YEAR 2000 ISSUES (UNAUDITED)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the fund' s other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The Dreyfus Corporation is working to avoid Year 2000-related problems in its
systems and to obtain assurances from other service providers that they are
taking similar steps. In addition, issuers of securities in which the fund
invests may be adversely affected by Year 2000-related problems. This could have
an impact on the value of the fund's investments and its share price.
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 12-month period ended December 31, 1998,
the Portfolio produced a total return including share price changes and dividend
income generated, of 5.49%,* compared to 8.95% for the Merrill Lynch Domestic
Master Index (Subindex D010).** Income dividends paid from net investment income
during the period amounted to $0.679 per share, representing a distribution rate
per share of 5.81%.***
ECONOMIC REVIEW
During 1998, the 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 early in the
year, but world economic weakness generated powerful enough disinflationary
forces that the Fed acted instead to ease credit beginning in September. After
many years of subpar economic growth, continental Europe moved into a sustained
economic expansion. The overall European economy benefited as interest rates in
peripheral countries such as Spain and Italy fell, approaching the lower levels
established by Germany, on the eve of currency unification. Unlike the U.S.,
Europe has substantial excess capacity of productive plant and labor. In Asia,
weak economies were pervasive as a result of a financial crisis. The Latin
American economies weakened in turn as the financial stresses spread throughout
that region. On balance, there was a substantial weakening of the world economy
over the course of 1998 moderated mainly by the American consumer's role as
"spender of last resort."
A main influence on the U.S. economy during the year was the foreign
financial crisis and consequent cooling of the world economy. 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. The fall in inflation left more of the growth in consumer income
with which to buy goods and services. Thus, consumers benefited from a
combination of good growth in income after inflation, a strong labor market, and
increases in the prices of assets they owned, including bonds, stocks and real
estate. In a sense, 1998 was a year of disinflationary boom in the U.S., as
above-trend economic growth coincided with negligible inflation.
The negative effect of Asian weakness was felt in the industrial sector more
than in the consumer sector. Corporate profits weakened, especially in sectors
affected by the Asian crisis such as world-traded commodities (oil, metals and
paper) and exports.
Evidence of a weaker world economy accumulated during 1998 as the financial
stresses continued. A worsened financial crisis occurred between the Russian
default in mid-August and the fallout from the Long-Term Capital Management
hedge fund crisis through early October. However, energetic steps were taken to
stabilize the Japanese banks, design a support package for Brazil, ease monetary
policy, and help overinvested financial institutions rebuild their cash
reserves. Indications of a calming of financial fears were evident in the final
months of the year. In any case, there appears to have been a shift in the
priorities of key policymakers from fighting potential inflation to
restimulating future world economic growth.
The global economy survived a triple financial crisis in 1998 from Japan,
emerging market countries and overextended financial institutions. Excess
capacity persists in many worldwide industries after years of high capital
spending followed by the onset of a worldwide weakening in demand. Fortunately,
the U.S. has led the world in making the transition from the old manufacturing
industries to the new growth industries, such as biotechnology, software,
computer hardware and the Internet. This contributed to the favorable
combination of low unemployment and low inflation in the U.S., and may yet lead
toward more efficient allocation of capital elsewhere in the world.
As 1998 ended, interest rates set by central banks remained in a downtrend in
most parts of the world including Europe and the U.S. A similar trend had even
begun in many emerging countries, as the stresses of financial crisis relaxed.
MARKET OVERVIEW
In our previous letter for the period ended June 30, 1998, the 10-year U.S.
Treasury bond was yielding 5.45%. Since then, this yield has fallen to 4.65% as
of December 31, 1998. This declining rate was precipitated by the deterioration
in the international economy that was mentioned above, as well as declining U.S.
equity markets which had peaked this summer. As a result, U.S. Treasuries have
become the safe haven for both U.S. and international investors at a time when
the supply is shrinking due to a federal budget surplus.
The flight to safety has caused yield spreads to Treasuries on both corporate
bonds and mortgage-backed bonds to widen dramatically. In many cases, while
Treasury yields were falling and prices rising, corporate and mortgage bond
yields were actually rising with prices declining. This dramatic price
divergence has resulted in forced hedge fund and brokerage firm liquidations
which, in turn, caused further price divergence to occur.
PORTFOLIO FOCUS
The Portfolio was generally positioned with a longer effective duration than
its benchmark, the Merrill Lynch Domestic Master Index (Subindex D010), during
most of the twelve-month period and thus has benefited from declining interest
rates. However, the more important factor has been our decision to own
corporates and mortgages and relatively few U.S. Treasury securities. This
single decision has caused the Portfolio to underperform its benchmark Index,
which has approximately 48% in U.S. Treasury and government agency securities.
At this time, the Portfolio is positioned to benefit from a more stable
financial environment where spreads on corporates and mortgages will narrow
relative to U.S. Treasury securities. We continue underweight government
mortgage-backed securities which, at these rate levels, are vulnerable to
increasing prepayment rates on the underlying home mortgages. Instead, we own
commercial mortgage-backed securities which have much better protection against
early pre-payments than government mortgage-backed bonds. Regarding specific
holdings in the Portfolio, we have added positions in Illinois Power and
Southern California Edison and sold positions in BT Capital Trust and Equitable
Life Assurance of the U.S.
As always, we will be monitoring all areas of the fixed-income markets for
superior risk-to-reward relationships on which the Fund can capitalize. It is
both an honor and a pleasure to be managing your investments.
Very truly yours,
Kevin McClintock
Kevin McClintock
Head of Taxable Fixed Income
January 15, 1999
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, divided by the net asset value per share at
the end of the period.
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO DECEMBER 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS VARIABLE
INVESTMENT FUND, QUALITY BOND PORTFOLIO AND THE MERRILL LYNCH DOMESTIC MASTER
INDEX (SUBINDEX D010)
Dollars
$20,660
Dreyfus Variable Investment Fund, Quality Bond Portfolio
$20,651
Merrill Lynch Domestic Master Index (Subindex D010)*
*Source: Merrill Lynch, Pierce, Fenner and Smith Inc.
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended Five Years Ended From Inception (8/31/90)
December 31, 1998 December 31, 1998 to December 31, 1998
____________________ ____________________ _________________________
<S> <C> <C> <C>
5.49% 6.46% 9.09%
- ------------------------
Past performance is not predictive of future performance.
</TABLE>
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 above graph compares a $10,000 investment made in Dreyfus Variable
Investment Fund, Quality Bond Portfolio on 8/31/90 (Inception Date) to a $10,000
investment made in the Merrill Lynch Domestic Master Index (Subindex D010) on
that date. All dividends and capital gain distributions are reinvested.
The Portfolio' s performance shown in the line graph takes into account all
applicable fees and expenses of the Portfolio. 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. The Index does not take into account charges, fees and other
expenses. Further information relating to Portfolio performance, including
expense reimbursements, if applicable, is contained in the Financial Highlights
section of the Prospectus and elsewhere in this report.
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Principal
Bonds and Notes--99.2% Amount Value
- -------------------------------------------------------- _____________ _____________
<S> <C> <C>
Asset-Backed--9.0% California Infrastructure and Economic Development Bank:
Special Purpose Trust SCE-1,
Rate Reduction Ctfs.,
Ser. 1997-1, Cl. A5, 6.28%, 2005 . . . . . . . $ 750,000 $ 782,284
Special Purpose Trust SDG & E-1,
Rate Reduction Ctfs.,
Ser. 1997-1, Cl. A5, 6.19%, 2005 . . . . . . . 1,000,000 1,012,370
ComEd Transitional Funding Trust,
Transitional Funding Trust Notes,
Ser. 1998, Cl. A-4, 5.39%, 2005 . . . . . . . . . 5,000,000 4,959,375
Illinois Power
Special Purpose Trust,
Transitional Funding Trust Notes,
Ser. 1998-1, Cl. A-6, 5.54%, 2009 . . . . . . . . 3,000,000 2,990,062
The Money Store Trust,
Asset-Backed Ctfs.,
Ser. 1996-D, Cl. A-16, 7.11%, 2028 . . . . . . . . 1,188,986 1,219,710
_____________
10,963,801
_____________
Banking--1.9% Colonial Capital I,
Gtd. Capital Securities, Ser. A, 8.92%, 2027 . . 1,000,000 1,029,225
Fuji Finance,
Gtd. Floating Rate Notes, 6.55%, 2049 . . . . . . 2,000,000 (a) 1,300,000
_____________
2,329,225
_____________
Commercial Mortgage
Pass-Through Ctfs.--20.6% 277 Park Avenue Finance,
Ser. 1997-C1, Cl. A2, 7.68%, 2007 . . . . . . . . 2,250,000 (b) 2,427,188
Asset Securitization,
Ser. 1997-D5, Cl. A1D, 6.85%, 2041 . . . . . . . . 2,000,000 2,088,125
BTC Mortgage Investors Trust,
Ser. 1997-S1, Cl. B, 6.445%, 2009 . . . . . . . . 2,000,000 (b) 2,000,000
DLJ Mortgage Acceptance:
Ser. 1996-CF2, Cl. A-3, 7.38%, 2021 . . . . . . . 2,000,000 (b) 2,118,750
Ser. 1997-CF2, Cl. B-3, 6.99%, 2009 . . . . . . . 1,000,000 (b) 923,438
Ser. 1998-CF2, Cl. A-1A, 5.88%, 2031 . . . . . . . 4,000,000 4,015,000
Merrill Lynch Mortgage Investors,
Ser. 1995-C3, Cl. C, 7.342%, 2025 . . . . . . . . 2,200,000 (a) 2,330,097
Mortgage Capital Funding,
Ser. 1998-MC1, Cl. C, 6.947%, 2008 . . . . . . . . 3,000,000 3,095,625
Nomura Asset Securities,
Ser. 1998-D6, Cl. A-3, 6.98%, 2028 . . . . . . . . 3,000,000 (a) 3,174,795
Resolution Trust,
Ser. 1994-C2, Cl. D, 8%, 2025 . . . . . . . . . . 2,744,825 2,820,157
_____________
24,993,175
_____________
Hotels & Motels--1.7% Hyatt Equities,
Notes, 6.80%, 2000 . . . . . . . . . . . . . . . . 2,000,000 (b) 2,026,278
_____________
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Principal
Bonds and Notes (continued) Amount Value
- -------------------------------------------------------- _____________ _____________
Industrial--.5% Eastman Kodak,
Deb., 9.95%, 2018 . . . . . . . . . . . . . . . . $ 400,000 $ 557,620
_____________
Insurance--0.0% SunAmerica,
Deb., 9.95%, 2008 . . . . . . . . . . . . . . . . 13,000 16,531
_____________
Other--0.0% City of New York, Ser. D,
General Obligation Bonds, 10%, 2007 . . . . . . . 25,000 28,562
_____________
Pharmaceutical--2.5% Bayer,
Notes, 6.65%, 2028 . . . . . . . . . . . . . . . . 3,000,000 (b) 3,074,100
_____________
Publishing--1.7% A.H. Belo,
Sr. Notes, 6.875%, 2002 . . . . . . . . . . . . . 2,000,000 2,058,376
_____________
Railroads--1.7% Terminal Railroad Association,
First Mortgage Bonds, 4%, 2019 . . . . . . . . . . 2,601,000 1,998,353
_____________
Real Estate Investment Trusts--3.2% Crescent Real Estate Equities,
Notes, 6.625%, 2002 . . . . . . . . . . . . . . . 2,000,000 1,909,434
Tanger Properties,
Notes, 7.875%, 2004 . . . . . . . . . . . . . . . 2,000,000 1,920,000
_____________
3,829,434
_____________
Residential Mortgage
Pass-Through Ctfs.--13.0% Chase Mortgage Finance,
REMIC, Ser. 1998S3, Cl. B3, 6.50%, 2013 . . . . . 664,025 (b) 593,057
GE Capital Mortgage Services, REMIC:
Ser. 1996-14, Cl. 2B1, 7.25%, 2011 . . . . . . . . 754,442 772,881
Ser. 1996-17, Cl. 2B1, 7.25%, 2011 . . . . . . . . 717,821 734,187
Norwest Asset Securities:
Ser. 1997-7, Cl. B-1, 7%, 2027 . . . . . . . . . . 1,969,824 1,949,003
Ser. 1997-11, Cl. M, 7%, 2027 . . . . . . . . . . 2,475,889 2,479,182
Ser. 1997-16, Cl. M, 6.75%, 2027 . . . . . . . . . 1,483,262 1,461,576
Ser. 1998-2, Cl. B-1, 6.50%, 2028 . . . . . . . . 2,980,444 2,843,015
PNC Mortgage Securities,
Ser. 1997-3, Cl. 1B3, 7%, 2027 . . . . . . . . . . 353,729 371,935
Residential Funding Mortgage Securities 1:
Ser. 1997-S19, Cl. M-1, 6.50%, 2012 . . . . . . . 1,660,093 1,655,113
Ser. 1997-S19, Cl. M-2, 6.50%, 2012 . . . . . . . 1,106,697 1,089,543
Ser. 1997-S21, Cl. M-1, 6.50%, 2012 . . . . . . . 959,836 1,002,040
Ser. 1997-S21, Cl. M-2, 6.50%, 2012 . . . . . . . 639,666 666,193
Ser. 1998-NS1, Cl. B-1, 6.375%, 2009 . . . . . . . 153,435 (b) 132,844
_____________
15,750,569
_____________
Tobacco--1.7% Philip Morris,
Notes, 6.95%, 2001 . . . . . . . . . . . . . . . . 2,000,000 (c) 2,061,128
_____________
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Principal
Bonds and Notes (continued) Amount Value
- -------------------------------------------------------- _____________ _____________
U.S. Government Agency/
Mortgage Backed--14.2% Federal Home Loan Mortgage Association, REMIC Trust,
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1916, Cl. PI, 7%, 12/15/2011
(Interest Only Obligation) . . . . . . . . . . . . $ 4,016,371 (d) $ 604,94
Federal National Mortgage Association:
6.88%, 2/1/2028 . . . . . . . . . . . . . . . . . 1,389,165 1,490,827
REMIC Trust,
Gtd. REMIC Pass-Through Ctfs.:
Ser. 1993-20, Cl. GC, 7%, 9/25/2019
(Interest Only Obligation) . . . . . . . . . 2,121,428 (d) 351,266
Ser. 1997-24, Cl. IA, 7%, 1/18/2026
(Interest Only Obligation) . . . . . . . . . 2,325,786 (d) 514,976
Government National Mortgage Association I:
6.90%, 7/15/2037 . . . . . . . . . . . . . . . . . 6,347,000 (e) 6,394,539
8%, 9/15/2008 . . . . . . . . . . . . . . . . . . 711,799 740,271
Government National Mortgage Association II,
Adjustable Rate Mortgage,
5.50%, 5/20/2028 . . . . . . . . . . . . . . . . . 3,803,934 3,832,464
Government National Mortgage Association REMIC Trust,
Gtd. REMIC Pass-Through Securities,
Ser. 1997-2, Cl. K, 7.50%, 1/20/2024 . . . . . . . 3,300,000 3,375,867
_____________
17,305,156
_____________
U.S. Government Agency--.1% FICO Coupon Strips,
Ser. 1, Zero Coupon, 5/11/2000 . . . . . . . . . . 95,000 88,982
_____________
U.S. Government--27.4% U.S. Treasury Bonds:
4.75%, 11/15/2008 . . . . . . . . . . . . . . . . 14,750,000 14,864,755
5.25%, 11/15/2028 . . . . . . . . . . . . . . . . 12,000,000 12,292,320
U.S. Treasury Notes,
5.50%, 2/28/2003 . . . . . . . . . . . . . . . . . 6,000,000 6,181,020
_____________
33,338,095
_____________
TOTAL BONDS AND NOTES
(cost $120,680,563) . . . . . . . . . . . . . . . $120,419,385
_____________
Short-Term Investments--.3%
- -------------------------------------------------------
Agency Discount Note; Federal Home Loan Banks,
4.30%, 1/4/1999
(cost $386,861) . . . . . . . . . . . . . . . . . $ 387,000 $ 386,861
_____________
TOTAL INVESTMENTS (cost $121,067,424). . . . . . . . . . . . . . . . . . . . . . . . . . . 99.5% $120,806,246
_______ _____________
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5% $ 654,292
_______ _____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $121,460,538
_______ _____________
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- ------------------------------------------------------------------------------
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 December 31,
1998, these securities amounted to $13,295,655 or 10.9% 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) Partially purchased on a forward commitment basis.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
______________ ______________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . . . $121,067,424 $120,806,246
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679,987
Interest receivable . . . . . . . . . . . . . . . . . . . . . . 1,094,034
Prepaid expenses and other assets . . . . . . . . . . . . . . . 22,123
______________
122,602,390
______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . . . . 69,752
Payable for investment securities purchased . . . . . . . . . . 995,534
Payable for shares of Beneficial Interest redeemed . . . . . . 41,528
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 35,038
______________
1,141,852
______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $121,460,538
______________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . $122,144,379
Accumulated net realized gain (loss) on investments . . . . . . (422,663)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (261,178)
______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $121,460,538
______________
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 10,562,714
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $11.50
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income . . . . . . . . . . . . . . . . . . . . . . . . $6,707,355
EXPENSES: Investment advisory fee--Note 3(a) . . . . . . . . . . . . . . $ 673,601
Prospectus and shareholders' reports . . . . . . . . . . . . 34,911
Professional fees . . . . . . . . . . . . . . . . . . . . . . . 19,109
Custodian fees--Note 3(a) . . . . . . . . . . . . . . . . . . . 14,145
Registration fees . . . . . . . . . . . . . . . . . . . . . . . 9,946
Trustees' fees and expenses--Note 3(b) . . . . . . . . . . . 1,808
Shareholder servicing costs . . . . . . . . . . . . . . . . . . 965
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 4,212
____________
Total Expenses . . . . . . . . . . . . . . . . . . . . . 758,697
____________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,948,658
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . . . . $1,055,595
Net unrealized appreciation (depreciation) on investments . . . (1,773,317)
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . (717,722)
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $5,230,936
____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1998 December 31, 1997
__________________ __________________
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,948,658 $ 4,512,320
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . 1,055,595 630,840
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . (1,773,317) 1,544,540
______________ ______________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . 5,230,936 6,687,700
______________ ______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,012,534) (4,588,351)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . (1,826,296) (579,245)
______________ ______________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,838,830) (5,167,596)
______________ ______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . 44,681,117 29,770,049
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,838,830 5,167,612
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,743,853) (9,101,449)
______________ ______________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions . . 35,776,094 25,836,212
______________ ______________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . 33,168,200 27,356,316
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,292,338 60,936,022
______________ ______________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $121,460,538 $ 88,292,338
______________ ______________
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . $ ---- $ 63,876
______________ ______________
Shares Shares
______________ ______________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,785,929 2,571,613
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . 668,662 447,867
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,421,510) (789,293)
______________ ______________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . 3,033,081 2,230,187
______________ ______________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
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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.
Year Ended December 31,
____________________________________________________________
PER SHARE DATA: 1998 1997 1996 1995 1994
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . $11.73 $11.50 $11.81 $10.53 $11.81
_______ _______ _______ _______ _______
Investment Operations:
Investment income--net . . . . . . . . . . . . . .67 .73 .66 .68 .73
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . (.04) .32 (.31) 1.42 (1.27)
_______ _______ _______ _______ _______
TOTAL FROM INVESTMENT OPERATIONS . . . . . . . . .63 1.05 .35 2.10 (.54)
_______ _______ _______ _______ _______
Distributions:
Dividends from investment income--net . . . . . . (.68) (.73) (.66) (.69) (.73)
Dividends from net realized gain on investments . (.18) (.09) -- (.13) (.01)
_______ _______ _______ _______ _______
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . . . (.86) (.82) (.66) (.82) (.74)
_______ _______ _______ _______ _______
Net asset value, end of period . . . . . . . . . $11.50 $11.73 $11.50 $11.81 $10.53
_______ _______ _______ _______ _______
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . 5.49% 9.42% 3.13% 20.42% (4.59%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets . . .73% .75% .79% .81% --
Ratio of interest expense to average net assets . . -- .02% -- -- --
Ratio of net investment income
to average net assets . . . . . . . . . . . . . 5.74% 6.27% 5.86% 6.13% 7.03%
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus Corporation .-- .-- .-- .04% 1.20%
Portfolio Turnover Rate . . . . . . . . . . . . 244.95% 374.76% 258.36% 263.53% 64.80%
Net Assets, end of period (000's Omitted) . . . $121,461 $88,292 $60,936 $37,447 $13,244
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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
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.
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.
(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 custody 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 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 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 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 (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 December
31, 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. During the period
ended December 31, 1998, the Series was charged $102 pursuant to the transfer
agency agreement.
The Series compensates Mellon under a custody agreement to provide custodial
services for the Series. During the period ended December 31, 1998, the Series
was charged $14,145 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
December 31, 1998, amounted to $266,853,430 and $234,970,061, respectively.
At December 31, 1998, accumulated net unrealized depreciation on investments
was $261,178, consisting of $1,777,390 gross unrealized appreciation and
$2,038,568 gross unrealized depreciation.
At December 31, 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).
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Variable Investment Fund,
Quality Bond Portfolio (one of the series constituting the Dreyfus Variable
Investment Fund) as of December 31, 1998, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and financial highlights for
each of the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of December 31, 1998 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Variable Investment Fund, Quality Bond Portfolio at December 31, 1998,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
New York, New York
February 4, 1999
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Series hereby designates $.0221 per share as a
long-term capital gain distributions of the $.2010 per share paid on December
31, 1998, and also designates $.0001 per share as a long-term capital gain
distribution of the $.0939 per share paid on September 1, 1998.
[reg.tm logo]
(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. 120AR9812
Variable
Investment Fund,
QUALITY BOND
PORTFOLIO
Annual Report
December 31, 1998
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
AND THE MERRILL LYNCH DOMESTIC MASTER INDEX (SUBINDEX D010)
EXHIBIT A:
DREYFUS VARIABLE
MERRILL LYNCH INVESTMENT FUND,
PERIOD DOMESTIC MASTER QUALITY BOND
INDEX (SUBINDEX D010)* PORTFOLIO
8/31/90 10,000 10,000
12/31/90 10,626 10,240
12/31/91 12,299 11,686
12/31/92 13,219 13,098
12/31/93 14,522 15,106
12/31/94 14,112 14,414
12/31/95 16,702 17,357
12/31/96 17,299 17,899
12/31/97 18,954 19,584
12/31/98 20,651 20,660
*Source: Merrill Lynch, Pierce, Fenner and Smith Inc.
