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, ZERO COUPON 2000 PORTFOLIO
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for the Dreyfus Variable Investment
Fund--Zero Coupon 2000 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 7.27%,* compared to 7.19% for the Merrill Lynch
U.S. Treasury Coupon 2-Year Strips Index.** Income dividends paid from net
investment income during the period amounted to $0.673 per share representing a
distribution rate per share of 5.38%.***
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 ENVIRONMENT
Over the past 12 months, the bond market experienced record volatility, with
sharp swings in interest rates. This volatility generated a "flight to quality"
as investors scrambled for a safe haven in 1998, driving yields significantly
lower. The 30-year Treasury bond began the year yielding 5.925% and ended the
year yielding 5.096%. At one point, yields on the 30-year Treasury bond declined
to 4.72% at the peak of fear. Investors apparently were inclined to accept these
significantly lower yields for Treasuries in order to lessen quality risk.
To put in perspective the amount of fear that arose during this tumultuous
market, we can look at quality spreads. Quality spreads are the differences in
yields between Treasuries and other investment grade securities like corporate
bonds, mortgage-backed securities and agency securities. The quality spreads
among these securities reached levels during the reporting period that were last
seen in the early 1990s during a recession. At the end of the reporting period,
these securities recovered somewhat from the dramatically wide spread levels
that were reached during the month of October. The primary reason for the
recovery is that the Fed lowered interest rates three times during the reporting
period to provide liquidity in an effort to calm the markets.
PORTFOLIO OVERVIEW
During 1998 we maintained a slightly above-average duration for the target
maturity of this Portfolio most of the year, which worked out quite well. We
also aimed at a December 2000 target maturity, with a slight bias to shorter
maturities outperforming longer ones in the Portfolio's exposure. This worked
out well, as the Fed eventually lowered interest rates. At the end of the fiscal
year, the Portfolio reflected a neutral duration strategy.
We continued to target zero coupon bonds where possible for the Portfolio. We
will look to move any issues that are longer in maturity than the target back
toward the target date. We have also emphasized agency zero coupon notes.
Thank you for your investment with Dreyfus. We appreciate the opportunity to
serve your investment needs.
Very truly yours,
[Gerald E. Thunelius signature]
Gerald E. Thunelius
Portfolio Manager
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 U.S.
Treasury Coupon 2-Year Strips Index is an unmanaged zero coupon index with
constant maturity and duration. The Index does not take into account charges,
fees and other expenses.
*** 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, ZERO COUPON 2000 PORTFOLIO DECEMBER 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS VARIABLE
INVESTMENT FUND, ZERO COUPON 2000 PORTFOLIO AND THE MERRILL LYNCH U.S. TREASURY
COUPON 2-YEAR STRIPS INDEX
Dollars
$21,459
Dreyfus Variable Investment Fund, Zero Coupon 2000 Portfolio
$17,954
Merrill Lynch U.S. Treasury Coupon 2-Year Strips Index*
*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>
7.27% 5.94% 9.59%
- ------------------------
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, Zero Coupon 2000 Portfolio on 8/31/90 (Inception Date) to a
$10,000 investment made in the Merrill Lynch U.S. Treasury Coupon 2-Year Strips
Index 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 U.S. Treasury
Coupon 2-Year Strips Index is an unmanaged zero coupon index with constant
maturity and duration. 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, ZERO COUPON 2000 PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Principal
Bonds and Notes--98.0% Amount Value
- ------------------------------------------------------- ____________ ____________
<S> <C> <C>
Foreign--2.4% Deutsche Bank AG,
Medium-Term Notes, Zero Coupon, 2000 . . . . . . . $..1,000,000 $ 938,442
____________
Municipal Bonds--3.5% New Jersey Economic Development Authority,
State Pension Funding Bonds, Ser. 1997B,
Zero Coupon, 2001 . . . . . . . . . . . . . . . . 1,500,000 1,342,545
____________
U.S. Government
Agencies--85.7% Chattanooga Valley,
Secured First Mortgage, Zero Coupon, 1/1/2000 . . 176,000 167,126
FACO Coupon Strips,
Ser. 97-1, Zero Coupon, 7/21/2000 . . . . . . . . 4,743,000 4,403,605
FICO Coupon Strips:
Ser. 1, Zero Coupon, 11/11/2000 . . . . . . . . . 1,132,000 1,034,450
Ser. 15, Zero Coupon, 9/7/2001 . . . . . . . . . . 2,500,000 2,186,600
Federal Home Loan Bank Coupon Strips,
Ser. A-1, Zero Coupon, 2/25/2003 . . . . . . . . . 1,789,000 1,453,271
Federal Home Loan Mortgage:
Coupon Strips, Zero Coupon, 5/15/2000 . . . . . . 5,000,000 4,686,150
Principal Strips, Zero Coupon, 5/15/2000 . . . . . 1,000,000 937,569
Federal National Mortgage Association:
Medium-Term Notes, Coupon Strips:
Zero Coupon, 4/8/2001 . . . . . . . . . . . . . 5,500,000 4,917,770
Zero Coupon, 7/24/2001 . . . . . . . . . . . . 1,227,000 1,081,501
Principal Strips,
Zero Coupon, 8/7/2001 . . . . . . . . . . . . . 6,000,000 5,279,160
Tennessee Valley Authority:
Coupon Strips, Zero Coupon, 11/1/2000 . . . . . . 3,000,000 2,744,196
Principal Strips, Zero Coupon, 11/1/2000 . . . . . 4,500,000 4,114,089
____________
33,005,487
____________
U.S. Government--6.4% U.S. Treasury Bonds,
4.25%, 11/15/2003 . . . . . . . . . . . . . . . . 2,500,000 2,468,550
____________
TOTAL BONDS AND NOTES
(cost $36,919,565) . . . . . . . . . . . . . . . . $37,755,024
____________
DREYFUS VARIABLE INVESTMENT FUND, ZERO COUPON 2000 PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Principal
Short-Term Investments--.4% Amount Value
- ------------------------------------------------------- ____________ ____________
U.S. Government Agency
Discount Note--.3% Federal Home Loan Banks, 4.30%, 1/4/1999 . . . . . . . $.....100,000 $ 99,964
____________
U.S. Treasury Bills--.1% 4.50%, 1/21/1999 . . . . . . . . . . . . . . . . . . . 25,000 24,939
4%, 1/28/1999 . . . . . . . . . . . . . . . . . . . . 25,000 24,930
____________
49,869
____________
TOTAL SHORT-TERM INVESTMENTS
(cost $149,827) . . . . . . . . . . . . . . . . . $ 149,833
____________
TOTAL INVESTMENTS (cost $37,069,392) . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.4% $37,904,857
_______ ____________
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6% $ 623,135
_______ ____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $38,527,992
_______ ____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, ZERO COUPON 2000 PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
____________ ____________
<S> <C> <S>
ASSETS: Investments in securities--See Statement of Investments . . $37,069,392 $37,904,857
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 647,343
Interest receivable . . . . . . . . . . . . . . . . . . . 13,795
Prepaid expenses and other assets . . . . . . . . . . . . 10,231
____________
38,576,226
____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 16,929
Payable for shares of Beneficial Interest redeemed . . . 5,991
Accrued expenses . . . . . . . . . . . . . . . . . . . . 25,314
____________
48,234
____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38,527,992
____________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $37,887,511
Accumulated net realized gain (loss) on investments . . . (194,984)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4(b) . . . . . . . . . . . . . . . 835,465
____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38,527,992
____________
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 3,082,677
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $12.50
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, ZERO COUPON 2000 PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income . . . . . . . . . . . . . . . . . . . . . $2,169,448
EXPENSES: Investment advisory fee--Note 3(a) . . . . . . . . . . . $162,716
Prospectus and shareholders' reports . . . . . . . . . . 19,627
Auditing fees . . . . . . . . . . . . . . . . . . . . . . 17,091
Custodian fees--Note 3(a) . . . . . . . . . . . . . . . . 9,324
Trustees' fees and expenses--Note 3(b) . . . . . . . . . 1,272
Shareholder servicing costs . . . . . . . . . . . . . . . 817
Registration fees . . . . . . . . . . . . . . . . . . . . 797
Legal fees . . . . . . . . . . . . . . . . . . . . . . . 532
Loan commitment fees--Note 2 . . . . . . . . . . . . . . 218
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 2,114
_________
Total Expenses . . . . . . . . . . . . . . . . . . 214,508
___________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,954,940
___________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . $ 53,302
Net realized gain (loss) on financial futures . . . . . . 35,191
_________
Net Realized Gain (Loss) . . . . . . . . . . . . . 88,493
Net unrealized appreciation (depreciation) on investments
[including ($18,906) net unrealized depreciation
on financial futures] . . . . . . . . . . . . . . . . 467,097
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 555,590
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $2,510,530
___________
___________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, ZERO COUPON 2000 PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1998 December 31, 1997
_________________ _________________
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,954,940 $ 1,852,449
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . 88,493 (236,008)
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . 467,097 641,766
____________ ____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . 2,510,530 2,258,207
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,955,398) (1,851,991)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . -- (341,946)
____________ ____________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,955,398) (2,193,937)
____________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . 9,622,198 7,185,361
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,955,398 2,193,937
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,710,873) (6,133,188)
____________ ____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions . . 2,866,723 3,246,110
____________ ____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . 3,421,855 3,310,380
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,106,137 31,795,757
____________ ____________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38,527,992 $35,106,137
____________ ____________
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . --- $ 458
____________ ____________
Shares Shares
____________ ____________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 770,401 586,814
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . 157,239 179,780
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (698,443) (500,612)
____________ ____________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . 229,197 265,982
____________ ____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, ZERO COUPON 2000 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.
Year Ended December 31,
______________________________________________________
PER SHARE DATA: 1998 1997 1996 1995 1994
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . $12.30 $12.29 $12.70 $11.39 $12.57
________ ________ ________ ________ ________
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . .67 .69 .68 .69 .69
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . . . .20 .14 (.36) 1.31 (1.18)
________ ________ ________ ________ ________
Total from Investment Operations . . . . . . . . . . . . .87 .83 .32 2.00 (.49)
________ ________ ________ ________ ________
Distributions:
Dividends from investment income--net . . . . . . . . . . (.67) (.69) (.68) (.69) (.68)
Dividends from net realized gain on investments . . . . . -- (.13) (.05) -- (.01)
________ ________ ________ ________ ________
Total Distributions . . . . . . . . . . . . . . . . . . . (.67) (.82) (.73) (.69) (.69)
________ ________ ________ ________ ________
Net asset value, end of period . . . . . . . . . . . . . $12.50 $12.30 $12.29 $12.70 $11.39
________ ________ ________ ________ ________
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . 7.27% 7.01% 2.59% 17.95% (3.91%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . . . . . .59% .61% .66% .68% --
Ratio of net investment income
to average net assets . . . . . . . . . . . . . . . . 5.41% 5.65% 5.54% 5.73% 6.04%
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus Corporation . . . -- -- -- .03% 1.05%
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . 84.71% 200.54% 98.28% 49.43% --
Net Assets, end of period (000's Omitted) . . . . . . . . $38,528 $35,106 $31,796 $22,291 $10,913
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, ZERO COUPON 2000 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 Zero Coupon 2000 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 as high an investment return as is consistent with the
preservation of capital. 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 and financial futures) 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 portfolio's securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Securities for which there are no such valuations are valued
at fair value as determined in good faith under the direction of the Board of
Trustees. Short-term investments, excluding U. S. Treasury Bills, are carried at
amortized cost, which approximates value. Financial futures are valued at the
last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market on
each business day.
(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.
The Series has an unused capital loss carryover of approximately $146,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1998. The
carryover does not DREYFUS VARIABLE INVESTMENT FUND, ZERO COUPON 2000 PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
include net realized securities losses from November 1, 1998 through December
31, 1998 which are treated, for Federal income tax purposes, as arising in
fiscal 1999. If not applied, the carryover expires in fiscal 2005.
NOTE 2--BANK LINE OF CREDIT:
The Series participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (" Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Series has agreed to pay commitment fees on its pro rata portion
of the Facility. Interest is charged to the Series at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended
December 31, 1998, the Series did not borrow under the Facility.
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 .45 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 $94 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 $9,324 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:
(A) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities and financial futures, during the period ended
December 31, 1998, amounted to $29,968,758 and $29,895,714, respectively.
The Series may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Series is exposed to
market risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the Series to "mark to
market" on a daily basis, which reflects the change in the market value of the
contract at the close of each day' s trading. Typically, variation margin
payments are received or made to reflect daily unrealized gains or losses. When
the contracts are closed, the Series recognizes a realized gain or loss. These
investments require initial margin deposits with a custodian, which consist of
cash or cash equivalents, up to approximately 10% of the contract amount. The
amount of these deposits is determined by the exchange or Board of Trade on
which the contract is traded and is subject to change. At December 31, 1998,
there were no financial futures contract outstanding.
(B) At December 31, 1998, accumulated net unrealized appreciation on
investments was $835,465, consisting of $859,163 gross unrealized appreciation
and $23,698 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, ZERO COUPON 2000 PORTFOLIO
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS VARIABLE INVESTMENT FUND, ZERO COUPON 2000 PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments of Dreyfus Variable Investment Fund, Zero
Coupon 2000 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, Zero Coupon 2000 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
[reg.tm logo]
(reg.tm)
DREYFUS VARIABLE INVESTMENT FUND,
ZERO COUPON 2000 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. 119AR9812
Variable
Investment Fund,
ZERO COUPON 2000
PORTFOLIO
Annual Report
December 31, 1998
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS VARIABLE INVESTMENT FUND, ZERO COUPON
2000 PORTFOLIO AND THE MERRILL LYNCH U.S. TREASURY
COUPON 2-YEAR STRIPS INDEX
EXHIBIT A:
MERRILL LYNCH DREYFUS VARIABLE
U.S. TREASURY INVESTMENT FUND,
PERIOD COUPON 2-YEAR ZERO COUPON 2000
STRIPS INDEX * PORTFOLIO
8/31/90 10,000 10,000
12/31/90 10,452 10,677
12/31/91 11,825 12,822
12/31/92 12,625 13,959
12/31/93 13,352 16,079
12/31/94 13,369 15,450
12/31/95 14,969 18,223
12/31/96 15,689 18,695
12/31/97 16,750 20,006
12/31/98 17,954 21,459
*Source: Merrill Lynch, Pierce, Fenner and Smith Inc.
