Dreyfus Variable Investment Fund, Quality Bond Portfolio
SEMIANNUAL REPORT June 30, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the portfolio are subject to change at any time based on
market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
Year 2000 Issues (Unaudited)
The portfolio could be adversely affected if the computer systems used by The
Dreyfus Corporation and the portfolio'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 portfolio
invests may be adversely affected by Year 2000-related problems. This could have
an impact on the value of the portfolio's investments and its share price.
Contents
THE PORTFOLIO
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2 Letter from the President
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
14 Financial Highlights
15 Notes to Financial Statements
FOR MORE INFORMATION
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Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Quality Bond Portfolio
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment
Fund, Quality Bond Portfolio, covering the six-month period from January 1, 1999
through June 30, 1999. Inside, you'll find valuable information about how the
portfolio was managed during the reporting period, including a discussion with
Dominick DeAlto, senior portfolio manager and a member of the Dreyfus Taxable
Fixed Income Team that manages the portfolio.
The past six months have produced mixed results for fixed-income investors.
That' s because economic growth has been stronger than many analysts expected,
fueling fears that inflation pressures may re-emerge. Overseas economies that
had been in recession -- including Japan and the rest of Asia -- appear to have
begun to gain strength. The U.S. economy, which is now in its eighth year of
expansion, has also grown more robustly than expected. In response, the Federal
Reserve raised short-term interest rates modestly on June 30.
In this economic climate, U.S. Treasury securities declined, giving back all of
the gains they achieved during their remarkable rally last summer and fall.
Prices of other types of bonds fell less sharply or remained relatively
unchanged when investors shifted assets back into market sectors they had
previously avoided. Accordingly, many corporate bonds, mortgage-backed
securities, asset-backed securities and U.S. dollar-denominated foreign bonds
provided higher returns than U.S. Treasuries over the first half of 1999.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Variable Investment Fund, Quality Bond
Portfolio.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
July 15, 1999
DISCUSSION OF PERFORMANCE
Dominick DeAlto, Senior Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus Variable Investment Fund, Quality Bond Portfolio perform during
the period?
For the six-month period ended June 30, 1999, Dreyfus Variable Investment Fund,
Quality Bond Portfolio produced a total return of -1.46%.(1) In addition, the
portfolio provided an income dividend (per share) of $0.305 as well as an
annualized distribution rate per share of 5.55% .(2) In comparison, the
portfolio' s benchmark, the Merrill Lynch Domestic Master Index (Subindex D010),
provided a total return of -1.52%.(3) The Lehman Brothers Aggregate Bond Index
had a total return of -1.37% for the same time period.(4)
We attribute the portfolio's performance to our ability to harvest gains from
some of our corporate and commercial mortgage-backed securities. At the same
time, we took the opportunity to increase our allocation to U.S. Treasury
securities, thereby enhancing the portfolio's overall liquidity.
Since March 1, 1999, the Team has initiated several modest changes to the
portfolio' s investment strategy -- including increasing the liquidity of the
portfolio -- which they believe will be able to further enhance performance.
What is the portfolio's investment approach?
The portfolio seeks to maximize current income while attempting to preserve
capital and maintain the portfolio' s liquidity. In doing so, the portfolio
invests at least 80% of its assets in fixed-income securities, including
mortgage-related securities, collateralized mortgage obligations ("CMOs"), and
asset-backed securities that, when purchased, are rated A or better or the
unrated equivalent as determined by Dreyfus. The portfolio may also invest up to
10% of its net assets in foreign securities.
The Portfolio
DISCUSSION OF PERFORMANCE (CONTINUED)
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.
During the first three months of the period, the portfolio maintained a longer
duration -- or higher sensitivity to interest rates -- versus its benchmark.
However, beginning in April, we began to shorten our duration, primarily because
we believed the Federal Reserve might increase short-term interest rates in
response to fears of inflation, improving global economies and investors'
willingness to take on incremental risk. This turned out to be a prudent move as
the portfolio benefited from an environment characterized by rising interest
rates. Furthermore, when the Federal Open Market Committee (FOMC) decided to
raise short-term interest rates by 25 basis points on June 30, 1999, it prompted
bond prices, which generally move inversely to interest rates, to fall.
What other factors influenced the portfolio's performance?
The majority of our gains during the period were realized within the corporate
bond sector, the portfolio's largest weighting. Specifically, we profited from
many of the same types of bonds that hurt us last fall. As global economies
improved, so did their bonds, many of which we held in the portfolio.
Additionally, when market sentiment turned mid-period to favor value-oriented
type securities, we benefited by taking on meaningful positions in more
domestic-oriented cyclical bonds -- that is, bonds issued by companies whose
earnings are sensitive to changes in economic conditions. In particular, the
portfolio' s overweight in such areas as chemicals, paper and forest products,
energy and oil services served to boost its relative return.
Commercial mortgage-backed securities (CMBS) also provided positive results for
the portfolio. The sector, which had sustained a great deal of damage from the
fall, has since rebounded nicely. Gains in CMBS's were primarily driven by
climbing real estate prices and
again, investors' desire to take on higher levels of risk in order to earn
higher yields. We reduced the portolio's exposure to this sector and boosted
profits in doing so.
On the other hand, several factors held back the portfolio' s overall
performance. First, while many corporate bonds provided strong returns for the
portfolio, not all did. In some cases, we took losses, which served to hinder
our returns.
What is the portfolio's current strategy?
Toward the end of the period, as our opinion of the spread sectors was tempered,
we began trimming our corporate bond and commercial mortgage-backed security
positions, choosing to take profits and use those assets to build up the
portfolio's Treasury position for liquidity purposes. In doing so, we believe we
have enabled the portfolio to maintain ready access to cash so that it can
quickly take advantage of new investment opportunities.
July 15, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD 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) 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.
(3) 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 OR BETTER.
(4) SOURCE: LEHMAN BROTHERS -- THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS AN
UNMANAGED INDEX OF CORPORATE, GOVERNMENT AND GOVERNMENT AGENCY DEBT INSTRUMENTS,
MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES WITH AN AVERAGE MATURITY
OF 1-10 YEARS.
The Portfolio
STATEMENT OF INVESTMENTS
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
BONDS AND NOTES--94.8% Amount ($) Value ($)
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<S> <C> <C>
Asset-Backed--1.1%
Copelco Capital Funding,
Asset-Backed Ctfs.,
Ser. 1999-A, Cl. A5, 5.95%, 2004 490,000 (a) 481,272
Peco Energy Transition Trust,
Transition Bonds,
Ser. 1999-A, Cl. A2, 5.63%, 2005 1,000,000 986,900
1,468,172
Banking--1.3%
Capital One Bank,
Sr. Notes, 6.15%, 2001 1,800,000 1,781,658
Chemicals--1.1%
ICI Wilmington
(Gtd. by Imperial Chemical Industries),
Notes, 7.05%, 2007 1,500,000 1,467,448
Commercial Mortgage Pass-Through Ctfs.--7.4%
Asset Securitization,
Ser. 1997-D5, Cl. A1D, 6.85%, 2041 2,000,000 1,962,188
DLJ Mortgage Acceptance,
Ser. 1997-CF2, Cl. B3, 6.99%, 2009 1,000,000 (a) 896,563
Heller Financial Commercial Mortgage Asset,
Ser. 1999-PH1, Cl. A2, 6.847%, 2031 2,000,000 1,984,687
Merrill Lynch Mortgage Investors,
Ser. 1995-C3, Cl. C, 7.339%, 2025 2,200,000 (b) 2,230,899
Resolution Trust,
Ser. 1994-C2, Cl. D, 8%, 2025 2,730,882 2,764,158
9,838,495
Conglomerates--1.1%
Tyco International Group,
Gtd. Notes, 7%, 2028 1,600,000 1,487,286
Electric Power--1.1%
Electric Lightwave,
Notes, 6.05%, 2004 1,500,000 (a) 1,456,473
Energy--1.4%
Conoco,
Notes, 6.95%, 2029 2,000,000 1,873,676
Financial--1.4%
Associates Corp. of North America,
Sr. Notes, 6.25%, 2008 2,000,000 1,902,146
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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Hotels & Motels--1.5%
Hyatt Equities,
Notes, 6.8%, 2000 2,000,000 (a) 2,003,150
Industrial--.4%
Eastman Kodak,
Deb., 9.95%, 2018 400,000 506,668
Insurance--2.9%
Frank Russell,
Notes, 5.625%, 2009 1,500,000 (a) 1,364,250
Marsh & McLennan Cos.,
Sr. Notes, 7.125%, 2009 2,400,000 2,418,106
3,782,356
Money Center Banks--1.5%
HSBC Holding,
Sub. Notes, 7.5%, 2009 2,000,000 2,016,668
Oil & Gas Products/Services--1.0%
CMS Panhandle Holding,
Sr. Notes, 7%, 2029 1,400,000 (a) 1,297,642
Oil Services--1.4%
Petroleum Geo-Services,
Sr. Notes, 7.125%, 2028 2,000,000 1,844,716
Paper & Forest Products--1.4%
International Paper,
Deb., 6.875%, 2029 2,000,000 1,842,726
Railroad--1.5%
Terminal Railroad Association,
First Mortgage, 4%, 2019 2,601,000 1,959,466
Real Estate Investment Trusts--1.1%
Reckson Operating Partnership,
Notes, 7.75%, 2009 1,500,000 1,440,991
Residential Mortgage Pass-Through Ctfs.--11.8%
Chase Mortgage Finance,
REMIC, Ser. 1998S3, Cl. B3, 6.5%, 2013 650,061 (a) 528,378
GE Capital Mortgage Services:
REMIC, Ser. 1996-14, Cl. 2B1, 7.25%, 2011 734,555 716,742
REMIC, Ser. 1996-17, Cl. 2B1, 7.25%, 2011 699,110 680,947
Nomura Asset Securities,
Ser. 1998-D6, Cl. A3, 6.98%, 2028 1,000,000 (b) 951,719
The Portfolio
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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Norwest Asset Securities:
Ser. 1997-7, Cl. B1, 7%, 2027 1,956,950 1,809,513
Ser. 1997-11, Cl. M, 7%, 2027 2,461,010 2,356,712
Ser. 1997-16, Cl. M, 6.75%, 2027 1,474,178 1,381,880
Ser. 1998-2, Cl. B1, 6.5%, 2028 2,964,483 2,625,346
Ser. 1998-13, Cl. B5, 6.25%, 2028 247,135 (a) 153,069
PNC Mortgage Securities,
Ser. 1997-3, Cl. 1B3, 7%, 2027 342,950 337,799
Residential Funding Mortgage Securities 1:
Ser. 1997-S19, Cl. M1, 6.5%, 2012 1,624,070 1,519,756
Ser. 1997-S19, Cl. M2, 6.5%, 2012 1,082,682 995,028
Ser. 1997-S21, Cl. M1, 6.5%, 2012 938,462 917,327
Ser. 1997-S21, Cl. M2, 6.5%, 2012 625,422 609,774
Ser. 1998-NS1, Cl. B1, 6.375%, 2009 147,371 (a) 124,580
15,708,570
Restaurants--1.5%
Tricon Global Restaurants,
Sr. Notes, 7.45%, 2005 2,000,000 1,992,904
Retail--1.9%
Lowe's Cos.,
Notes, 6.5%, 2029 1,500,000 (a) 1,338,395
Saks,
Notes, 8.25%, 2008 1,100,000 1,146,709
2,485,104
U.S. Government Agencies--7.3%
FICO Coupon Strips,
Ser. 1, Zero Coupon, 5/11/ 2000 95,000 90,681
Federal National Mortgage Association, Deb.,
5.125%, 2/13/2004 10,000,000 9,591,430
9,682,111
U.S. Government Agency/Mortgage Backed--12.6%
Federal Home Loan Mortgage Association, REMIC Trust,
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1916, Cl. P1, 7%, 12/15/2011
(Interest Only Obligation) 3,630,633 (c) 760,944
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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Federal National Mortgage Association:
6.88%, 2/1/2028 1,382,336 1,372,195
REMIC Trust,
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1993-20, Cl. GC, 7%, 9/25/2019
(Interest Only Obligation) 2,121,428 (c) 360,706
Government National Mortgage Association I:
7%, 8/15/2029 1,000,000 (d) 990,000
7.5%, 8/15/2029 6,400,000 (d) 6,480,000
8%, 9/15/2008 603,790 621,710
Project Loan,
6.9%, 11/15/2038 6,005,828 6,017,059
Government National Mortgage Association II,
Adjustable Rate Mortgage,
5.5%, 5/20/2028 96,591 97,677
16,700,291
U.S. Government--30.0%
U.S. Treasury Bonds,
5.25%, 2/15/2029 2,000,000 1,795,760
U.S. Treasury Notes:
5.25%, 5/31/2001 16,000,000 15,927,360
5.25%, 5/15/2004 18,500,000 18,202,705
5.5%, 5/15/2009 4,000,000 3,916,320
39,842,145
Yankee--1.1%
Korea Electric Power,
Deb., 7.75%, 2013 1,600,000 1,450,146
Total Bonds and Notes
(cost $127,567,933) 125,831,008
The Portfolio
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
Short-Term Investments--11.1% Amount ($) Value ($)
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Agency Discount Note;
Federal Farm Credit Bank,
4.5%, 7/1/1999
(cost $14,735,000) 14,735,000 14,735,000
Total Investments (cost $142,302,933) 105.9% 140,566,008
Liabilities, Less Cash and Receivables (5.9%) (7,792,389)
Net Assets 100.0% 132,773,619
(A) 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, 1999,
THESE SECURITIES AMOUNTED TO $9,643,772 OR 7.3% OF NET ASSETS.
(B) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(C) NOTIONAL FACE AMOUNT SHOWN.
(D) PURCHASED ON A FORWARD COMMITMENT BASIS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
Cost Value
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Assets ($):
Investments in securities--See Statement of
Investments 142,302,933 140,566,008
Cash 694,146
Receivable for investment securities sold 8,413,759
Interest receivable 1,230,711
Paydowns receivable 13,412
Prepaid expenses and other assets 15,800
150,933,836
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Liabilities ($):
Due to The Dreyfus Corporation and affiliates 73,305
Payable for investment securities purchased 17,920,480
Payable for shares of Beneficial Interest redeemed 132,122
Accrued expenses 34,310
18,160,217
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Net Assets ($) 132,773,619
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Composition of Net Assets ($):
Paid-in capital 138,073,932
Accumulated undistributed investment income--net 612,694
Accumulated net realized gain (loss) on investments (4,176,082)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (1,736,925)
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Net Assets ($) 132,773,619
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Shares Outstanding
(unlimited number of $.001 par value
shares of Beneficial Interest authorized) 11,985,865
Net Asset Value, offering and redemption price per share ($) 11.08
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999 (Unaudited)
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Investment Income ($):
Interest Income 3,850,580
Expenses:
Investment advisory fee--Note 3(a) 399,538
Professional fees 20,556
Prospectus and shareholders' reports 15,298
Custodian fees--Note 3(a) 14,215
Registration fees 4,428
Trustees' fees and expenses--Note 3(b) 913
Shareholder servicing costs 818
Miscellaneous 3,755
Total Expenses 459,521
Investment Income--Net 3,391,059
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Realized and Unrealized Gain (Loss) on Investments--Note 4 ($):
Net realized gain (loss) on investments (3,753,419)
Net unrealized appreciation (depreciation) on investments (1,475,747)
Net Realized and Unrealized Gain (Loss) on Investments (5,229,166)
Net (Decrease) in Net Assets Resulting from Operations (1,838,107)
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
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Operations ($):
Investment income--net 3,391,059 5,948,658
Net realized gain (loss) on investments (3,753,419) 1,055,595
Net unrealized appreciation (depreciation)
on investments (1,475,747) (1,773,317)
Net Increase (Decrease) in Net Assets
Resulting from Operations (1,838,107) 5,230,936
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Dividends to Shareholders from ($):
Investment income--net (2,778,365) (6,012,534)
Net realized gain on investments -- (1,826,296)
Total Dividends (2,778,365) (7,838,830)
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Beneficial Interest Transactions ($):
Net proceeds from shares sold 26,187,970 44,681,117
Dividends reinvested 2,778,365 7,838,830
Cost of shares redeemed (13,036,782) (16,743,853)
Increase (Decrease) in Net Assets from
Beneficial Interest Transactions 15,929,553 35,776,094
Total Increase (Decrease) in Net Assets 11,313,081 33,168,200
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Net Assets ($):
Beginning of Period 121,460,538 88,292,338
End of Period 132,773,619 121,460,538
Undistributed investment income--net 612,694 --
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Capital Share Transactions (Shares):
Shares sold 2,329,067 3,785,929
Shares issued for dividends reinvested 247,186 668,662
Shares redeemed (1,153,102) (1,421,510)
Net Increase (Decrease) in Shares Outstanding 1,423,151 3,033,081
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
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.
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended December 31,
-----------------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value,
beginning of period 11.50 11.73 11.50 11.81 10.53 11.81
Investment Operations:
Investment income--net .30 .67 .73 .66 .68 .73
Net realized and unrealized
gain (loss) on investments (.47) (.04) .32 (.31) 1.42 (1.27)
Total from Investment Operations (.17) .63 1.05 .35 2.10 (.54)
Distributions:
Dividends from investment
income--net (.25) (.68) (.73) (.66) (.69) (.73)
Dividends from net realized gain
on investments -- (.18) (.09) -- (.13) (.01)
Total Distributions (.25) (.86) (.82) (.66) (.82) (.74)
Net asset value, end of period 11.08 11.50 11.73 11.50 11.81 10.53
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TOTAL RETURN (%) (2.94)(a) 5.49 9.42 3.13 20.42 4.59
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to
average net assets .75(a) .73 .75 .79 .81 --
Ratio of interest expense
to average net assets -- -- .02 -- -- --
Ratio of net investment income
to average net assets 5.52(a) 5.74 6.27 5.86 6.13 7.03
Decrease reflected in above
expense ratios due to
undertakings by
The Dreyfus Corporation -- -- -- -- .04 1.20
Portfolio Turnover Rate 262.42(b) 244.95 374.76 258.36 263.53 64.80
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Net Assets, end of period
($ x 1,000) 132,774 121,461 88,292 60,936 37,447 13,244
(A) ANNUALIZED.
(B) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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 thirteen
series, including the Quality Bond Portfolio (the "portfolio") 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 portfolio is a diversified series. The portfolio's 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 portfolio's investment
adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). Premier
Mutual Fund Services, Inc. is the distributor of the portfolio's 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 portfolio' s 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
The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(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
portfolio 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
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, if any, 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.
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 at rates which are related to the Federal
Funds rate in effect at the time of borrowings. During the period ended June 30,
1999, the portfolio 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
portfolio's average daily net assets and is payable monthly.
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, 1999, the portfolio was charged $40 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, 1999, the
portfolio was charged $14,215 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.
The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
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,
1999, amounted to $311,276,321 and $300,710,163, respectively.
At June 30, 1999, accumulated net unrealized depreciation on investments was
$1,736,925, consisting of $684,704 gross unrealized appreciation and $2,421,629
gross unrealized depreciation.
At June 30, 1999, 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).
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.
P.O. Box 9671
Providence, RI 02940
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
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) 1999 Dreyfus Service Corporation 120SA996
