Dreyfus Variable
Investment Fund,
Small Cap Portfolio
ANNUAL REPORT December 31, 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
Dreyfus and the portfolio's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. Dreyfus has
taken steps designed to avoid year 2000-related problems in its systems and to
monitor the readiness of other service providers. 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
- ------------------------------------------------------------
2 Letter from the President
3 Discussion of Portfolio Performance
6 Portfolio Performance
7 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
20 Report of Independent Auditors
21 Important Tax Information
FOR MORE INFORMATION
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Back Cover
The Portfolio
Dreyfus Variable Investment Fund,
Small Cap Portfolio
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Variable Investment
Fund, Small Cap Portfolio, covering the 12-month period from January 1, 1999
through December 31, 1999. Inside, you'll find valuable information about how
the portfolio was managed during the reporting period, including a discussion
with the portfolio managers, Hilary Woods and Paul Kandel.
The past year has been both highly volatile and rewarding for investors in U.S.
stocks, including the small-capitalization sector of the market. On December 31,
the last trading day of 1999, most major stock market indices hit new highs,
including the Dow Jones Industrial Average, the S&P 500 Index of large-cap
stocks, the technology-heavy Nasdaq 100 and the Russell 2000 Index of
small-capitalization stocks.
These simultaneous highs masked the remarkable narrowness of the stock market's
advance in 1999, however, including the small-cap market. Growth-oriented
small-cap stocks handily outperformed value-oriented small-cap stocks throughout
the year. Indeed, the overall stock market's stellar performance was generally
limited to a handful of highly valued technology and telecommunications
companies, some of which have no earnings. In our view, many fundamentally sound
small-cap companies in other market sectors may be selling at attractive
valuations.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Variable Investment Fund, Small Cap
Portfolio.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
January 14, 2000
DISCUSSION OF PERFORMANCE
Hilary Woods and Paul Kandel, Portfolio Managers
How did Dreyfus Variable Investment Fund, Small Cap Portfolio perform relative
to its benchmark?
For the 12-month period ended December 31, 1999, Dreyfus Variable Investment
Fund, Small Cap Portfolio produced a total return of 23.15%.(1) This performance
exceeded the Russell 2000 Index's 21.26% total return for the same period.(2)
We attribute this performance to our success in identifying individual
investment opportunities among a broad range of sectors, industries and
investment styles. In addition, we succeeded in emphasizing some of the market's
strongest sectors, such as technology, consumer products and energy.
What is the portfolio's investment approach?
The portfolio invests primarily in a diversified group of small-cap companies,
focusing on those companies that offer new or innovative products or services
that we believe enhance prospects for growth of future earnings. We also base
investment decisions on economic or political conditions that we believe are
likely to affect a stock' s performance, and on the impact of changes in a
company's management or organizational structure.
Our investment approach targets growth-oriented stocks (those of companies with
earnings that are expected to grow faster than the overall market) ,
value-oriented stocks (those that appear underpriced according to a variety of
financial measurements) , and stocks that exhibit both characteristics. We also
diversify among the market's various industries and sectors, supervising a team
of sector managers who each make buy-and-sell decisions within their respective
areas of expertise.
What other factors influenced the portfolio's performance?
The portfolio benefited from being overweight in the technology sector, a
volatile sector of the market, which was the best-performing segment of the
small-cap market by a wide margin. Our technology
The Portfolio
DISCUSSION OF PERFORMANCE (CONTINUED)
holdings profited from growth in three key areas: the Internet, semiconductors
and telecommunications. Internet-related holdings included Network Solutions,
the company that registers and maintains most Internet domain names, and CMGI, a
venture capital firm with stakes in dozens of public and private
Internet-related companies. In the semiconductor area, we achieved gains with
chip producers such as Conexant Systems and equipment manufacturers such as Lam
Research. In telecommunications, we connected with companies such as SDL that
deliver products to meet the ever greater need for bandwidth in business
communications.
In addition, the portfolio was positively influenced by consistent strength in
the U.S. economy, which was driven by strong consumer spending. As a result, the
portfolio achieved excellent results in the consumer products sector. Our best
performers included TCA Cable TV, which was taken over by Cox Communications,
Infinity Broadcasting, and Tiffany & Co., the luxury retailer.
Global economies showed signs of resurgence as well, leading to increasing
demand for energy resources. The portfolio was overweight in this sector and the
portfolio' s stock selection was good. Energy resources included offshore oil
service companies such as Cooper Cameron, Smith International and Global
Industries.
Of course, not every company in the portfolio showed positive returns. Some
stocks lagged, even among our best-performing sectors. The portfolio also
experienced weak performance throughout the period from two sectors in
particular: finance and health care. The portfolio benefited from our caution in
both segments; however, our selections were worse than the index.
Financial stocks generally suffered during 1999' s rising interest-rate
environment. As a result, many of the portfolio's financial holdings lost
ground. In particular, Reliance Group Holdings and Fremont General disappointed,
owing to a combination of company- and industry-specific problems. Exceptions
included Executive Risk, which was taken over by Chubb Corp. at a substantial
premium, and Duff & Phelps Credit Rating, an internationally recognized credit
rating agency.
An increasingly restrictive regulatory environment and the prospect for further
government-imposed limitations on Medicare and Medicaid reimbursements battered
the health care sector. Although the portfolio benefited from a few holdings of
stocks in advanced-stage biotech companies such as Gilead Sciences, those gains
were more than matched by losses in other health care companies such as
information management services provider IDX Systems, which was hit by Y2K
deferrals.
What is the portfolio's current strategy?
During the month of December 1999, small-cap stocks performed exceptionally
well, with the Russell 2000 Index enjoying its greatest gains since January
1987. Supported by those late gains, the Russell 2000 Index outperformed the S&P
500 Index for 1999, the first time it has done so in many years.
Although no one knows whether or how long this trend will persist, we continue
to believe that small-cap stocks offer the potential for strong growth and
above-average capital appreciation. Accordingly, we have continued to adhere to
our blended growth-and-value investment strategy in seeking to outperform the
Russell 2000 Index.
We currently remain sanguine on technology and energy given the strong earnings
growth prospects for these two groups and their historically strong first
quarter performance. We currently are sticking with our caution on financial
services near term in view of possible continued unfriendly Fed policy.
January 14, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT
THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH
INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS.
(2) SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- REFLECTS THE REINVESTMENT OF
INCOME DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE RUSSELL
2000 INDEX IS AN UNMANAGED INDEX OF SMALL-CAP PERFORMANCE AND IS COMPOSED OF THE
2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS
COMPOSED OF THE LARGEST U.S. COMPANIES BY MARKET CAPITALIZATION.
The Portfolio
PORTFOLIO PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Variable
Investment Fund, Small Cap Portfolio and the Russell 2000 Index
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<TABLE>
Average Annual Total Returns AS OF 12/31/99
Inception From
Date 1 Year 5 Years Inception
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<S> <C> <C> <C> <C>
PORTFOLIO 8/31/90 23.15% 15.93% 35.65%
</TABLE>
(+) SOURCE: LIPPER ANALYTICAL SERVICES, INC.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
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, SMALL CAP PORTFOLIO ON 8/31/90 (INCEPTION DATE) TO A $10,000
INVESTMENT MADE IN THE RUSSELL 2000 INDEX ON THAT DATE. ALL DIVIDENDS AND
CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED.
THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL
APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE RUSSELL 2000 INDEX IS AN
UNMANAGED INDEX AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL
3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF 3,000 OF THE LARGEST U.S.
COMPANIES BY MARKET CAPITALIZATION. THE INDEX DOES NOT TAKE INTO ACCOUNT
CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO
PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN
THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT
STATEMENT OF INVESTMENTS
<TABLE>
December 31, 1999
COMMON STOCKS--98.1% Shares Value ($)
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<S> <C> <C>
COMMERCIAL SERVICES--2.9%
Profit Recovery Group International 637,500 (a) 16,933,594
Strategic Distribution 945,000 (a) 1,358,437
Valassis Communications 450,000 (a) 19,012,500
37,304,531
CONSUMER NON-DURABLES--2.0%
Movado Group 700,000 (b) 15,268,750
Tommy Hilfiger 475,000 (a) 11,073,437
26,342,187
CONSUMER SERVICES--6.8%
Infinity Broadcasting, Cl. A 781,250 (a) 28,271,484
Meredith 432,500 18,029,844
Premier Parks 525,000 (a) 15,159,375
SFX Entertainment 470,000 (a) 17,008,125
Sun International Hotels 486,000 (a) 9,416,250
87,885,078
ELECTRONIC TECHNOLOGY--20.7%
Conexant Systems 630,000 (a) 41,816,250
Cordant Technologies 480,000 15,840,000
L-3 Communications Holdings 325,000 (a) 13,528,125
Lam Research 300,000 (a) 33,468,750
Lattice Semiconductor 740,000 (a) 34,872,500
Newport News Shipbuilding 550,000 15,125,000
Novellus Systems 315,000 (a) 38,597,344
SDL 225,000 (a) 49,050,000
Sanmina 265,000 (a) 26,466,875
268,764,844
ENERGY MINERALS--1.9%
Devon Energy 500,000 16,437,500
Ocean Energy 1,141,000 (a) 8,842,750
25,280,250
FINANCE--9.3%
Bank United, Cl. A 275,000 7,493,750
CCB Financial 225,000 9,801,563
Charter One Financial 595,350 11,386,069
Dime Bancorp 500,000 7,562,500
Duff & Phelps Credit Rating 280,000 (b) 24,902,500
Everest Reinsurance Holdings 600,000 13,387,500
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
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FINANCE (CONTINUED)
FBL Financial Group, Cl. A 650,000 13,000,000
Protective Life 470,000 14,951,875
Republic Bancorp 511,500 6,209,930
Terra Nova (Bermuda) Holdings, Cl. A 375,000 11,250,000
119,945,687
HEALTH SERVICES--4.7%
Foundation Health Systems, Cl. A 1,450,000 (a) 14,409,375
IDX Systems 500,000 (a) 15,625,000
Oxford Health Plans 1,100,000 (a) 13,956,250
Total Renal Care Holdings 2,525,000 (a) 16,885,937
60,876,562
HEALTH TECHNOLOGY--3.3%
Andrx 256,500 (a) 10,853,156
Gilead Sciences 310,000 (a) 16,778,750
Mentor 600,000 15,487,500
43,119,406
INDUSTRIAL SERVICES--8.2%
Cooper Cameron 450,000 (a) 22,021,875
Cox Communications, Cl. A 500,000 (a) 25,750,000
Global Industries 1,535,000 (a) 13,239,375
Granite Construction 675,000 12,445,313
IMCO Recycling 400,000 5,050,000
Safety-Kleen 650,000 (a) 7,353,125
Smith International 400,000 (a) 19,875,000
105,734,688
NON-ENERGY MINERALS--2.4%
Bethlehem Steel 600,000 (a) 5,025,000
Martin Marietta Materials 245,000 10,045,000
Minerals Technologies 395,000 15,824,687
30,894,687
PROCESS INDUSTRIES--3.5%
Abitibi-Consolidated 1,425,000 16,921,875
Albany International, Cl. A 900,000 (a) 13,950,000
OM Group 425,000 14,635,937
45,507,812
COMMON STOCKS (CONTINUED) Shares Value ($)
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PRODUCER MANUFACTURING--5.4%
Crane 725,000 14,409,375
Harsco 425,000 13,493,750
MagneTek 750,000 (a) 5,765,625
Terex 525,000 (a) 14,568,750
Titan International 1,295,000 (b) 8,417,500
U.S. Can 654,000 (a) 12,998,250
69,653,250
RETAIL TRADE--4.3%
Tiffany & Co. 625,000 55,781,250
TECHNOLOGY SERVICES--14.2%
Art Technology Group 245,000 31,390,625
Intuit 570,000 (a) 34,164,375
National Data 510,000 17,308,125
Network Solutions 200,000 (a) 43,512,500
Proxicom 222,500 27,659,531
Rational Software 600,000 (a) 29,475,000
183,510,156
TRANSPORTATION--1.6%
Expeditors International of Washington 474,000 20,767,125
UTILITIES--6.9%
IPALCO Enterprises 400,000 6,825,000
Metromedia Fiber Network, Cl. A 875,000 (a) 41,945,313
Minnesota Power 530,000 8,976,875
Montana Power 500,000 18,031,250
National Fuel Gas 295,000 13,717,500
89,495,938
TOTAL COMMON STOCKS
(cost $814,093,087) 1,270,863,451
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
SHORT-TERM INVESTMENTS--2.8% Amount ($) Value ($)
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U.S.TREASURY BILLS:
5.15%, 1/13/2000 535,000 534,310
5.16%, 1/20/2000 21,458,000 21,411,007
4.93%, 2/3/2000 2,838,000 2,826,705
5.05%, 2/10/2000 1,773,000 1,763,869
5.26%, 3/23/2000 1,047,000 1,035,200
5.19%, 3/30/2000 9,639,000 9,518,802
TOTAL SHORT-TERM INVESTMENTS
(cost $37,071,642) 37,089,893
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TOTAL INVESTMENTS (cost $851,164,729) 100.9% 1,307,953,344
LIABILITIES, LESS CASH AND RECEIVABLES (.9%) (12,255,620)
NET ASSETS 100.0% 1,295,697,724
A NON-INCOME PRODUCING.
B INVESTMENTS IN NON-CONTROLLED AFFILIATES (COST $37,526,058)--SEE NOTE 1(D).
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
Cost Value
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ASSETS ($):
Investments in securities--See Statement of
Investments 851,164,729 1,307,953,34
Cash 1,127,028
Dividends receivable 574,754
Receivable for investment securities sold 307,415
Prepaid expenses 59,121
1,310,021,662
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 799,498
Payable for investment securities purchased 13,458,696
Accrued expenses 65,744
14,323,938
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NET ASSETS ($) 1,295,697,724
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COMPOSITION OF NET ASSETS ($):
Paid-in capital 854,169,818
Accumulated undistributed investment income--net 872,859
Accumulated net realized gain (loss) on investments (16,133,568)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 456,788,615
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NET ASSETS ($) 1,295,697,724
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SHARES OUTSTANDING
(unlimited number of $.001 par value shares of
Beneficial Interest authorized) 19,532,502
NET ASSET VALUE, offering and redemption price per share ($) 66.34
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
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INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $29,014 foreign taxes withheld at source):
Unaffiliated issuers 7,590,878
Affiliated issuers--Note 1(d) 110,625
Interest 2,426,404
TOTAL INCOME 10,127,907
EXPENSES:
Investment advisory fee--Note 3(a) 8,915,955
Prospectus and shareholders' reports 137,335
Custodian fees--Note 3(a) 73,899
Professional fees 70,905
Trustees' fees and expenses--Note 3(b) 15,175
Shareholder servicing costs 11,529
Loan commitment fees--Note 2 9,766
Miscellaneous 15,359
TOTAL EXPENSES 9,249,923
INVESTMENT INCOME--NET 877,984
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments 72,618,485
Net unrealized appreciation (depreciation) on investments:
Unaffiliated issuers 170,061,604
Affiliated issuers--Note 1(d) 7,127,813
NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 177,189,417
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 249,807,902
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 250,685,886
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31,
-------------------------------------
1999 1998
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OPERATIONS ($):
Investment income--net 877,984 856,250
Net realized gain (loss) on investments 72,618,485 (88,451,268)
Net unrealized appreciation (depreciation)
on investments 177,189,417 40,225,699
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS 250,685,886 (47,369,319)
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DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (863,336) (4,484)
Net realized gain on investments -- (23,750,579)
TOTAL DIVIDENDS (863,336) (23,755,063)
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BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold 193,828,071 208,013,634
Dividends reinvested 863,336 23,755,063
Cost of shares redeemed (395,620,128) (188,132,272)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (200,928,721) 43,636,425
TOTAL INCREASE (DECREASE) IN NET ASSETS 48,893,829 (27,487,957)
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NET ASSETS ($):
Beginning of Period 1,246,803,895 1,274,291,852
END OF PERIOD 1,295,697,724 1,246,803,895
Undistributed investment income--net 872,859 858,211
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CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 3,502,189 3,992,161
Shares issued for dividends reinvested 16,198 525,438
Shares redeemed (7,114,605) (3,690,117)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (3,596,218) 827,482
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>
Year Ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value, beginning of period 53.91 57.14 52.08 46.13 36.52
Investment Operations:
Investment income--net .04(a) .04 .07 .10 .16
Net realized and unrealized
gain (loss) on investments 12.43 (2.21) 8.49 7.53 10.54
Total from Investment Operations 12.47 (2.17) 8.56 7.63 10.70
Distributions:
Dividends from investment income--net (.04) (.00)(b) (.07) (.10) (.18)
Dividends from net realized gain
on investments -- (1.06) (3.43) (1.51) (.91)
Dividends in excess of net realized gain
on investments -- -- -- (.07) --
Total Distributions (.04) (1.06) (3.50) (1.68) (1.09)
Net asset value, end of period 66.34 53.91 57.14 52.08 46.13
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 23.15 (3.44) 16.75 16.60 29.38
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .78 .77 .78 .79 .83
Ratio of net investment income
to average net assets .07 .07 .12 .24 .54
Portfolio Turnover Rate 40.60 75.04 79.00 89.10 99.02
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Net Assets, end of period ($ x 1,000) 1,295,698 1,246,804 1,274,292 960,365 543,281
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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 Small Cap 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
maximize capital appreciation. The Dreyfus Corporation ("Dreyfus") serves as the
portfolio' s investment adviser. Dreyfus is a direct subsidiary of Mellon Bank,
N.A. (" Mellon" ), which is a wholly-owned subsidiary of Mellon Financial
Corporation. 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 (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices, except for open
short positions, where the asked price is used for valuation purposes. Bid price
is used when no asked price is available. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board The Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of Trustees. Investments denominated in foreign currencies are translated to
U.S. dollars at the prevailing rates of exchange. Forward currency exchange
contracts are valued at the forward rate.
(b) Foreign currency transactions: The portfolio does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the portfolio's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value
of assets and liabilities other than investments in securities resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custody agreement, the portfolio received
net earnings credits of $12,926 during the period ended December 31, 1999 based
on available cash balances left on deposit. Income earned under this arrangement
is included in interest income.
(d) Affiliated issuers: Issuers in which the portfolio held 5% or more of the
outstanding voting securities are defined as "affiliated" in the Act. The
following summarizes affiliated issuers during the period ended December 31,
1999:
<TABLE>
SHARES
-----------------------------------------------------------
BEGINNING END OF DIVIDEND MARKET
NAME OF ISSUER OF PERIOD PURCHASES SALES PERIOD INCOME ($) VALUE ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Duff & Phelps
Credit Rating 280,000 - - 280,000 33,600 24,902,500
Titan International 1,250,000 45,000 - 1,295,000 77,025 8,417,500
Movado Group* 550,000 150,000 - 700,000 15,268,750
TOTAL - - - - 110,625 48,588,750
* Not an affiliated issuer at December 31, 1998.
</TABLE>
(e) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and 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, it is the policy of the portfolio not to distribute such gain.
(f) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes.
The portfolio has an unused capital loss carryover of approximately $3,588,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1999. This
amount is calculated based on Federal income tax regulations which may differ
from financial reporting in accordance with generally accepted accounting
principles. If not applied, the carryover expires in fiscal 2006.
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay The Portfoli
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
commitment fees on its pro rata portion of the Facility. Interest is charged to
the portfolio at rates based on prevailing market rates in effect at the time of
borrowings. During the period ended December 31, 1999, the portfolio did not
borrow under the Facility.
NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment
advisory fee is computed at the annual rate of .75 of 1% of the value of the
portfolio's average daily net assets and is payable monthly.
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 December 31, 1999, the portfolio was charged $329 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 December 31, 1999,
the portfolio was charged $73,899 pursuant to the custody agreement.
(b) Each trustee who is not an "affiliated person" as defined in the Act
received from the fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board received an additional 25% of such
compensation.
Each non-affiliated trustee is a Board member of one or more funds comprising a
certain group of funds (" Fund Group") within the Dreyfus complex. Effective
January 1, 2000, for their participation as a trustee in a Fund Group, the
trustees receive an annual fee of $40,000 each, $6,000 for each meeting attended
in person and $500 for each telephonic meeting in which they participate. These
fees are allocated among the funds in the Fund Group. The Chairman of the Board
receives an additional 25% of such compensation.
(c) During the period ended December 31, 1999, the portfolio incurred total
brokerage commissions of $1,407,162, of which $13,000 was paid to Dreyfus
Brokerage Services, a wholly-owned subsidiary of Mellon Financial Corporation.
NOTE 4--Securities Transactions:
The following summarizes the aggregate amount of purchases and sales of
investment securities, excluding short-term securities, during the period ended
December 31, 1999:
PURCHASES ($) SALES ($)
- --------------------------------------------------------------------------------
Unaffiliated issuers 458,761,987 632,259,959
Affiliated issuers 3,782,188 --
TOTAL 462,544,175 632,259,959
At December 31, 1999, accumulated net unrealized appreciation on investments was
$456,788,615, consisting of $536,043,638 gross unrealized appreciation and
$79,255,023 gross unrealized depreciation.
At December 31, 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).
The Portfolio
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Trustees
Dreyfus Variable Investment Fund, Small Cap Portfolio
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Dreyfus Variable Investment Fund, Small Cap
Portfolio (one of the series constituting the Dreyfus Variable Investment Fund)
as of December 31, 1999, 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 auditing standards generally accepted
in the United States. 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, 1999 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, Small Cap Portfolio at December 31, 1999, 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 accounting principles
generally accepted in the United States.
New York, New York
February 3, 2000
IMPORTANT TAX INFORMATION (Unaudited)
The portfolio also designates 100% of the ordinary dividends paid during the
fiscal year ended December 31, 1999 as qualifying for the corporate dividends
received deduction.
The Portfolio
For More Information
Dreyfus Variable Investment Fund,
Small Cap 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) 2000 Dreyfus Service Corporation 121AR9912
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
AND THE RUSSELL 2000 INDEX
EXHIBIT A:
DREYFUS VARIABLE
INVESTMENT FUND,
PERIOD RUSSELL 2000 SMALL CAP
INDEX * PORTFOLIO
8/31/90 10,000 10,000
12/31/90 9,569 10,210
12/31/91 13,976 26,519
12/31/92 16,548 45,422
12/31/93 19,676 76,451
12/31/94 19,319 82,376
12/31/95 24,828 106,579
12/31/96 28,923 124,263
12/31/97 35,392 145,074
12/31/98 34,490 140,081
12/31/99 41,821 172,509
* Source: Lipper Analytical Services, Inc.
