DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for the Dreyfus Variable Investment
Fund -- Quality Bond Portfolio. For the six-month reporting period ended June
30, 1998, the Portfolio produced a total return including share price changes
and dividend income generated of 4.12%,* compared to 4.02% for the Merrill Lynch
Domestic Master Index (Subindex D010) .** Income dividends paid from net
investment income during the period amounted to $0.353 per share, representing
an annualized distribution rate per share of 5.98%.***
ECONOMIC REVIEW
In the first half of 1998, three main regions of the world had very different
economic fundamentals. The U.S. entered the year with a strong economy near full
employment, with unemployment only slightly above 4%. The tight labor market led
the Federal Reserve Board to contemplate a rise in interest rates, but the U.S.
economy cooled enough over the course of the half-year that no action was taken.
After many years of subpar economic growth, continental Europe moved into a
better economic expansion. Unlike the U.S., Europe has substantial excess
capacity of productive plant and labor. In Asia, weak economies were pervasive
in the aftermath of the Asian financial crisis late last year.
A main influence on the U.S. economy in the first half of 1998 was Asian
economic weakness. It had both positive and negative effects. The positive
effects hit first. Actual inflation and expected inflation dropped, causing a
decline in long-term Treasury bond yields and mortgage rates. This caused a boom
in housing and rising asset prices, including bonds, stocks and houses. The fall
in inflation helped the consumer sector as more of the growth in consumer income
was left over after inflation to buy goods and services. Consumers benefited
from a combination of good growth in income after inflation, a strong labor
market and rising prices of assets they owned.
The negative effect of Asian weakness was directed towards the industrial
sector rather than the consumer sector. By midyear, the evidence of industrial
weakness was clear-cut in response to a slowing of inventory accumulation and
weakened exports. One result of this industrial weakness was to cool off a U.S.
economy that had been growing so rapidly that there were fears that the Federal
Reserve might raise interest rates. This favorable shift in expectations about
Fed policy was one reason for the rise in U.S. bond and stock prices. Another
background factor was the increasing evidence of prospects for multi-year budget
surpluses in the U.S.
MARKET ENVIRONMENT
The bond market has been very strong from a fundamental point of view.
Everything from reduced supply of U.S. Treasury debt, to the Asian crisis, to
falling commodity prices have worked in the bond market's favor.
At the time of this letter, it is very hard to find any sentiment regarding
the bond market that is not bullish. Generally, there are several themes which
have produced this optimism in the bond market. The first is that Japan may
never put forth a credible financial package, which is a key element to ending
the Asian crisis. Second, OPEC members may never actually adhere to any
agreed-upon cutbacks in oil production, which should keep oil prices from
rising. Also, many believe yields are considered too high on a global basis. On
the domestic front, inflation generally is viewed as nonexistent. And, the
manufacturing sector of the U.S. economy is already signaling much slower growth
ahead.
The 30-year Treasury bond traded in a range of 5.5% to 5.85% during the
reporting period. Currently, the yield is at the lower end of that range. The
above-mentioned themes have been talked about enough that one can assume that at
the moment they are priced into yield levels and could cause yields to drop
When viewing the above bond market themes, you can see that they are somewhat
intertwined. If one of them were to change, the others could be impacted as
well. The Japanese fiscal reform or policy change could have the biggest impact
on the direction of the others. While we believe it will take years for
recoveries to be in place for Asia, the direction is important. If the fiscal
package from Japan is credible and sizable, the financial markets may begin to
assume that the worst is behind. This could in turn positively impact commodity
prices as people anticipate a greater need in the future. The "zero inflation"
scenario could be hindered by any rise in commodity prices. In fact, core
inflation in the U.S. has been moving up. If it were not for the Asian crisis'
impact on commodity prices, it is likely that fewer people would be proclaiming
that inflation is dead.
While only time will tell what will occur, the external pressure being exerted
on Japan to reform seems great by any historical standards. It is our opinion
that Japan may reform sooner than the markets are anticipating (albeit it could
take years to work through), but we are less convinced about the prediction that
rates will fall precipitously further without more defining news on the bond
market themes discussed above.
PORTFOLIO OVERVIEW
In light of our apprehension for a continued bond market rally, we currently
believe that a neutral stance in duration is warranted. Going forward, we
anticipate that the target duration will be in the area of 4.5 years. Over the
last 6 months ended June 30, 1998 the duration of the Fund has been as high as
5.0 years, which worked out well as rates declined over that time. Of course, we
will have to see what develops and our approach is subject to change.
During the reporting period, we positioned the Fund in an effort to take
advantage of a flatter yield curve, which worked well. However, we believe that
positioning the Fund for a steepening yield curve might be warranted in the
future. The reasons for this are twofold. First, if inflation picks up, even
minimally, 30-year Treasury bonds should underperform. (Inflation would eat away
at longer maturities.) Or, if the economy really does slow down, we currently
believe that the Fed would remove their tightening bias, which could help
shorter maturity securities. Second, in economic slowdowns banks generally have
tended to invest capital because loan demand slows. This could mean better
buying of shorter dated securities.
We have allocated resources to "Treasury Inflation Protected Securities"
(TIPS). TIPS represent value on a very simple basis: As of June 30, 1998 30-year
Treasury bonds yielded 5.63%, and 30-year TIPS yielded 3.65%. Based on the rate
of inflation as of June 30, 1998, we believe that TIPS provided better relative
value as compared to 30-year Treasury bonds. We had a position of approximately
8% in this product as of June 30, 1998.
The corporate security strategy has been to emphasize quality and liquidity.
The credit cycle was about as good as a bond investor could wish for during the
reporting period. The spread (the yield difference) between corporate securities
and Treasuries was historically narrow. This spread had been narrowing for
several years in coordination with improving company cash flows. In light of the
global crisis, particularly in Asia, we believe that corporate earnings may have
hit the peak of this cycle.
Very truly yours,
[Gerald E. Thunelius, signature logo]
Portfolio Manager
July 23, 1998
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid.
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.
**SOURCE: MERRILL LYNCH, PIERCE, FENNER AND SMITH INC. -- The Merrill Lynch
Domestic Master Index (Subindex D010) is an unmanaged performance benchmark for
portfolios that include U.S. Government, mortgage and investment-grade corporate
securities rated A and better.
*** Distribution rate per share is based upon dividends per share paid from net
investment income during the period (annualized), divided by the net asset value
per share at the end of the period.
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
Principal
Bonds and Notes--86.5% Amount Value
- -------------------------------------------------------
______________ _____________
Asset-Backed--3.0% California Infrastructure and Economic
Development Bank:
Special Purpose Trust SCE-1,
Rate Reduction Ctfs.,
<S> <C> <C>
Ser. 1997-1, Cl. A5, 6.28%, 2005 $ 750,000 $ 764,801
Special Purpose Trust SDG & E -1,
Rate Reduction Ctfs.,
Ser. 1997-1, Cl. A5, 6.19%, 2005 1,000,000 1,009,375
The Money Store Trust,
Asset-Backed Ctfs.,
Ser.1996-D, Cl. A-16, 7.11%, 2028 1,322,578 1,335,804
______________ _____________
3,109,980
______________ _____________
Banking--3.7% BT Capital Trust,
Gtd. Sub. Capital Income Securities,
Ser. B1, 7.90%, 2027 1,000,000 1,055,328
Colonial Capital I,
Gtd. Capital Securities, Ser. A, 8.92%, 2027 1,000,000 1,122,353
Fuji Finance,
Gtd. Floating Rate Notes, 6.425%, 2049 2,000,000 (a) 1,600,000
______________ _____________
3,777,681
______________ _____________
Commercial Mortgages--22.4% 277 Park Avenue Finance,
Commercial Mortgage Pass-Through Ctfs.
Ser. 1997-C1, Cl. A2, 7.68% 2007 2,250,000 (b) 2,428,594
Asset Securitization,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-D5, Cl. A1D, 6.85%, 2041 2,000,000 2,095,000
BTC Mortage Investors Trust,
Mortage Pass-Through Ctfs.,
Ser. 1997-S1, C1.B, 6.445%, 2009 2,000,000 (b) 1,997,813
DLJ Mortgage Acceptance,
Mortgage Pass-Through Ctfs.:
Ser. 1996-CF2, Cl. A-3, 7.38%, 2021 2,000,000 (b) 2,103,750
Ser. 1997-CF2, Cl. B-3, 6.99%, 2009 1,000,000 (b) 984,687
GS Mortgage Securities II,
Mortgage Pass-Through Ctfs.,
Ser. 1998-GLII, Cl. C, 6.966%, 2031 2,000,000 2,031,875
Merrill Lynch Mortgage Investors,
Mortgage Pass-Through Ctfs.,
Ser. 1995-C3, Cl. C, 7.342%, 2025 2,200,000 (a) 2,289,375
Mortgage Capital Funding,
Mortgage Pass-Through Ctfs.,
Ser. 1998-MC1, Cl. C, 6.947%, 2008 3,000,000 3,088,125
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- ______________ _____________
Commercial Mortgages (continued) Nomura Asset Securities,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1998-D6, Cl. A-3, 6.98%, 2028 $....3,000,000 (a) $ 3,090,000
Resolution Trust,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1994-C2, Cl. D, 8%, 2025 2,760,412 2,833,412
______________ _____________
22,942,631
_____________
Hotels & Motels--2.0% Hyatt Equities, L.L.C.,
Notes, 6.80%, 2000 2,000,000 (b) 2,031,370
______________ _____________
Industrial--.5% Eastman Kodak,
Deb., 9.95%, 2018 400,000 551,993
_____________
Insurance--1.1% Equitable Life Assurance Society of the U. S.,
Surplus Notes, 7.70%, 2015 1,000,000 (b) 1,117,169
SunAmerica,
Deb., 9.95%, 2012 13,000 16,573
_____________
1,133,742
_____________
Other--0.0% City of New York,
General Obligation Bonds, Ser. D, 10%, 2007 25,000 28,500
_____________
Pharmaceutical--3.1% Bayer,
Notes, 6.65%, 2028 3,000,000 (b) 3,123,312
_____________
Publishing--2.0% A. H. Belo,
Sr. Notes, 6.875%, 2002 2,000,000 2,056,742
_____________
Railroads--1.9% Terminal Railroad Association,
First Mortgage, 4%, 2019 2,601,000 1,966,359
_____________
Real Estate Investment Trusts--3.9% Crescent Real Estate Equities, L.P.,
Notes, 6.625%, 2002 2,000,000 (b) 1,982,308
Tanger Properties, Ltd.,
Notes, 7.875%, 2004 2,000,000 2,037,768
_____________
4,020,076
_____________
Residential Mortgages--15.7% Chase Mortgage Finance,
Multi-Class Mortgage Pass-Through Ctfs.,
REMIC, Ser. 1998S3, Cl. B3, 6.50%, 2013 675,000 (b) 626,906
GE Capital Mortgage Services,
REMIC Multi-Class Pass Through Ctfs.:
Ser. 1996-14, Cl. 2B1, 7.25%, 2011 772,661 789,081
Ser. 1996-17, Cl. 2B1, 5%, 2011 734,614 750,224
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- ______________ _____________
Residential Mortgages (continued) Norwest Asset Securities,
Mortgage Pass-Through Ctfs.,
Ser. 1997-7, Cl. B-1, 7%, 2027 $ 1,978,518 $ 2,002,577
Ser. 1997-11, Cl. M, 7%, 2027 2,485,985 2,531,044
Ser. 1997-16, Cl. M, 6.75%, 2027 1,489,418 1,517,345
Ser. 1998-2, Cl. B-1, 6.50%, 2028 2,995,703 2,947,024
Residential Funding Mortgage Securities 1,
Mortgage Pass-Through Ctfs.:
Ser. 1997-S19, Cl. M-1, 6.50%, 2012 1,694,525 1,695,122
Ser. 1997-S19, Cl. M-2, 6.50%, 2012 1,129,650 1,126,959
Ser. 1997-S21, Cl. M-1, 6.50%, 2012 979,849 980,195
Ser. 1997-S21, Cl. M-2, 6.50%, 2012 653,004 651,448
Ser. 1998-NS1, Cl. B-1, 6.375%, 2009 159,302 147,554
PNC Mortgage Securities,
Mortgage Pass-Through Ctfs.,
Ser. 1997-3, Cl. 1B3, 7%, 2027 362,437 364,476
______________
16,129,955
_____________
Telecommunications--.5% U.S. West Capital Funding,
Gtd. Notes, 6.875%, 2028 500,000 503,997
_____________
Tobacco--2.0% Philip Morris,
Notes, 6.95%, 2001 2,000,000 (c) 2,067,488
_____________
U.S. Government Agency/
Mortgage-Backed--14.4% Federal Home Loan Mortgage Association, REMIC Trust,
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1916, Cl. PI, 7%, 12/15/2011
(Interest Only Obligation) 4,183,746 (d) 920,633
Federal National Mortgage Association:
6.88%, 2/1/2028 1,395,746 1,406,214
REMIC Trust:
Gtd. REMIC Pass-Through Ctfs.:
Ser. 1997-24, Cl IA, 7%, 1/18/2026
(Interest Only Obligation) 2,325,786 (d) 974,039
Ser. 1993-20, Cl. GC, 7%, 9/25/2019
(Interest Only Obligation) 2,121,428 (d) 615,877
Government National Mortgage Association I,
8%, 9/15/2008 818,448 850,671
Government National Mortgage Association II,
Adjustable Rate Mortage,
5.50%, 5/20/2028 4,029,323 4,040,646
Government National Mortgage Association REMIC Trust,
Gtd. REMIC Pass-Through Securities:
Ser. 1997-2, Cl. K, 7.50%, 1/20/2024 3,300,000 3,409,098
Ser. 1997-4, Cl. G, 7.50%, 11/16/2024 2,500,000 2,573,350
_____________
14,790,528
_____________
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- ______________ _____________
U.S. Government Agency--.1% FICO Coupon Strips,
Ser. 1, Zero Coupon, 5/11/2000 $ 95,000 $ 85,535
_____________
U.S. Government--10.2% U.S. Treasury Inflation Protection Securities,
3.625%, 4/15/2028 5,000,000 (e) 4,964,631
U.S. Treasury Notes,
5.50%, 2/28/2003 5,500,000 5,498,284
_____________
10,462,915
_____________
TOTAL BONDS AND NOTES
(cost $87,003,153) $ 88,782,804
=============
Short-Term Investments--3.2%
- -------------------------------------------------------
Agency Discount Note; Federal Home Loan Banks,
5.85%, 7/1/1998
(cost $3,225,000) $ 3,225,000 $ 3,225,000
=============
TOTAL INVESTMENTS (cost $90,228,153) 89.7% $ 92,007,804
=============
CASH AND RECEIVABLES (NET) 10.3% $ 10,584,431
=============
NET ASSETS 100.0% $102,592,235
=============
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Variable rate security-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, 1998,
these securities amounted to $16,395,909 or 16.0% of net assets.
(c)Reflects date security can be redeemed at holders' option; the stated
maturity date is 6/1/2006.
(d) Notional face amount shown.
(e)Variable rate security--base interest rate shown--adjustment to interest
rate linked to the Consumer Price Index.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED)
Cost Value
______________ ______________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $ 90,228,153 $ 92,007,804
Cash 803,719
Receivable for investment securities sold 9,684,370
Interest receivable 955,770
Prepaid expenses and other assets 8,565
_____________
103,460,228
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 57,489
Payable for investment securities purchased 627,787
Payable for shares of Beneficial Interest redeemed 167,113
Accrued expenses 15,604
_____________
867,993
_____________
NET ASSETS $102,592,235
z =============
REPRESENTED BY: Paid-in capital $ 99,195,957
Accumulated undistributed investment income--net 498,242
Accumulated net realized gain (loss) on investments 1,118,385
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 1,779,651
_____________
NET ASSETS $102,592,235
=============
SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial Interest authorized) 8,615,607
NET ASSET VALUE, offering and redemption price per share $11.91
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income $3,159,859
EXPENSES: Investment advisory fee--Note 3(a) $ 306,972
Professional fees 11,696
Prospectus and shareholders' reports 8,814
Custodian fees--Note 3(a) 8,039
Registration fees 3,784
Trustees' fees and expenses--Note 3(b) 775
Shareholder servicing costs 455
Miscellaneous 1,047
___________
Total Expenses 341,582
___________
INVESTMENT INCOME--NET 2,818,277
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments $ 770,347
Net unrealized appreciation (depreciation) on investments 267,511
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,037,858
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,856,135
===========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
________________ ___________________
OPERATIONS:
<S> <C> <C>
Investment income--net $ 2,818,277 $ 4,512,320
Net realized gain (loss) on investments 770,347 630,840
Net unrealized appreciation (depreciation) on investments 267,511 1,544,540
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations 3,856,135 6,687,700
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net (2,383,911) (4,588,351)
Net realized gain on investments -- (579,245)
_____________ _____________
Total Dividends (2,383,911) (5,167,596)
_____________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold 17,834,869 29,770,049
Dividends reinvested 2,383,911 5,167,612
Cost of shares redeemed (7,391,107) (9,101,449)
_____________ _____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 12,827,673 25,836,212
_____________ _____________
Total Increase (Decrease) in Net Assets 14,299,897 27,356,316
NET ASSETS:
Beginning of Period 88,292,338 60,936,022
_____________ _____________
End of Period $102,592,235 $ 88,292,338
============= =============
Undistributed investment income--net $ 498,242 $ 63,876
_____________ _____________
Shares Shares
_____________ _____________
CAPITAL SHARE TRANSACTIONS:
Shares sold 1,509,419 2,571,613
Shares issued for dividends reinvested 202,458 447,867
Shares redeemed (625,903) (789,293)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding 1,085,974 2,230,187
============= =============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This information
has been derived from the Series' financial statements.
Six Months Ended
June 30, 1998 Year Ended December 31,
__________________________________
___________
PER SHARE DATA: (Unaudited) 1997 1996 1995 1994 1993
__________ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.73 $11.50 $11.81 $10.53 $11.81 $10.94
______ ______ ______ ______ ______ ______
Investment Operations:
Investment income--net .40 .73 .66 .68 .73 .76
Net realized and unrealized gain (loss)
on investments .13 .32 (.31) 1.42 (1.27) .88
______ ______ ______ ______ ______ ______
Total from Investment Operations .53 1.05 .35 2.10 (.54) 1.64
______ ______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net (.35) (.73) (.66) (.69) (.73) (.76)
Dividends from net realized gain on investments -- (.09) -- (.13) (.01) (.01)
______ ______ ______ ______ ______ ______
Total Distributions (.35) (.82) (.66) (.82) (.74) (.77)
______ ______ ______ ______ ______ ______
Net asset value, end of period $11.91 $11.73 $11.50 $11.81 $10.53 $11.81
______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______
TOTAL INVESTMENT RETURN 8.31%(1) 9.42% 3.13% 20.42% (4.59%) 15.33%
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets .72%(1) .75% .79% .81% -- --
Ratio of interest expense to average net assets -- .02% -- -- -- --
Ratio of net investment income
to average net assets 5.97%(1) 6.27% 5.86% 6.13% 7.03% 6.51%
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus Corporation -- -- -- .04% 1.20% 3.51%
Portfolio Turnover Rate 151.31%(2) 374.76% 258.36% 263.53% 64.80% 110.62%
Net Assets, end of period (000's Omitted) $102,592 $88,292 $60,936 $37,447 $13,244 $4,706
- -----------------------------
(1) Annualized.
(2) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
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 ("Act") as an open-end management investment
company, operating as a series company currently offering thirteen series,
including the Quality Bond Portfolio (the "Series") and is intended to be a
funding vehicle for variable annuity contracts and variable life insurance
policies to be offered by the separate accounts of life insurance companies. The
Series is a diversified portfolio. The Series' investment objective is to
provide the maximum amount of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Dreyfus
Corporation (" Dreyfus") serves as the Series' investment adviser. Dreyfus is a
direct subsidiary of Mellon Bank, N.A. ("Mellon"). Premier Mutual Fund Services,
Inc. is the distributor of the Series' shares, which are sold without a sales
charge.
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 Series' financial statements are prepared in accordance with generally
accepted accounting principles 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) are valued each business day by an
independent pricing service (" 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 portfolios' 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.
Short-term investments, excluding U.S. Treasury Bills, are carried at amortized
cost, which approximates value.
(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,
including, where applicable, amortization of discount on investments, is
recognized on the accrual basis. Under the terms of the custodian agreement, the
Series receives net earnings credits based on available cash balances left on
deposit.
(C) 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 are normally declared and paid annually, but the
Series may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code. To the extent that net
realized capital gain can be offset by capital loss carryovers, if any, it is
the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series 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 Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2--BANK LINES OF CREDIT:
The Series 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 Series at rates which are related to the Federal
Funds rate in effect at the time of borrowings. During the period ended June 30,
1998 the Series did not borrow under either line of credit.
NOTE 3--INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment
advisory fee is computed at the annual rate of .65 of 1% of the value of the
Series' average daily net assets and is payable monthly.
The Series 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 Series.
The Series compensates Mellon under a custody agreement for providing
custodial services for the Series. During the period ended June 30, 1998, the
Series was charged $8,039 pursuant to the custody agreement.
(B) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of investment
securities, excluding short-term securities, during the period ended June 30,
1998, amounted to $136,325,885 and $137,805,534, respectively.
At June 30, 1998, accumulated net unrealized appreciation on investments was
$1,779,651, consisting of $2,095,781 gross unrealized appreciation and $316,130
gross unrealized depreciation.
At June 30, 1998, 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).
[reg.tm]
[reg.tm]
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.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 120SA986
Variable
Investment Fund,
QUALITY BOND
PORTFOLIO
Semi-Annual
Report
June 30, 1998
