Emerson Electric 26,000 1,328,600
General Electric 268,000 7,686,240
Lockheed Martin 16,000 761,120
Norfolk Southern 55,600 1,067,520
Northrop Grumman 14,000 1,208,060
3M 11,000 1,418,780
Tyco International 67,000 1,271,660
United Technologies 18,200 1,289,106
Waste Management 52,000 1,252,680
21,436,996
INFORMATION TECHNOLOGY--19.6%
Accenture 70,000 (a) 1,266,300
Applied Materials 76,000 (a) 1,205,360
Cisco Systems 191,000 (a) 3,187,790
Computer Sciences 40,200 (a) 1,532,424
Dell Computer 95,000 (a) 3,036,200
EMC 152,000 (a) 1,591,440
First Data 46,000 1,906,240
Hewlett-Packard 56,825 1,210,373
Intel 174,800 3,633,043
International Business Machines 46,000 3,795,000
Jabil Circuit 87,000 (a) 1,922,700
KLA-Tencor 49,000 (a) 2,278,010
Microsoft 337,000 8,630,570
Motorola 138,000 1,301,340
National Semiconductor 37,800 (a) 745,416
Nokia Oyj, ADR 75,000 1,232,250
Novellus Systems 35,000 (a) 1,281,735
NVIDIA 53,000 (a) 1,219,530
Oracle 238,000 (a) 2,860,760
SAP, ADR 40,000 1,168,800
8
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (CONTINUED)
Teradyne 51,300 (a) 888,003
VeriSign 87,000 (a) 1,203,210
Xilinx 43,000 (a) 1,088,330
48,184,824
MATERIALS--3.0%
Alcoa 51,000 1,300,500
Du Pont (E.I.) de Nemours 18,000 749,520
International Paper 72,000 2,572,560
PPG Industries 26,000 1,319,240
Weyerhaeuser 24,000 1,296,000
7,237,820
TELECOMMUNICATION SERVICES--3.0%
BellSouth 63,000 1,677,690
SBC Communications 109,000 2,784,950
Telefonos de Mexico, ADR 40,000 1,256,800
Verizon Communications 41,000 1,617,450
7,336,890
UTILITIES--2.0%
Exelon 26,000 1,555,060
FPL Group 18,000 1,203,300
Progress Energy 19,000 834,100
TXU 56,000 1,257,200
4,849,660
TOTAL COMMON STOCKS
(cost $233,277,360) 243,088,043
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
SHORT-TERM INVESTMENTS--.3% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS:
1.14%, 7/10/2003 500,000 (c) 499,910
..99%, 9/4/2003 150,000 (c) 149,778
..79%, 9/25/2003 50,000 (c) 49,901
TOTAL SHORT-TERM INVESTMENTS
(cost $699,495) 699,589
The Portfolio 9
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
INVESTMENT OF CASH COLLATERAL
- ------------------------------------------------------------------------------------------------------------------------------------
FOR SECURITIES LOANED--1.4% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANY;
Dreyfus Institutional Preferred
Money Market Fund
(cost $3,472,000) 3,472,000 3,472,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $237,448,855) 100.8% 247,259,632
LIABILITIES, LESS CASH AND RECEIVABLES (.8%) (1,925,829)
NET ASSETS 100.0% 245,333,803
(A) NON-INCOME PRODUCING.
(B) ALL OF THIS SECURITY IS ON LOAN. AT JUNE 30, 2003, THE TOTAL MARKET VALUE
OF THE PORTFOLIO'S SECURITY ON LOAN IS $3,434,676 AND THE TOTAL MARKET
VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS $3,472,000.
(C) PARTIALLY HELD BY BROKER AS COLLATERAL FOR OPEN SHORT POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
10
STATEMENT OF SECURITIES SOLD SHORT
June 30, 2003 (Unaudited)
COMMON STOCKS Shares Value ($)
- --------------------------------------------------------------------------------
Teva Pharmaceutical Industries, ADR
(proceeds $522,509) 14,000 797,020
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 11
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement
of Investments (including securities loaned
valued at $3,434,676)--Note 1(c) 237,448,855 247,259,632
Receivable for investment securities sold 3,977,410
Receivable from brokers for
proceeds on securities sold short 522,509
Dividends and interest receivable 235,333
Receivable for shares of Beneficial Interest subscribed 48,129
Prepaid expenses 11,960
252,054,973
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 165,111
Cash overdraft due to Custodian 41,649
Liability for securities loaned--Note 1(c) 3,472,000
Payable for investment securities purchased 1,224,966
Payable for shares of Beneficial Interest redeemed 966,621
Securities sold short, at value (proceeds $522,509)
--see Statement of Securities Sold Short 797,020
Accrued expenses 53,803
6,721,170
- --------------------------------------------------------------------------------
NET ASSETS ($) 245,333,803
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 290,575,495
Accumulated undistributed investment income--net 5,769
Accumulated net realized gain (loss) on investments (54,783,727)
Accumulated net unrealized appreciation
(depreciation) on investments 9,536,266
- --------------------------------------------------------------------------------
NET ASSETS ($) 245,333,803
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- --------------------------------------------------------------------------------
Net Assets ($) 222,993,693 22,340,110
Shares Outstanding 12,592,910 1,264,243
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 17.71 17.67
SEE NOTES TO FINANCIAL STATEMENTS.
12
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $4,756 foreign taxes withheld at source) 1,888,428
Interest 6,754
Income from securities lending 3,238
TOTAL INCOME 1,898,420
EXPENSES:
Investment advisory fee--Note 3(a) 877,494
Prospectus and shareholders' reports 33,339
Distribution fees--Note 3(b) 25,555
Professional fees 24,278
Custodian fees--Note 3(b) 10,295
Trustees' fees and expenses--Note 3(c) 9,450
Shareholder servicing costs --Note 3(b) 3,238
Dividends on securities sold short 1,758
Interest expense--Note 2 1,151
Loan commitment fees--Note 2 1,024
Miscellaneous 2,546
TOTAL EXPENSES 990,128
Less--waiver of fees due to undertaking--Note 3(a) (7,269)
NET EXPENSES 982,859
INVESTMENT INCOME--NET 915,561
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments:
Long transactions (15,406,872)
Short sale transactions (11,273)
Net realized gain (loss) on financial futures 132,671
NET REALIZED GAIN (LOSS) (15,285,474)
Net unrealized appreciation (depreciation) on
investments and securities sold short (including
$20,625 net unrealized appreciation on financial futures) 37,997,473
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 22,711,999
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 23,627,560
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 13
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 915,561 1,850,550
Net realized gain (loss) on investments (15,285,474) (35,533,732)
Net unrealized appreciation
(depreciation) on investments 37,997,473 (64,066,004)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 23,627,560 (97,749,186)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (858,791) (1,780,284)
Service shares (67,982) (100,587)
TOTAL DIVIDENDS (926,773) (1,880,871)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 6,084,223 29,993,819
Service shares 1,472,954 13,574,671
Dividends reinvested:
Initial shares 858,791 1,780,284
Service shares 67,982 100,587
Cost of shares redeemed:
Initial shares (31,156,513) (97,622,710)
Service shares (1,630,314) (3,014,297)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (24,302,877) (55,187,646)
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,602,090) (154,817,703)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 246,935,893 401,753,596
END OF PERIOD 245,333,803 246,935,893
Undistributed investment income--net 5,769 16,981
14
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 373,144 1,644,953
Shares issued for dividends reinvested 52,460 102,406
Shares redeemed (1,940,399) (5,452,822)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (1,514,795) (3,705,463)
- --------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 90,239 690,262
Shares issued for dividends reinvested 4,161 5,941
Shares redeemed (102,230) (173,258)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (7,830) 522,945
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31,
June 30, 2003 --------------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 16.06 21.65 23.48 25.48 22.63 20.78
Investment Operations:
Investment income--net .06(a) .11(a) .11(a) .14(a) .16(a) .21
Net realized and unrealized
gain (loss) on investments 1.66 (5.59) (1.49) (1.10) 3.64 2.23
Total from Investment Operations 1.72 (5.48) (1.38) (.96) 3.80 2.44
Distributions:
Dividends from investment
income--net (.07) (.11) (.11) (.15) (.15) (.20)
Dividends from net realized
gain on investments -- -- (.11) (.89) (.70) (.39)
Dividends in excess of net
realized gain on investments -- -- (.23) -- (.10) --
Total Distributions (.07) (.11) (.45) (1.04) (.95) (.59)
Net asset value, end of period 17.71 16.06 21.65 23.48 25.48 22.63
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 10.73(b) (25.33) (5.85) (3.78) 16.88 11.81
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .41(b) .80 .79 .78 .79 .78
Ratio of interest expense, loan
commitment fees and dividends
on securities sold short
to average net assets .00(b,c) .00(c) .01 -- -- --
Ratio of net investment income
to average net assets .40(b) .58 .48 .56 .67 1.00
Portfolio Turnover Rate 19.73(b) 34.61 33.82 60.90 96.26 126.18
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 222,994 226,548 385,569 437,407 461,392 430,702
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) NOT ANNUALIZED.
(C) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
16
Six Months Ended Year Ended December 31,
June 30, 2003 ---------------------------------------------
SERVICE SHARES (Unaudited) 2002 2001 2000(a)
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 16.03 21.61 23.48 23.48
Investment Operations:
Investment income--net .05(b) .08(b) .06(b) --
Net realized and unrealized
gain (loss) on investments 1.64 (5.58) (1.51) --
Total from Investment Operations 1.69 (5.50) (1.45) --
Distributions:
Dividends from investment income--net (.05) (.08) (.08) --
Dividends from net realized
gain on investments -- -- (.11) --
Dividends in excess of net
realized gain on investments -- -- (.23) --
Total Distributions (.05) (.08) (.42) --
Net asset value, end of period 17.67 16.03 21.61 23.48
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 10.60(c) (25.46) (6.14) --
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .50(c) .98 1.00 --
Ratio of interest expense, loan
commitment fees and dividends
on securities sold short
to average net assets .00(c,d) .00(d) .01 --
Ratio of net investment income
to average net assets .31(c) .43 .28 --
Decrease reflected in above expense
ratios due to undertaking
by The Dreyfus Corporation .04(c) .05 .11 --
Portfolio Turnover Rate 19.73(c) 34.61 33.82 60.90
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 22,340 20,388 16,185 1
(A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED.
(D) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the Growth and Income Portfolio (the "portfolio"). The
portfolio is only offered to separate accounts established by insurance
companies to fund variable annuity contracts and variable life insurance
policies. The portfolio is a non-diversified series. The portfolio's investment
objective is to provide long-term capital growth, current income and growth of
income, consistent with reasonable investment risk. The Dreyfus Corporation (the
"Manager") serves as the portfolio's investment adviser. The Manager is a
wholly-owned subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned
subsidiary of Mellon Financial Corporation.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
the Manager, is the distributor of the portfolio's shares, which are sold
without a sales charge. The portfolio 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities
18
exchange on which such securities are primarily traded or at the last sales
price on the national securities market. Effective April 14, 2003, the portfolio
began pricing securities traded on the NASDAQ stock market using the NASDAQ
official closing price. 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, except for open
short positions, where the asked price is used for valuation purposes. Bid price
is used when no asked price is available. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Trustees. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward currency exchange contracts are valued at the forward rate.
(B) FOREIGN CURRENCY TRANSACTIONS: The portfolio 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 from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amount of
dividends, interest and foreign withholding taxes recorded on the portfolios'
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 in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest
The Portfolio 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
income, including, where applicable, amortization of discount and premium on
investments, is recognized on the accrual basis. Under the terms of the custody
agreement, the portfolio receives net earnings credits based on available cash
balances left on deposit.
The portfolio may lend securities to qualified institutions. At origination, all
loans are secured by cash 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 will be
maintained at all times. Cash collateral is invested in certain money market
mutual funds managed by the Manager as shown in the portfolio's Statement of
Investments. The portfolio will be entitled to receive all income on securities
loaned, in addition to income earned as a result of the lending transaction.
Although each security loaned is fully collateralized, the portfolio would bear
the risk of delay in recovery of, or loss of rights in, the securities loaned
should a borrower fail to return the securities in a timely manner.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
The portfolio declares and pays dividends from investment income-net on a
quarterly basis. Dividends from net realized capital gain, if any, are normally
declared and paid annually, but the portfolio 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 gain can be offset by capital loss carryovers, it is the policy of the
portfolio not to distribute such gain. Income and capital gain distributions are
determined in accordance with income tax regulations, which may differ from
generally accepted accounting principles.
(E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
20
The portfolio has an unused capital loss carryover of $33,853,822 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, the carryover
expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002, was as follows: ordinary income $1,880,871. The tax
character of current year distributions will be determined at the end of the
current fiscal year.
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the portfolio based on
prevailing market rates in effect at the time of borrowings.
The average daily amount of borrowings outstanding under the Facility during the
period ended June 30, 2003 was approximately $137,600, with a related weighted
average annualized interest rate of 1.66%.
NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates:
(A) Pursuant to an Investment Advisory Agreement with the Manager, the
investment advisory fee is computed at the annual rate of .75 of 1% of the value
of the portfolios' average daily net assets and is payable monthly.
The Manager has agreed, from January 1, 2003 to December 31, 2003 to waive
receipt of its fees and/or assume the expenses of the portfolio so that the
expenses of neither class, exclusive of taxes, brokerage fees, interest on
borrowings, commitment fees and extraordinary expenses, exceed 1% of the value
of the average daily net assets of their
The Portfolio 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
class. During the period ended June 30, 2003, the Manager waived receipt of fees
of $7,269, pursuant to the undertaking.
(B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% 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 Plan are
payable without regard to actual expenses incurred. During the period ended June
30, 2003, Service shares were charged $25,555 pursuant to the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $229 pursuant to the
transfer agency agreement.
The portfolio compensates Mellon under a custody agreement for providing
custodial services for the portfolio. During the period ended June 30, 2003, the
portfolio was charged $10,295 pursuant to the custody agreement.
(C) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in-person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund' s relative net assets. The Chairman of the Board
receives an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the annual
retainer fee and per meeting fee paid at the time the Board member achieves
emeritus status.
22
NOTE 4--Securities Transactions:
The following summarizes the aggregate amount of purchases and sales of
investment securities and securities sold short, excluding short-term securities
and financial futures, during the period ended June 30, 2003:
Purchases ($) Sales ($)
- --------------------------------------------------------------------------------
Long transactions 45,936,574 68,036,227
Short sale transactions 1,579,276 --
TOTAL 47,515,850 68,036,227
The portfolio is engaged in short-selling which obligates the portfolio to
replace the security borrowed by purchasing the security at current market
value. The portfolio would incur a loss if the price of the security increases
between the date of the short sale and the date on which the portfolio replaces
the borrowed security. The portfolio would realize a gain if the price of the
security declines between those dates. Until the portfolio replaces the borrowed
security, the portfolio will maintain daily, a segregated account with a broker,
of permissible liquid assets sufficient to cover its short position. Securities
sold short at June 30, 2003, and their related market values and proceeds are
set forth in the Statement of Securities Sold Short.
The portfolio may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The portfolio is exposed
to market risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the portfolio to "mark to
market" on a daily basis, which reflects the change in market value of the
contracts at the close of each day's trading. Accordingly, variation margin
payments are received or made to reflect daily unrealized gains or losses. When
the contracts are closed, the portfolio recognizes a realized gain or loss.
These investments require initial margin deposits with a broker, which consist
of cash or cash equivalents, up to approximately 10% of the contract amount. The
amount of these deposits is determined by the exchange or Board of Trade on
which the contract is traded and is subject to change. At June 30, 2003, there
were no financial futures contracts outstanding.
The Portfolio 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
At June 30, 2003, accumulated net unrealized appreciation on investments was
$9,810,777, consisting of $31,046,352 gross unrealized appreciation and
$21,235,575 gross unrealized depreciation.
At June 30, 2003, 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).
24
For More Information
Dreyfus Variable Investment Fund,
Growth and Income Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call
1-800-554-4611 or
516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 108SA0603
Dreyfus Variable
Investment Fund,
International
Equity Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
14 Financial Highlights
16 Notes to Financial Statements
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
International Equity Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, International
Equity Portfolio covers the six-month period from January 1, 2003, through June
30, 2003. Inside, you'll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with the portfolio
manager, Paul Butler.
The first half of 2003 was a time of long-awaited recovery for international
stocks. Despite continued volatility and lackluster economic conditions leading
up to the war in Iraq, stocks began to rally as the fighting wound down and
investors turned their attention back to the prospects for the global economy.
Apparently, they liked what they saw. Despite current economic weakness,
investors in many parts of the world appear to be focused on the possibility of
better economic times ahead.
If these trends persist, 2003 could mark the first positive calendar year for
international stocks since 1999. In our view, investors who have the potential
to benefit most are those who steadfastly maintained their international equity
exposure during the bear market. In contrast, investors who avoided
international stocks may have missed the market' s recent gains, a timely
reminder that patience, discipline and a long-term perspective are fundamental
principles that may lead to successful investing.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Paul Butler, Portfolio Manager
How did Dreyfus Variable Investment Fund, International Equity Portfolio perform
relative to its benchmark?
For the six-month period ended June 30, 2003, the portfolio produced total
returns of 13.80% for its Initial shares and 13.70% for its Service shares.(1)
This compares with a 9.47% total return produced by the portfolio's benchmark,
the Morgan Stanley Capital International Europe, Australasia, Far East Index
("MSCI EAFE Index"), for the same period.(2)
The fund and international stock market benefited during the reporting period
from improving investor sentiment as market participants turned their attention
from the war in Iraq to the possibility of better economic times ahead. The fund
produced higher returns than its benchmark, primarily because of the relative
success of our stock selection strategy and currency exchange rate movements
favorable to the portfolio.
What is the portfolio's investment approach?
The portfolio focuses on individual stock selection. We do not attempt to
predict interest rates or market movements, nor do we have country allocation
models or targets. Rather, we choose investments on a company-by-company basis,
searching for what we believe are well-managed, well-positioned companies,
wherever they may be.
In choosing stocks, the portfolio establishes a global framework within which to
select investments. This involves identifying and forecasting key trends in
global economic variables, such as gross domestic product, inflation and
interest rates; investment themes, such as the impact of new technologies and
the globalization of industries and brands; relative values of equity
securities, bonds and cash; and long-term trends in currency movements.
Within the markets and sectors determined to be relatively attractive, the
portfolio seeks what it believes to be attractively priced companies that
possess a sustainable competitive advantage in their market or sector. The
portfolio generally will sell securities when themes or strategies change, or
when the portfolio determines that the company's prospects have changed, or if
the portfolio believes that the company's stock is fully valued by the market.
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
What other factors influenced the portfolio's performance?
The portfolio and various international stock markets were positively affected
during the first half of 2003 by improving investor sentiment. During the first
quarter, sentiment was generally negative as investors reacted to rising
geopolitical tensions and a persistently sluggish global economy. As the war in
Iraq wound down in April, investors apparently began to look forward to a more
robust economic recovery in the United States, which was widely expected to lead
to better economic times in other parts of the world.
Additionally, the portfolio benefited from the weakening of the U.S. dollar
relative to the euro and other currencies. As the dollar's value declined,
investments denominated in other currencies became more valuable in U.S. dollar
terms.
Although we do not manage the portfolio according to country allocation targets,
our stock selection process often leads to greater or lesser exposure to various
regions of the world when compared to the portfolio's benchmark. During the
reporting period, the portfolio' s performance benefited from its relatively
light exposure to Japan, where stocks continued to languish, and relatively
heavy exposure to Europe and the emerging markets, where stocks performed
relatively well.
Although Japanese stocks performed relatively poorly as a whole, our emphasis on
individual companies such as CANON and OLYMPUS OPTICAL, contributed positively
to the portfolio's performance. In Europe, the fund received strong returns from
some of the United Kingdom' s natural gas companies and retailers despite
relatively lackluster returns from the United Kingdom overall.
Stock selection was particularly favorable in Asia and the emerging markets.
Petroleo Brasileiro, ADR, Comverse Technology, PT Hanjaya Mandala Sampoerna, and
Siam Cement were among the best contributors to the portfolio's performance.
Changes to the portfolio during the reporting period included a gradual shift
toward more economically sensitive companies, which we believed was appropriate
as investors began to look forward to better economic performance. As part of
that shift, we reduced the portfolio' s exposure to relatively defensive
industry groups, such as consumer staples, and increased the fund's emphasis on
more growth-oriented areas, such as technology.
What is the portfolio's current strategy?
After receiving strong gains from the weakening U.S. dollar relative to other
currencies, we recently have begun to adopt a more defensive investment posture
with regard to currency exchange rates. In our view, most of the benefit from a
weaker U.S. dollar has probably already been realized. At the same time, we
continue to maintain relatively heavy exposure to Europe, where we believe the
central bank has room to cut interest rates in its attempts to stimulate renewed
economic growth. We also have continued to maintain lighter than average
exposure to Japan, which is mired in a deflationary recession. However, we
recently have begun to explore potential buying opportunities among beaten-down
blue-chip companies in Japan, including well-known automobile manufacturers that
are selling at prices we consider attractive.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, INTERNATIONAL EQUITY PORTFOLIO MADE AVAILABLE THROUGH INSURANCE
PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS.
HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN,
AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE
DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED
IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL
REDUCE RETURNS.
(2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST (MSCI EAFE) INDEX IS AN
UNMANAGED INDEX COMPOSED OF A SAMPLE OF COMPANIES REPRESENTATIVE OF THE
MARKET STRUCTURE OF EUROPEAN AND PACIFIC BASIN COUNTRIES.
The Portfolio 5
June 30, 2003 (Unaudited)
STATEMENT OF INVESTMENTS
COMMON STOCKS--99.3% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--1.0%
Rio Tinto 14,700 288,634
AUSTRIA--2.4%
Erste Bank der oesterreichischen Sparkassen 5,730 (a) 506,753
Telekom Austria AG 17,500 (a) 198,714
705,467
BRAZIL--4.2%
Aracruz Celulose, ADR 7,500 157,950
Companhia Vale do Rio Doce, ADR 5,200 144,300
Petroleo Brasileiro, ADR 53,500 950,160
1,252,410
FINLAND--1.9%
Nokia 33,600 553,760
FRANCE--9.5%
Aventis 8,975 494,190
BNP Paribas 8,810 448,046
France Telecom 10,230 251,137
L'Oreal 4,230 298,498
Sanofi-Synthelabo 5,370 314,759
Societe Generale 5,790 367,325
Total 2,810 425,007
Veolia Environnement (Warrants) 13,000 (a) 1,046
Vivendi Universal 12,000 218,597
2,818,605
GERMANY--2.7%
AMB Generali Holding 4,130 266,285
Deutsche Bank 4,300 277,987
SAP 2,260 264,936
809,208
GREECE--1.1%
Public Power 18,500 334,239
HUNGARY--1.6%
Magyar Tavkozlesi 57,400 196,466
OTP Bank 27,500 265,878
462,344
INDONESIA--5.5%
PT Bank Central Asia 2,320,000 808,485
PT Hanjaya Mandala Sampoerna 1,615,000 812,394
1,620,879
6
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
IRELAND--1.4%
Irish Life & Permanent 36,800 400,527
ITALY--2.3%
Assicurazioni Generali 12,810 297,100
Telecom Italia 71,100 389,782
686,882
JAPAN--14.4%
CANON 7,000 322,142
JAPAN TELECOM HOLDINGS 85 259,125
JFE Holdings 18,000 270,609
Japan Retail Fund Investment 68 356,669
KIRIN BREWERY 24,000 169,181
Kao 11,000 205,337
Kuraray 33,000 217,189
MURATA MANUFACTURING 4,600 181,341
Mitsubishi 45,000 313,080
NISSAN MOTOR 30,100 288,606
Nippon Building Fund 58 318,266
Nippon Yusen Kabushiki Kaisha 76,000 297,068
OLYMPUS OPTICAL 12,000 249,060
Shin-Etsu Chemical 8,200 280,798
Shiseido 17,000 165,698
Toyota Motor 15,300 397,419
4,291,588
LUXEMBOURG--.7%
Arcelor 17,200 200,447
MEXICO--.7%
Grupo Televisa, ADR 6,100 210,450
NETHERLANDS--5.3%
ING Groep 11,700 203,450
Koninklijke (Royal) Philips Electronics 25,600 487,230
Royal Dutch Petroleum 7,250 336,797
STMicroelectronics 15,835 332,317
Vedior 23,350 211,737
1,571,531
RUSSIA--1.4%
YUKOS, ADR 7,687 428,781
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
SINGAPORE--.9%
MobileOne 263,000 200,182
Singapore Post 208,000 80,341
280,523
SOUTH KOREA--4.2%
KT&G, GDR 55,300 (b) 456,225
Kookmin Bank, ADR 5,850 176,963
Samsung Electronics 1,315 390,812
Shinsegae 1,430 223,269
1,247,269
SPAIN--3.9%
Abertis Infraestructuras 20,956 293,111
Iberdrola 13,000 225,309
Repsol YPF 17,100 277,501
Telefonica 30,893 (a) 358,959
1,154,880
SWEDEN--1.1%
Telefonaktiebolaget LM Ericsson, Cl. B 306,260 (a) 329,106
SWITZERLAND--7.5%
Nestle 2,435 503,203
Novartis 14,110 559,184
Roche Holding 4,960 389,649
UBS 7,750 431,765
Zurich Financial Services 2,960 353,449
2,237,250
TAIWAN--.6%
Asustek Computer, GDR 69,000 172,500
THAILAND--3.1%
Kasikornbank 254,700 (a) 237,514
National Finance 469,800 168,543
Siam Cement 132,600 529,266
935,323
UNITED KINGDOM--19.9%
AstraZeneca 11,090 446,028
Barclays 41,700 310,580
British Sky Broadcasting Group 18,300 (a) 203,386
GUS 29,950 336,582
GlaxoSmithKline 40,360 816,962
8
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
HBOS 21,450 278,512
HSBC Holdings 65,210 772,772
Kingfisher 62,350 286,109
mmO2 207,000 (a) 194,429
Reckitt Benckiser 11,045 203,280
Royal Bank of Scotland Group 20,540 577,928
Shell Transport & Trading 98,400 651,447
Vodafone Group 418,175 820,164
5,898,179
UNITED STATES--2.0%
Comverse Technology 40,400 (a) 607,212
TOTAL COMMON STOCKS
(cost $25,817,782) 29,497,994
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--.7%
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY;
Fresenius Medical Care, ADR 1 12
Henkel 3,240 198,847
TOTAL PREFERRED STOCKS
(cost $185,808) 198,859
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $26,003,590) 100.0% 29,696,853
CASH AND RECEIVABLES (NET) .0% 11,761
NET ASSETS 100.0% 29,708,614
(A) NON-INCOME PRODUCING.
(B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF SECURITIES ACT OF
1933. THIS SECURITY MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION,
NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2003, THIS SECURITY
AMOUNTED TO $456,225 OR 1.5% OF NET ASSETS.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 9
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of Investments 26,003,590 29,696,853
Cash denominated in foreign currencies 430 427
Receivable for investment securities sold 286,510
Dividends receivable 82,928
Receivable for shares of Beneficial Interest subscribed 41,877
Net unrealized appreciation on forward
currency exchange contracts--Note 4 15,729
Prepaid expenses 134
30,124,458
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 19,360
Cash overdraft due to Custodian 294,468
Payable for shares of Beneficial Interest redeemed 53,508
Accrued expenses 48,508
415,844
- --------------------------------------------------------------------------------
NET ASSETS ($) 29,708,614
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 53,733,249
Accumulated undistributed investment income--net 3,105
Accumulated net realized gain (loss) on investments (27,742,123)
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions 3,714,383
- --------------------------------------------------------------------------------
NET ASSETS ($) 29,708,614
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- --------------------------------------------------------------------------------
Net Assets ($) 27,257,449 2,451,165
Shares Outstanding 2,772,173 249,884
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 9.83 9.81
SEE NOTES TO FINANCIAL STATEMENTS.
10
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
CASH DIVIDENDS (net of $51,476 foreign taxes withheld at source) 441,346
EXPENSES:
Investment advisory fee--Note 3(a) 104,920
Custodian fees 29,766
Prospectus and shareholders' reports 19,583
Auditing fees 13,019
Trustees' fees and expenses--Note 3(c) 2,761
Distribution fees--Note 3(b) 2,658
Shareholder servicing costs--Note 3(b) 1,004
Loan commitment fees--Note 2 120
Miscellaneous 2,615
TOTAL EXPENSES 176,446
INVESTMENT INCOME--NET 264,900
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments
and foreign currency transactions (2,381,480)
Net realized gain (loss) on forward currency exchange contracts 663,773
NET REALIZED GAIN (LOSS) (1,717,707)
Net unrealized appreciation (depreciation)
on investments and foreign currency transactions 5,116,879
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 3,399,172
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,664,072
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 264,900 341,745
Net realized gain (loss) on investments (1,717,707) (3,665,694)
Net unrealized appreciation
(depreciation) on investments 5,116,879 (2,702,762)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 3,664,072 (6,026,711)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (310,725) (945,989)
Service shares (26,294) (59,674)
TOTAL DIVIDENDS (337,019) (1,005,663)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 411,190 3,293,604
Service shares 591,791 6,548,333
Dividends reinvested:
Initial shares 310,725 945,989
Service shares 26,294 59,674
Cost of shares redeemed:
Initial shares (3,637,252) (10,401,400)
Service shares (455,035) (5,884,615)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (2,752,287) (5,438,415)
TOTAL INCREASE (DECREASE) IN NET ASSETS 574,766 (12,470,789)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 29,133,848 41,604,637
END OF PERIOD 29,708,614 29,133,848
Undistributed investment income--net 3,105 75,224
12
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 45,682 319,869
Shares issued for dividends reinvested 37,893 104,209
Shares redeemed (409,855) (1,038,517)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (326,280) (614,439)
- --------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 67,358 627,215
Shares issued for dividends reinvested 3,211 6,662
Shares redeemed (51,467) (556,049)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 19,102 77,828
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 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 portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended
June 30, 2003 Year Ended December 31,
--------------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 8.75 10.76 15.34 22.34 14.50 14.02
Investment Operations:
Investment income--net .08(a) .10(a) .03(a) .07(a) .06(a) .15
Net realized and unrealized
gain (loss) on investments 1.11 (1.81) (4.50) (3.45) 8.58 .48
Total from Investment Operations 1.19 (1.71) (4.47) (3.38) 8.64 .63
Distributions:
Dividends from investment
income--net (.11) (.30) (.11) (.05) (.06) (.15)
Dividends from net realized
gain on investments -- -- -- (2.66) (.74) --
Dividends in excess of net
realized gain on investments -- -- -- (.91) -- --
Total Distributions (.11) (.30) (.11) (3.62) (.80) (.15)
Net asset value, end of period 9.83 8.75 10.76 15.34 22.34 14.50
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 13.80(b) (15.94) (29.18) (16.40) 59.76 4.49
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to
average net assets .61(b) 1.14 1.08 .99 1.02 .99
Ratio of net investment income
to average net assets .95(b) .96 .25 .33 .38 1.04
Portfolio Turnover Rate 51.52(b) 116.65 238.88 192.42 261.64 204.50
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 27,257 27,117 39,961 65,854 69,208 45,811
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
14
Six Months Ended
June 30, 2003 Year Ended December 31,
-----------------------------------------
SERVICE SHARES (Unaudited) 2002 2001 2000(a)
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 8.74 10.75 15.34 15.34
Investment Operations:
Investment income (loss)--net .08(b) .07(b) (.03)(b) --
Net realized and unrealized
gain (loss) on investments 1.10 (1.80) (4.47) --
Total from Investment Operations 1.18 (1.73) (4.50) --
Distributions:
Dividends from investment income--net (.11) (.28) (.09) --
Net asset value, end of period 9.81 8.74 10.75 15.34
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 13.70(c) (16.20) (29.35) --
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .74(c) 1.41 1.47 --
Ratio of net investment income
(loss) to average net assets .85(c) .74 (.27) --
Portfolio Turnover Rate 51.52(c) 116.65 238.88 192.42
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 2,451 2,017 1,644 1
(A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
NOTES TO FINANCIAL STATEMENT (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the International Equity Portfolio (the "portfolio"). The
portfolio is only offered to separate accounts established by insurance
companies to fund variable annuity contracts and variable life insurance
policies. The portfolio is a non-diversified series. The portfolio's investment
objective is to maximize capital growth. The Dreyfus Corporation ("Dreyfus")
serves as the portfolio' s investment adviser. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary
of Mellon Financial Corporation. Newton Capital Management Limited ("Newton")
serves as the portfolio's sub-investment adviser. Newton is also a wholly-owned
subsidiary of Mellon, and an affiliate of Dreyfus.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
Dreyfus, is the distributor of the portfolio's shares, which are sold without a
sales charge. The portfolio 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
16
(a) Portfolio valuation: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Effective April 14, 2003, the portfolio began
pricing securities traded on the NASDAQ stock market using the NASDAQ official
closing price. 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, except for open short
positions, where the asked price is used for valuation purposes. Bid price is
used when no asked price is available. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Trustees. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward currency exchange contracts are valued at the forward rate.
(b) Foreign currency transactions: The portfolio 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 market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the portfolio's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value
of assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
The Portfolio 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the terms of the custody agreement, the portfolio
receives net earnings credits based on available cash balances left on deposit.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain, if any, are normally declared and paid annually, but the portfolio 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 gain can be offset by capital loss
carryovers, it is the policy of the portfolio not to distribute such gain.
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from generally accepted accounting principles.
(e) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $25,137,669 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, $21,204,341 of
the carryover expires in fiscal 2009 and $3,933,328 expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002, was as follows: ordinary income $1,005,663. The tax
character of current year distributions, will be determined at the end of the
current fiscal year.
18
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the portfolio based on
prevailing market rates in effect at the time of borrowings. During the period
ended June 30, 2003, the portfolio did not borrow under the Facility.
NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other
Transactions with Affiliates:
(a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment
advisory fee is computed at the annual rate of .75 of 1% of the value of the
portfolio's average daily net assets and is payable monthly.
Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Newton, the
sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the
value of the portfolio' s average daily net assets, computed at the following
annual rates:
Average Net Assets
0 to $100 million. . . . . . . . . . . . . . . . . .35 of 1%
$100 million to $1 billion . . . . . . . . . . . . .30 of 1%
$1 billion to $1.5 billion . . . . . . . . . . . . .26 of 1%
In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1%
(b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% of the value of 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
The Portfolio 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
products. The fees payable under the Plan are payable without regard to actual
expenses incurred. During the period ended June 30, 2003, Service shares were
charged $2,658 pursuant to the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $100 pursuant to the
transfer agency agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in-person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund' s relative net assets. The Chairman of the Board
receives an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the annual
retainer fee and per meeting fee paid at the time the Board member achieves
emeritus status.
NOTE 4-- Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities and forward currency exchange contracts, during the period
ended June 30, 2003, amounted to $14,346,557 and $16,222,761, respectively.
The portfolio enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to settle foreign currency transactions. When executing
forward currency exchange contracts, the portfolio is obligated to buy or sell a
foreign currency at a specified rate on a certain date in the future. With
respect to sales of forward currency exchange contracts, the portfolio would
incur a loss if the value of the contract increases between the date the forward
contract is opened and
20
the date the forward contract is closed. The portfolio realizes a gain if the
value of the contract decreases between those dates. With respect to purchases
of forward currency exchange contracts, the portfolio would incur a loss if the
value of the contract decreases between the date the forward contract is opened
and the date the forward contract is closed. The portfolio realizes a gain if
the value of the contract increases between those dates. The portfolio is also
exposed to credit risk associated with counterparty nonperformance on these
forward currency exchange contracts which is typically limited to the unrealized
gain on each open contract. The following summarizes open forward currency
exchange contracts at June 30, 2003:
Foreign Unrealized
Forward Currency Currency Appreciation
Exchange Contracts Amounts Cost ($) Value ($) (Depreciation) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASES:
British Pounds,
expiring 11/14/2003 830,972 1,356,000 1,363,126 7,126
Euro Dollars,
expiring 8/15/2003 227,358 241,000 260,962 19,962
Euro Dollars,
expiring 11/14/2003 1,442,376 1,649,645 1,651,376 1,731
Euro Dollars,
expiring 12/15/2003 2,033,873 2,375,564 2,326,547 (49,017)
SALES: PROCEEDS ($)
Japanese Yen,
expiring 12/15/2003 278,604,000 2,375,564 2,339,637 35,927
TOTAL 15,729
At June 30, 2003, accumulated net unrealized appreciation on investments was
$3,693,263, consisting of $4,167,486 gross unrealized appreciation and $474,223
gross unrealized depreciation.
At June 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Portfolio
For More Information
Dreyfus Variable Investment Fund, International Equity
Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Newton Captial Management Limited
71 Queen Victoria Street
London, EC4V 4DR
England
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent & Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE Call
1-800-554-4611 or 516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 109SA0603
Dreyfus Variable
Investment Fund,
International Value
Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
11 Statement of Assets and Liabilities
12 Statement of Operations
13 Statement of Changes in Net Assets
15 Financial Highlights
17 Notes to Financial Statements
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund, International Value Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, International Value
Portfolio covers the six-month period from January 1, 2003, through June 30,
2003. Inside, you' ll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with the portfolio
manager, D. Kirk Henry.
The first half of 2003 was a time of long-awaited recovery for international
stocks. Despite continued volatility and lackluster economic conditions leading
up to the war in Iraq, stocks began to rally as the fighting wound down and
investors turned their attention back to the prospects for the global economy.
Apparently, they liked what they saw. Despite current economic weakness,
investors in many parts of the world appear to be focused on the possibility of
better economic times ahead.
If these trends persist, 2003 could mark the first positive calendar year for
international stocks since 1999. In our view, investors who have the potential
to benefit most are those who steadfastly maintained their international equity
exposure during the bear market. In contrast, investors who avoided
international stocks may have missed the market' s recent gains, a timely
reminder that patience, discipline and a long-term perspective are fundamental
principles that may lead to successful investing.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
DISCUSSION OF PERFORMANCE
D. Kirk Henry, Senior Portfolio Manager
How did Dreyfus Variable Investment Fund, International Value Portfolio perform
relative to its benchmark?
For the six-month period ended June 30, 2003, the portfolio produced total
returns of 7.37% for its Initial shares and 7.35% for its Service shares.(1)
This compares with a 9.47% return for the portfolio's benchmark, the Morgan
Stanley Capital International Europe, Australasia, Far East Index ("MSCI EAFE
Index"), for the same period.(2)
International stocks rallied during the reporting period as investors looked
forward to improved economic conditions, and the war with Iraq came to an end.
The portfolio's returns underperformed that of its benchmark, primarily because
of its limited exposure to certain telecommunications stocks and its relatively
heavy emphasis on investments in Asia, where stocks suffered due to the SARS
outbreak.
What is the portfolio's investment approach?
The portfolio invests in an internationally diversified portfolio of value
stocks; that is, stocks selling at what we think are attractive prices relative
to their perceived intrinsic worth based on historical measures. These measures
typically include price-to-earnings, price-to-book value and price-to-cash flow
ratios. Discrepancies from historical norms are often the result of short-term
factors that affect market perception; that is, a stock falls out of general
market favor, creating what we perceive to be a buying opportunity. The
portfolio purchases the security at the depressed price, seeking to profit when
perceptions change and the stock price rises to its perceived value.
When putting the value approach to work, the portfolio employs the following
process: we select individual securities using a process that blends
quantitative and qualitative analysis. After an initial computer screen
eliminates approximately 90% of purchase candidates, analysts perform extensive
fundamental research and conduct on-site visits to
The Portfolio
DISCUSSION OF PERFORMANCE (CONTINUED)
determine which securities we will buy for the portfolio. We can invest more or
less in any given country or sector depending on the number of value
opportunities that we see in a particular area.
What other factors influenced the portfolio's performance?
Several factors affected the portfolio's performance during the reporting
period. On the positive side, improving sentiment among U.S. businesses and
consumers helped fuel a rally across most of the world's equity markets,
particularly after the war in Iraq came to an end. In addition, changes in
currency exchange rates resulted in a modest increase in the portfolio's returns
in U.S. dollar terms. On the negative side, volatility in the global stock
markets remained high as a result of sudden shifts in investor sentiment as
economic news developed. For example, Germany spent much of the reporting period
on the brink of a recession, and both Germany and France risked violating the
European Monetary Union's mandate on budget deficits.
In this challenging investment environment, the portfolio enjoyed solid returns
from its oil- and electric-company investments both in Latin America and among
companies with interests in the region. Economic conditions in many Latin
American markets have improved steadily amid rising export activity and stronger
local consumption trends. The portfolio also benefited from investments in
France, primarily by investing in airlines and banks and by avoiding
semiconductor stocks; and in Germany, where we focused on banks, utility stocks
and the country's postal service, which is expanding into the air-freight
business.
On the other hand, the portfolio's relative performance suffered because of its
lack of exposure to three key telecommunications stocks: Vodaphone, Deutsche
Telecom and Siemens, all of which staged a sharp rebound during the reporting
period. We refrained from investing in these stocks because they did not meet
our valuation criteria. In addition, the portfolio's performance was negatively
affected by its relatively heavy emphasis on stocks in Asian markets, where the
SARS outbreak hindered returns.
What is the portfolio's current strategy?
As of the end of the reporting period, we are finding what we believe are
attractive investment opportunities in Asia. These include stocks that have
fallen sharply as a result of the SARS outbreak as well as companies that, in
our view, have benefited from ongoing corporate restructuring efforts. We also
have been adding selectively to the fund's holdings of relatively economically
sensitive companies, that we believe are well-positioned to rebound as a
stronger economy leads to higher levels of global production. On the other hand,
we have trimmed the portfolio's exposure to U.K. retailers, locking in gains
after their stocks appreciated.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, INTERNATIONAL VALUE PORTFOLIO MADE AVAILABLE THROUGH INSURANCE
PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS.
HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN,
AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE
DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED
IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL
REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO
EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT
THROUGH DECEMBER 31, 2003, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR
MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS
WOULD HAVE BEEN LOWER.
() INTERNATIONAL INVESTING INVOLVES SPECIAL RISKS, INCLUDING CHANGES IN
CURRENCY EXCHANGE RATES, POLITICAL, ECONOMIC OR SOCIAL INSTABILITY, A LACK
OF COMPREHENSIVE COMPANY INFORMATION, DIFFERING AUDITING AND LEGAL
STANDARDS, AND LESS MARKET LIQUIDITY. THESE RISKS ARE GENERALLY GREATER
WITH EMERGING MARKET COUNTRIES THAN WITH MORE ECONOMICALLY AND POLITICALLY
ESTABLISHED COUNTRIES.
(2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL
INTERNATIONAL EUROPE, AUSTRALASIA, FAR EAST (MSCI EAFE) INDEX IS AN
UNMANAGED INDEX COMPOSED OF A SAMPLE OF COMPANIES REPRESENTATIVE OF THE
MARKET STRUCTURE OF EUROPEAN AND PACIFIC BASIN COUNTRIES.
The Portfolio
STATEMENT OF INVESTMENTS
June 30, 2003 (Unaudited)
COMMON STOCKS--101.3% Shares Value ($)
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AUSTRALIA--1.9%
Australia and New Zealand Banking Group 16,819 210,400
Santos 120,300 477,208
687,608
BELGIUM--2.8%
Dexia 39,750 503,193
Dexia (Strip) 16,650 (a) 191
Fortis 29,770 514,016
1,017,400
BRAZIL--.9%
Petroleo Brasileiro, ADR 8,870 175,056
Telecomunicacoes Brasileiras, ADR 5,630 155,006
330,062
FINLAND--2.2%
Nokia, ADR 19,130 314,466
Sampo, Cl. A 35,550 261,136
UPM-Kymmene 16,500 239,632
815,234
FRANCE--8.4%
Air France 8,240 106,748
Assurances Generales de France 8,000 329,845
Aventis 9,250 509,680
BNP Paribas 5,770 293,842
Compagnie Generale des
Etablissements Michelin, Cl. B 7,981 311,848
Pechiney 10,600 381,227
Schneider Electric 4,930 231,940
Thomson 20,600 318,141
Total 3,330 504,067
Total, ADR 1,298 98,388
3,085,726
GERMANY--6.1%
Deutsche Bank 3,900 252,334
Deutsche Lufthansa 18,948 221,466
Deutsche Post 25,660 374,881
E.ON 11,199 575,032
KarstadtQuelle 18,700 395,454
Volkswagen 9,880 415,872
6 2,235,039
COMMON STOCKS (CONTINUED) Shares Value ($)
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GREECE--.9%
Hellenic Telecommunications Organization 29,395 347,527
HONG KONG--3.2%
Bank of East Asia 114,510 226,194
China Mobile (Hong Kong) 100,500 237,119
MTR 186,442 214,080
Sun Hung Kai Properties 48,000 242,620
Swire Pacific, Cl. A 56,500 247,432
1,167,445
IRELAND--1.3%
Bank of Ireland 39,316 476,657
ITALY--3.3%
Banca Popolare di Bergamo-Credito Varesino 14,230 326,817
Eni 19,295 292,473
Finmeccanica 632,040 406,092
Sanpaolo IMI 22,376 208,539
1,233,921
JAPAN--24.0%
AIFUL 6,950 297,320
CANON 8,000 368,162
Credit Saison 32,400 533,199
DENTSU 66 206,044
Eisai 19,700 406,517
FUJI MACHINE MANUFACTURING 10,600 123,060
Fuji Heavy Industries 45,500 205,926
Fuji Photo Film 3,000 87,099
HONDA MOTOR 11,300 429,516
KONAMI 14,800 265,803
Kao 22,000 410,674
LAWSON 7,500 206,900
MABUCHI MOTOR 4,700 360,429
MINEBEA 78,000 310,244
MURATA MANUFACTURING 7,400 291,948
Matsumotokiyoshi 6,900 293,178
Matsushita Electric Industrial 23,600 234,430
NIPPON TELEGRAPH AND TELEPHONE 56 220,610
Nippon Express 112,000 436,121
RINNAI 17,900 377,566
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
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JAPAN (CONTINUED)
SFCG 3,050 283,053
SKYLARK 23,300 277,215
Sekisui House 32,400 246,830
77 Bank 47,000 214,073
Shin-Etsu Chemical 9,200 315,060
Sumitomo Bakelite 49,000 204,990
TDK 3,500 173,380
Takeda Chemical Industries 11,200 414,655
Toyota Motor 9,200 239,069
Yamaha Motor 46,000 389,192
8,822,263
LUXEMBOURG--.8%
Arcelor 26,270 306,082
MEXICO--.7%
Telefonos de Mexico, ADR 7,756 243,869
NETHERLANDS--5.7%
ABN AMRO 20,925 400,598
Akzo Nobel 17,350 460,875
Buhrmann 22,032 (a) 152,288
Hunter Douglas 7,617 253,899
Koninklijke (Royal) Philips Electronics 2,600 49,484
Koninklijke (Royal) Philips Electronics, ADR 14,880 284,611
Vedior 20,619 186,624
Wolters Kluwer 26,689 322,524
2,110,903
NEW ZEALAND--.8%
Telecom Corporation of New Zealand 98,681 303,679
NORWAY--1.6%
Norsk Hydro 6,400 314,515
Statoil 31,330 266,618
581,133
PORTUGAL--1.6%
EDP 152,400 326,004
Portugal Telecom 38,085 273,132
599,136
8
COMMON STOCKS (CONTINUED) Shares Value ($)
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SINGAPORE--2.4%
Creative Technology 19,960 159,861
DBS Group 90,000 527,445
MobileOne 243,600 185,431
872,737
SOUTH KOREA--1.2%
Korea Electric Power, ADR 24,680 219,972
POSCO, ADR 7,980 208,986
428,958
SPAIN--2.5%
Endesa 34,460 577,576
Repsol YPF, ADR 22,740 367,813
945,389
SWEDEN--1.6%
Autoliv 6,000 161,668
Investor, Cl. B 37,390 273,342
Nordea 33,200 160,271
595,281
SWITZERLAND--7.0%
Barry Callebaut 652 90,147
Clariant 31,340 (a) 287,582
Nestle 2,645 546,858
Novartis 16,800 666,113
Roche 5,600 440,077
UBS 9,720 541,647
2,572,424
TAIWAN--.7%
United Microelectronics, ADR 70,850 (a) 266,348
UNITED KINGDOM--19.7%
Allied Domecq 122,750 679,832
BAE SYSTEMS 145,389 343,179
BOC Group 40,599 523,436
BT Group 60,100 202,758
Barclays 84,969 633,981
Bunzl 58,554 412,479
Cadbury Schweppes 87,416 517,962
The Portfolio 9
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
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UNITED KINGDOM (CONTINUED)
Centrica 122,400 356,722
GKN 144,650 534,327
GlaxoSmithKline 30,943 627,101
Marks & Spencer Group 7,700 40,267
Old Mutual 125,550 182,036
Rexam 17,400 109,993
Rio Tinto 23,639 447,821
Sainsbury (J) 133,001 560,595
Scottish and Southern Energy 36,320 375,809
Shell Transport & Trading 104,255 691,614
7,239,912
TOTAL COMMON STOCKS
(cost $37,524,163) 37,284,733
Principal
SHORT-TERM INVESTMENTS--8.2% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS;
.74%, 8/7/2003
(cost $2,999,717) 3,002,000 2,999,628
TOTAL INVESTMENTS (cost $40,523,880) 109.5% 40,284,361
LIABILITIES, LESS CASH AND RECEIVABLES (9.5%) (3,479,384)
NET ASSETS 100.0% 36,804,977
(A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of Investments 0,523,880 40,284,361
Cash denominated in foreign currencies 734,657 726,775
Receivable for investment securities sold 419,725
Dividends receivable 129,415
Receivable for shares of Beneficial Interest subscribed 25,590
Prepaid expenses 1,217
41,587,083
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 32,075
Cash overdraft due to Custodian 858,221
Payable for investment securities purchased 2,969,936
Payable for shares of Beneficial Interest redeemed 866,807
Net unrealized depreciation on forward
currency exchange contracts--Note 4 162
Accrued expenses 54,905
4,782,106
NET ASSETS ($) 36,804,977
COMPOSITION OF NET ASSETS ($):
Paid-in capital 42,222,151
Accumulated undistributed investment income--net 436,057
Accumulated net realized gain (loss) on investments (5,610,950)
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions (242,281)
- --------------------------------------------------------------------------------
NET ASSETS ($) 36,804,977
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- --------------------------------------------------------------------------------
Net Assets ($) 31,912,073 4,892,904
Shares Outstanding 2,968,701 454,257
NET ASSET VALUE PER SHARE ($) 10.75 10.77
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 11
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $86,325 foreign taxes withheld at source) 659,742
Interest 188
TOTAL INCOME 659,930
EXPENSES:
Investment advisory fee--Note 3(a) 159,858
Custodian fees 27,018
Auditing fees 20,457
Prospectus and shareholders' reports 13,627
Distribution fees--Note 3(b) 5,490
Shareholder servicing costs--Note 3(b) 2,946
Trustees' fees and expenses--Note 3(c) 1,951
Legal fees 526
Loan commitment fees--Note 2 236
Miscellaneous 3,330
TOTAL EXPENSES 235,439
Less--waiver of fees due to undertaking--Note 3(a) (11,637)
NET EXPENSES 223,802
INVESTMENT INCOME--NET 436,128
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments and foreign currency
transactions (1,631,825)
Net realized gain (loss) on forward currency exchange contracts 5,731
NET REALIZED GAIN (LOSS) (1,626,094)
Net unrealized appreciation (depreciation) on
investments and foreign currency transactions 4,201,564
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,575,470
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,011,598
SEE NOTES TO FINANCIAL STATEMENTS.
12
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 436,128 335,828
Net realized gain (loss) on investments (1,626,094) (2,228,122)
Net unrealized appreciation
(depreciation) on investments 4,201,564 (2,454,039)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 3,011,598 (4,346,333)
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (73,572) (285,845)
Service shares (11,074) (40,778)
TOTAL DIVIDENDS (84,646) (326,623)
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 30,735,211 45,164,883
Service shares 567,926 3,701,530
Dividends reinvested:
Initial shares 73,572 285,845
Service shares 11,074 40,778
Cost of shares redeemed:
Initial shares (29,049,190) (35,454,200)
Service shares (450,750) (826,483)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS 1,887,843 12,912,353
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,814,795 8,239,397
NET ASSETS ($):
Beginning of Period 31,990,182 23,750,785
END OF PERIOD 36,804,977 31,990,182
Undistributed investment income--net 436,057 84,575
The Portfolio 13
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 3,112,460 3,969,633
Shares issued for dividends reinvested 8,067 28,146
Shares redeemed (2,895,146) (3,122,571)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 225,381 875,208
SERVICE SHARES
Shares sold 58,566 323,257
Shares issued for dividends reinvested 1,211 4,038
Shares redeemed (46,941) (71,377)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 12,836 255,918
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 portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended
June 30, 2003 Year Ended December 31,
--------------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998
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PER SHARE DATA ($):
Net asset value,
beginning of period 10.04 11.56 13.52 15.67 13.45 13.45
Investment Operations:
Investment income--net .13(a) .12(a) .12(a) .11(a) .13(a) .14
Net realized and unrealized
gain (loss) on investments .61 (1.53) (1.90) (.74) 3.52 1.01
Total from Investment Operations .74 (1.41) (1.78) (.63) 3.65 1.15
Distributions:
Dividends from investment
income--net (.03) (.11) (.11) (.06) (.13) (.12)
Dividends from net realized
gain on investments -- -- -- (1.40) (1.30) (1.03)
Dividends in excess of net
realized gain on investments -- -- (.07) (.06) -- --
Total Distributions (.03) (.11) (.18) (1.52) (1.43) (1.15)
Net asset value, end of period 10.75 10.04 11.56 13.52 15.67 13.45
TOTAL RETURN (%) 7.37(b) (12.23) (13.22) (3.69) 27.82 8.74
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to
average net assets .69(b) 1.40 1.40 1.39 1.35 1.29
Ratio of net investment income
to average net assets 1.35(b) 1.10 .97 .78 .90 .94
Decrease reflected in above
expense ratios due
to undertakings by
The Dreyfus Corporation .02(b) .07 .20 -- -- --
Portfolio Turnover Rate 29.20(b) 47.18 49.34 37.33 41.90 42.14
Net Assets, end of period
($ x 1,000) 31,912 27,549 21,602 25,765 27,386 20,680
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended
June 30, 2003 Year Ended December 31,
--------------------------------------
SERVICE SHARES (Unaudited) 2002 2001 2000(a)
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PER SHARE DATA ($):
Net asset value, beginning of period 10.06 11.58 13.52 13.52
Investment Operations:
Investment income--net .13(b) .12(b) .05(b) --
Net realized and unrealized
gain (loss) on investments .61 (1.54) (1.81) --
Total from Investment Operations .74 (1.42) (1.76) --
Distributions:
Dividends from investment income--net (.03) (.10) (.11) --
Dividends in excess of net
realized gain on investments -- -- (.07) --
Total Distributions (.03) (.10) (.18) --
Net asset value, end of period 10.77 10.06 11.58 13.52
TOTAL RETURN (%) 7.35(c) (12.25) (13.07) --
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .69(c) 1.40 1.40 --
Ratio of net investment income
to average net assets 1.34(c) 1.07 .44 --
Decrease reflected in above expense
ratios due to undertakings
by The Dreyfus Corporation .14(c) .26 .59 --
Portfolio Turnover Rate 29.20(c) 47.18 49.34 37.33
Net Assets, end of period ($ x 1,000) 4,893 4,441 2,148 1
(A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
16
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the International Value Portfolio (the "portfolio"). The
portfolio is only offered to separate accounts established by insurance
companies to fund variable annuity contracts and variable life insurance
policies. The portfolio is a diversified series. The portfolio's investment
objective is long-term capital growth. The Dreyfus Corporation (the "Manager")
serves as the portfolio's investment adviser. The Manager is a wholly-owned
subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary
of Mellon Financial Corporation.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
the Manager, is the distributor of the portfolio's shares, which are sold
without a sales charge. The portfolio 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Effective April 14, 2003,
The Portfolio 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
the portfolio began pricing securities traded on the NASDAQ stock market using
the NASDAQ official closing price. 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, except for
open short positions, where the asked price is used for valuation purposes. Bid
price is used when no asked price is available. Securities for which there are
no such valuations are valued at fair value as determined in good faith under
the direction of the Board of Trustees. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward currency exchange contracts are valued at the forward rate.
(B) FOREIGN CURRENCY TRANSACTIONS: The portfolio 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 market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the portfolio's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value
of assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the terms of the custody agreement, the portfolio
receives net earnings credits based on available cash balances left on deposit.
18
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain, if any, are normally declared and paid annually, but the portfolio 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 gain can be offset by capital loss
carryovers, it is the policy of the portfolio not to distribute such gain.
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from generally accepted accounting principles.
(E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $3,011,029 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, $982,883 of
the carryover expires in fiscal 2009 and $2,028,146 expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002 was as follows: ordinary income $326,623. The tax
character of current year distributions will be determined at the end of the
current fiscal year.
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the portfolio based on
prevailing market rates in effect at the time of borrowings. During the period
ended June 30, 2003, the portfolio did not borrow under the Facility.
The Portfolio 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates:
(A) Pursuant to an Investment Advisory Agreement with the Manager, the
investment advisory fee is computed at the annual rate of 1% of the value of the
portfolio's average daily net assets and is payable monthly.
The Manager has agreed, from January 1, 2003 to December 31, 2003, to waive
receipt of its fees and/or assume the expenses of the portfolio so that the
expenses of neither class, exclusive of taxes, brokerage fees, interest on
borrowings, commitment fees and extraordinary expenses, exceed an annual rate of
1.40% of the value of the average daily net assets of their class. During the
period ended June 30, 2003, the Manager waived receipt of fees of $11,637,
pursuant to the undertaking.
(B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% 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 Plan are
payable without regard to actual expenses incurred. During the period ended June
30, 2003, Service shares were charged $5,490 pursuant to the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $129 pursuant to the
transfer agency agreement.
20
(C) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in-person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund' s relative net assets. The Chairman of the Board
receives an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the annual
retainer fee and per meeting fee paid at the time the Board member achieves
emeritus status.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities and forward currency exchange contracts, during the period
ended June 30, 2003, amounted to $12,354,769 and $9,128,970, respectively.
The portfolio enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to settle foreign currency transactions. When executing
forward currency exchange contracts, the portfolio is obligated to buy or sell a
foreign currency at a specified rate on a certain date in the future. With
respect to sales of forward currency exchange contracts, the portfolio would
incur a loss if the value of the contract increases between the date the forward
contract is opened and the date the forward contract is closed. The portfolio
realizes a gain if the value of the contract decreases between those dates. With
respect to purchases of forward currency exchange contracts, the portfolio would
incur a loss if the value of the contract decreases between the date the forward
contract is opened and the date the forward contract is closed.
The Portfolio 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
The portfolio realizes a gain if the value of the contract increases between
those dates. The portfolio is also exposed to credit risk associated with
counterparty nonperformance on these forward currency exchange contracts which
is typically limited to the unrealized gain on each open contract. The following
summarizes open forward currency exchange contracts at June 30, 2003:
Foreign Unrealized
Forward Currency Currency Appreciation
Exchange Contracts Amounts Proceeds ($) Value ($) (Depreciation) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
SALES:
Hong Kong Dollar,
expiring 7/2/2003 850,846 109,104 109,105 (1)
Japanese Yen,
expiring 7/2/2003 10,981,441 91,398 91,719 (321)
Singapore Dollar,
expiring 7/1/2003 63,975 36,499 36,339 160
TOTAL (162)
At June 30, 2003, accumulated net unrealized depreciation on investments was
$239,519, consisting of $3,057,278 gross unrealized appreciation and $3,296,797
gross unrealized depreciation.
At June 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
22
NOTES
For More Information
Dreyfus Variable Investment Fund,
International Value Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call
1-800-554-4611 or
516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 152SA0603
Dreyfus Variable
Investment Fund,
Limited Term
High Yield Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL
COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
19 Statement of Assets and Liabilities
20 Statement of Operations
21 Statement of Changes in Net Assets
23 Financial Highlights
25 Notes to Financial Statements
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Limited Term High Yield Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Limited Term High
Yield Portfolio covers the six-month period from January 1, 2003, through June
30, 2003. Inside, you'll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with Gerald E.
Thunelius, portfolio manager and director of the Dreyfus Taxable Fixed Income
Team that manages the portfolio.
Bonds continued to rally during the first half of 2003, with prices driven
higher by a combination of declining interest rates and improving investor
sentiment. Most notably, corporate bonds rose sharply as companies paid down
debt, trimmed expenses and adopted more rigorous standards of corporate
governance in the wake of last year's high-profile accounting scandals. However,
the bond market' s strong performance over the past several years has had a
downside: yields on some types of bonds are hovering near historical lows. For
many investors, maintaining a steady stream of current income has been a
challenge.
What should an income-oriented investor do now? While we believe that bonds
continue to represent an important component of a well-balanced investment
portfolio, your financial advisor may be in the best position to recommend the
income strategies that are right for you in today' s low interest-rate
environment.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Gerald E. Thunelius, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus Variable Investment Fund, Limited Term High Yield Portfolio
perform relative to its benchmark?
For the six-month period ended June 30, 2003, the portfolio's Initial shares
achieved a total return of 20.40% , and its Service shares achieved a total
return of 20.61% . The portfolio generated aggregate income dividends of $0.33
for each of its Initial shares and Service shares.(1) The Merrill Lynch High
Yield Master II Index, the portfolio's benchmark, achieved a total return of
17.88% for the same period.(2)
The high-yield bond market rallied strongly during the reporting period as
investors apparently became more comfortable with issuers' management practices
and the outlook for the U.S. economy. The portfolio's returns were higher than
its benchmark, primarily because of our emphasis on asset-rich companies and
"fallen angels" that had been hit hard during 2002's market downturn.
What is the portfolio's investment approach?
The portfolio seeks to maximize total return consisting of capital appreciation
and current income by investing in high-yield fixed-income securities. The
average effective maturity of the portfolio is limited to 5.5 years.
We normally invest most of the portfolio's assets in fixed-income securities of
below investment-grade credit quality. Issuers of below investment-grade
securities may be in the early stages of development or may have highly
leveraged balance sheets. To compensate buyers for taking greater risks, these
companies must offer higher yields than those offered by more highly rated
firms.
Our approach to selecting individual issues is based on careful credit analysis.
We thoroughly analyze the business, management and financial strength of each of
the companies whose bonds we buy, then project each issuer's ability to repay
its debt.
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
What other factors influenced the portfolio's performance?
The high-yield bond market enjoyed a substantial rally during the first half of
2003, which was driven by a number of factors. After the high-profile corporate
governance scandals of 2002 and resulting credit-rating downgrades, many
high-yield debt issuers took steps to restore investor confidence, including
strengthening their accounting and financial disclosure practices. In addition,
when the war in Iraq began to wind down in April 2003, investors began to look
forward to greater economic growth, which promised to help improve business
conditions overall. Expectations for a stronger economy were fueled by the Bush
Administration' s stimulative fiscal policies, which included further tax cuts,
and the Federal Reserve Board' s accommodative monetary policy, including a
reduction of short-term interest rates in late June.
Furthermore, after a prolonged period of substandard performance, many
high-yield bonds began the reporting period at low valuations compared to
historical norms. At the time, yield differences between lower-rated corporate
bonds and U.S. Treasury securities were at unusually high levels. The
combination of stronger finances, expectations of better business conditions and
low valuations resulted in renewed interest in high-yield bonds among investors
seeking high levels of current income in a low interest-rate environment.
Despite the improving investment climate, we adopted a relatively conservative
approach, emphasizing bonds issued by companies that we considered asset rich,
such as wireless telephone provider Nextel Communications, cellular
infrastructure company American Tower, energy producer Williams Cos., cable
television provider Cablevision and the diversified conglomerate Tyco
International. In our view, companies such as these represented higher "quality"
choices because their bond prices were more likely to be supported by tangible
assets with measurable resale values. In addition, we focused a portion of the
portfolio on "fallen angels," which are companies we considered fundamentally
sound but whose bonds had been hit hard during 2002's downturn. Holdings in a
variety of industries -- such as telecommunications companies and electric
utilities -- rebounded strongly from relatively low price levels during the
reporting period, contributing positively to the portfolio's total return.
4
What is the portfolio's current strategy?
As of the end of the reporting period, yield differences between high-yield
bonds and U.S. Treasury securities have moved closer to historical norms, and we
believe that the bulk of the market rally is probably behind us. Accordingly, we
recently took profits in some of the portfolio's "fallen angels," and we have
intensified our focus on relatively high-quality debt issuers, including some in
the gaming, broadcasting and forest products industries. At the same time, we
are maintaining our emphasis on asset-rich companies that, in our view, can
demonstrate tangible value even if the economy continues to struggle. Finally,
to manage risk more effectively, we have increased the number of companies in
the portfolio to about 175, which we believe represents an ample level of
diversification.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, LIMITED TERM HIGH YIELD PORTFOLIO MADE AVAILABLE THROUGH
INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED
BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR
LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS
FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT
THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH
INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN
FIGURES PROVIDED REFLECT THE ABSORPTION OF CERTAIN PORTFOLIO EXPENSES BY THE
DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31,
2003, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE
EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER.
(2) SOURCE: BLOOMBERG L.P. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MERRILL LYNCH HIGH YIELD MASTER II
INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. DOMESTIC AND YANKEE
BONDS RATED BELOW INVESTMENT GRADE WITH AT LEAST $100 MILLION PAR AMOUNT
OUTSTANDING AND GREATER THAN OR EQUAL TO ONE YEAR TO MATURITY. UNLIKE THE FUND,
IT IS NOT LIMITED BY ANY MAXIMUM AVERAGE MATURITY.
The Portfolio 5
June 30, 2003 (Unaudited)
STATEMENT OF INVESTMENTS
Principal
BONDS AND NOTES--92.9% Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ADVERTISING--.3%
RH Donnelley Finance:
Sr. Notes, 8.875%, 2010 48,000 (b) 53,280
Sr. Sub. Notes, 10.875%, 2012 32,000 (b) 37,440
90,720
AEROSPACE & DEFENSE--.8%
BE Aerospace,
Sr. Sub. Notes, Ser. B, 8%, 2008 175,000 139,125
K&F Industries,
Sr. Sub. Notes, Ser. B 9.625%, 2010 45,000 50,175
Vought Aircraft Industries,
Sr. Notes, 8%, 2011 63,000 (b) 63,630
252,930
AGRICULTURAL--.2%
North Atlantic Trading,
Sr. Notes, Ser. B, 11%, 2004 75,000 71,625
AIRLINES--1.3%
Airplane Pass-Through Trust,
Pass-Through Ctfs.,
Ser. 1, Cl. D, 10.875%, 2019 2,963,100 148,155
Continental Airlines,
Notes, 8%, 2005 100,000 90,000
Delta Air Lines,
Notes, 7.7%, 2005 200,000 176,000
414,155
AUTOMOTIVE, TRUCKS & PARTS--1.1%
Airxcel,
Sr. Sub. Notes, Ser. B, 11%, 2007 23,000 19,435
Collins & Aikman Products,
Sr. Notes, 10.75%, 2011 47,000 41,595
General Motors,
Notes, 7.125%, 2013 125,000 124,509
Hawk,
Sr. Notes, 12%, 2006 116,476 117,058
UIS,
Sr. Sub. Notes, 9.375%, 2013 48,000 (b) 50,040
352,637
BUILDING & CONSTRUCTION--1.8%
American Builders & Contract,
Sr. Sub. Notes, Ser. B, 10.625%, 2007 182,000 189,735
Atrium Cos.,
Sr. Sub. Notes, Ser. B, 10.5%, 2009 110,000 118,250
6
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
BUILDING & CONSTRUCTION (CONTINUED)
Owens Corning,
Notes, 7.7%, 2008 375,000 (d) 211,875
WCI Communities,
Sr. Sub. Notes, 10.625%, 2011 67,000 74,370
594,230
CHEMICALS--4.8%
Avecia,
Gtd. Sr. Notes, 11%, 2009 480,000 436,800
HMP Equity,
Units, 0%, 2008 32,000 (b) 16,320
Huntsman ICI Chemicals,
Sr. Sub. Notes, 10.125%, 2009 48,000 46,320
Lyondell Chemical:
Gtd. Sr. Secured Notes, Ser. B, 9.875%, 2007 181,000 178,285
Sr. Secured Notes, 11.125%, 2012 236,000 243,080
OM Group,
Sr. Sub. Notes, 9.25%, 2011 165,000 161,700
PolyOne,
Sr. Notes, 10.625%, 2010 63,000 (b) 61,740
Resolution Performance Products,
Sr. Sub. Notes, 13.5%, 2010 286,000 287,430
Rhodia,
Sr. Sub. Notes, 8.875%, 2011 94,000 (b) 97,760
1,529,435
COMMERCIAL SERVICES--1.2%
Brickman,
Sr. Sub. Notes, 11.75%, 2009 62,000 (b) 69,595
Trico Marine Services,
Notes, 8.875%, 2012 94,000 81,310
United Rentals:
Sr. Notes, 10.75%, 2008 16,000 (b) 17,560
Sr. Notes, Ser. B, 10.75%, 2008 55,000 60,362
Williams Scotsman,
Sr. Notes, 9.875%, 2007 150,000 147,750
376,577
CONSUMER PRODUCTS--.2%
Moore North American Finance,
Sr. Notes, 7.875%, 2011 40,000 (b) 41,900
Playtex Products,
Sr. Sub. Notes, 9.375%, 2011 31,000 31,155
73,055
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICE--1.5%
Diamond,
Notes, 10%, 2008 GBP 63,000 (a) 94,887
Finova,
Notes, 7.5%, 2009 210,000 92,400
HLI Operating,
Sr. Notes, 10.5%, 2010 62,000 (b) 65,410
Trump Casino Holdings/Funding,
First Mortgage, 11.625%, 2010 91,000 (b) 87,360
Williams Holdings of Delaware,
Notes, 6.5%, 2008 140,000 137,200
477,257
ELECTRIC UTILITIES--6.1%
Allegheny Energy Statutory Trust 2001:
Secured Notes, 10.25%, 2007 11,169 (b) 11,001
Secured Notes, 10.25%, 2007 165,830 (b) 171,634
Allegheny Energy Supply,
Bonds, 8.25%, 2012 304,000 (b) 261,440
CMS Energy,
Sr. Notes, 9.875%, 2007 319,000 341,729
Calpine,
Sr. Notes, 4%, 2006 156,000 141,180
Calpine Canada Energy Finance,
Gtd. Sr. Notes, 8.5%, 2008 557,000 437,245
Mirant,
Sr. Notes, 7.4%, 2004 161,000 (b,k) 120,750
Mirant Americas Generation,
Sr. Notes, 7.625%, 2006 354,000 (k) 274,350
Reliant Resources,
Secured Notes, 9.25%, 2010 190,000 (b) 191,900
1,951,229
ENTERTAINMENT--2.3%
AMC Entertainment,
Sr. Sub. Notes, 9.5%, 2009 147,000 151,043
Argosy Gaming,
Sr. Sub. Notes, 9%, 2011 110,000 119,350
Bally Total Fitness:
Sr. Notes, 10.5%, 2011 79,000 (b) 79,395
Sr. Sub. Notes, Ser. D, 9.875%, 2007 91,000 83,492
8
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT (CONTINUED)
Cinemark USA,
Sr. Sub. Notes, 9%, 2013 31,000 (b) 33,790
Kerzner International,
Sr. Sub. Notes, 8.875%, 2011 32,000 34,680
Old Evangeline Downs,
Sr. Secured Notes, 13%, 2010 35,000 (b) 35,875
Regal Cinemas,
Sr. Sub. Notes, Ser. B, 9.375%, 2012 30,000 33,225
Six Flags,
Sr. Notes, 9.5%, 2009 60,000 59,400
Town Sports International,
Sr. Notes, 9.625%, 2011 90,000 (b) 94,500
724,750
ENVIRONMENTAL CONTROL--1.9%
Allied Waste:
Gtd. Sr. Notes,
Ser. B, 7.625%, 2006 370,000 385,263
Sr. Sub. Notes,
Ser. B, 10%, 2009 150,000 160,125
Synagro Technologies,
Sr. Sub. Notes, 9.5%, 2009 61,000 65,575
610,963
FOOD & BEVERAGES--1.4%
Del Monte,
Sr. Sub Notes, 8.625%, 2012 62,000 (b) 66,030
Doane Pet Care,
Sr. Notes, 10.75%, 2010 90,000 98,550
Dole Foods:
Deb., 8.75%, 2013 46,000 49,565
Sr. Notes, 8.875%, 2011 91,000 (b) 96,915
Land O'Lakes,
Sr. Notes, 8.75%, 2011 140,000 112,700
Swift & Co.,
Sr. Notes, 10.125%, 2009 33,000 (b) 34,485
458,245
FOREIGN GOVERNMENTAL--.1%
Province of Quebec,
Deb., 3.3%, 2013 CAD 40,000 (a,e) 30,810
The Portfolio 9
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
GAMING & LODGING--2.7%
Coast Hotels & Casino,
Sr. Sub. Notes, 9.5%, 2009 93,000 99,975
Extended Stay America,
Sr. Sub. Notes, 9.875%, 2011 50,000 54,000
MGM Grand,
Sr. Collateralized Notes, 6.95%, 2005 18,000 18,878
Mohegan Tribal Gaming Authority,
Sr. Sub. Notes, 8.375%, 2011 63,000 68,512
Park Place Entertainment:
Sr. Notes, 7%, 2013 30,000 (b) 32,250
Sr. Sub. Notes, 7.875%, 2005 152,000 162,450
Resorts International Hotel and Casino,
First Mortgage, 11.5%, 2009 194,000 185,270
Station Casinos,
Sr. Sub. Notes, 9.875%, 2010 63,000 69,615
Turning Stone Casino Entertainment,
Sr. Notes, 9.125%, 2010 76,000 (b) 81,415
Wynn Las Vegas,
Second Mortgage, 12%, 2010 99,000 109,890
882,255
HEALTH CARE--1.3%
Extendicare Health Services:
Sr. Notes, 9.5%, 2010 40,000 42,200
Sr. Sub. Notes, 9.35%, 2007 21,000 20,108
Hanger Orthopedic,
Notes, 10.375%, 2009 95,000 105,450
Province Healthcare,
Sr. Sub. Notes, 7.5%, 2013 140,000 138,600
Tenet HealthCare:
Notes, 7.375%, 2013 63,000 61,110
Sr. Notes, 5%, 2007 50,000 47,000
414,468
MACHINERY--.8%
National Equipment Services:
Sr. Sub. Notes, Ser. B, 10%, 2004 156,000 (d) 31,980
Sr. Sub. Notes, Ser. C, 10%, 2004 546,000 (d) 111,930
10
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
MACHINERY (CONTINUED)
Terex,
Sr. Sub. Notes, 8.875%, 2008 100,000 104,500
248,410
MANUFACTURING--3.5%
Day International,
Sr. Notes, Ser. B, 11.125%, 2005 132,000 133,980
Dresser,
Sr. Sub. Notes, 9.375%, 2011 251,000 259,785
Hexcel,
Sr. Sub. Notes, 9.75%, 2009 237,000 237,000
Jacuzzi Brands,
Sr. Secured Notes, 9.625%, 2010 32,000 (b) 32,000
Key Components/Finance,
Sr. Notes, 10.5%, 2008 79,000 80,580
Tekni-Plex,
Sr. Sub. Notes, Ser. B, 12.75%, 2010 33,000 32,340
Tyco International:
Gtd. Notes, 5.8%, 2006 105,000 108,938
Gtd. Notes, 6.375%, 2005 222,000 232,545
1,117,168
MEDIA--6.6%
Adelphia Communications,
Sr. Notes, 9.375%, 2009 255,000 (d) 164,475
Charter Communications Holdings/Capital:
Sr. Discount Notes, 0/9.92%, 2011 92,000 (f) 60,950
Sr. Discount Notes, 0/11.75%, 2011 142,000 (f) 72,420
Sr. Discount Notes, 0/12.125%, 2011 92,000 (f) 42,895
Sr. Discount Notes, 0/13.5%, 2011 150,000 (f) 78,750
Sr. Notes, 10.75%, 2009 432,000 336,960
Coaxial Communications of Cental Ohio,
Sr. Notes, 10%, 2006 213,000 220,721
Gray Communications Systems,
Sr. Sub. Notes, 9.25%, 2011 30,000 33,300
Houghton Mifflin,
Sr. Sub. Notes, 9.875%, 2013 30,000 (b) 32,700
The Portfolio 11
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA (CONTINUED)
Lodgenet Entertainment,
Sr. Sub. Deb., 9.5%, 2013 78,000 80,340
NTL,
Deb., 11.2%, 2007 108,000 105,975
Pegasus Communications,
Sr. Sub. Notes, Ser. B, 12.5%, 2007 800,000 740,000
Spanish Broadcasting System,
Sr. Sub. Notes, 9.625%, 2009 153,000 163,328
2,132,814
MINING & METALS--1.6%
AK Steel:
Sr. Notes, 7.75%, 2012 46,000 38,410
Sr. Notes, 7.875%, 2009 85,000 72,675
Elgin National Industries,
Sr. Notes, Ser. B, 11%, 2007 70,000 30,450
Gerdau AmeriSteel,
Sr. Notes, 10.375%, 2011 156,000 (b) 153,270
Haynes International,
Sr. Notes, 11.625%, 2004 119,000 55,335
U.S. Steel,
Sr. Notes, 10.75%, 2008 154,000 162,470
512,610
OIL & GAS--10.4%
Coastal,
Sr. Deb., 6.5%, 2008 664,000 597,600
EOTT Energy Partners/Finance,
Gtd. Sr. Notes, 11%, 2009 717,000 (d) 684,735
Hanover Equipment Trust:
Sr. Secured Notes, Ser. A, 8.5%, 2008 257,000 271,135
Sr. Secured Notes, Ser. B, 8.75%, 2011 11,000 11,605
McMoRan Exploration,
Sr. Notes, 6%, 2008 316,000 (b) 317,185
Nuevo Energy,
Sr. Sub. Notes, Ser. B, 9.375%, 2010 370,000 400,525
Petrobras International Finance:
Notes, 9.125%, 2013 316,000 316,790
Sr. Notes, 9.75%, 2011 16,000 17,720
Sr. Notes, 9.875%, 2008 366,000 405,345
12
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS (CONTINUED)
Premcor Refining:
Sr. Notes, 9.25%, 2010 60,000 65,700
Sr. Notes, 9.5%, 2013 86,000 95,460
Wiser Oil,
Sr. Sub Notes, 9.5%, 2007 170,000 155,550
3,339,350
PACKAGING & CONTAINERS--1.9%
Graham Packaging,
Sr. Sub. Notes, 8.75%, 2008 109,000 (b) 109,000
Owens-Brockway:
Sr. Notes, 8.25%, 2013 30,000 (b) 31,500
Sr. Secured Notes, 7.75%, 2011 60,000 (b) 63,750
Sr. Secured Notes, 8.875%, 2009 50,000 54,500
Pliant:
Sr. Secured Notes, 11.125%, 2009 31,000 (b) 33,093
Sr. Sub. Notes, 13%, 2010 92,000 86,940
Riverwood International,
Sr. Sub. Notes, 10.875%, 2008 91,000 93,730
Stone Containers:
Sr. Notes, 8.375%, 2012 75,000 80,812
Sr. Notes, 9.75%, 2011 50,000 55,000
608,325
PAPER & FOREST PRODUCTS--2.9%
Appleton Papers,
Sr. Sub. Notes, Ser. B, 12.5%, 2008 65,000 73,125
Buckeye Technologies,
Sr. Sub. Notes, 8.5%, 2005 187,000 187,000
Fort James,
Sr. Notes, 6.625%, 2004 65,000 66,463
Georgia-Pacific:
Sr. Notes, 7.375%, 2008 123,000 (b) 125,460
Sr. Notes, 8.875%, 2010 426,000 (b) 464,340
916,388
PIPELINES--5.0%
ANR Pipeline,
Sr. Notes, 8.875%, 2010 150,000 (b) 164,625
El Paso Production,
Sr. Notes, 7.75%, 2013 280,000 (b) 280,700
The Portfolio 13
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
PIPELINES (CONTINUED)
Leviathan Gas Pipeline Partners,
Sr. Sub. Notes, 10.375%, 2009 112,000 120,120
Southern Natural Gas,
Sr. Notes, 8.875%, 2010 123,000 (b) 134,685
Williams Cos,
Notes, 6.5%, 2006 277,000 271,460
Notes, 6.625%, 2004 36,000 36,180
Notes, 9.25%, 2004 190,000 195,700
Putable Asset Term Securities,
Ser. A, 6.75%, 2006 255,000 252,450
Sr. Notes, 8.625%, 2010 131,000 137,550
1,593,470
RETAIL--1.2%
Buffets,
Sr. Sub. Notes, 11.25%, 2010 31,000 30,845
Dillards,
Notes, 6.875%, 2005 6,000 6,060
Hollywood Entertainment,
Sr. Sub. Notes, 9.625%, 2011 64,000 70,320
Jafra Cosmetics International,
Sr. Sub. Notes, 10.75%, 2011 32,000 (b) 33,600
JC Penney,
Sr. Notes, 8%, 2010 92,000 96,830
Remington Arms,
Sr. Notes, 10.5%, 2011 23,000 (b) 24,150
Rite Aid:
Sr. Secured Notes, 8.125%, 2010 60,000 (b) 62,400
Sr. Secured Notes, 12.5%, 2006 64,000 72,000
396,205
STRUCTURED INDEX--12.5%
JP Morgan HYDI-100:
Linked Ctf. of Deposit, 6.4%, 2008 3,436,000 (b,g) 3,487,540
Linked Ctf. of Deposit, 8%, 2008 500,000 (b,g) 517,500
4,005,040
TECHNOLOGY--.6%
AMI Semiconductor,
Sr. Sub. Notes, 10.75%, 2013 125,000 (b) 141,875
Fairchild Semiconductor International,
Sr. Sub. Notes, 10.375%, 2007 61,000 64,470
206,345
14
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--9.7%
Alamosa:
Sr. Discount Notes, 0/12.875%, 2010 20,000 (f) 11,700
Alamosa Delaware,
Sr. Notes, 13.625%, 2011 50,000 42,250
American Tower,
Sr. Notes, 9.375%, 2009 323,000 326,230
American Tower Escrow,
Units, 0%, 2008 30,000 19,500
Crown Castle International,
Sr. Notes, 9.375%, 2011 150,000 156,750
Fairpoint Communications,
Sr. Notes, 11.875%, 2010 30,000 (b) 34,950
Horizon PCS,
Sr. Notes, 13.75%, 2011 150,000 29,250
Insight Midwest/Insight Capital,
Sr. Notes, 9.75%, 2009 62,000 (b) 65,875
Level 3 Communications,
Sr. Discount Notes, 0/10.5%, 2008 86,000 (f) 74,605
MJD Communications,
Floating Rate Notes, Ser. B, 5.488%, 2008 500,000 (c) 407,500
Metromedia Fiber Network:
Sr. Notes, 10%, 2009 150,000 (d) 9,563
Sr. Notes, 14%, 2007 235,000 (d) 105,750
Sr. Notes, Ser. B, 10%, 2008 610,000 (d) 38,887
Nextel Communications,
Conv. Sub. Deb., 5.25%, 2010 138,000 130,410
Northeast Optic Network,
Sr. Notes, 12.75%, 2008 200,000 (d) 20,000
Qwest Services:
Notes, 7.2%, 2004 276,000 284,280
Notes, 13.5%, 2010 122,000 (b) 138,470
Qwest,
Bank Note, Ser. A, 5.97%, 2007 423,000 (c) 426,172
Bank Note, Ser. B, 5.97%, 2007 244,000 (c) 242,170
SBA Communications,
Sr. Notes, 10.25%, 2009 200,000 185,000
Spectrasite,
Sr. Notes, 8.25%, 2010 93,000 (b) 97,185
Star Choice Communications,
Sr. Secured Notes, 13%, 2005 180,000 193,050
The Portfolio 15
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
US West Capital Funding,
Notes, 6.25%, 2005 65,000 60,450
3,099,997
TEXTILES & APPAREL--.3%
Simmons,
Sr. Sub. Notes, Ser. B, 10.25%, 2009 97,000 104,275
TRANSPORTATION--.1%
TFM,
Sr. Notes, 10.25%, 2007 27,000 27,675
U.S. GOVERNMENT--6.8%
U.S. Treasury Notes:
1.125%, 6/30/2005 680,000 677,663
1.25%, 5/31/2005 592,000 592,000
2%, 5/15/2006 911,000 920,964
2,190,627
U.S. GOVERNMENT AGENCIES/
MORTGAGE-BACKED--0.0%
Federal Home Loan Mortgage Corp.,
REMIC, Gtd. Multiclass Mortgage
Participation Ctfs.,
(Interest Only Obligation):
Ser. 2288, Cl. IO, 6.5%, 1/15/2027 58,273 (h) 556
Ser. 2407, Cl. DI, 6%, 12/15/2021 625,727 (h) 5,620
Federal National Mortgage Association,
REMIC Trust, Gtd. Pass-Through Cfts.,
Ser. 2001-74, Cl. NI, 6%, 2/25/2021
(Interest Only Obligation) 800,000 (h) 5,718
11,894
TOTAL BONDS AND NOTES
(cost $32,967,662 ) 29,815,934
PREFERRED STOCKS--3.4% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICE--.1%
Williams Holdings Of Delaware,
Cum. Conv., 2.75% 460 (b) 24,840
MEDIA--2.5%
CSC Holdings,
Ser. H, Cum., $117.50 3,865 398,095
Paxson Communications:
Cum., $1,325 0 2,119
Cum. Conv., $975 46 (b) 395,720
795,934
MINING & METALS--.8%
Kaiser Group Holdings,
Cum., $3.85 6,081 272,733
TOTAL PREFERRED STOCKS
(cost $938,343)
16 1,093,507
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--2.6%
- ------------------------------------------------------------------------------------------------------------------------------------
MINING & METALS--0.0%
Kaiser Group Holdings (rights) 17,554 (i,j,l) 0
OIL & GAS--.5%
EXCO Resources 9,600 171,936
TELECOMMUNICATION--0.0%
American Tower (warrants) 30 (i) 3,734
Loral Cyberstar (warrants) 20,940 (i) 209
3,943
TEXTILES & APPAREL--2.1%
HCI Direct, Cl. A 60,714 (i,j,l) 653,708
TOTAL COMMON STOCKS
(cost $867,986) 829,587
The Portfolio 17
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
SHORT-TERM INVESTMENTS--3.7% Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS:
.7%, 10/23/2003 95,000 94,762
.8%, 11/20/2003 95,000 94,644
.86%, 12/18/2003 645,000 642,175
.87%, 9/25/2003 345,000 344,317
1.06%, 8/14/2003 10,000 9,991
TOTAL SHORT-TERM INVESTMENTS
(cost $1,186,127) 1,185,889
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $35,960,118) 102.6% 32,924,917
LIABILITIES, LESS CASH AND RECEIVABLES (2.6%) (838,317)
NET ASSETS 100.0% 32,086,600
(A) PRINCIPAL AMOUNT STATED IN U.S DOLLARS UNLESS OTHERWISE NOTED.
CAD-CANADIAN DOLLARS
GBP-GREAT BRITIAN POUND STERLING
(B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2003,
THESE SECURITIES AMOUNTED TO $8,939,828 OR 27.9% OF NET ASSETS.
C VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(D) NON-INCOME PRODUCING--SECURITY IN DEFAULT.
(E)PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES TO THE CANADIAN CONSUMER PRICE INDEX.
(F) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
(G) SECURITY LINKED TO A PORTFOLIO OF DEBT SECURITIES.
(H) NOTIONAL FACE AMOUNT SHOWN.
(I) NON-INCOME PRODUCING SECURITY.
(J) THE VALUE OF THESE SECURITIES HAS BEEN DETERMINED IN GOOD FAITH UNDER THE
DIRECTION OF THE BOARD OF TRUSTEES.
(K) SUBSEQUENT TO JUNE 30, 2003, THESE SECURITIES BECAME NON-INCOME PRODUCING.
(L) SECURITY RESTRICTED AS TO PUBLIC RESALE. INVESTMENTS IN RESTRICTED
SECURITIES, WITH A VALUE OF $653,708 OR 2.0% OF NET ASEETS, ARE AS FOLLOWS:
Acquisition Purchase Percentage of
Issuer Date Price ($) Net Assets (%) Valuation ($)
- ------------------------------------------------------------------------------------------------------------------------------------
HCI Direct, Cl. A 6/20/2002 10.767 2.0 10.767
Kaiser Group Holdings (rights) 6/26/2002 -- -- --
18
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of Investments 35,960,118 32,924,917
Cash 42,591
Receivable for investment securities sold 1,488,160
Dividends and interest receivable 513,809
Receivable for shares of Beneficial Interest subscribed 245,598
Prepaid expenses 8,148
35,223,223
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 18,915
Payable for investment securities purchased 3,075,416
Payable for shares of Beneficial Interest redeemed 17,873
Accrued expenses 24,419
3,136,623
- --------------------------------------------------------------------------------
NET ASSETS ($) 32,086,600
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 67,505,214
Accumulated distributions in excess of investment income--net (187,500)
Accumulated net realized gain (loss) on investments (32,196,010)
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions (3,035,104)
- --------------------------------------------------------------------------------
NET ASSETS ($) 32,086,600
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- --------------------------------------------------------------------------------
Net Assets ($) 23,992,285 8,094,315
Shares Outstanding 3,725,679 1,256,971
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 6.44 6.44
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 19
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Interest 1,363,786
Dividends 58,427
TOTAL INCOME 1,422,213
EXPENSES:
Investment advisory fee--Note 3(a) 89,608
Auditing fees 21,920
Prospectus and shareholders' reports 11,066
Custodian fees--Note 3(b) 7,927
Distribution fees--Note 3(b) 7,837
Interest expense--Note 2 1,409
Trustees' fees and expenses--Note 3(c) 1,312
Legal fees 555
Shareholder servicing costs--Note 3(b) 925
Miscellaneous 6,611
TOTAL EXPENSES 149,170
Less-waiver of fees due to
undertaking--Note 3 (a) (23,973)
NET EXPENSES 125,197
INVESTMENT INCOME--NET 1,297,016
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments and foreign currency
transactions 421,226
Net realized gain (loss) on financial futures (436,245)
Net realized gain (loss) on options transactions 5,864
Net realized gain (loss) on swap transactions 509,600
Net realized gain (loss) on forward currency exchange contracts (26,791)
NET REALIZED GAIN (LOSS) 473,654
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions (including $109,688
net unrealized appreciation on financial futures) 3,381,983
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 3,855,637
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 5,152,653
SEE NOTES TO FINANCIAL STATEMENTS.
20
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 1,297,016 3,091,277
Net realized gain (loss) on investments 473,654 (7,336,450)
Net unrealized appreciation
(depreciation) on investments 3,381,983 (83,344)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 5,152,653 (4,328,517)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (1,145,572) (2,782,472)
Service shares (359,073) (547,004)
TOTAL DIVIDENDS (1,504,645) (3,329,476)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 2,428,397 1,660,910
Service shares 2,774,579 6,129,955
Dividends reinvested:
Initial shares 1,145,572 2,782,472
Service shares 359,073 547,004
Cost of shares redeemed:
Initial shares (2,449,458) (7,968,161)
Service shares (785,021) (3,472,239)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS 3,473,142 (320,059)
TOTAL INCREASE (DECREASE) IN NET ASSETS 7,121,150 (7,978,052)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 24,965,450 32,943,502
END OF PERIOD 32,086,600 24,965,450
Undistributed (distributions in
excess of) investment income--net (187,500) 20,129
The Portfolio 21
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 387,585 263,095
Shares issued for dividends reinvested 186,091 452,259
Shares redeemed (404,327) (1,272,866)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 169,349 (557,512)
- --------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 452,384 934,734
Shares issued for dividends reinvested 58,191 90,154
Shares redeemed (129,550) (530,752)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 381,025 494,136
SEE NOTES TO FINANCIAL STATEMENTS.
22
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio' s financial statements.
Six Months Ended
June 30, 2003 Year Ended December 31,
---------------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001(a) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 5.63 7.33 8.47 10.44 11.80 12.88
Investment Operations:
Investment income--net .28(b) .69(b) .84(b) 1.15 1.21 1.14
Net realized and unrealized
gain (loss) on investments .86 (1.64) (1.07) (1.95) (1.38) (1.08)
Total from Investment Operations 1.14 (.95) (.23) (.80) (.17) .06
Distributions:
Dividends from investment
income--net (.33) (.75) (.91) (1.17) (1.19) (1.14)
Net asset value, end of period 6.44 5.63 7.33 8.47 10.44 11.80
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 20.40(c) (13.01) (2.90) (8.27) (1.54) .29
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .90(d) .90 .90 .76 .73 .77
Ratio of interest expense
to average net assets .01(d) .02 .01 .23 .11 .32
Ratio of net investment income
to average net assets 9.40(d) 10.69 10.37 11.10 10.53 10.10
Decrease reflected in above
expense ratios due to
undertaking by
The Dreyfus Corporation .11(d) .02 -- -- -- --
Portfolio Turnover Rate 157.05(c) 436.35 198.14 15.29 52.08 50.18
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 23,992 20,033 30,146 39,529 66,357 83,418
(A) AS REQUIRED, EFFECTIVE JANUARY 1, 2001, THE PORTFOLIO HAS ADOPTED THE
PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND
BEGAN AMORTIZING DISCOUNT OR PREMIUM ON FIXED INCOME SECURITIES ON A SCIENTIFIC
BASIS AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME.THE EFFECT OF
THESE CHANGES FOR THE PERIOD ENDED DECEMBER 31, 2001 WAS TO DECREASE NET
INVESTMENT INCOME PER SHARE BY $.05, INCREASE NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS PER SHARE BY $.05 AND DECREASE THE RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS FROM 11.07% TO 10.37%. PER SHARE DATA AND
RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1, 2001 HAVE NOT BEEN
RESTATED TO REFLECT THIS CHANGE IN PRESENTATION.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED. (D) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 23
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended
June 30, 2003 Year Ended December 31,
-----------------------------------------
SERVICE SHARES (Unaudited) 2002 2001(a) 2000(b)
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 5.63 7.33 8.46 8.46
Investment Operations:
Investment income--net .29(c) .68(c) .79(c) --
Net realized and unrealized
gain (loss) on investments .85 (1.63) (1.02) --
Total from Investment Operations 1.14 (.95) (.23) --
Distributions:
Dividends from investment income--net (.33) (.75) (.90) --
Net asset value, end of period 6.44 5.63 7.33 8.46
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 20.61(d) (13.12) (2.95) --
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .90(e) .90 .90 --
Ratio of interest expense
to average net assets .00(e,f) .02 .01 --
Ratio of net investment income
to average net assets 9.44(e) 10.73 10.35 --
Decrease reflected in above expense
ratios due to undertakings
by The Dreyfus Corporation .40(e) .33 .24 --
Portfolio Turnover Rate 157.05(d) 436.35 198.14 15.29
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 8,094 4,933 2,797 1
(A) AS REQUIRED, EFFECTIVE JANUARY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS
OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN
AMORTIZING DISCOUNT OR PREMIUM ON FIXED INCOME SECURITIES ON A SCIENTIFIC BASIS
AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME. THE EFFECT OF THESE
CHANGES FOR THE PERIOD ENDED DECEMBER 31, 2001 WAS TO DECREASE NET INVESTMENT
INCOME PER SHARE BY $.05, INCREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS PER SHARE BY $.05 AND DECRASE THE RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS FROM 11.04% TO 10.35%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL
DATA FOR PERIODS PRIOR TO JANUARY 1, 2002 HAVE NOT BEEN RESTATED TO REFLECT THIS
CHANGE IN PRESENTATION.
(B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(D) NOT ANNUALIZED.
(E) ANNUALIZED.
(F) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
24
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940 as amended (the "Act"), as an open-end management investment
company, operating as a series company, currently offering twelve series,
including the Limited Term High Yield Portfolio (the "portfolio"). The portfolio
is only offered to separate accounts established by insurance companies to fund
variable annuity contracts and variable life insurance policies. The portfolio
is a diversified series. The portfolio's investment objective is to maximize
total return, consisting of capital appreciation and current income. The Dreyfus
Corporation (the "Manager" ) serves as the portfolio's investment adviser. The
Manager is a wholly-owned subsidiary of Mellon Bank, N.A. ("Mellon"), which is a
wholly-owned subsidiary of Mellon Financial Corporation.
At a meeting held on March 10, 2003, the Board of Trustees, on behalf of the
portfolio, changed the name of the portfolio from Dreyfus Variable Investment
Fund, Limited Term High Income Portfolio to Dreyfus Variable Investment Fund,
Limited Term High Yield Portfolio, which became effective on March 11, 2003.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
the Manager, is the distributor of the portfolio's shares, which are sold
without a sales charge. The portfolio is authorized to issue an unlimited number
of $.001 par value shares of Beneficial Interest in 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
The Portfolio 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(a) Portfolio valuation: Investments in securities (excluding short-term
investments other than U.S. Treasury Bills, financial futures, options, swap
transactions and forward currency exchange contracts) are valued each business
day by an independent pricing service (the "Service") approved by the Board of
Trustees. Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the direction if the Board of Trustees.
Short-term investments, excluding U.S. Treasury Bills, are carried at amortized
cost, which approximates value. Financial futures and options, which are traded
on an exchange, are valued at the last sales price on the securities exchange on
which the securities are primarily traded or at the last sales price on the
national securities market on each business day. Options traded over-the-counter
are priced at the mean between the bid prices and the asked prices. Swap
transactions are valued daily based upon quotations from market makers.
Investments denominated in foreign cuurencies are translated to U.S. dollars at
the prevailing rates of exchange. Forward currency exchange contracts are valued
at the forward rate.
(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 and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between
26
the amount 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 in securities, resulting
from changes in exchange rates. Such gains and losses are included with net
realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the terms of the custody agreement, the portfolio
receives net earnings credits based on available cash balances left on deposit.
(d) Dividends to shareholders: It is the policy of the portfolio to declare and
pay dividends quarterly from investment income-net. Dividends from net realized
capital gain, if any, are normally declared and paid annually, but the portfolio
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 gain can be offset by capital loss
carryovers, it is the policy of the portfolio not to distribute such gain.
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from generally accepted accounting principles.
(e) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $31,558,596 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not
The Portfolio 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
applied, $454,463 of the carryover expires in fiscal 2006, $5,316,701 expires in
fiscal 2007, $4,480,534 expires in fiscal 2008, $10,613,045 expires in fiscal
2009 and $10,693,853 expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002 was as follows: ordinary income $3,329,476. 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 portfolio may borrow up to $10 million for leveraging purposes under a
short-term unsecured line of credit and participates with other Dreyfus-managed
funds in a $100 million unsecured line of credit primarily to be utilized for
temporary or emergency purposes, including the financing of redemptions.
Interest is charged to the portfolio based on prevailing market rates in effect
at the time of borrowings.
The average daily amount of borrowings outstanding under the leveraging line
during the period ended June 30, 2003 was approximately $171,600, with a related
weighted average annualized interest rate of 1.66%.
NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to an Investment Advisory Agreement ("Agreement") with Dreyfus, the
investment advisory fee is computed at the annual rate of .65 of 1% of the value
of the portfolio' s average daily net assets and is payable monthly.
The Manager has agreed, from January 1, 2003 to December 31, 2003, to waive
receipt of its fees and/or assume the expenses of the portfolio so that the
expenses of neither class, exclusive of taxes, brokerage commissions,
extraordinary expenses, interest expenses and commitment fees on borrowings
exceed .90 of 1% of the value of the average daily net assets of their class.
During the period ended June 30, 2003, the Manager waived receipt of fees of
$23,973, pursuant to the undertaking.
28
(b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% 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 Plan are
payable without regard to actual expenses incurred. During the period ended June
30, 2003, Service shares were charged $7,837 under the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $20 pursuant to the
transfer agency agreement.
The portfolio compensates Mellon under a custody agreement to provide custodial
services for the portfolio. During the period ended June 30, 2003, the portfolio
was charged $7,927 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group.
The Chairman of the Board receives an additional 25% of such compensation.
Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if
any, receive 50% of the annual retainer fee and per meeting fee paid at the time
the Board member achieves emeritus status.
The Portfolio 29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities and financial futures, during the period ended June 30,
2003, amounted to $44,578,113 and $41,379,482, respectively.
The portfolio may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The portfolio is exposed
to market risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the portfolio to "mark to
market" on a daily basis, which reflects the change in the market value of the
contracts at the close of each day's trading. Accordingly, variation margin
payments are received or made to reflect daily unrealized gains or losses. When
the contracts are closed, the portfolio recognizes a realized gain or loss.
These investments require initial margin deposits with a broker, which consist
of cash or cash equivalents, up to approximately 10% of the contract amount. The
amount of these deposits is determined by the exchange or Board of Trade on
which the contract is traded and is subject to change. At June 30, 2003, there
were no financial futures contracts outstanding.
The portfolio enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to settle foreign currency transactions. When executing
forward currency exchange contracts, the portfolio 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 currency exchange contracts, the portfolio would
incur 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 portfolio
realizes a gain if the value of the contract decreases between those dates. With
respect to purchases of forward currency exchange con-
30
tracts, the portfolio would incur 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 portfolio realizes a gain if the value of the contract
increases between those dates. The portfolio is also exposed to credit risk
associated with counterparty nonperformance on these forward currency exchange
contracts which is typically limited to the unrealized gain on each open
contract. At June 30, 2003, there were no forward currency exchange contracts
outstanding.
The portfolio may enter into swap agreements to exchange the interest rate on,
or return generated by, one nominal instrument for the return generated by
another nominal instrument. Total return swaps involve commitments to pay
interest in exchange for a market-linked return based on a notional amount. To
the extent the total return of the security or index underlying the transaction
exceeds or falls short of the offsetting interest rate obligation, the portfolio
will receive a payment from or make a payment to the counterparty, respectively.
Total return swaps are marked-to-market daily and the change, if any, is
recorded as unrealized appreciation or depreciation in the Statement of
Operations. Periodic payments received or made at the end of each measurement
period, but prior to termination, are recorded as realized gains or losses in
the Statement of Operations.
Credit default swaps involve commitments to pay a fixed rate in exchange for
payment if a credit event affecting a third party (the referenced company)
occurs. Credit events may include a failure to pay interest, bankruptcy, or
restructuring. Net periodic interest payments to be received or paid are accrued
daily and are recorded in the Statement of Operations as an adjustment to
interest income. Credit default swaps are marked-to-market daily and the change,
if any, is recorded as unrealized appreciation or depreciation in the Statement
of Operations. At June 30, 2003, there were no credit default swaps outstanding.
The Portfolio 31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
Realized gains or losses on maturity or termination of swaps are presented in
the Statement of Operations. Risks may arise upon entering into these agreements
from the potential inability of the counterparties to meet the terms of the
agreement and are generally limited to the amount of net payments to be
received, if any, at the date of default.
The fund may purchase and write (sell) call/put options in order to gain
exposure to or protect against changes in the market.
As a writer of call options, the fund receives a premium at the outset and then
bears the market risk of unfavorable changes in the price of the financial
instruments underlying the options. Generally, the fund would incur a gain, to
the extent of the premium, if the price of the underlying financial instrument
decreases between the date the option is written and the date on which the
option is terminated. Generally, the fund would realize a loss, if the price of
the financial instrument increases between those dates. At June 30, 2003, there
were no written call options outstanding.
As writer of put options, the fund receives a premium at the outset and then
bears the market risk of unfavorable changes in the price of the financial
instruments underlying the options. Generally, the fund would incur a gain, to
the extent of the premium, if the price of the underlying financial instrument
increases between the date the option is written and the date on which the
option is terminated. Generally, the fund would realize a loss, if the price of
the financial instrument decreases between those dates. At June 30, 2003, there
were no written put options outstanding.
At June 30, 2003, accumulated net unrealized depreciation on investments was
$3,035,201, consisting of $1,502,372 gross unrealized appreciation and
$4,537,573 gross unrealized depreciation.
At June 30, 2003, 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).
For More Information
Dreyfus Variable Investment Fund, Limited Term High
Yield Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent & Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call
1-800-554-4611 or 516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 156SA0603
Dreyfus Variable
Investment Fund,
Money Market
Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
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
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Money Market Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Money Market
Portfolio covers the six-month period from January 1, 2003, through June 30,
2003. Inside, you'll find valuable information about how the fund was managed
during the reporting period, including a discussion with the fund's portfolio
manager, Thomas Riordan.
The first half of 2003 was a challenging year for money market funds. In its
ongoing attempts to stimulate renewed economic growth, the Federal Reserve Board
reduced a key short-term interest rate to just 1% in June, and yields of money
market funds fell to historical lows. As a result, maintaining a steady stream
of current income from investments in money market securities has become a
challenge for many investors.
Nonetheless, we believe that it is important for investors to remember that
money market funds have continued to achieve their objective of preserving
shareholders' capital, although the preservation of capital is not guaranteed.
For emergency reserves and money earmarked for near-term needs, we believe money
market funds can play an important role in creating a diversified portfolio.
However, if you seek to maximize current income from your long-term savings,
your financial advisor may be able to recommend higher-yielding alternatives
that are right for you in today's low interest-rate environment.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Thomas S. Riordan, Portfolio Manager
How did Dreyfus Variable Investment Fund, Money Market Portfolio perform during
the period?
During the six-month period ended June 30, 2003, the portfolio produced an
annualized yield of 0.83%. Taking into account the effects of compounding, the
portfolio provided an annualized effective yield of 0.83% for the same
period.(1)
The portfolio's modest returns are the result of declining interest rates in a
persistently sluggish economy.
What is the portfolio's investment approach?
The portfolio seeks as high a level of current income as is consistent with the
preservation of capital and the maintenance of liquidity. To pursue this goal,
the portfolio invests in a diversified selection of high-quality, short-term
debt securities. These include securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities, certificates of deposit,
short-term securities issued by domestic or foreign banks, repurchase
agreements, asset-backed securities, domestic and dollar-denominated foreign
commercial paper and dollar-denominated obligations issued or guaranteed by
foreign governments.
Normally, the portfolio invests at least 25% of its net assets in domestic or
dollar-denominated foreign bank obligations.
What other factors influenced the portfolio's performance?
When the reporting period began in January 2003, the U.S. economy continued to
struggle, as evidenced by the fourth quarter of 2002's GDP annualized growth
rate of just 1.4% . During the first quarter of 2003, the economy sent mixed
signals, but hopes of a more robust economic rebound faded as geopolitical
tensions mounted, culminating with the war in Iraq. War fears caused business
and consumers to postpone their spending plans. In fact, consumer confidence
fell to new
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
lows. On the other hand, home sales rose, and manufacturing expanded modestly.
For its part, the Federal Reserve Board (the "Fed") kept the federal funds rate
unchanged at 1.25%.
In March, the outbreak of hostilities in Iraq continued to cloud the economic
picture. The Fed indicated at the time that the uncertainty regarding the war
with Iraq was so great that it could not adequately assess economic risks.
Nonetheless, as the conflict progressed, the market's focus appeared to shift
toward expectations of a quick resolution to the war, fueling greater investor
optimism and causing money market yields to rise at the longer end of the curve.
After the war began winding down in April, investors' attention returned to the
problems underlying the weak U.S. economy. The manufacturing sector contracted
in April and the unemployment rate rose to 6%, suggesting lingering caution
among businesses reluctant to resume hiring and production. In addition,
uncertainty remained as to the prospects for continued spending among consumers,
as revised estimates of U.S. economic growth for the first quarter of 2003 came
in at a relatively disappointing 1.6%.
In May, the economy showed signs of gradual improvement. A key purchasing index
rose significantly over the previous month' s levels, suggesting that the
manufacturing sector may be improving. Consumer confidence rebounded to its
highest levels in almost a year, indicating that consumers were becoming
increasingly optimistic. These encouraging signs were supported by other
potentially constructive factors, including gains in the stock market, low
inflation, declining oil prices, rising productivity and pending tax cuts.
However, at its meeting in early May, the Fed adopted a relatively cautious
stance, citing disappointing numbers related to employment and production in its
assessment that economic risks were "weighted toward weakness for the
foreseeable future."
In June, signs emerged of stronger consumer confidence. The housing sector
continued to support the economy, as evidenced by strong existing and new home
sales. However, most investors expected the
4
Fed to reduce interest rates further at its meeting in late June. The Fed did
not disappoint them, cutting rates for the thirteenth time since January 2001
and lowering the federal funds rate another 25 basis points to 1%. However,
because the Fed did not cut rates by 50 basis points as some investors had
expected, money market yields rose modestly in the wake of the Fed' s
announcement.
What is the portfolio's current strategy?
We remain cautious regarding the prospects for a quick pickup in economic
growth. We believe that more solid evidence is required to support a sustainable
rebound in economic activity among consumers and businesses.
Because the Fed has stated their desire to see a more robust economy and has
shown little concern of a rise in the rate of inflation, and therefore is
unlikely to raise the federal funds rate, we have continued to maintain a long
average maturity in the fund.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THESE PORTFOLIOS DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, MONEY MARKET PORTFOLIO MADE AVAILABLE THROUGH INSURANCE
PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS.
HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN,
AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) ANNUALIZED EFFECTIVE YIELD IS BASED UPON DIVIDENDS DECLARED DAILY AND
REINVESTED MONTHLY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. YIELDS
FLUCTUATE. AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE
FDIC OR THE U.S. GOVERNMENT. ALTHOUGH THE PORTFOLIO SEEKS TO PRESERVE THE VALUE
OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING
IN THE PORTFOLIO. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF
ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE
INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS.
The Portfolio 5
STATEMENT OF INVESTMENTS
June 30, 2003 (Unaudited)
Principal
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT--18.1% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
American Express Centurion Bank
1.04%, 7/28/2003 9,000,000 9,000,000
Bank of Nova Scotia (Yankee)
1.85%, 10/8/2003 5,000,000 4,998,499
Citibank N.A.
1.20%, 8/27/2003 9,000,000 9,000,000
Wilmington Trust Co.
1.53%, 11/18/2003 10,000,000 9,999,617
TOTAL NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
(cost $32,998,116) 32,998,116
COMMERCIAL PAPER--34.7%
- ------------------------------------------------------------------------------------------------------------------------------------
AIG Funding Inc.
1.25%, 7/1/2003 6,000,000 6,000,000
Abbey National North America
1.33%, 7/1/2003 6,000,000 6,000,000
Amstel Funding Corp.
1.10%, 9/26/2003 8,000,000 (b) 7,978,733
Deutsche Bank Financial LLC
1.38%, 7/1/2003 6,000,000 6,000,000
FCAR Owner Trust
1.24%, 7/18/2003 9,000,000 8,994,730
GE Capital International Funding Inc.
1.27%, 9/19/2003 10,000,000 9,972,000
Nordea North America Inc.
1.01%, 8/19/2003 6,000,000 5,991,792
Prudential Funding LLC
1.30%, 7/1/2003 6,000,000 6,000,000
UBS Finance Delaware LLC
1.31%, 7/1/2003 6,000,000 6,000,000
TOTAL COMMERCIAL PAPER
(cost $62,937,255) 62,937,255
6
Principal
CORPORATE NOTES--10.4% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co. Inc.
1.16%, 1/15/2004 9,000,000 (a) 9,011,381
Paradigm Funding LLC
1.28%, 10/31/2003 5,000,000 (a,b) 5,000,000
Sigma Finance Inc.
1.09%, 7/10/2003 5,000,000 (a,b) 5,000,000
TOTAL CORPORATE NOTES
(cost $19,011,381) 19,011,381
PROMISSORY NOTES--5.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Group Inc.
1.24%--1.25%, 11/12/2003--1/28/2004
(cost $9,000,000) 9,000,000 (c) 9,000,000
SHORT-TERM BANK NOTES--7.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Bank One N.A.
1.05%, 8/15/2003 10,000,000 (a) 9,999,630
National City Bank
1.05%, 8/22/2003 4,000,000 (a) 3,999,972
TOTAL SHORT-TERM BANK NOTES
(cost $13,999,602) 13,999,602
U.S. GOVERNMENT AGENCIES--16.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Banks, Discount Notes
.95%, 7/1/2003 5,000,000 5,000,000
Federal Home Loan Banks, Notes
1.05%--1.39%, 3/5/2004--7/14/2004 25,000,000 25,000,000
TOTAL U.S. GOVERNMENT AGENCIES
(cost $30,000,000) 30,000,000
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
TIME DEPOSITS--6.2% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
HSBC Bank USA (Grand Cayman)
1.25%, 7/1/2003 6,000,000 6,000,000
Marshall & Ilsley Bank (Grand Cayman)
1.13%, 7/1/2003 5,174,000 5,174,000
TOTAL TIME DEPOSITS
(cost $11,174,000) 11,174,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $179,120,354) 98.6% 179,120,354
CASH AND RECEIVABLES (NET) 1.4% 2,508,941
NET ASSETS 100.0% 181,629,295
(A) VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE.
(B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2003,
THESE SECURITIES AMOUNTED TO $17,978,733 OR 9.9% OF NET ASSETS.
(C) THESE NOTES WERE ACQUIRED FOR INVESTMENT, AND NOT WITH THE INTENT TO
DISTRIBUTE OR SELL. SECURITIES RESTRICTED AS TO PUBLIC RESALE. THESE
SECURITIES WERE ACQUIRED FROM 5/16/2003 TO 5/27/2003 AT A COST OF
$9,000,000. AT JUNE 30, 2003, THE AGGREGATE VALUE OF THESE SECURITIES WERE
$9,000,000 OR 5.0% OF NET ASSETS AND ARE VALUED AT AMORTIZED COST.
SEE NOTES TO FINANCIAL STATEMENTS.
8
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 179,120,354 179,120,354
Cash 3,247,256
Interest receivable 292,765
Prepaid expenses 2,456
182,662,831
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 75,752
Payable for shares of Beneficial Interest redeemed 907,404
Accrued expenses 50,380
1,033,536
NET ASSETS ($) 181,629,295
COMPOSITION OF NET ASSETS ($):
Paid-in capital 181,653,498
Accumulated net realized gain (loss) on investments (24,203)
NET ASSETS ($) 181,629,295
SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial Interest 181,653,498
authorized)
NET ASSET VALUE, offering and redemption price per share ($) 1.00
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 9
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 1,413,719
EXPENSES:
Investment advisory fee--Note 2(a) 503,320
Custodian fees 22,724
Professional fees 21,763
Trustees' fees and expenses--Note 2(b) 11,482
Prospectus and shareholders' reports 9,272
Shareholder servicing costs--Note 2(a) 8,879
Registration fees 972
Miscellaneous 1,777
TOTAL EXPENSES 580,189
INVESTMENT INCOME--NET 833,530
NET REALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 1(B) ($) (17)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 833,513
SEE NOTES TO FINANCIAL STATEMENTS.
10
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 833,530 2,964,049
Net realized gain (loss) on investments (17) (10,974)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 833,513 2,953,075
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (833,530) (2,964,049)
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold 317,032,840 1,012,791,163
Dividends reinvested 833,220 2,964,049
Cost of shares redeemed (332,453,902) (1,009,975,937)
INCREASE (DECREASE) IN NET ASSETS
FROM BENEFICIAL INTEREST TRANSACTIONS (14,587,842) 5,779,275
TOTAL INCREASE (DECREASE) IN NET ASSETS (14,587,859) 5,768,301
NET ASSETS ($):
Beginning of Period 196,217,154 190,448,853
END OF PERIOD 181,629,295 196,217,154
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 11
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the portfolio would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been derived from the
portfolio's financial statements.
Six Months Ended
June 30, 2003 Year Ended December 31,
----------------------------------------------------------------
(Unaudited) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 1.00 1.00 1.00 1.00 1.00 1.00
Investment Operations:
Investment income--net .004 .015 .039 .058 .047 .050
Distributions:
Dividends from
investment income--net (.004) (.015) (.039) (.058) (.047) (.050)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00 1.00
TOTAL RETURN (%) .41(a) 1.46 3.97 5.98 4.78 5.12
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses
to average net assets .58(a) .56 .58 .60 .58 .56
Ratio of net investment income
to average net assets .83(a) 1.44 3.72 5.87 4.69 5.01
Net Assets, end of period
($ x 1,000) 181,629 196,217 190,449 124,375 102,727 89,025
(A) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
12
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the Money Market Portfolio (the "portfolio"). The portfolio is
only offered to separate accounts established by insurance companies to fund
variable annuity contracts and variable life insurance policies. The portfolio
is a diversified series. The portfolio's investment objective is to provide as
high a level of current income as is consistent with the preservation of capital
and the maintenance of liquidity. The Dreyfus Corporation (the "Manager") serves
as the portfolio's investment adviser. The Manager is a wholly-owned subsidiary
of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial
Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned
subsidiary of the Manager, is the distributor of the portfolio's shares, which
are sold without a sales charge.
It is the portfolio's policy to maintain a continuous net asset value per share
of $1.00; the portfolio has adopted certain investment, portfolio valuation and
dividend and distribution policies to enable it to do so. There is no assurance,
however, that the portfolio will be able to maintain a stable net asset value
per share of $1.00.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
The Portfolio 13
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(a) Portfolio valuation: Investment securities are valued at amortized cost in
accordance with Rule 2a-7 of the Act, which has been determined by the fund's
Board of Trustees to represent the fair value of the portfolio's investments.
(b) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of discount and premium on investments, is earned from
settlement date and is recognized on the accrual basis. Cost of investments
represents amortized cost. Under the terms of the custody agreement, the
portfolio receives net earnings credits based on available cash balances left on
deposit.
The portfolio may enter into repurchase agreements with financial institutions,
deemed to be creditworthy by the Manager, subject to the seller's agreement to
repurchase and the portfolio's agreement to resell such securities at a mutually
agreed upon price. Securities purchased subject to repurchase agreements are
deposited with the portfolio' s custodian and, pursuant to the terms of the
repurchase agreement, 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 portfolio 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
portfolio maintains its right to sell the underlying securities at market value
and may claim any resulting loss against the seller.
(c) Dividends to shareholders: It is the policy of the portfolio to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and paid
annually, but the portfolio 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
14
extent that net realized capital gain can be offset by capital loss carryovers,
it is the policy of the portfolio not to distribute such gain.
(d) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $24,254 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, $1,106 of the
carryover expires in fiscal 2006, $1,115 expires in fiscal 2007, $11,060 expires
in fiscal 2008 and $10,973 expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002 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, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
NOTE 2--Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to an Investment Advisory Agreement with the Manager, the
investment advisory fee is computed at the annual rate of .50 of 1% of the value
of the portfolio's average daily net assets and is payable monthly.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $120 pursuant to the
transfer agency agreement.
The Portfolio 15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(b) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in-person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund' s relative net assets. The Chairman of the Board
receives an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's
annual retainer fee and per meeting fee paid at the time the Board member
achieves emeritus status.
For More Information
Dreyfus Variable Investment Fund,
Money Market Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call
1-800-554-4611 or
516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 117SA0603
Dreyfus Variable
Investment Fund,
Quality Bond Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
14 Statement of Finacial Futures
15 Statement of Assets and Liabilities
16 Statement of Operations
17 Statement of Changes in Net Assets
19 Financial Highlights
21 Notes to Financial Statements
31 Proxy Results
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Quality Bond Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Quality Bond
Portfolio covers the six-month period from January 1, 2003, through June 30,
2003. Inside, you'll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with William
Howarth, portfolio manager and a member of the Dreyfus Taxable Fixed Income Team
that manages the portfolio.
Bonds continued to rally during the first half of 2003, with prices driven
higher by a combination of declining interest rates and improving investor
sentiment. Most notably, corporate bonds rose sharply as companies paid down
debt, trimmed expenses and adopted more rigorous standards of corporate
governance in the wake of last year's high-profile accounting scandals. However,
the bond market' s strong performance over the past several years has had a
downside: yields on some types of bonds are hovering near historical lows. For
many investors, maintaining a steady stream of current income has been a
challenge.
What should an income-oriented investor do now? While we believe that bonds
continue to represent an important component of a well-balanced investment
portfolio, your financial advisor may be in the best position to recommend the
income strategies that are right for you in today's low interest-rate
environment.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
William Howarth, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus Variable Investment Fund, Quality Bond Portfolio perform
relative to its benchmark?
For the six-month period ended June 30, 2003, the portfolio's Initial shares
achieved a total return of 4.93% and its Service shares achieved a total return
of 4.84% .(1) The portfolio produced aggregate income dividends of $0.199 per
share and $0.188 per share for its Initial and Service shares, respectively. In
comparison, the portfolio's benchmark, the Lehman Brothers Aggregate Bond Index
(the "Index"), achieved a total return of 3.93% for the same period.(2)
The portfolio benefited during the reporting period from a rally among
investment-grade corporate bonds. The portfolio's overweight in investment-grade
corporate bonds and inflation-protected securities, and its underweight position
in mortgage-backed securities and U.S. government agency debentures, enabled it
to provide higher returns than its benchmark during the reporting period.
What is the portfolio's investment approach?
On December 18, 2002, the portfolio' s shareholders voted to change the
portfolio' s investment objective. Since January 20, 2003, the portfolio's
investment objective has been to seek to maximize total return consisting of
capital appreciation and current income. Prior to then, the portfolio's
investment objective was to seek to maximize current income to the extent
consistent with the preservation of capital and the maintenance of liquidity.
The portfolio invests at least 80% of its assets in bonds, including corporate
bonds, mortgage-related securities, collateralized mortgage obligations ("CMOs")
and asset-backed securities that, when purchased, are A-rated or better or what
we believe are the unrated equivalent, and in securities issued or guaranteed by
the U.S. government or its agencies or its instrumentalities. The portfolio may
also invest up to 10% of its net assets in foreign securities. In addition, the
portfolio may invest in high-grade commercial paper issued by U.S. corporations,
certificates of deposit, time deposits and bankers' acceptances, as well as
municipal obligations and zero coupon securities.
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
Our investment approach emphasizes:
* FUNDAMENTAL ECONOMIC ANALYSIS. Our review of U.S. economic conditions helps
us establish the portfolio's average duration, which is a measure of
sensitivity to interest-rate changes. If interest rates appear to be
rising, we will generally reduce the portfolio's average duration to keep
cash available for the purchase of higher-yielding securities as they
become available. If interest rates appear to be declining, we will
generally increase the portfolio's average duration to lock in prevailing
yields.
* SECTOR ALLOCATION. We allocate assets among the various sectors of the
fixed-income marketplace according to their relative attractiveness based
on prevailing and expected market and economic conditions.
* SECURITY SELECTION. We choose individual securities according to factors
that include their yields, prices, liquidity and the financial health of
their issuers.
What other factors influenced the portfolio's performance?
The portfolio was primarily affected by renewed strength in the corporate bond
market. When the reporting period began, corporate bonds had already begun to
recover from a lengthy period of pronounced weakness as investors began to look
forward to potentially stronger economic growth in 2003. Although the economy
failed to gain momentum during the first quarter of 2003, investors apparently
felt more comfortable investing in corporate bonds after many companies
strengthened their balance sheets and reduced capital expenditures and debt. As
a result of these actions, the difference in yields, or "spread," between
corporate bonds and U.S. Treasury securities contracted, producing attractive
levels of price appreciation.
In the second quarter, as the war in Iraq wound down and investors' attention
shifted from geopolitics to economic fundamentals, many investors began to
anticipate lower short-term interest rates. Indeed, near the end of the
reporting period, the Federal Reserve Board reduced the federal funds rate by 25
basis points, driving interest rates to a 45-year low of 1%. As yields fell in
anticipation of lower interest rates, bond prices generally rose.
The portfolio was well-positioned for this constructive investment environment
after beginning 2003 with heavier exposure to corporate bonds than its
benchmark. Our sector allocation strategy helped drive the portfolio' s
performance in other ways as well. For example, the portfolio's lighter than
average exposure to mortgage-backed securi-
4`
ties helped it avoid the brunt of weakness in the mortgage marketplace, which
was caused by a surge in mortgage refinancing as interest rates continued to
fall. Later in the reporting period, the portfolio's relatively light holdings
of U.S. government agency debt helped protect it when questions arose about the
management practices of the Federal Home Loan Mortgage Corporation, also known
as "Freddie Mac."
Although the portfolio generally held a smaller percentage of U.S. Treasury
securities than the Index, much of the portfolio's U.S. Treasury position was
composed of Treasury Inflation Protected Securities (TIPS), which, despite
relatively few inflationary pressures, provided higher total returns than
"plain" U.S. Treasuries during the reporting period.
What is the portfolio's current strategy?
We have begun to trim the portfolio's holdings of corporate bonds, because
spreads recently have declined to levels that are below their historical
averages, even though corporate debt levels are still historically high. We also
have taken profits in TIPS as they have also, in our opinion, become richly
valued. At the same time, because we are seeing signs that prepayment activity
is abating, we have increased the portfolio' s exposure to mortgage-backed
securities. However, we continue to remain defensively positioned with regard to
U.S. government agency debt, which we believe may continue to languish as
Congressional and regulatory scrutiny of government-sponsored enterprises
intensifies.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, QUALITY BOND PORTFOLIO MADE AVAILABLE THROUGH INSURANCE
PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS.
HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN,
AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE
DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED
IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL
REDUCE RETURNS.
(2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS AGGREGATE BOND
INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN INDEX OF CORPORATE, U.S.
GOVERNMENT AND U.S. GOVERNMENT AGENCY DEBT INSTRUMENTS, MORTGAGE-BACKED
SECURITIES AND ASSET-BACKED SECURITIES WITH AN AVERAGE MATURITY OF 1-10
YEARS.
The Portfolio 5
STATEMENT OF INVESTMENTS
June 30, 2003 (Unaudited)
Principal
BONDS AND NOTES--97.1% Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
AIRLINES--.3%
American Airlines,
Notes, 3.857%, 2010 656,000 656,000
Continental Airlines,
Pass-Through Ctfs.,
Ser. 1998-1, Cl. A, 6.648%, 2017 108,935 105,142
USAir,
Enhanced Equipment Notes,
Ser. C, 8.93%, 2009 270,471 (b) 54,094
815,236
ASSET-BACKED CTFS./CREDIT CARDS--.8%
MBNA Credit Card Master Note Trust,
Ser. 2002-C1, Cl. C1, 6.8%, 2014 1,850,000 2,024,457
AUTO-MANUFACTURING--1.0%
Ford Motor,
Global Landmark Securities, 7.45%, 2031 245,000 225,058
General Motors,
Notes, 8.375%, 2033 2,478,000 2,439,120
2,664,178
BANKING--3.1%
Abbey National,
Sub. Notes, 7.35%, 2006 1,379,000 (c) 1,569,830
Bayer Hypo-und Vereinsbank,
Bonds, 8.741%, 2031 740,000 (d) 780,541
Corp Andina de Fomento,
Notes, 5.2%, 2013 2,570,000 2,609,555
Dresdner Funding Trust I,
Bonds, 8.151%, 2031 1,010,000 (d) 1,117,445
Scotland International Finance BV,
Sub. Notes, 4.25%, 2013 1,248,000 (d) 1,245,956
Sovereign Bancorp,
Sr. Notes, 10.5%, 2006 597,000 717,832
8,041,159
CABLE TELEVISION--.5%
Comcast,
Sr. Notes, 6.5%, 2015 1,115,000 1,257,091
COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--2.5%
CS First Boston Mortgage Securities,
Ser. 1998-C1, Cl. C, 6.78%, 2040 3,355,000 3,850,632
Chase Commerical Mortgage Securities,
Ser. 2001-245, Cl. A1, 6.173%, 2016 431,753 (c,d) 476,479
6
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE PASS-THROUGH CTFS. (CONTINUED)
Chase Manhattan Bank-First Union National Bank,
Ser. 1999-1, Cl. A1, 7.134%, 2031 9,370 10,421
GS Mortgage Securities II,
Ser. 2001-LIBA, Cl. A2, 6.615%, 2016 1,948,000 (d) 2,178,600
6,516,132
DIVERSIFIED FINANCIAL SERVICE--2.0%
Brascan,
Bonds, 7.375%, 2033 1,485,000 1,636,470
Farmers Exchange Capital,
Trust Surplus Note Securities, 7.05%, 2028 300,000 (d) 270,375
GMAC,
Bonds, 8%, 2031 672,000 661,163
General Electric Capital,
Medium-Term Notes, Ser. A, 6.75%, 2032 591,000 693,594
SLM,
Medium-Term Notes, Ser. A, 3.625%, 2008 1,917,000 1,969,666
5,231,268
ELECTRIC UTILITIES--2.6%
Centerpoint Energy Houston Electric,
Notes, 6.95%, 2033 1,184,000 (d) 1,361,708
Consolidated Edison of New York,
Notes, 4.875%, 2013 1,500,000 1,584,575
Duke Energy,
First Mortgage, 3.75%, 2008 662,000 (d) 682,145
Entergy Mississippi,
First Mortgage, 4.35%, 2008 275,000 280,826
PPL Energy Supply,
Conv. Sr. Notes, 2.625%, 2023 748,000 (d) 781,660
Public Service Co. of Colorado,
First Mortgage, 4.875%, 2013 1,057,000 (d) 1,100,804
Virginia Electric & Power,
Sr. Notes, Ser. A, 4.75%, 2013 911,000 946,601
6,738,319
FOOD & BEVERAGES--.5%
Diageo Capital,
Notes, 4.85%, 2018 1,140,000 1,180,313
FOREIGN GOVERNMENTAL--2.4%
Canadian Government:
Bonds, 3%, 2036 CAD 3,008,000 2,213,304
Bonds, 4%, 2031 CAD 2,175,000 (e) 2,133,811
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENTAL (CONTINUED)
Export Development Canada,
Bonds, 2.75%, 2005 1,500,000 1,538,012
Province of Quebec,
Deb., 3.3%, 2013 CAD 570,000 (e) 439,049
6,324,176
GAMING & LODGING--.2%
Resorts International Hotel and Casino,
First Mortgage, 11.5%, 2009 560,000 (d) 534,800
HEALTH CARE--2.6%
Baxter International,
Notes, 4.625%, 2015 2,139,000 (d) 2,173,688
Becton Dickinson & Co.,
Notes, 4.9%, 2018 1,500,000 1,576,595
Eli Lilly & Co.,
Notes, 4.5%, 2018 1,825,000 1,847,705
HCA,
Notes, 7.125%, 2006 500,000 543,927
Manor Care,
Notes, 6.25%, 2013 465,000 (d) 483,600
6,625,515
MANUFACTURING--.8%
General Electric,
Notes, 5%, 2013 1,225,000 1,296,384
Tyco International,
Gtd. Notes, 5.8%, 2006 780,000 809,250
2,105,634
MEDIA--1.4%
America Online,
Conv. Sub. Notes, 0%, 2019 1,154,000 (f) 706,825
Cox Communications,
Notes, 6.75%, 2011 664,000 775,685
Liberty Media,
Notes, 7.875%, 2009 887,000 (f) 1,040,604
USA Interactive,
Notes, 7%, 2013 910,000 1,050,011
3,573,125
8
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
MINING & METALS--.8%
Alcoa,
Notes, 6%, 2012 1,050,000 1,184,755
Placer Dome,
Deb., Ser. B, 8.5%, 2045 725,000 879,334
2,064,089
OIL & GAS--.2%
Petro-Canada,
Deb., 7%, 2028 383,000 451,802
PAPER & FOREST PRODUCTS--.7%
Inversiones CMPC,
Notes, 4.875%, 2013 710,000 (d) 703,088
Weyerhaeuser,
Notes, 6.75%, 2012 940,000 1,068,879
1,771,967
PROPERTY-CASUALTY INSURANCE--2.4%
Ace Capital Trust II,
Gtd. Capital Securities, 9.7%, 2030 950,000 1,284,682
Fund American Cos.,
Notes, 5.875%, 2013 635,000 665,220
Markel,
Notes, 6.8%, 2013 725,000 790,082
Metlife,
Sr. Notes, 5.375%, 2012 805,000 (f) 868,982
New York Life Insurance,
Notes, 5.875%, 2033 1,770,000 (d) 1,864,277
QBE Insurance,
Bonds, 5.647%, 2023 745,000 725,441
6,198,684
RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--2.2%
Chase Mortgage Finance:
Ser. 1998-S3, Cl. B3, 6.5%, 2013 511,525 (d) 543,202
Ser. 1999-S12, Cl. B1, 7.25%, 2029 1,436,776 1,535,758
IMPAC Secured Assets Owner Trust,
Ser. 2002-1, Cl. AI3, 5.57%, 2023 2,006,611 2,016,359
Norwest Asset Securities,
Ser. 1998-13 Cl.B5, 6.25%, 2028 224,591 (d) 237,807
The Portfolio 9
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE PASS-THROUGH CTFS. (CONTINUED)
PNC Mortgage Securities,
Ser. 1997-3, Cl. 1B3, 7%, 2027 207,438 207,100
Residential Funding Mortgage Securities I:
Ser. 1997-S19, Cl. M2, 6.5%, 2012 703,342 702,188
Ser. 1997-S21, Cl. M2, 6.5%, 2012 401,455 400,796
Ser. 1998-NS1, Cl. B1, 6.375%, 2009 88,157 (d) 93,493
5,736,703
RETAIL--.5%
Sears Roebuck Acceptance,
Notes, 7%, 2032 645,000 (f) 723,842
Toys R US,
Notes, 7.625%, 2011 610,000 (f) 655,127
1,378,969
STRUCTURED INDEX--14.0%
HSBC Bank USA TIGERS:
Medium Term Notes,
Ser. 2003-2, 3.915%, 2008 6,900,000 (c,d,g) 6,900,000
Medium Term Notes,
Ser. 2003-3, Cl. D-1, 3.915%, 2008 2,556,000 (c,d,g) 2,554,431
Lehman Brothers TRAINS,
Ser. L-2002, 7.754%, 2031 7,972,800 (c,d,g) 9,868,174
Morgan Stanley TRACERS:
Ser. 2001-1, 7.252%, 2011 13,952,000 (d,g) 16,496,747
Ser. 2002-5, 6.799%, 2012 480,000 (d,f,g) 567,549
36,386,901
TECHNOLOGY--.9%
Hewlett-Packard,
Notes, 5.75%, 2006 1,037,000 1,156,326
IBM,
Sr. Notes, 4.75%, 2012 1,055,000 1,110,983
2,267,309
U.S. GOVERNMENT--29.3%
U.S. Treasury Inflation Protection Securities,
Principal Strip,
0%, 4/15/2029 2,500,000 1,512,031
U.S. Treasury Notes:
1.25%, 5/31/2005 11,534,000 11,534,000
1.125%, 6/30/2005 10,073,000 10,038,379
2%, 5/15/2006 23,582,000 23,839,940
10
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT (CONTINUED)
U.S. Treasury Notes (continued):
6%, 8/15/2009 18,750,000 (h) 22,122,750
3.625%, 5/15/2013 7,050,000 7,111,688
76,158,788
U.S. GOVERNMENT AGENCIES--1.4%
Tennessee Valley Authority,
Valley Indexed Principal Securities,
3.375%, 1/15/2007 2,862,000 (i) 3,607,579
U.S. GOVERNMENT AGENCIES/MORTGAGE-BACKED--24.0%
Federal Home Loan Mortgage Corp.,
REMIC Trust, Gtd. Pass-Through Ctfs.
(Interest Only Obligations):
Ser. 1916, Cl. PI, 7%, 12/15/2011 815,768 (j) 63,801
Ser. 1999, Cl. PW, 7%, 8/15/2026 473,676 (j) 7,674
Federal National Mortgage Association:
5.5%, 3/1/2033--5/1/2033 906,190 938,469
6%, 1/1/2029--12/1/2032 4,606,542 4,791,445
6.88%, 2/1/2028 1,317,560 1,526,960
7%, 6/1/2029--9/1/2029 996,933 1,050,828
Government National Mortgage Association I:
5% 10,974,000 (k) 11,241,436
5.5% 12,947,000 (k) 13,481,064
5.5%, 4/15/2033 14,622,636 15,262,378
6%, 2/15/2029--2/15/2033 13,193,592 13,841,195
Project Loan,
8%, 9/15/2008 150,499 159,481
Government National Mortgage Association II,
7%, 7/20/2029--9/20/2028 136,435 143,721
62,508,452
TOTAL BONDS AND NOTES
(cost $246,675,221) 252,162,646
PREFERRED STOCKS--1.7% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--.8%
Raytheon,
Cum. Conv., $4.125 (units) 35,000 (l) 2,003,400
ELECTRIC UTILITIES--.3%
Ameren,
Cum. Conv., $2.4375 (units) 14,097 (m) 400,637
The Portfolio 11
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
PREFERRED STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES (CONTINUED)
Keyspan,
Cum. Conv., $4.375 (units) 8,246 (n) 436,626
837,263
PROPERTY-CASUALTY INSURANCE--.4%
Travelers Property Casualty,
Cum. Conv., $1.125 40,515 972,360
TELECOMMUNICATIONS--.2%
Motorola,
Cum. Conv., $3.50 (units) 13,766 (f,o) 448,771
TOTAL PREFERRED STOCKS
(cost $5,023,689) 4,261,794
OTHER INVESTMENTS--7.6%
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES:
Dreyfus Institutional Cash Advantage Fund 6,556,000 (p) 6,556,000
Dreyfus Institutional Cash Advantage Plus Fund 6,556,000 (p) 6,556,000
Dreyfus Institutional Preferred Plus Money Market Fund 6,556,000 (p) 6,556,000
TOTAL OTHER INVESTMENTS
(cost $19,668,000) 19,668,000
Principal
SHORT-TERM INVESTMENTS--12.7% Amount(a) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS:
1.15%, 7/3/2003 3,266,000 (h) 3,265,869
1.1%, 7/24/2003 2,574,000 2,572,739
..898%, 9/25/2003 5,397,000 5,386,314
..785%, 10/23/2003 124,000 123,690
..805%, 11/20/2003 124,000 123,535
..833%, 12/11/2003 15,487,000 15,419,167
..856%, 12/18/2003 6,166,000 6,142,878
TOTAL SHORT-TERM INVESTMENTS
(cost $33,038,154) 33,034,192
12
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--1.6% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANY;
Dreyfus Institutional Preferred Money Market Fund
(cost $4,192,030) 4,192,030 4,192,030
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT (cost $308,597,094) 120.7% 313,318,662
LIABILITIES, LESS CASH AND RECEIVABLES (20.7%) (53,630,743)
NET ASSETS 100.0% 259,687,919
(A) PRINCIPAL AMOUNT STATED IN U.S DOLLARS UNLESS OTHERWISE NOTED.
CAD--CANADIAN DOLLARS
(B) NON-INCOME PRODUCING--SECURITY IN DEFAULT.
(C) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(D) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2003,
THESE SECURITIES AMOUNTED TO $53,016,569 OR 20.4% OF NET ASSETS.
(E) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES IN THE CANADIAN CONSUMER PRICE INDEX.
(F) ALL OR A PORTION OF THESE SECURITIES ARE ON LOAN. AT JUNE 30, 2003, THE
TOTAL MARKET VALUE OF THE PORTFOLIO'S SECURITIES ON LOAN IS $ 4,057,532 AND
THE TOTAL MARKET VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS
$4,192,030.
(G) SECURITY LINKED TO A PORTFOLIO OF DEBT SECURITIES.
(H) PARTIALLY HELD BY A BROKER AS COLLATERAL FOR OPEN FINANCIAL FUTURES
POSITION.
(I) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES IN THE CONSUMER PRICE INDEX.
(J) NOTIONAL FACE AMOUNT SHOWN.
(K) PURCHASED ON A FORWARD COMMITMENT BASIS.
(L) WITH WARRANTS ATTACHED.
(M) UNITS REPRESENT A CONTRACT TO PURCHASE SHARES OF COMMON STOCK FOR $50 ON
MAY 16, 2005 AND A SENIOR NOTE WITH A PRINCIPAL OF $50.
(N) UNITS REPRESENT A CONTRACT TO PURCHASE SHARES OF COMMON STOCK FOR $25 ON
MAY 15, 2005 AND A SENIOR NOTE WITH A PRINCIPAL OF $25.
(O) UNITS REPRESENT A CONTRACT TO PURCHASE SHARES OF COMMON STOCK FOR $50 ON
NOVEMBER 16, 2004 AND A SENIOR NOTE WITH A PRINCIPAL OF $50.
(P) INVESTMENTS IN AFFILIATED MONEY MARKET MUTUAL FUNDS--SEE NOTE 3(D).
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 13
STATEMENT OF FINANCIAL FUTURES
June 30, 2003 (Unaudited)
Market Value Unrealized
Covered by Appreciation
Contracts Contracts ($) Expiration at 6/30/2003 ($)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL FUTURES SHORT
U.S. Government Agency
10 Year Notes 59 6,779,469 September 2003 114,313
SEE NOTES TO FINANCIAL STATEMENTS.
14
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement
of Investments
(including securities loaned valued
at $4,057,532)--Note 1(c) 308,597,094 313,318,662
Cash 570,784
Receivable for investment securities sold 8,458,316
Dividends and interest receivable 2,110,284
Receivable for shares of Beneficial Interest subscribed 85,968
Unrealized appreciation on swaps--Note 4 6,953
Prepaid expenses 51,866
324,602,833
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 164,715
Payable for investment securities purchased 59,765,614
Liability for securities loaned--Note 1(c) 4,192,030
Payable for shares of Beneficial Interest redeemed 532,170
Payable for futures variation margin--Note 4 212,561
Accrued expenses 47,824
64,914,914
NET ASSETS ($) 259,687,919
COMPOSITION OF NET ASSETS ($):
Paid-in capital 248,164,450
Accumulated distribution in excess of investment income--net (30,846)
Accumulated net realized gain (loss) on investments 6,711,480
Accumulated net unrealized appreciation (depreciation)
on investments (including $114,313 net unrealized
appreciation on financial futures) 4,842,835
NET ASSETS ($) 259,687,919
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- --------------------------------------------------------------------------------
Net Assets ($) 197,542,889 62,145,030
Shares Outstanding 16,430,217 5,182,379
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 12.02 11.99
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Interest 4,788,865
Cash dividends 350,948
Income from securities lending 6,304
TOTAL INCOME 5,146,117
EXPENSES:
Investment advisory fee--Note 3(a) 833,545
Distribution fees--Note 3(b) 76,093
Prospectus and shareholders' reports 36,917
Professional fees 30,447
Custodian fees--Note 3(b) 24,926
Trustees' fees and expenses--Note 3(c) 13,838
Shareholder servicing costs--Note 3(b) 5,692
Miscellaneous 23,354
TOTAL EXPENSES 1,044,812
INVESTMENT INCOME--NET 4,101,305
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments and foreign currency
transactions 11,548,663
Net realized gain (loss) on options transactions 33,531
Net realized gain (loss) on financial futures (1,514,538)
Net realized gain (loss) on forward currency exchange contracts (318,507)
NET REALIZED GAIN (LOSS) 9,749,149
Net unrealized appreciation (depreciation) on investments
(including $114,313 net unrealized appreciation
on financial futures) (1,310,219)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 8,438,930
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 12,540,235
SEE NOTES TO FINANCIAL STATEMENTS.
16
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 4,101,305 11,001,031
Net realized gain (loss) on investments 9,749,149 (558,850)
Net unrealized appreciation (depreciation)
on investments (1,310,219) 7,581,366
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 12,540,235 18,023,547
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (3,321,769) (9,812,698)
Service shares (978,709) (2,083,091)
TOTAL DIVIDENDS (4,300,478) (11,895,789)
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 15,007,065 45,075,486
Service shares 6,402,735 36,277,905
Dividends reinvested:
Initial shares 3,321,769 9,812,698
Service shares 978,709 2,083,091
Cost of shares redeemed:
Initial shares (21,585,805) (56,303,393)
Service shares (5,161,447) (5,108,691)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (1,036,974) 31,837,096
TOTAL INCREASE (DECREASE) IN NET ASSETS 7,202,783 37,964,854
NET ASSETS ($):
Beginning of Period 252,485,136 214,520,282
END OF PERIOD 259,687,919 252,485,136
Undistributed (distributions in excess of)
investment income--net (30,846) 168,327
The Portfolio 17
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 1,274,940 3,952,537
Shares issued for dividends reinvested 281,581 859,867
Shares redeemed (1,827,273) (4,922,208)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (270,752) (109,804)
- --------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 544,866 3,187,587
Shares issued for dividends reinvested 83,163 182,766
Shares redeemed (433,827) (447,023)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 194,202 2,923,330
SEE NOTES TO FINANCIAL STATEMENTS.
18
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended
June 30, 2003 Year Ended December 31,
----------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001(a) 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 11.65 11.37 11.39 10.89 11.50 11.73
Investment Operations:
Investment income--net .19(b) .54(b) .65(b) .68 .62 .67
Net realized and unrealized
gain (loss) on investments .41 .32 .10 .50 (.61) (.04)
Total from Investment Operations .60 .86 .75 1.18 .01 .63
Distributions:
Dividends from
investment income--net (.23) (.58) (.69) (.68) (.62) (.68)
Dividends from net realized
gain on investments -- -- (.08) -- -- (.18)
Total Distributions (.23) (.58) (.77) (.68) (.62) (.86)
Net asset value, end of period 12.02 11.65 11.37 11.39 10.89 11.50
TOTAL RETURN (%) 4.93(c) 7.76 6.69 11.20 .18 5.49
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses
to average net assets .76(d) .72 .75 .72 .74 .73
Ratio of net investment income
to average net assets 3.26(d) 4.70 5.57 6.12 5.66 5.74
Portfolio Turnover Rate 436.90(c) 877.87 1,105.61 917.75 521.51 244.95
Net Assets, end of period
($ x 1,000) 197,543 194,519 191,089 148,885 135,822 121,461
(A) AS REQUIRED, EFFECTIVE JANUARY 1, 2001, THE PORTFOLIO HAS ADOPTED THE
PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES
AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON FIXED INCOME SECURITIES ON A
SCIENTIFIC BASIS AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME.
THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED DECEMBER 31, 2001, WAS TO
DECREASE NET INVESTMENT INCOME PER SHARE BY $.04, INCREASE NET REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY $.04 AND DECREASE THE
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 5.91% TO 5.57%.
PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1,
2001 HAVE NOT BEEN RESTATED TO REFLECT THESE CHANGES IN PRESENTATION.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED.
(D) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 19
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended
June 30, 2003 Year Ended December 31,
--------------------------------------------
SERVICE SHARES (Unaudited) 2002 2001(a) 2000(b)
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 11.62 11.35 11.39 11.39
Investment Operations:
Investment income--net .18(c) .50(c) .58(c) --
Net realized and unrealized
gain on investments .41 .32 .14 --
Total from Investment Operations .59 .82 .72 --
Distributions:
Dividends from investment income--net (.22) (.55) (.68) --
Dividends from net realized
gain on investments -- -- (.08) --
Total Distributions (.22) (.55) (.76) --
Net asset value, end of period 11.99 11.62 11.35 11.39
TOTAL RETURN (%) 4.84(d) 7.47 6.37 --
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets 1.01(e) .97 1.01 --
Ratio of net investment income
to average net assets 3.00(e) 4.39 5.24 --
Portfolio Turnover Rate 436.90(d) 877.87 1,105.61 917.75
Net Assets, end of period ($ x 1,000) 62,145 57,966 23,431 1
(A) AS REQUIRED, EFFECTIVE JANUARY1, 2001, THE PORTFOLIO HAS ADOPTED THE
PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES
AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON FIXED INCOME SECURITIES ON A
SCIENTIFIC BASIS AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME.
THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED DECEMBER 31, 2001, WAS TO
DECREASE NET INVESTMENT INCOME PER SHARE BY $.03, INCREASE NET REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY $.03 AND DECREASE THE
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 5.57% TO 5.24%.
PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1,
2001 HAVE NOT BEEN RESTATED TO REFLECT THESE CHANGES IN PRESENTATION.
(B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(D) NOT ANNUALIZED.
(E) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
20
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the Quality Bond Portfolio (the "portfolio"). The portfolio is
only offered to separate accounts established by insurance companies to fund
variable annuity contracts and variable life insurance policies. The portfolio
is a diversified series. The portfolio's investment objective will be to
maximize total return, consisting of capital appreciation and current income.
The Dreyfus Corporation (the "Manager") serves as the portfolio's investment
adviser. The Manager is a wholly-owned subsidiary of Mellon Bank, N.A.
("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
the Manager, is the distributor of the portfolio's shares, which are sold
without a sales charge. The portfolio 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(a) Portfolio valuation: Investments in securities (excluding short-term
investments other than U.S. Treasury Bills, financial futures, options, swap
transactions and forward currency exchange contracts) are valued each
The Portfolio 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
business day by an independent pricing service (the "Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily available
and are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by the
Service based upon its evaluation of the market for such securities). Other
investments (which constitute a majority of the portfolio's securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Securities for which there are no such valuations are valued
at fair value as determined in good faith under the direction of the Board of
Trustees. Short-term investments, excluding U.S. Treasury Bills, are carried at
amortized cost, which approximates value. Financial futures and options, which
are traded on an exchange, are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sales
price on the national securities market on each business day. Options traded
over-the-counter are priced at the mean between the bid prices and asked prices.
Swap transactions are valued daily based upon quotations from market makers.
Investments denominated in foreign currencies are translated to U.S. dollars at
the prevailing rates of exchange. Forward currency exchange contracts are valued
at the forward rate.
(b) Foreign currency transactions: The portfolio 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 from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amount of
dividends, interest and foreign withholding taxes recorded on the portfolios'
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange
22
gains and losses arise from changes in the value of assets and liabilities other
than investments in securities, resulting from changes in exchange rates. Such
gains and losses are included with net realized and unrealized gain or loss on
investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the terms of the custody agreement, the portfolio
received net earnings credits of $5,145 during the period ended June 30, 2003,
based on available cash balances left on deposit. Income earned under this
arrangement is included in interest income.
The portfolio may lend securities to qualified institutions. At origination, all
loans are secured by cash 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 will be
maintained at all times. Cash collateral is invested in certain money market
mutual funds managed by the Manager as shown in the portfolio's Statement of
Investments. The portfolio will be entitled to receive all income on securities
loaned, in addition to income earned as a result of the lending transaction.
Although each security loaned is fully collateralized, the fund would bear the
risk of delay in recovery of, or loss of rights in, the securities loaned should
a borrower fail to return the securities in a timely manner.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are declared and paid monthly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the portfolio 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 gain can be offset by
The Portfolio 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
capital loss carryovers, if any, it is the policy of the portfolio not to
distribute such gain. Income and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
(e) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $1,903,723 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, the carryover
expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002, was as follows: ordinary income $11,895,789. 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 portfolio may borrow up to $10 million for leveraging purposes under a
short-term unsecured line of credit and participates with other Dreyfus-managed
funds in a $100 million unsecured line of credit primarily to be utilized for
temporary or emergency purposes, including the financing of redemptions.
Interest is charged to the portfolio based on prevailing market rates in effect
at the time of borrowings. During the period ended June 30, 2003, the portfolio
did not borrow under the line of credit.
NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to an Investment Advisory Agreement with the Manager, the
investment advisory fee is computed at the annual rate of .65 of 1% of the value
of the portfolio's average daily net assets and is payable monthly.
24
(b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% 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 Plan are
payable without regard to actual expenses incurred. During the period ended June
30, 2003, Service shares were charged $76,093 pursuant to the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $165 pursuant to the
transfer agency agreement.
The portfolio compensates Mellon under a custody agreement to provide custodial
services for the portfolio. During the period ended June 30, 2003, the portfolio
was charged $24,926 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in-person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund's relative net assets. The Chairman of the Board
receives an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the annual
retainer fee and per meeting fee paid at the time the Board member achieves
emeritus status.
The Portfolio 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(d) Pursuant to an exemptive order from the Securities and Exchange Commission,
the portfolio may invest its available cash balances in affiliated money market
mutual funds as shown in the portfolio's Statement of Investments. Management
fees are not charged to these accounts. During the period ended June 30, 2003,
the portfolio derived $177,164 in income from these investments, which is
included in dividend income in the portfolio's Statement of Operations.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment
securities, excluding short-term securities financial futures, forward currency
exchange contracts, options transactions and swap transactions during the period
ended June 30, 2003, amounted to $1,096,033,976 and $1,108,596,205,
respectively.
The portfolio may purchase and write (sell) put and call options in order to
gain exposure to or to protect against changes in the market.
As a writer of call options, the portfolio receives a premium at the outset and
then bears the market risk of unfavorable changes in the price of the financial
instrument underlying the option. Generally, the portfolio would incur a gain,
to the extent of the premium, if the price of the underlying financial
instrument decreases between the date the option is written and the date on
which the option is terminated. Generally, the portfolio would realize a loss,
if the price of the financial instrument increases between those dates. At June
30, 2003, there were no written call options outstanding.
As a writer of put options, the portfolio receives a premium at the outset and
then bears the market risk of unfavorable changes in the price of the financial
instrument underlying the option. Generally, the portfolio would incur a gain,
to the extent of the premium, if the price of the underlying financial
instrument increases between the date the option is written and the date on
which the option is terminated. Generally, the portfolio would realize a loss,
if the price of the financial instrument decreases between those dates. At June
30, 2003, there were no written put options outstanding.
26
The portfolio may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The portfolio is exposed
to market risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the portfolio to "mark to
market" on a daily basis, which reflects the change in market value of the
contracts at the close of each day's trading. Accordingly, variation margin
payments are received or made to reflect daily unrealized gains or losses. When
the contracts are closed, the portfolio recognizes a realized gain or loss.
These investments require initial margin deposits with a broker, which consist
of cash or cash equivalents, up to approximately 10% of the contract amount. The
amount of these deposits is determined by the exchange or Board of Trade on
which the contract is traded and is subject to change. Contracts open at June
30, 2003, are set forth in the Statement of Financial Futures.
The portfolio may enter into swap agreements to exchange the interest rate on,
or return generated by, one nominal instrument for the return generated by
another nominal instrument.
Credit default swaps involve commitments to pay a fixed rate in exchange for
payment if a credit event affecting a third party (the referenced company)
occurs. Credit events may include a failure to pay interest, bankruptcy, or
restructuring. Net periodic interest payments to be received or paid are accrued
daily and are recorded in the Statement of Operations as an adjustment to
interest income. Credit default swaps are marked-to-market daily and the change,
if any, is recorded as unrealized appreciation or depreciation in the Statement
of Operations. The following summarizes credit default swaps entered into by the
portfolio at June 30, 2003:
Unrealized
Appreciation
Notional Amount ($) Description (Depreciation) ($)
- --------------------------------------------------------------------------------
3,200,000 Agreement with Merrill Lynch terminating (3,188)
June 20, 2008 to pay a fixed rate of .29%
and receive if positive (pay if negative)
the notional amount as a result of interest
payment default totaling $1,000,000 or
principal payment default of $10,000,000
on Bank of America, 6.25%, 4/15/2012
The Portfolio 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
Unrealized
Appreciation
Notional Amount ($) Description (Depreciation) ($)
- --------------------------------------------------------------------------------
950,000 Agreement with Merrill Lynch terminating 463
June 20, 2008 to pay a fixed rate of .34%
and receive if positive (pay if negative)
the notional amount as a result of interest
payment default totaling $1,000,000 or
principal payment default of $10,000,000
on the Bear Stearns, 7.625%, 12/7/2009
950,000 Agreement with Merrill Lynch terminating (431)
June 20, 2008 to pay a fixed rate of .36%
and receive if positive (pay if negative)
the notional amount as a result of interest
payment default totaling $1,000,000 or
principal payment default of $10,000,000
on Bear Stearns, 7.625%, 12/7/2009
1,300,000 Agreement with Merrill Lynch terminating (1,899)
September 20, 2008 to pay a fixed
rate of .38% and receive if positive
(pay if negative) the notional amount as a
result of interest payment default totaling
$1,000,000 or principal payment default
of $10,000,000 on Bear Stearns,
7.625%, 12/7/2009
1,900,000 Agreement with Merrill Lynch terminating 7,917
June 20, 2008 to pay a fixed rate of .51%
and receive if positive (pay if negative)
the notional amount as a result of interest
payment default totaling $1,000,000 or
principal payment default of $10,000,000
on Countrywide Home Loans,
5.625%, 7/15/2009
1,300,000 Agreement with Merrill Lynch terminating 1,213
September 20, 2008 to pay a fixed
rate of .59% and receive if positive
(pay if negative) the notional amount as a
result of interest payment default totaling
$1,000,000 or principal payment default of
$10,000,000 on Countrywide Home Loans,
5.625%, 7/15/2009
635,000 Agreement with Merrill Lynch terminating 876
June 20, 2008 to pay a fixed rate of .42%
and receive if positive (pay if negative)
the notional amount as a result of interest
payment default totaling $1,000,000 or
principal payment default of $10,000,000
on Goldman Sachs, 6.6%, 1/15/2012
28
Unrealized
Appreciation
Notional Amount ($) Description (Depreciation) ($)
- --------------------------------------------------------------------------------
2,535,000 Agreement with Merrill Lynch terminating 2,226
June 20, 2008 to pay a fixed rate of .43%
and receive if positive (pay if negative)
the notional amount as a result of interest
payment default totaling $1,000,000 or
principal payment default of $10,000,000
on Goldman Sachs, 6.6%, 1/15/2012
1,900,000 Agreement with Merrill Lynch terminating 943
June 20, 2008 to pay a fixed rate of .54%
and receive if positive (pay if negative)
the notional amount as a result of interest
payment default totaling $1,000,000 or
principal payment default of $10,000,000
on Washington Mutual, 5.625%, 1/15/2007
1,300,000 Agreement with Merrill Lynch terminating (1,167)
September 20, 2008 to pay a fixed
rate of .59% and receive if positive
(pay if negative) the notional amount as a
result of interest payment default totaling
$1,000,000 or principal payment default of
$10,000,000 on Washington Mutual,
5.625%, 1/15/2007
Realized gains and losses on maturity or termination of swaps are presented in
the Statement of Operations. Risks may arise upon entering into these agreements
from the potential inability of the counterparties to meet the terms of the
agreement and are generally limited to the amount of net payments to be
received, if any, at the date of default.
The portfolio may enter into forward currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to settle foreign currency transactions. When executing
forward currency exchange contracts, the portfolio 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 currency exchange contracts, the portfolio would
incur 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 portfolio
realizes a gain if
The Portfolio 29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
the value of the contract decreases between those dates. With respect to
purchases of forward currency exchange contracts, the portfolio would incur 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 portfolio
realizes a gain if the value of the contract increases between those dates. The
portfolio is also exposed to credit risk associated with counterparty
nonperformance on these forward currency exchange contracts which is typically
limited to the unrealized gain on each open contract. At June 30, 2003, there
were no forward currency exchange contracts outstanding.
At June 30, 2003, accumulated net unrealized appreciation on investments was
$4,721,568, consisting of $7,064,190 gross unrealized appreciation and
$2,342,622 gross unrealized depreciation.
At June 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
30
PROXY RESULTS (Unaudited)
The portfolio held a special meeting of shareholders on December 18, 2002. The
proposals considered at the meeting, and the results, are as follows:
Shares
------------------------------------------------------
For Against Abstained
----------------------------------------------------------------------------
To approve changes to certain of
the portfolio's fundamental policies
and investment restrictions to
expand participation in a portfolio
securities lending program 16,431,914 1,203,202 1,833,523
To approve changes to certain of
the portfolio's fundamental policies
and investment restrictions to
expand futures and options
transactions 15,923,747 1,818,306 1,726,586
To change the portfolio's investment
objective 15,746,280 1,272,114 2,450,245
The Portfolio 31
NOTES
For More Information
Dreyfus Variable
Investment Fund,
Quality Bond Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call
1-800-554-4611 or
516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 120SA0603
Dreyfus Variable
Investment Fund,
Developing Leaders
Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
14 Financial Highlights
16 Notes to Financial Statements
22 Proxy Results
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Developing Leaders Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Developing Leaders
Portfolio covers the six-month period from January 1, 2003, through June 30,
2003. Inside, you' ll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with the portfolio
managers, Paul Kandel and Hilary Woods.
The first half of 2003 was a time of long-awaited recovery for the U.S. stock
market. Despite continued volatility leading up to the war in Iraq, stocks began
to rally as the fighting wound down and investors turned their attention back to
the prospects for the U.S. economy. Apparently, they liked what they saw.
Despite current economic weakness, investors appear to be focused on the
possibility of better economic times ahead.
If these trends persist, 2003 could mark the first positive calendar year for
stocks since 1999. In our view, investors who have the potential to benefit most
are those who steadfastly maintained their equity exposure during the bear
market. In contrast, we believe investors who avoided stocks may have missed the
market's recent gains, a timely reminder that patience, discipline and a
long-term perspective are fundamental principles that may lead to successful
investing.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Paul Kandel and Hilary Woods, Portfolio Managers
How did Dreyfus Variable Investment Fund, Developing Leaders Portfolio perform
relative to its benchmark?
For the six-month period ended June 30, 2003, Dreyfus Variable Investment Fund,
Developing Leaders Portfolio produced total returns of 11.09 % for its Initial
shares and 10.90% for its Service shares.(1) This compares with a total return
of 17.88 % for the portfolio's benchmark, the Russell 2000 Index (the "Index"),
during the same period.(2)
We attribute these results to a sharp rise in stock prices that occurred during
the second half of the reporting period. This rise reflected an improvement in
investor optimism coinciding with the successful conclusion of major combat
operations in Iraq and expectations for greater U.S. economic growth. The
portfolio shared in the market's gains in April, May and June 2003. The Russell
2000 Index performance was dominated by micro-cap, unprofitable, low-priced
stocks, thus making it very difficult for the fund managers who focus on more
liquid, profitable companies to match the Index performance. Primarily because
our disciplined stock selection process tends to avoid such speculative
investments, the portfolio produced lower returns than the Index.
What is the portfolio's investment approach?
The portfolio invests primarily in companies with market capitalizations of less
than $2 billion at the time of purchase, focusing on those believed to be new
leaders in their industries. Typically, these companies are characterized by new
or innovative products or services that have the potential to enhance earnings
or revenue growth. We also consider factors that we believe are likely to affect
a stock's performance, such as changes in a company's management or
organizational structure.
Our investment approach targets growth-oriented stocks (those of companies with
earnings or revenues that are expected to grow faster than the overall market),
value-oriented stocks (those that appear underpriced
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
according to a variety of financial measurements) and stocks that exhibit both
growth and value characteristics. We further diversify among the market's
various sectors and industries, supervising a team of sector managers, each of
whom makes buy-and-sell recommendations within their respective areas of
expertise.
What other factors influenced the portfolio's performance?
The portfolio derived positive absolute returns from virtually every sector in
which it invested, although those returns proved less robust than the benchmark
in the areas of technology, health care and financial services.
Technology produced the portfolio's weakest performance relative to its
benchmark. In addition to avoiding many of the area's higher-flying, more
speculative issues, the portfolio was also hurt by several specific stock
disappointments. In a few instances, such as software vendor Network Associates,
a weaker than expected earnings report drove the stock lower. In other
instances, such as communications manufacturer Aeroflex, the portfolio bought
and sold shares at a disadvantageous time. Nevertheless, strong gains from other
holdings, such as semiconductor manufacturer Integrated Circuit Systems and
network storage device provider Emulex, contributed to the portfolio's
performance.
Similar conditions prevailed in the health care area in terms of portfolio
performance and stock selection. The portfolio was underweight biotechnology and
drugs/pharmaceutical stocks that, in our view, lacked solid fundamentals. Among
the portfolio's holdings, a few poor performers further detracted from relative
performance. However, the portfolio's health care stocks did appreciate during
the reporting period on the strength of managed care provider Mid Atlantic
Medical Services, prescription benefit manager Advance PCS and biotech company
Celegene. Stock-specific disappointments undermined the portfolio's performance
in financial services relative to its benchmark.
On the other hand, the portfolio outperformed its benchmark in some areas. In
the autos and transportation sector, performance was driven by Atlantic Coast
Airlines and freight forwarder Forward Air. A diverse group of manufacturing
stocks contributed to the portfolio's above-
4
average gains among producer durables companies. Top performers included
suppliers for the mining industry such as construction machinery manufacturer
Terex; aerospace company Goodrich; paper machinery producer Albany
International; and homebuilder KB HOME. However, these areas could not
compensate for the lower relative returns in the technology, health care and
financial services area.
What is the portfolio's current strategy?
As of the end of the reporting period, we are concerned that the market's recent
climb may not be fully supported by economic fundamentals. We are cautiously
seeking investment opportunities among companies that are likely to benefit from
gradually improving economic conditions. Accordingly, we have placed slightly
greater than average emphasis on investments in a variety of cyclical and
growth-oriented areas, such as energy and, to a lesser degree, technology. We
have maintained relatively light positions in consumer and financial stocks,
which we believe could be hurt by flat or rising interest rates.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO 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. DREYFUS VARIABLE INVESTMENT FUND, DEVELOPING LEADERS PORTFOLIO
MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER
FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS
OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO,
THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE
DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED
IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL
REDUCE RETURNS.
(2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE RUSSELL 2000 INDEX IS AN
UNMANAGED INDEX OF SMALL-CAP STOCK PERFORMANCE AND IS COMPOSED OF THE 2,000
SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS
COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET
CAPITALIZATION.
The Portfolio 5
STATEMENT OF INVESTMENTS
June 30, 2003 (Unaudited)
COMMON STOCKS--96.0% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOS & TRANSPORTS--3.3%
Atlantic Coast Airlines Holdings 425,000 (a) 5,733,250
Kansas City Southern 550,000 (a) 6,616,500
Teekay Shipping 200,000 8,580,000
20,929,750
CONSUMER--16.7%
Allied Waste Industries 800,000 (a) 8,040,000
American Italian Pasta, Cl. A 150,000 (a) 6,247,500
Big Lots 575,000 (a) 8,648,000
Callaway Golf 450,000 (b) 5,949,000
Dial 475,000 9,238,750
Emmis Communications, Cl. A 420,000 (a) 9,639,000
Mediacom Communications 650,000 (a) 6,415,500
Meredith 145,000 6,380,000
Pacific Sunwear of California 475,000 (a,b) 11,442,750
Performance Food Group 272,500 (a,b) 10,082,500
Station Casinos 350,000 (a,b) 8,837,500
Talbots 305,000 8,982,250
Valassis Communications 275,000 (a) 7,073,000
106,975,750
ENERGY--6.5%
Cabot Oil & Gas 372,500 10,284,725
Denbury Resources 680,000 (a) 9,132,400
Key Energy Services 670,000 (a) 7,182,400
Premcor 250,000 (a) 5,387,500
Pride International 525,000 (a) 9,880,500
41,867,525
FINANCIAL SERVICES--16.6%
BOK Financial 250,000 (a) 9,642,500
Bank United 250,000 (a) 20,000
Benfield Group 1,800,000 8,401,288
Cullen/Frost Bankers 245,300 7,874,130
East West Bancorp 240,000 8,673,600
First Midwest Bancorp 320,000 9,219,200
Gallagher (Arthur J.) & Co. 310,000 8,432,000
Global Payments 311,500 11,058,250
Harbor Florida Bancshares 355,000 8,505,800
Hilb, Rogal & Hamilton 175,000 5,957,000
6
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES (CONTINUED)
Montpelier Re Holdings 267,500 (b) 8,453,000
Protective Life 175,000 4,681,250
Texas Regional Bancshares, Cl. A 216,500 7,512,550
Ventas 500,000 7,575,000
106,005,568
HEALTH CARE--13.9%
AdvancePCS 290,000 (a,b) 11,086,700
American Pharmaceutical Partners 197,500 (a,b) 6,695,250
Apria Healthcare Group 370,500 (a) 9,218,040
Celgene 232,500 (a) 7,068,000
Genesis Health Ventures 450,000 (a) 7,942,500
Henry Schein 145,000 (a) 7,589,300
IDX Systems 340,000 (a) 5,276,800
Medicis Pharmaceutical, Cl. A 145,000 8,221,500
Mid Atlantic Medical Services 189,500 (a) 9,910,850
NDCHealth 380,000 6,973,000
Renal Care Group 260,500 (a) 9,172,205
89,154,145
MATERIALS & PROCESSING--8.2%
Agnico-Eagle Mines 650,000 7,540,000
Agrium 758,500 8,313,160
Bowater 219,000 8,201,550
Chicago Bridge & Iron (New York Shares) 550,000 12,474,000
Minerals Technologies 65,000 3,162,900
Packaging Corp. of America 275,000 (a) 5,068,250
RPM International 575,000 7,906,250
52,666,110
PRODUCER DURABLES--9.7%
AGCO 425,000 (a) 7,259,000
Albany International, Cl. A 320,000 8,768,000
Alliant Techsystems 150,000 (a) 7,786,500
Crane 365,000 8,259,950
Gardner Denver 205,400 (a) 4,202,484
Goodrich 450,000 9,450,000
Hanover Compressor 625,000 (a) 7,062,500
Terex 460,000 (a) 8,979,200
61,767,634
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY--16.6%
Advanced Fibre Communications 475,000 (a) 7,728,250
Emulex 288,500 (a,b) 6,569,145
Exar 600,000 (a) 9,498,000
Genesis Microchip 425,000 (a) 5,754,500
GlobespanVirata 1,100,000 (a) 9,075,000
InfoSpace 600,000 (a) 8,142,000
Integrated Circuit Systems 310,500 (a) 9,759,015
Network Associates 520,000 (a,b) 6,593,600
Plexus 563,500 (a) 6,497,155
Skyworks Solutions 1,100,000 (a,b) 7,447,000
Sycamore Networks 1,975,000 (a) 7,564,250
United Online 432,500 (a) 10,959,550
Varian Semiconductor Equipment Associates 347,500 (a) 10,341,600
105,929,065
UTILITIES & OTHER--4.5%
ALLETE 250,000 6,637,500
NSTAR 100,000 4,555,000
Peabody Energy 265,000 8,901,350
Vectren 335,000 8,391,750
28,485,600
TOTAL COMMON STOCKS
(cost $550,241,818) 613,781,147
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS--6.9% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES:
Dreyfus Institutional Cash Advantage Fund 14,728,333 (c) 14,728,333
Dreyfus Institutional Cash Advantage Plus Fund 14,728,333 (c) 14,728,333
Dreyfus Institutional Preferred Plus Money Market Fund 14,728,334 (c) 14,728,334
TOTAL OTHER INVESTMENTS
(cost $44,185,000) 44,185,000
8
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--5.5% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANY;
Dreyfus Institutional Preferred Money Market Fund
(cost $34,895,180) 34,895,180 34,895,180
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $629,321,998) 108.4% 692,861,327
LIABILITIES, LESS CASH AND RECEIVABLES (8.4%) (53,427,549)
NET ASSETS 100.0% 639,433,778
(A) NON-INCOME PRODUCING.
(B) ALL OR A PORTION OF THESE SECURITIES ARE ON LOAN. AT JUNE 30, 2003, THE
TOTAL MARKET VALUE OF THE PORTFOLIO'S SECURITIES ON LOAN IS $32,962,828 AND
THE TOTAL MARKET VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS
$34,895,180.
(C) INVESTMENTS IN AFFILIATED MONEY MARKET MUTUAL FUNDS--SEE NOTE 3(D).
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 9
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- ---------------------------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of Investments
(including securities loaned valued at $32,962,828)--Note 1(c) 629,321,998 692,861,327
Cash 135,182
Dividends and interest receivable 427,615
Receivable for shares of Beneficial Interest subscribed 59,535
Prepaid expenses 73,836
693,557,495
- ---------------------------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 409,009
Liability for securities loaned--Note 1(c) 34,895,180
Payable for investment securities purchased 17,968,357
Payable for shares of Beneficial Interest redeemed 792,443
Accrued expenses 58,728
54,123,717
- ---------------------------------------------------------------------------------------------------
NET ASSETS ($) 639,433,778
- ---------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 724,290,802
Accumulated undistributed investment income--net 172,250
Accumulated net realized gain (loss) on investments (148,568,603)
Accumulated net unrealized appreciation
(depreciation) on investments 63,539,329
- ---------------------------------------------------------------------------------------------------
NET ASSETS ($) 639,433,778
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- ---------------------------------------------------------------------------------------------------
Net Assets ($) 626,428,213 13,005,565
Shares Outstanding 19,857,574 414,915
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 31.55 31.35
SEE NOTES TO FINANCIAL STATEMENTS.
10
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $10,425 foreign taxes withheld at source) 2,567,149
Income from securities lending 45,685
TOTAL INCOME 2,612,834
EXPENSES:
Investment advisory fee--Note 3(a) 2,198,727
Prospectus and shareholders' reports 90,726
Shareholder servicing costs--Note 3(b) 46,213
Professional fees 32,981
Trustees' fees and expenses--Note 3(c) 28,874
Custodian fees--Note 3(b) 22,508
Distribution fees--Note 3(b) 14,385
Loan commitment fees--Note 2 2,513
Miscellaneous 3,657
TOTAL EXPENSES 2,440,584
INVESTMENT INCOME--NET 172,250
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (50,067,509)
Net unrealized appreciation (depreciation) on investments 112,952,318
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 62,884,809
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 63,057,059
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 172,250 96,759
Net realized gain (loss) on investments (50,067,509) (78,392,655)
Net unrealized appreciation
(depreciation) on investments 112,952,318 (68,250,947)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 63,057,059 (146,546,843)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares -- (294,103)
Service shares -- (1,677)
TOTAL DIVIDENDS -- (295,780)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 93,898,401 194,519,182
Service shares 2,322,463 8,992,771
Dividends reinvested:
Initial shares -- 294,103
Service shares -- 1,677
Cost of shares redeemed:
Initial shares (106,727,937) (160,010,926)
Service shares (1,480,553) (1,669,190)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (11,987,626) 42,127,617
TOTAL INCREASE (DECREASE) IN NET ASSETS 51,069,433 (104,715,006)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 588,364,345 693,079,351
END OF PERIOD 639,433,778 588,364,345
Undistributed investment income--net 172,250 --
12
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 3,251,826 5,935,850
Shares issued for dividends reinvested -- 8,680
Shares redeemed (3,725,163) (5,176,962)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (473,337) 767,568
- --------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 81,002 274,741
Shares issued for dividends reinvested -- 45
Shares redeemed (51,697) (54,660)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 29,305 220,126
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 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 portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31,
June 30, 2003 --------------------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 28.40 35.13 40.30 66.34 53.91 57.14
Investment Operations:
Investment income--net .01(a) .01(a) .11(a) .17(a) .04(a) .04
Net realized and unrealized
gain (loss) on investments 3.14 (6.73) (2.63) 7.16 12.43 (2.21)
Total from Investment
Operations 3.15 (6.72) (2.52) 7.33 12.47 (2.17)
Distributions:
Dividends from
investment income--net -- (.01) (.17) (.27) (.04) (.00)(b)
Dividends from net realized
gain on investments -- -- (1.38) (33.10) -- (1.06)
Dividends in excess of net
realized gain on investments -- -- (1.10) -- -- --
Total Distributions -- (.01) (2.65) (33.37) (.04) (1.06)
Net asset value, end of period 31.55 28.40 35.13 40.30 66.34 53.91
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 11.09(c) (19.12) (6.12) 13.31 23.15 (3.44)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses
to average net assets .41(c) .81 .79 .78 .78 .77
Ratio of net investment income
to average net assets .03(c) .02 .29 .24 .07 .07
Portfolio Turnover Rate 33.58(c) 52.41 84.45 64.99 40.60 75.04
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 626,428 577,468 687,283 688,070 1,295,698 1,246,804
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
14
Six Months Ended Year Ended December 31,
June 30, 2003 ------------------------------------------------
SERVICE SHARES (Unaudited) 2002 2001 2000(a)
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 28.26 35.02 40.30 40.30
Investment Operations:
Investment (loss)--net (.03)(b) (.03)(b) (.01)(b) --
Net realized and unrealized
gain (loss) on investments 3.12 (6.72) (2.67) --
Total from Investment Operations 3.09 (6.75) (2.68) --
Distributions:
Dividends from investment income--net -- (.01) (.12) --
Dividends from net realized
gain on investments -- -- (1.38) --
Dividends in excess of net realized
gain on investments -- -- (1.10) --
Total Distributions -- (.01) (2.60) --
Net asset value, end of period 31.35 28.26 35.02 40.30
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 10.90(c) (19.31) (6.47) --
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .53(c) 1.05 1.11 --
Ratio of net investment (loss)
to average net assets (.09)(c) (.11) (.02) --
Portfolio Turnover Rate 33.58(c) 52.41 84.45 64.99
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 13,006 10,896 5,796 1
(A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the Developing Leaders Portfolio (the "portfolio"). The
portfolio is only offered to separate accounts established by insurance
companies to fund variable annuity contracts and variable life insurance
policies. The portfolio is a diversified series. The portfolio's investment
objective is to maximize capital appreciation. The Dreyfus Corporation (the
"Manager") serves as the portfolio's investment adviser. The Manager is a
wholly-owned subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned
subsidiary of the Mellon Financial Corporation.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
the Manager, is the distributor of the portfolio's shares, which are sold
without a sales charge. The portfolio is authorized to issue an unlimited number
of $.001 par value shares of Beneficial Interest in 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(a) Portfolio valuation: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Effective April 14, 2003,
16
the portfolio began pricing securities traded on the NASDAQ stock market using
the NASDAQ official closing price. 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, except for
open short positions, where the asked price is used for valuation purposes. Bid
price is used when no asked price is available. Securities for which there are
no such valuations are valued at fair value as determined in good faith under
the direction of the Board of Trustees. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward currency exchange contracts are valued at the forward rate.
(b) Foreign currency transactions: The portfolio 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 market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the portfolio's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value
of assets and liabilities other than investments in securities resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the terms of the
The Portfolio 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
custody agreement, the portfolio received net earnings credits of $667 during
the period ended June 30, 2003 based on available cash balances left on deposit.
Income earned under this arrangement is included in interest income.
The portfolio may lend securities to qualified institutions. At origination, all
loans are secured by cash 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 will be
maintained at all times. Cash collateral is invested in certain money market
mutual funds managed by the Manager as shown in the portfolio's Statement of
Investments. The portfolio will be entitled to receive all income on securities
loaned, in addition to income earned as a result of the lending transaction.
Although each security loaned is fully collateralized, the portfolio would bear
the risk of delay in recovery of, or loss of rights in, the securities loaned
should a borrower fail to return the securities in a timely manner.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain, if any, are normally declared and paid annually, but the portfolio 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 gain can be offset by capital loss
carryovers, it is the policy of the portfolio not to distribute such gain.
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from generally accepted accounting principles.
(e) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $84,449,649 available for
federal income tax purposes to be applied against future
18
net securities profits, if any, realized subsequent to December 31, 2002. If not
applied, the carryover expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002, was as follows: ordinary income $295,780. The tax
character of current year distributions, if any, will be determined at the end
of the current fiscal year.
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the portfolio based on
prevailing market rates in effect at the time of borrowings. During the period
ended June 30, 2003, the portfolio did not borrow under the Facility.
NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to an Investment Advisory Agreement with the Manager, the
investment advisory fee is computed at the annual rate of .75 of 1% of the value
of the portfolio's average daily net assets and is payable monthly.
(b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% 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 Plan are
payable without regard to actual expenses incurred. During the period ended June
30, 2003, Service shares were charged $14,385 pursuant to the Plan.
The Portfolio 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $370 pursuant to the
transfer agency agreement.
The portfolio compensates Mellon under a custody agreement for providing
custodial services for the portfolio. During the period ended June 30, 2003, the
portfolio was charged $22,508 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in-person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund' s relative net assets. The Chairman of the Board
receives an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the annual
retainer fee and per meeting fee paid at the time the Board member achieves
emeritus status.
(d) Pursuant to an exemptive order from the Securities and Exchange Commission,
the portfolio invests its available cash balances in affiliated money market
mutual funds as shown in the portfolio's Statement of Investments. Management
fees are not charged to these accounts. During the period ended June 30, 2003,
the portfolio derived $193,988 in income from these investments, which is
included as dividend income in the portfolio's Statement of Operations.
(e) During the period ended June 30, 2003, the portfolio incurred total
brokerage commissions of $1,163,915, of which $1,578 was paid to Harborside Plus
Inc., a wholly-owned subsidiary of Mellon Financial Corporation.
20
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended June 30, 2003, amounted to
$189,402,996 and $202,050,128, respectively.
At June 30, 2003, accumulated net unrealized appreciation on investments was
$63,539,329, consisting of $102,640,135 gross unrealized appreciation and
$39,100,806 gross unrealized depreciation.
At June 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Portfolio 21
PROXY RESULTS (Unaudited)
The portfolio held a special meeting of shareholders on December 18, 2002. The
proposal considered at the meeting, and the results, are as follows:
Shares
--------------------------------------------------------------------------
For Against Abstained
--------------------------------------------------------------------------
To approve changes to certain of the
portfolio's fundamental policies and
investment restrictions to expand
participation in a portfolio securities
lending program 17,221,097 1,321,666 1,502,065
NOTES
For More Information
Dreyfus Variable
Investment Fund,
Developing Leaders Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call
1-800-554-4611 or
516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 121SA0603
Dreyfus Variable
Investment Fund,
Small Company
Stock Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
14 Statement of Assets and Liabilities
15 Statement of Operations
16 Statement of Changes in Net Assets
18 Financial Highlights
20 Notes to Financial Statements
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Small Company Stock Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Small Company Stock
Portfolio covers the six-month period from January 1, 2003, through June 30,
2003. Inside, you' ll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with the portfolio
managers, Anthony Galise, and James Wadsworth.
The first half of 2003 was a time of long-awaited recovery for the U.S. stock
market. Despite continued volatility leading up to the war in Iraq, stocks began
to rally as the fighting wound down and investors turned their attention back to
the prospects for the U.S. economy. Apparently, they liked what they saw.
Despite current economic weakness, investors appear to be focused on the
possibility of better economic times ahead.
If these trends persist, 2003 could mark the first positive calendar year for
stocks since 1999. In our view, investors who have the potential to benefit most
are those who steadfastly maintained their equity exposure during the bear
market. In contrast, we believe investors who avoided stocks may have missed the
market' s recent gains, a timely reminder that patience, discipline and a
long-term perspective are fundamental principles that may lead to successful
investing.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Anthony Galise and James Wadsworth, Portfolio Managers
How did Dreyfus Variable Investment Fund, Small Company Stock Portfolio perform
relative to its benchmark?
For the six-month period ended June 30, 2003, the portfolio produced total
returns of 13.91% for its Initial shares and 13.82% for its Service shares.(1)
This compares with a total return of 13.30% for the portfolio's new benchmark,
the S&P SmallCap 600 Index, for the same period.(2) The portfolio's former
benchmark, the Russell 2500 Index achieved a 16.92% for the reporting period.(3)
We attribute the portfolio' s performance primarily to a positive shift in
investor sentiment that accompanied decisive U.S. and U.K. action in Iraq.
Virtually all market sectors and capitalization ranges rose during the second
quarter of 2003 in response to these developments, with some of the greatest
gains occurring among the smaller companies on which the portfolio focuses. The
portfolio produced slightly higher returns than its benchmark, primarily due to
the strong performance of several individual holdings, particularly in the areas
of producer goods and industrial services.
The portfolio's relative performance also benefited from the favorable timing of
the portfolio' s shareholder-approved change of benchmark, which occurred in
March 2003. At that time, the portfolio adopted the S&P SmallCap 600 Index as
its benchmark, and we reallocated the portfolio' s assets among a broadly
diversified group of small-capitalization stocks to reflect the new benchmark's
composition. These changes positioned the portfolio to share in the particularly
strong gains enjoyed by small-cap stocks during the second half of the reporting
period.
What is the portfolio's investment approach?
The portfolio seeks capital appreciation. To pursue this goal, the portfolio
normally invests at least 80% of its assets in the stocks of small companies.
Small companies are those with market caps ranging from $250 million to $1.5
billion at the time of purchase. However, since the
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
portfolio may continue to hold its securities as their market capitalizations
grow, a substantial portion of the portfolio' s holdings may have market
capitalizations in excess of $1.5 billion at any given time. Stocks are chosen
through a disciplined process, combining computer modeling techniques,
fundamental analysis and risk management to create a blended portfolio of growth
and value stocks. We use a computer model to identify and rank stocks within an
industry or sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic worth;
* GROWTH, in this case the sustainability or growth of earnings; and
* FINANCIAL PROFILE, which measures the financial health of the company.
We then use fundamental analysis to select the most attractive of the top-ranked
securities, drawing on a variety of sources, including Wall Street research and
company management. We attempt to manage risk by diversifying across companies
and industries, limiting the potential adverse impact from any one stock or
industry. The portfolio is structured so that its sector weightings and risk
characteristics, such as growth, size and yield, are similar to those of the S&P
SmallCap 600 Index.
What other factors influenced the portfolio's performance?
The portfolio benefited from the success of its security selection process. For
example, quantitative and fundamental analysis helped us identify a number of
opportunities in the producer goods sector, including home builder Hovnanian
Enterprises and construction products company Hughes Supply. Such companies
benefited from ongoing strength in the housing market, which has been driven by
historically low mortgage rates. Among various service providers, four key
holdings performed exceptionally well: University of Phoenix Online maintained
high enrollment rates and good profit margins; Regis, a hair salon chain,
delivered better than expected earnings; Kroll, a security consultant, benefited
from increasing corporate and government security needs; and Labor Ready, a temp
staffing agency, rose in anticipation of economic recovery. All four companies
met our disciplined investment criteria, and all helped boost the portfolio's
overall performance.
On the other hand, disappointments among a handful of individual holdings offset
a portion of these gains. For example, TECO Energy, a Florida-based utility,
suffered from reductions in its credit ratings and its dividend yield. Office
Depot lost ground due to weaker than expected same store sales.
What is the portfolio's current strategy?
Despite the market' s recent rally, we see little direct evidence that a
significant economic recovery currently is underway. Accordingly, as of the end
of the reporting period we have trimmed the portfolio's exposure to some of its
stronger recent performers. Instead, we are focusing on high-quality, reasonably
valued companies that meet our stringent investment criteria. We continue to
find such opportunities in a variety of individual companies spanning the full
range of industry groups that comprise the portfolio' s benchmark.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO MADE AVAILABLE THROUGH INSURANCE
PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS.
HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN,
AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE
DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED
IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL
REDUCE RETURNS.
(2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD AND POOR'S SMALLCAP
600 INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF SMALL-CAP STOCK MARKET
PERFORMANCE.
(3) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE RUSSELL 2500 INDEX IS A WIDELY
ACCEPTED, UNMANAGED INDEX OF SMALL- TO MIDCAP STOCK MARKET PERFORMANCE AND
IS COMPOSED OF THE 2,500 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE
RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BY
MARKET CAPITALIZATION.
The Portfolio 5
June 30, 2003 (Unaudited)
STATEMENT OF INVESTMENTS
COMMON STOCKS--99.0% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL--17.9%
Albany International, Cl. A 3,300 90,420
American Eagle Outfitters 480 (a) 8,803
AnnTaylor Stores 8,200 (a) 237,390
Bebe Stores 6,400 (a) 122,432
Blyth 3,500 95,200
Bob Evans Farms 3,900 107,757
Burlington Coat Factory Warehouse 9,200 164,680
CEC Entertainment 3,000 (a) 110,790
Cato, Cl. A 5,500 115,940
Claire's Stores 4,900 124,264
Dick's Sporting Goods 6,100 223,748
Finish Line, Cl. A 5,100 (a) 113,271
Furniture Brands International 3,700 (a) 96,570
Gymboree 2,850 (a) 47,823
K-Swiss, Cl. A 6,300 217,476
Kerzner International 4,500 (a) 144,945
Linens 'n Things 7,300 (a) 172,353
Men's Wearhouse 6,200 (a) 135,470
Mesa Air Group 23,900 (a) 191,200
Oshkosh Truck 2,700 160,164
Pacific Sunwear of California 3,980 (a) 95,878
Panera Bread, Cl. A 4,100 (a) 164,000
Penn National Gaming 7,700 (a) 158,235
Pep Boys-Manny, Moe & Jack 3,850 52,014
Pier 1 Imports 3,800 77,520
Polaris Industries 3,400 208,760
Prime Hospitality 2,260 (a) 15,165
Quiksilver 5,800 (a) 95,642
RC2 5,100 (a) 86,751
Ruby Tuesday 1,860 45,998
Ryan's Family Steak Houses 10,300 (a) 144,200
Select Comfort 5,800 (a) 95,004
ShopKo Stores 6,650 (a) 86,450
Shuffle Master 3,600 (a) 105,804
SkyWest 8,000 152,480
6
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
Sonic 6,600 (a) 167,838
TBC 8,300 (a) 158,115
Too 6,800 (a) 137,700
Toro 2,200 87,450
Tractor Supply 3,900 (a) 186,225
Urban Outfitters 4,300 (a) 154,370
Wabash National 1,070 (a) 15,012
Wolverine World Wide 2,000 38,520
Yankee Candle Co. 3,400 (a) 78,948
Zale 5,100 (a) 204,000
5,492,775
CONSUMER STAPLES--2.3%
Chiquita Brands International 5,200 (a) 75,400
Church & Dwight Co. 2,600 85,098
Flowers Foods 3,600 71,136
Fresh Del Monte Produce 4,800 123,312
International Multifoods 5,800 (a) 132,878
Libbey 3,800 86,260
Ralcorp Holdings 5,100 (a) 127,296
701,380
ENERGY--7.6%
AGL Resources 2,350 59,784
Black Hills 3,200 98,240
Cabot Oil & Gas 6,000 165,660
Cal Dive International 2,250 (a) 49,050
Energen 5,900 196,470
Frontier Oil 8,100 123,120
Headwaters 7,500 (a) 110,175
New Jersey Resources 4,600 163,300
Newfield Exploration 5,240 (a) 196,762
ONEOK 4,800 94,224
Oil States International 9,400 (a) 113,740
Patina Oil & Gas 6,125 196,919
Plains Exploration & Production 5,390 (a) 58,266
Remington Oil & Gas 8,800 (a) 161,744
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY (CONTINUED)
Southwestern Energy 3,230 (a) 48,482
Stone Energy 5,900 (a) 247,328
Unit 7,900 (a) 165,189
Universal Compression Holdings 3,800 (a) 79,268
2,327,721
HEALTH CARE--10.6%
Advanced Medical Optics 5,300 90,365
Advanced Neuromodulation Systems 1,200 (a) 62,124
American Medical Security Group 3,800 (a) 72,580
CONMED 5,700 (a) 104,082
Charles River Laboratories International 2,500 (a) 80,450
Cobalt 4,000 (a) 82,200
Connetics 3,200 (a) 47,904
Cooper Cos. 6,100 212,097
Curative Health Services 2,040 (a) 34,680
Diagnostic Products 4,400 180,620
Gen-Probe 2,200 (a) 89,914
IDEXX Laboratories 5,300 (a) 177,762
Medicis Pharmaceutical, Cl. A 860 48,762
Merit Medical Systems 6,100 (a) 121,878
Mid Atlantic Medical Services 6,800 (a) 355,640
Orthodontic Centers of Amercia 6,110 (a) 48,941
Owens & Minor 7,600 169,860
Pediatrix Medical Group 5,700 (a) 203,205
Pharmaceutical Resources 2,600 (a) 126,516
Priority Healthcare, Cl. B 9,700 (a) 179,935
Respironics 5,000 (a) 187,600
Serologicals 1,970 (a) 26,851
Sierra Health Services 6,700 (a) 134,000
Techne 3,500 (a) 106,190
US Oncology 22,400 (a) 165,536
Wright Medical Group 6,400 (a) 121,600
3,231,292
8
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST SENSITIVE--14.7%
Affiliated Managers Group 1,600 (a) 97,520
American Capital Strategies 3,700 92,278
Anchor BanCorp Wisconsin 5,300 126,617
Arch Capital Group 3,100 107,663
BankUnited Financial, Cl. A 9,400 (a) 189,410
BlackRock 2,700 (a) 121,608
CBL & Associates Properties 1,800 77,400
Capital Automotive REIT 4,800 134,352
Cash America International 11,200 148,064
Commercial Capital Bancorp 1,110 17,038
Cullen/Frost Bankers 3,890 124,869
Downey Financial 2,380 98,294
East West Bancorp 5,400 195,156
First American 4,600 121,210
First BanCorp 5,300 145,485
Flagstar Bancorp 11,000 268,950
Friedman, Billings, Ramsey Group, Cl. A 14,000 187,600
Hilb, Rogal and Hamilton 3,000 102,120
Hudson United Bancorp 3,800 129,770
IPC Holdings 3,600 120,600
Independence Community Bank 3,100 87,482
Irwin Financial 5,500 142,450
MAF Bancorp 2,900 107,503
Newtek Business Services 2,040 (a) 10,832
Phoenix Cos. 7,220 65,197
Provident Bankshares 6,500 165,165
Provident Financial Services 1,340 25,527
R & G Financial, Cl. B 1,750 51,975
RAIT Investment Trust 4,000 106,000
Republic Bancorp 8,300 111,386
SL Green Realty 2,870 100,134
SWS Group 1,700 34,255
South Financial Group 8,000 186,640
The Portfolio 9
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST SENSITIVE (CONTINUED)
Staten Island Bancorp 4,920 95,842
Sterling Bancshares 10,000 130,800
Susquehanna Bancshares 6,100 142,435
Washington Federal 9,354 216,358
Wintrust Financial 4,100 121,360
4,507,345
INTERNET--.4%
eSPEED, Cl. A 4,900 (a) 96,824
Verity 2,350 (a) 29,751
126,575
PRODUCER GOODS--20.0%
AGCO 5,900 (a) 100,772
AMETEK 1,400 51,310
Alliant Techsystems 1,700 (a) 88,247
Applied Industrial Technologies 4,600 97,060
AptarGroup 4,500 162,000
Arch Coal 4,400 101,112
Arkansas Best 6,600 157,014
Baldor Electric 2,800 57,680
CLARCOR 1,800 69,390
Chicago Bridge & Iron 5,900 133,812
Crown Holdings 14,300 (a) 102,102
Curtiss-Wright 2,400 151,680
DRS Technologies 3,000 (a) 83,760
EMCOR Group 2,500 (a) 123,400
Engineered Support Systems 3,000 125,550
Georgia Gulf 4,400 87,120
Graco 8,500 272,000
H.B. Fuller 5,400 118,908
Heartland Express 7,100 (a) 157,975
Hovnanian Enterprises 3,100 (a) 182,745
Hughes Supply 4,500 156,150
InVision Techonologies 3,300 (a) 82,005
Kirby 5,300 (a) 149,460
Lennox International 7,800 100,386
M.D.C. Holdings 2,530 122,148
10
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCER GOODS (CONTINUED)
Maverick Tube 7,600 (a) 145,540
Minerals Technologies 2,700 131,382
NVR 510 (a) 209,610
Offshore Logistics 6,800 (a) 147,900
Quanex 630 18,724
RTI International Metals 3,540 (a) 38,338
Ryland Group 4,200 291,480
Schweitzer-Mauduit International 5,100 123,114
Simpson Manufacturing Co. 5,300 (a) 193,980
Smith (A.O.) 4,200 118,230
Standard Pacific 5,600 185,696
SurModics 4,300 (a) 131,150
Teekay Shipping 4,200 180,180
Teledyne Technologies 4,800 (a) 62,880
Timken 11,200 196,112
Tredegar 7,270 108,977
Triumph Group 3,600 (a) 101,412
URS 1,660 (a) 32,304
United Stationers 6,500 (a) 235,105
Valmont Industries 3,300 64,713
Watsco 6,800 112,608
Wellman 13,100 146,720
Woodward Governor 3,000 129,000
6,138,941
SERVICES--9.0%
Advisory Board 1,500 (a) 60,780
BARRA 5,100 (a) 182,070
Banta 3,100 100,347
CACI International, Cl. A 5,400 (a) 185,220
Consolidated Graphics 5,300 (a) 121,264
Cox Radio, Cl. A 4,000 (a) 92,440
Dollar Thrifty Automotive Group 4,800 (a) 89,040
FactSet Research Systems 7,000 308,350
Global Payments 6,300 223,650
ITT Industries 3,200 93,600
Kroll 5,900 (a) 159,654
The Portfolio 11
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
SERVICES (CONTINUED)
Labor Ready 17,300 (a) 124,041
NDCHealth 6,100 111,935
Navigant Consulting 7,300 86,505
New England Business Service 2,600 78,000
Regis 8,100 235,305
TiVo 11,900 (a) 144,942
University of Phoenix Online 2,800 (a) 141,960
Waste Connections 2,220 (a) 77,811
Watson Wyatt & Co. 6,300 (a) 146,034
2,762,948
TECHNOLOGY--15.2%
Analogic 3,500 170,660
Anixter International 6,300 (a) 147,609
Avid Technology 6,600 (a) 231,462
Axcelis Technologies 22,000 (a) 134,640
Benchmark Electronics 3,500 (a) 107,660
Cabot Microelectronics 2,700 (a) 136,269
Cerner 3,500 (a) 80,325
Checkpoint Systems 12,400 (a) 175,460
Cohu 8,300 129,480
Coinstar 2,500 (a) 47,150
DSP Group 3,700 (a) 79,661
ESS Technology 15,500 (a) 151,125
Esterline Technologies 5,700 (a) 99,237
FLIR Systems 5,200 (a) 156,780
Global Imaging Systems 7,100 (a) 164,436
Hyperion Solutions 5,000 (a) 168,800
II-VI 4,900 (a) 113,092
Imagistics International 4,900 (a) 126,420
Itron 5,000 (a) 107,800
Manhattan Associates 4,700 (a) 122,059
Mercury Computer Systems 3,500 (a) 63,560
Methode Electronics, Cl. A 11,200 120,400
Nam Tai Electronics 3,300 139,920
OmniVision Technologies 4,100 (a) 127,920
12
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
Pixelworks 10,900 (a) 64,746
Planar Systems 6,900 (a) 134,964
Power Integrations 5,600 (a) 136,192
Progress Software 8,500 (a) 176,205
Renaissance Learning 3,300 (a) 72,270
Roper Industries 2,820 104,904
SRA International 3,600 115,200
ScanSource 2,500 (a) 66,875
Silicon Laboratories 2,900 (a) 77,256
Standard Microsystems 1,680 (a) 25,486
Supertex 1,890 (a) 34,719
Take-Two Interactive Software 6,300 (a) 178,542
Tekelec 5,300 (a) 59,890
Trimble Navigation 7,600 (a) 174,268
Zebra Technologies, Cl. A 1,670 (a) 125,567
4,649,009
UTILITIES--1.3%
CH Energy Group 3,700 166,500
Cleco 12,400 214,768
381,268
TOTAL COMMON STOCKS
(cost $25,873,877) 30,319,254
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
SHORT-TERM INVESTMENTS--1.0% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT;
Greenwich Capital Markets, Tri-Party
Repurchase Agreement, 1.10%,
dated 6/30/2003, due 7/1/2003 in the
amount of $301,009 (fully collateralized
by $300,000 Federal Home Loan Mortgage
Notes, 3.5%, 4/1/2008, value $308,878)
(cost $301,000) 301,000 301,000
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $26,174,877) 100.0% 30,620,254
CASH AND RECEIVABLES (NET) .0% 9,854
NET ASSETS 100.0% 30,630,108
(A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 13
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--
See Statement of Investments--Note 1(b) 26,174,877 30,620,254
Cash 18,580
Receivable for investment securities sold 1,642,425
Receivable for shares of Beneficial Interest subscribed 17,542
Dividends and interest receivable 13,527
Prepaid expenses 2,235
32,314,563
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 22,279
Payable for investment securities purchased 1,381,930
Payable for shares of Beneficial Interest redeemed 248,381
Accrued expenses 31,865
1,684,455
- --------------------------------------------------------------------------------
NET ASSETS ($) 30,630,108
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 29,659,220
Accumulated undistributed investment income--net 5,928
Accumulated net realized gain (loss) on investments (3,480,417)
Accumulated net unrealized appreciation
(depreciation) on investments 4,445,377
- --------------------------------------------------------------------------------
NET ASSETS ($) 30,630,108
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- --------------------------------------------------------------------------------
Net Assets ($) 27,212,343 3,417,765
Shares Outstanding 1,678,539 211,767
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 16.21 16.14
SEE NOTES TO FINANCIAL STATEMENTS.
14
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $111 foreign taxes witheld at source) 163,663
Interest 1,725
TOTAL INCOME 165,388
EXPENSES:
Investment advisory fee--Note 3(a) 104,380
Auditing fees 17,658
Prospectus and shareholders' reports 16,389
Custodian fees--Note 3(b) 8,897
Legal fees 5,253
Distribution fees--Note 3(b) 3,904
Shareholder servicing costs--Note 3(b) 1,356
Trustees' fees and expenses--Note 3(c) 1,018
Loan commitment fees--Note 2 134
Miscellaneous 456
TOTAL EXPENSES 159,445
INVESTMENT INCOME--NET 5,943
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (908,540)
Net unrealized appreciation (depreciation) on investments 4,610,220
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 3,701,680
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,707,623
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 5,943 87,271
Net realized gain (loss) on investments (908,540) (380,658)
Net unrealized appreciation
(depreciation) on investments 4,610,220 (7,168,493)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 3,707,623 (7,461,880)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (32,617) (69,910)
Service shares (4,132) (601)
TOTAL DIVIDENDS (36,749) (70,511)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 967,185 5,696,601
Service shares 461,558 2,553,423
Dividends reinvested:
Initial shares 32,617 69,910
Service shares 4,132 601
Cost of shares redeemed:
Initial shares (2,501,053) (6,820,660)
Service shares (580,313) (677,527)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (1,615,874) 822,348
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,055,000 (6,710,043)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 28,575,108 35,285,151
END OF PERIOD 30,630,108 28,575,108
Undistributed investment income--net 5,928 36,734
16
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 64,974 346,737
Shares issued for dividends reinvested 2,379 4,341
Shares redeemed (174,998) (438,987)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (107,645) (87,909)
- --------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 30,474 152,418
Shares issued for dividends reinvested 303 33
Shares redeemed (38,456) (42,618)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (7,679) 109,833
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 17
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 portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31,
June 30, 2003 -------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 14.25 17.79 18.08 16.69 15.09 16.13
Investment Operations:
Investment income--net .01(a) .05(a) .03(a) .02(a) .04(a) .04
Net realized and unrealized
gain (loss) on investments 1.97 (3.55) (.31) 1.40 1.56 (.99)
Total from Investment Operations 1.98 (3.50) (.28) 1.42 1.60 (.95)
Distributions:
Dividends from investment
income--net (.02) (.04) (.01) (.03) -- (.04)
Dividends from net realized
gain on investments -- -- -- -- -- (.05)
Total Distributions (.02) (.04) (.01) (.03) -- (.09)
Net asset value, end of period 16.21 14.25 17.79 18.08 16.69 15.09
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 13.91(b) (19.71) (1.53) 8.53 10.60 (5.97)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses
to average net assets .55(b) .98 1.03 .93 .97 .98
Ratio of net investment income
to average net assets .04(b) .28 .16 .09 .24 .26
Portfolio Turnover Rate 136.01(b) 71.76 60.40 84.47 47.01 45.09
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 27,212 25,458 33,341 35,956 32,530 34,857
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
18
Six Months Ended Year Ended December 31,
June 30, 2003 --------------------------------------------------
SERVICE SHARES (Unaudited) 2002 2001 2000(a)
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 14.20 17.73 18.08 18.08
Investment Operations:
Investment income (loss)--net (.01)(b) .01(b) (.03)(b) --
Net realized and unrealized
gain (loss) on investments 1.97 (3.54) (.31) --
Total from Investment Operations 1.96 (3.53) (.34) --
Distributions:
Dividends from investment income--net (.02) (.00)(c) (.01) --
Net asset value, end of period 16.14 14.20 17.73 18.08
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 13.82(d) (19.89) (1.86) --
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .68(d) 1.22 1.39 --
Ratio of net investment income
(loss) to average net assets (.09)(d) .04 (.18) --
Portfolio Turnover Rate 136.01(d) 71.76 60.40 84.47
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 3,418 3,117 1,944 1
(A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 19
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the Small Company Stock Portfolio (the "portfolio"). The
portfolio is only offered to separate accounts established by insurance
companies to fund variable annuity contracts and variable life insurance
policies. The portfolio is a diversified series. The portfolio's investment
objective seeks capital appreciation and consistency of returns with its
benchmark, the Standard & Poor' s SmallCap 600 Index. The Dreyfus Corporation
(the "Manager" ) serves as the portfolio's investment adviser. The Manager is a
wholly-owned subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned
subsidiary of Mellon Financial Corporation.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
the Manager, is the distributor of the portfolio's shares, which are sold
without a sales charge. The portfolio 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results may differ from those
estimates.
(a) Portfolio valuation: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last
20
sales price on the national securities market. Effective April 14, 2003, the
portfolio began pricing securities traded on the NASDAQ stock market using the
NASDAQ official closing price. 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, except for
open short positions, where the asked price is used for valuation purposes. Bid
price is used when no asked price is available. Securities for which there are
no such valuations are valued at fair value as determined in good faith under
the direction of the Board of Trustees.
(b) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the terms of the custody agreement, the portfolio
received net earnings credits of $25 during the period ended June 30, 2003 based
on available cash balances left on deposit. Income earned under this arrangement
is included in interest income.
The portfolio may enter into repurchase agreements with financial institutions,
deemed to be creditworthy by the Manager, subject to the seller's agreement to
repurchase and the portfolio's agreement to resell such securities at a mutually
agreed upon price. Securities purchased subject to repurchase agreements are
deposited with the portfolio' s custodian and, pursuant to the terms of the
repurchase agreement, 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 portfolio 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
portfolio maintains its right to sell the underlying securities at market value
and may claim any resulting loss against the seller.
The Portfolio 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(c) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain, if any, are normally declared and paid annually, but the portfolio 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 gain can be offset by capital loss
carryovers, it is the policy of the portfolio not to distribute such gain.
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from gererally accepted accounting principles.
(d) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $2,468,690 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, $599,155 of
the carryover expires in fiscal 2007, $1,272,918 expires in fiscal 2009 and
$596,617 expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002 was as follows: ordinary income $70,511. The tax
character of current year distributions will be determined at the end of the
current fiscal year.
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the portfolio based on
prevailing market rates in effect at the time of borrowings. During the period
ended June 30, 2003, the portfolio did not borrow under the Facility.
22
NOTE 3--Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to an Investment Advisory Agreement with the Manager, the
investment advisory fee is computed at the annual rate of .75 of 1% of the value
of the portfolio's average daily net assets and is payable monthly.
(b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% 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 Plan are
payable without regard to actual expenses incurred. During the period ended June
30, 2003, Service shares were charged $3,904 pursuant to the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $175 pursuant to the
transfer agency agreement.
The portfolio compensates Mellon under a custody agreement for providing
custodial services for the portfolio. During the period ended June 30, 2003, the
portfolio was charged $8,897 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in-person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund's relative net assets. The Chairman of the Board
receives an
The Portfolio 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
additional 25% of such compensation. Subject to the fund's Emeritus Program
Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer
fee and per meeting fee paid at the time the Board member achieves emeritus
status.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended June 30, 2003, amounted to
$38,136,753 and $39,589,090, respectively.
At June 30, 2003, accumulated net unrealized appreciation on investments was
$4,445,377, consisting of $4,791,187 gross unrealized appreciation and $345,810
gross unrealized depreciation.
At June 30, 2003, 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).
24
For More Information
Dreyfus Variable Investment Fund,
Small Company Stock Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call 1-800-554-4611 or 516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 151SA0603
Dreyfus Variable
Investment Fund,
Special Value Portfolio
SEMIANNUAL REPORT June 30, 2003
YOU, YOUR ADVISOR AND
DREYFUS
A MELLON FINANCIAL COMPANY
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus
portfolio are based on numerous factors, may not be relied on as an indication
of trading intent on behalf of any Dreyfus portfolio.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
- ------------------------------------------------------------
2 Letter from the Chairman
3 Discussion of Performance
6 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
14 Financial Highlights
16 Notes to Financial Statements
21 Proxy Results
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Special Value Portfolio
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Variable Investment Fund, Special Value
Portfolio covers the six-month period from January 1, 2003, through June 30,
2003. Inside, you' ll find valuable information about how the portfolio was
managed during the reporting period, including a discussion with the portfolio
managers, Mark G. DeFranco and Brian M. Gillott, of Jennison Associates LLC, the
portfolio's sub-investment adviser.
The first half of 2003 was a time of long-awaited recovery for the U.S. stock
market. Despite continued volatility leading up to the war in Iraq, stocks began
to rally as the fighting wound down and investors turned their attention back to
the prospects for the U.S. economy. Apparently, they liked what they saw.
Despite current economic weakness, investors appear to be focused on the
possibility of better economic times ahead.
If these trends persist, 2003 could mark the first positive calendar year for
stocks since 1999. In our view, investors who have the potential to benefit most
are those who steadfastly maintained their equity exposure during the bear
market. In contrast, we believe investors who avoided stocks may have missed the
market's recent gains, a timely reminder that patience, discipline and a
long-term perspective are fundamental principles that may lead to successful
investing.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
2
DISCUSSION OF PERFORMANCE
Mark G. DeFranco and Brian M. Gillot, Portfolio Managers Jennison Associates
LLC, Sub-Investment Adviser
How did Dreyfus Variable Investment Fund, Special Value Portfolio perform
relative to its benchmark?
For the six-month period ended June 30, 2003, the portfolio produced total
returns of 9.68% for its Initial shares and 9.61% for its Service shares.(1) For
the same period, the total return of the Russell 1000 Value Index, the
portfolio's benchmark, was 11.57%.(2)
After experiencing continued weakness during the first quarter of 2003, stocks
rallied broadly and sharply in the second quarter as major combat operations in
Iraq wound down and investors turned their attention to the prospects for the
U.S. economy. The portfolio's returns were modestly lower than its benchmark's
return during the reporting period, primarily because of its focus on midcap
stocks, which tended to lag their larger and smaller counterparts.
What is the portfolio's investment approach?
The portfolio seeks to maximize total return, consisting of capital appreciation
and current income. To pursue this goal, the portfolio normally invests at least
80% of its assets in stocks. The portfolio's stock investments may include
common stocks, preferred stocks and convertible securities of both U.S. and
foreign companies of any size, including those purchased in initial public
offerings or shortly thereafter.
The portfolio managers seek to identify attractively valued companies with
current or emerging earnings growth that may not be fully recognized or
appreciated by the market. Generally, there are two types of companies which may
exhibit the characteristics the portfolio managers are seeking. The first type
is a company that is out of favor with investors but which the portfolio
managers expect will experience an improved earnings cycle over the next 12 to
18 months due to corporate restructuring, new product development, an industry
cycle turn, increased management focus on shareholder value or improving balance
sheet and cash flow. The second type is a company currently delivering good
growth characteristics but which the portfolio managers believe is being
mispriced by the market based on short-term
The Portfolio 3
DISCUSSION OF PERFORMANCE (CONTINUED)
earnings results relative to "street" expectations or market uncertainty
regarding the sustainability of earnings growth.
What other factors influenced the portfolio's performance?
The portfolio was primarily influenced by an upturn in investor sentiment
following decisive military action in Iraq and an improving outlook for the U.S.
economy during the second quarter of 2003. The market's sharp rally stood in
sharp contrast to its lackluster performance during the year's first quarter,
when war fears and economic concerns weighed heavily on stock prices.
Although the portfolio invests in "opportunistic value" companies of all sizes,
recently it has focused mostly on stocks in the mid-capitalization range, where
we believe opportunities for growth may be greater than among larger companies,
while the risk of failure may be less than that of smaller companies.
Unfortunately, midcap stocks were hit particularly hard by market weakness
during the first half of the reporting period, causing the portfolio's relative
performance to trail that of its benchmark for the reporting period as a whole.
Nonetheless, the portfolio had its share of strong performers. For example,
biotechnology firm Sepracor was selling at what we believed to be an
attractively low price after disappointing clinical trials for one of its drugs.
We invested in the company when our analysis showed that other, more promising
products were in its pipeline. As one of those drugs, an insomnia treatment,
moved closer to approval by the U.S. Food and Drug Administration, Sepracor's
stock significantly increased in value. Everest Re Group was also a top
performer as the reinsurer rebounded from weakness due to headline risk
regarding asbestos-related claims and problems in California' s workers'
compensation market. Since we believed that asbestos concerns were waning and
that Everest Re Group had greater pricing power than many of its competitors in
California, we purchased the stock. As the company's earnings improved and its
stock price rose, we began to reduce the portfolio's holdings of Everest Re
Group.
On the other hand, some holdings produced disappointing results. We expected
medical technology company Baxter International to benefit from a new
clotting-agent product for hemophiliacs, but excess inventories of older
products hindered its earnings. We sold the portfolio' s shares of Baxter
International in anticipation of these developments becoming known, preferring
to pursue other opportunities we considered more compelling. Specialty chemicals
and life sciences
4
company Cambrex missed its quarterly earnings estimate due to the loss of a key
contract which was cancelled due to regulatory issues in Europe. However,
because we believe that the company's businesses remain sound and its stock
price is low relative to its fair value, we have maintained a pared-back
position in Cambrex.
What is the portfolio's current strategy?
We continue to evaluate opportunities in value-oriented stocks one company at a
time. We reduced the portfolio's exposure to certain media and insurance stocks
after their good performances, and we have found a number of attractively valued
stocks in the energy group, particularly among natural gas producers and
oil-services companies. We have also recently invested in consumer-oriented
companies such as Wendy's International and Nordstrom that, in our view, were
overlooked in the second-quarter rally. We are finding relatively few attractive
opportunities among financial stocks, which we believe may be facing heightened
risks to earnings if interest rates begin to climb.
We believe that no single industry group or capitalization range appears to
offer more opportunities than the others. Instead, we are finding candidates for
investment on a company-by-company basis. Indeed, we believe that careful stock
picking is the key to success in today's stock market.
July 15, 2003
THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE
INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES.
INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE
ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES
INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER
LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS VARIABLE
INVESTMENT FUND, SPECIAL VALUE PORTFOLIO MADE AVAILABLE THROUGH INSURANCE
PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS.
HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN,
AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO.
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT
THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH
INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN
FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS
CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2003, AT
WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT
BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER.
Part of the portfolio's recent performance is attributable to its initial
public offering (IPO) investments. There can be no guarantee that IPOs will have
or continue to have a positive effect on the portfolio's performance.
(2) SOURCE: LIPPER INC. -- REFLECTS THE REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE RUSSELL 1000 VALUE INDEX IS AN
UNMANAGED INDEX WHICH MEASURES THE PERFORMANCE OF THOSE RUSSELL 1000 COMPANIES
WITH LOWER PRICE-TO-BOOK RATIOS AND LOWER FORECASTED GROWTH VALUES.
The Portfolio 5
June 30, 2003 (Unaudited)
STATEMENT OF INVESTMENTS
COMMON STOCKS--90.2% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.6%
Goodrich 6,800 142,800
Lockheed Martin 8,700 413,859
Northrop Grumman 6,600 569,514
1,126,173
CAPITAL MARKETS--7.5%
Bank of New York 24,700 710,125
Edwards (A.G.) 16,100 550,620
Mellon Financial 11,500 319,125
Merrill Lynch 16,400 765,552
2,345,422
CHEMICALS--4.1%
Cambrex 18,800 432,776
IMC Global 29,700 199,287
Monsanto 14,400 311,616
Olin 19,400 331,740
1,275,419
COMMERCIAL BANKS--.8%
Southwest Bancorporation of Texas 7,800 (a) 253,578
COMMERCIAL SERVICES & SUPPLIES--2.4%
Avery Dennison 4,200 210,840
Manpower 12,000 445,080
Robert Half International 4,100 (a) 77,654
733,574
COMMUNICATIONS EQUIPMENT--1.5%
Harris 8,200 246,410
Motorola 23,400 220,662
467,072
COMPUTERS & PERIPHERALS--2.0%
Hewlett-Packard 29,800 634,740
CONTAINERS & PACKAGING--.7%
Temple-Inland 5,000 214,550
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.3%
Agilent Technologies 9,300 (a) 181,815
Solectron 99,300 (a) 371,382
Symbol Technologies 18,100 235,481
Tech Data 9,300 (a) 248,403
1,037,081
6
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--10.3%
FMC Technologies 22,400 (a) 471,520
Halliburton 18,800 432,400
Rowan Cos. 20,100 (a) 450,240
Schlumberger 13,800 656,466
Transocean 23,100 (a) 507,507
Weatherford International 16,100 (a) 674,590
3,192,723
EXCHANGE TRADED FUNDS--.6%
iShares Nasdaq Biotechnology Index Fund 2,600 (a) 174,174
HEALTH CARE EQUIPMENT & SUPPLIES--3.4%
Apogent Technologies 27,500 (a) 550,000
Fisher Scientific International 14,500 (a) 506,050
1,056,050
HOTELS RESTAURANTS & LEISURE--1.7%
Wendy's International 18,000 521,460
HOUSEHOLD PRODUCTS--1.6%
Kimberly-Clark 9,800 510,972
INFORMATION TECHNOLOGY SERVICES--3.4%
BearingPoint 34,800 (a) 335,820
Ceridian 43,200 (a) 733,104
1,068,924
INSURANCE--6.4%
ACE 4,900 168,021
CNA Financial 10,400 (a) 255,840
Hartford Financial Services Group 9,900 498,564
Willis Group Holdings 8,300 255,225
XL Capital, Cl. A 9,700 805,100
1,982,750
INTERNET SOFTWARE & SERVICES--.5%
DoubleClick 17,700 163,725
MACHINERY--1.0%
Navistar International 9,400 (a) 306,722
MEDIA--6.5%
General Motors Hughes Electronic, Cl.H 51,400 (a) 658,434
Knight-Ridder 7,400 510,082
New York Times, Cl. A 9,700 441,350
Pearson, ADR 30,900 296,640
The Portfolio 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA (CONTINUED)
Scholastic 4,300 (a) 128,054
2,034,560
METALS & MINING--3.2%
Arch Coal 27,400 629,652
Placer Dome 30,600 375,462
1,005,114
MULTILINE RETAIL--1.0%
Nordstrom 16,600 324,032
OIL & GAS--2.5%
Spinnaker Exploration 19,800 (a) 518,760
Total SA, ADR 3,300 250,140
768,900
PAPER & FOREST PRODUCTS--3.5%
Boise Cascade 25,900 619,010
MeadWestvaco 19,000 469,300
1,088,310
PHARMACEUTICALS--4.8%
Abbott Laboratories 12,900 564,504
Bristol-Myers Squibb 14,600 396,390
Pfizer 15,300 522,495
1,483,389
ROAD & RAIL--1.6%
CSX 17,000 511,530
SEMICONDUCTORS--1.8%
Agere Systems, Cl. B 140,400 (a) 322,920
Vishay Intertechnology 16,800 (a) 221,760
544,680
SOFTWARE--7.3%
Autodesk 24,900 402,384
Mentor Graphics 10,300 (a) 149,144
Microsoft 21,600 553,176
Network Associates 24,300 (a) 308,124
Parametric Technology 47,700 (a) 145,485
Sybase 30,400 (a) 422,864
Synopsys 4,500 (a) 278,325
2,259,502
8
COMMON STOCKS (CONTINUED) Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--.8%
Toys "R" Us 19,700 (a) 238,764
TEXTILES & APPAREL--2.4%
Polo Ralph Lauren 28,600 737,594
TOTAL COMMON STOCKS
(cost $26,061,063) 28,061,484
PREFERRED STOCKS--2.5%
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIA;
News Corp, ADR, Cum.,$.4428
(cost $673,216) 30,800 771,540
OTHER INVESTMENTS--9.2%
- ------------------------------------------------------------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES:
Dreyfus Institutional Cash Advantage Fund 953,000 (b) 953,000
Dreyfus Institutional Cash Advantage Plus Fund 953,000 (b) 953,000
Dreyfus Institutional Preferred Plus Money Market Fund 953,000 (b) 953,000
TOTAL OTHER INVESTMENTS
(cost $2,859,000) 2,859,000
TOTAL INVESTMENTS (cost $29,593,279) 101.9% 31,692,024
LIABILITIES, LESS CASH AND RECEIVABLES (1.9%) (602,360)
NET ASSETS 100.0% 31,089,664
(A) NON-INCOME PRODUCING.
(B) INVESTMENTS IN AFFILIATED MONEY MARKET MUTUAL FUNDS--SEE NOTE 3(D).
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 9
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of Investments 29,593,279 31,692,024
Receivable for investment securities sold 491,165
Receivable for shares of Beneficial Interest subscribed 33,457
Dividend and interest receivable 27,574
32,244,220
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 24,296
Cash overdraft due to Custodian 24,604
Payable for investment securities purchased 999,254
Payable for shares of Beneficial Interest redeemed 78,799
Accrued expenses 27,603
1,154,556
NET ASSETS ($) 31,089,664
COMPOSITION OF NET ASSETS ($):
Paid-in capital 32,342,889
Accumulated undistributed investment income--net 37,909
Accumulated net realized gain (loss) on investments (3,389,879)
Accumulated net unrealized appreciation
(depreciation) on investments 2,098,745
NET ASSETS ($) 31,089,664
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Initial Shares Service Shares
- --------------------------------------------------------------------------------
Net Assets ($) 26,947,939 4,141,725
Shares Outstanding 2,249,303 346,560
NET ASSETS VALUE PER SHARE ($) 11.98 11.95
SEE NOTES TO FINANCIAL STATEMENTS.
10
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
CASH DIVIDENDS (net of $3,514 foreign taxes withheld at source) 180,376
EXPENSES:
Investment advisory fee--Note 3(a) 110,595
Auditing fees 17,204
Prospectus and shareholders' reports 7,871
Custodian fees 6,974
Distribution fees--Note 3(b) 4,777
Trustees' fees and expenses--Note 3(c) 1,751
Legal fees 760
Miscellaneous 808
TOTAL EXPENSES 150,740
Less--waiver of fees due to undertaking--Note 3(a) (8,802)
NET EXPENSES 141,938
INVESTMENT INCOME--NET 38,438
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (87,291)
Net unrealized appreciation (depreciation) on investments 2,753,756
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,666,465
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,704,903
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 38,438 295,172
Net realized gain (loss) on investments (87,291) (2,236,871)
Net unrealized appreciation
(depreciation) on investments 2,753,756 (4,303,348)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 2,704,903 (6,245,047)
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Initial shares (257,277) (115,505)
Service shares (38,181) (9,173)
TOTAL DIVIDENDS (295,458) (124,678)
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Initial shares 376,202 1,525,740
Service shares 371,517 2,492,917
Dividends reinvested:
Initial shares 257,277 115,505
Service shares 38,181 9,173
Cost of shares redeemed:
Initial shares (3,019,045) (8,445,447)
Service shares (508,996) (601,966)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (2,484,864) (4,904,078)
TOTAL INCREASE (DECREASE) IN NET ASSETS (75,419) (11,273,803)
NET ASSETS ($):
Beginning of Period 31,165,083 42,438,886
END OF PERIOD 31,089,664 31,165,083
Undistributed investment income--net 37,909 294,929
12
Six Months Ended
June 30, 2003 Year Ended
(Unaudited) December 31, 2002
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
INITIAL SHARES
Shares sold 32,520 129,723
Shares issued for dividends reinvested 25,027 8,569
Shares redeemed (276,327) (719,538)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (218,780) (581,246)
SERVICE SHARES
Shares sold 34,747 207,867
Shares issued for dividends reinvested 3,725 682
Shares redeemed (46,743) (51,771)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (8,271) 156,778
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 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 portfolio share. Total return shows how
much your investment in the portfolio would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the portfolio's financial statements.
Six Months Ended
June 30, 2003 Year Ended December 31,
------------------------------------------------------------------
INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 11.04 13.07 14.65 14.64 14.93 12.99
Investment Operations:
Investment income--net .01(a) .10(a) .14(a) .12(a) .11(a) .10
Net realized and unrealized
gain (loss) on investments 1.04 (2.09) (1.30) .70 .95 1.94
Total from Investment Operations 1.05 (1.99) (1.16) .82 1.06 2.04
Distributions:
Dividends from investment
income--net (.11) (.04) (.11) (.14) (.10) (.10)
Dividends from net realized
gain on investments -- -- (.31) (.67) (1.25) --
Total Distributions (.11) (.04) (.42) (.81) (1.35) (.10)
Net asset value, end of period 11.98 11.04 13.07 14.65 14.64 14.93
TOTAL RETURN (%) 9.68(b) (15.28) (7.97) 5.70 7.27 15.69
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to
average net assets .47(b) .92 .90 .87 .86 .83
Ratio of net investment income
to average net assets .13(b) .81 1.00 .81 .70 .67
Decrease reflected in above
expense ratios due to
undertakings by
The Dreyfus Corporation .02(b) .07 .01 -- -- --
Portfolio Turnover Rate 55.62(b) 148.29 59.85 149.83 171.41 252.24
Net Assets, end of period
($ x 1,000) 26,948 27,255 39,854 50,671 57,099 63,264
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
14
Six Months Ended
June 30, 2003 Year Ended December 31,
----------------------------------------------
SERVICE SHARES (Unaudited) 2002 2001 2000(a)
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 11.02 13.05 14.65 14.65
Investment Operations:
Investment income--net .01(b) .08(b) .12(b) --
Net realized and unrealized
gain (loss) on investments 1.03 (2.07) (1.31) --
Total from Investment Operations 1.04 (1.99) (1.19) --
Distributions:
Dividends from investment income--net (.11) (.04) (.10) --
Dividends from net realized
gain on investments -- -- (.31) --
Total Distributions (.11) (.04) (.41) --
Net asset value, end of period 11.95 11.02 13.05 14.65
TOTAL RETURN (%) 9.61(c) (15.32) (8.17) --
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .49(c) .99 1.00 --
Ratio of net investment income
to average net assets .11(c) .69 .92 --
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation .13(c) .27 .24 --
Portfolio Turnover Rate 55.62(c) 148.29 59.85 149.83
Net Assets, end of period ($ x 1,000) 4,142 3,910 2,585 1
(A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio 15
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company, operating as a series company currently offering twelve
series, including the Special Value Portfolio (the "portfolio"). The portfolio
is only offered to separate accounts established by insurance companies to fund
variable annuity contracts and variable life insurance policies. The portfolio
is a diversified series. The portfolio's investment objective is to maximize
total return, consisting of capital appreciation and current income. The Dreyfus
Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is
a wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Financial Corporation. Jennison Associates LLC ("Jennison")
serves as the portfolio's sub-investment adviser.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
Dreyfus, is the distributor of the portfolio's shares, which are sold without a
sales charge. The portfolio 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 and certain voting rights.
The fund 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 portfolio's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Effective April 14, 2003, the portfolio began
pricing securities traded on the NASDAQ stock
16
market using the NASDAQ official closing price. 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, except for open short positions, where the asked price is used for
valuation purposes. Bid price is used when no asked price is available.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the direction of the Board of Trustees.
Investments denominated in foreign currencies are translated to U.S. dollars at
the prevailing rates of exchange. Forward currency exchange contracts are valued
at the forward rate.
(B) FOREIGN CURRENCY TRANSACTIONS: The portfolio 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 market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amount of
dividends, interest and foreign withholding taxes recorded on the portfolio's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value
of assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss 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, amortization of discount and premium on investments, is recognized
on the accrual basis. Under the terms of the custody agreement, the portfolio
receives net earnings credits based on available cash balances left on deposits.
The Portfolio 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain, if any, are normally declared and paid annually, but the portfolio 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 gain can be offset by capital loss
carryovers, it is the policy of the portfolio not to distribute such gain.
Income and capital gain distributions are determined in accordance with incomes
tax regulations, which may differ from generally accepted accounting principles
(E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all federal income and excise taxes.
The portfolio has an unused capital loss carryover of $2,855,798 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to December 31, 2002. If not applied, $522,975 of
the carryover expires in fiscal 2009 and $2,332,823 expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended December 31, 2002, was as follows: ordinary income $124,678. 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 portfolio may borrow up to $5 million for leveraging purposes under a
short-term unsecured line of credit and participates with other Dreyfus managed
funds in a $100 million unsecured line of credit primarily to be utilized for
temporary or emergency purposes including the financing of redemptions. Interest
is charged to the portfolio based on prevailing market rates in effect at the
time of borrowings. During the period ended June 30, 2003, the portfolio did not
borrow under either line of credit.
18
NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates:
(A) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment
advisory fee is computed at the annual rate of .75 of 1% of the value of the
portfolio's average daily net assets and is payable monthly.
Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Jennison,
the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon
the value of the portfolio's average daily net assets, computed at the following
annual rates: .50 of 1% of the first $300 million and .45 of 1% over $300
million.
Dreyfus has agreed, from January 1, 2003 to December 31, 2003, to waive receipt
of its fees and/or assume the expenses of the portfolio so that the expenses of
neither class, exclusive of taxes, brokerage commissions, interest expense and
extraordinary expenses, exceed 1% of the value of the average daily net assets
of their class. During the period ended June 30, 2003, Dreyfus waived receipt of
fees of $8,802, pursuant to the undertaking.
(B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, Service shares pay the Distributor for distributing their shares,
for servicing and/or maintaining Service shares shareholder accounts and for
advertising and marketing for Service shares. The Plan provides for payments to
be made at an annual rate of .25 of 1% 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 Plan are
payable without regard to actual expenses incurred. During the period ended June
30, 2003, Service shares were charged $4,777 pursuant to the Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended June 30, 2003, the portfolio was charged $81 pursuant to the
transfer agency agreement.
The Portfolio 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(C) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $40,000
and an attendance fee of $6,000 for each in-person meeting and $500 for
telephone meetings. These fees are allocated among the funds in the Fund Group
in proportion to each fund' s relative net assets. The Chairman of the Board
receives an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board Members, if any, receive 50% of the annual
retainer fee and per meeting fee paid at the time the Board member achieves
emeritus status.
(D) Pursuant to an exemptive order from the Securities and Exchange Commission,
the portfolio may invest its available cash balances in affiliated money market
mutual funds as shown in the portfolio's Statement of Investments. Management
fees are not charged to these accounts. During the period ended June 30, 2003,
the portfolio derived $12,977 in income from these investments, which is
included in dividend income in the portfolio's Statement of Operations.
NOTE 4--Securities Transactions:
(A) The aggregate amount of purchases and sales of investment securities and
securities, excluding short-term securities, during the period ended June 30,
2003, amounted to $15,447,953 and $18,413,275, respectively.
At June 30, 2003, accumulated net unrealized appreciation on investments was
$2,098,745, consisting of $2,826,169 gross unrealized appreciation and $727,424
gross unrealized depreciation.
At June 30, 2003, 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).
20
PROXY RESULTS (Unaudited)
The fund held a special meeting of shareholders on December 18, 2002. The
proposal considered at the meeting, and the results, are as follows:
Shares
----------------------------------------------------------------
For Against Abstained
----------------------------------------------------------------
To approve changes to certain of the portfolio's
fundamental policies and investment
restrictions to expand participation
in a portfolio securities lending program 2,634,179 157,852 120,168
The Portfolio 21
For More Information
Dreyfus Variable
Investment Fund,
Special Value Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Jennison Associates LLC
466 Lexington Avenue
New York, NY 10017
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call
1-800-554-4611 or
516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
(c) 2003 Dreyfus Service Corporation 118SA0603
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. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. 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 controls over
financial reporting that occurred during the Registrant's most recently ended
fiscal half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 10. 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.
(b) Certification of principal executive and principal financial officers
as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
DREYFUS VARIABLE INVESTMENT FUND
By: /S/STEPHEN E. CANTER
-----------------------
Stephen E. Canter
Chief Executive Officer
Date: September 3, 2003
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/STEPHEN E. CANTER
-----------------------
Stephen E. Canter
Chief Executive Officer
Date: September 3, 2003
By: /S/JAMES WINDELS
-----------------------
James Windels
Chief Financial Officer
Date: September 3, 2003
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)