Dreyfus Variable
Investment Fund,
Quality Bond 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 Performance
6 Portfolio Performance
8 Statement of Investments
12 Statement of Assets and Liabilities
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Financial Highlights
16 Notes to Financial Statements
20 Report of Independent Auditors
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 annual report for Dreyfus Variable Investment
Fund, Quality Bond 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 Dominick DeAlto, senior portfolio manager and a member of the Dreyfus
Taxable Fixed Income Team that manages the portfolio.
The past year was challenging for most fixed-income investors. Faster than
expected economic growth in the U.S. and overseas fueled concerns that
long-dormant inflationary pressures might re-emerge, potentially reducing the
future value of bonds' interest and principal payments. These concerns prompted
the Federal Reserve Board to raise key short-term interest rates three times
during the summer and fall of 1999 in an attempt to prevent a reacceleration of
inflation.
While U.S. Treasury and agency securities declined sharply in this environment
during 1999, prices of higher yielding securities -- such as corporate bonds and
mortgage-backed securities -- fell less severely. In an environment of robust
economic growth, investors appeared more comfortable owning bonds that are
influenced primarily by credit risk, and they avoided securities that are most
affected by interest-rate risk.
We appreciate your confidence over the past year, 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
January 14, 2000
DISCUSSION OF PERFORMANCE
Dominick DeAlto, Senior Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus Variable Investment Fund, Quality Bond Portfolio perform
relative to its benchmark?
For the 12-month period ended December 31, 1999, Dreyfus Variable Investment
Fund, Quality Bond Portfolio produced a total return of 0.18%.(1) In addition,
the portfolio provided an income dividend of $0.624 per share as well as a
distribution rate of 5.73% per share.(2) In comparison, the portfolio's
benchmark, the Lehman Brothers Aggregate Bond Index, provided a total return of
- -0.82% for the same time period.(3)
We attribute the portfolio' s positive relative performance to our security
selection strategy, which generally emphasized investment grade corporate bonds
and de-emphasized U.S. Treasury securities.
What is the portfolio's investment approach?
The portfolio seeks to maximize current income as is consistent with the
preservation of capital and the maintenance of liquidity. To pursue this goal,
the portfolio invests at least 80% of its net 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 are the unrated equivalent as determined by Dreyfus. The portfolio may
also invest up to 10% of its net assets in foreign securities. In addition, the
portfolio may invest in high grade commercial paper of U.S. issuers,
certificates of deposit, time deposits and bankers' acceptances, municipal
obligations and zero coupon securities, and fixed-income securities rated lower
than A (but not lower than B) by both Moody' s and S& P.
When selecting investments, we conduct analyses to identify those bond market
sectors that we believe represent the most attractive relative values. We
typically strive to hold those securities until their true values are reached,
or until other market sectors become more attractively valued.
The Portfolio
DISCUSSION OF PERFORMANCE (CONTINUED)
What other factors influenced the portfolio's performance?
Like virtually all fixed-income investments, the bonds in the portfolio were
adversely affected by rising interest rates throughout 1999.
Soon after the reporting period began, it became apparent that overseas
economies were beginning to recover from 1998's global financial crisis, and
that the growth of the U.S. economy was stronger than most analysts expected. In
this environment, investors began to move away from U.S. Treasury securities, to
which they had previously fled during the worst of the global financial crisis.
They moved instead into higher yielding, riskier assets. This caused the prices
of U.S. Treasury securities to fall from relatively high levels, while prices of
corporate bonds, mortgage-backed securities and asset-backed securities rallied
from what we believed were very attractive valuations compared to historical
norms.
In the second through fourth quarters of 1999, economic strength in domestic and
overseas markets raised concerns among U.S. fixed-income investors that
inflationary pressures might re-emerge. In response, the Federal Reserve Board
increased short-term interest rates three times during the summer and fall of
1999 in an attempt to forestall a reacceleration of inflation. These changes in
monetary policy caused the prices of most bonds to fall.
However, corporate bonds generally fell less severely than prices of U.S.
Treasury securities during the second half of the year. That's primarily because
corporate bonds tend to be more sensitive to the credit quality of their
issuers, which generally improves in a strong economy, and can be less sensitive
to interest rates trends. Mortgage-backed securities and asset-backed securities
also outperformed U.S. Treasury securities for similar reasons.
What is the portfolio's current strategy?
Our current strategy is an extension of the strategy we put in place last
summer. At that time, we shifted our emphasis from corporate bonds issued by
economically sensitive companies in the U.S. to bonds issue
by out-of-favor finance companies, including midsized regional banks in the
United States as well as U.S. dollar-denominated bonds from larger banks in
Japan and the United Kingdom.
We maintained this emphasis until the fourth quarter of 1999, when we reduced
our holdings of U.S. banks after they had reached higher valuations, in our
view. As of December 31, 1999, we maintained our emphasis on foreign corporate
securities because of attractive valuations and prospects for further economic
growth in Europe and Southeast Asia. We have also emphasized corporate bonds
issued by energy companies. We believe that many oil producers and oil service
companies' bonds are currently attractively valued, and we believe that last
year' s oil-price increases can support these companies' earnings and credit
quality in 2000.
Overall, as of December 31, corporate bonds comprised about 45% of the
portfolio, mortgage-backed securities comprised about 30% and U.S. Treasury
securities accounted for about 20% of assets. In our view, the portfolio
currently is well positioned for any further increases in short-term interest
rates in 2000. Of course, portfolio composition is subject to change at any
time.
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, 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 12-MONTH PERIOD, DIVIDED BY THE NET ASSET VALUE PER
SHARE AT THE END OF THE PERIOD.
(3) SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- THE LEHMAN BROTHERS AGGREGATE
BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN INDEX OF CORPORATE, U.S.
GOVERNMENT AND U.S. GOVERNMENT AGENCY DEBT INSTRUMENTS, MORTGAGE-BACKED
SECURITIES AND ASSET-BACKED SECURITIES WITH AN AVERAGE MATURITY OF 1-10 YEARS.
The Portfolio
PORTFOLIO PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Variable
Investment Fund, Quality Bond Portfolio with the Merrill Lynch Domestic Master
Index (Subindex D010) and the Lehman Brothers Aggregate Bond Index
((+)) SOURCE: BLOOMBERG L.P.
((+)(+)) 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, QUALITY BOND PORTFOLIO ON 8/31/90 (INCEPTION DATE) TO A $10,000
INVESTMENT MADE IN THE LEHMAN BROTHERS AGGREGATE BOND INDEX AND IN THE MERRILL
LYNCH DOMESTIC MASTER INDEX (SUBINDEX D010) ON THAT DATE. ALL DIVIDENDS AND
CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED.
THIS IS THE FIRST YEAR IN WHICH COMPARATIVE PERFORMANCE IS BEING SHOWN FOR THE
LEHMAN BROTHERS AGGREGATE BOND INDEX, WHICH HAS BEEN SELECTED AS THE PRIMARY
INDEX FOR COMPARING THE PORTFOLIO'S PERFORMANCE. THE LEHMAN BROTHERS AGGREGATE
BOND INDEX REPLACES THE MERRILL LYNCH DOMESTIC MASTER INDEX (SUBINDEX D010),
WHICH WAS USED AS THE FUND'S BENCHMARK INDEX LAST YEAR, BECAUSE THE STATISTICAL
INFORMATION MADE AVAILABLE BY LEHMAN BROTHERS AGGREGATE BOND INDEX IS PROVIDED
MORE FREQUENTLY. PERFORMANCE FOR THE MERRILL LYNCH DOMESTIC MASTER INDEX
(SUBINDEX D010) WILL NOT BE PROVIDED WITH THE NEXT ANNUAL REPORT, BUT IS
PROVIDED HEREWITH PURSUANT TO APPLICABLE REGULATIONS.
THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL
APPLICABLE FEES AND EXPENSES. THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS A
WIDELY ACCEPTED, UNMANAGED INDEX OF CORPORATE, U.S. GOVERNMENT AND U.S.
GOVERNMENT AGENCY DEBT INSTRUMENTS, MORTGAGE-BACKED SECURITIES AND ASSET-BACKED
SECURITIES. THE MERRILL LYNCH DOMESTIC MASTER INDEX (SUBINDEX D010) IS AN
UNMANAGED PERFORMANCE BENCHMARK FOR PORTFOLIOS THAT INCLUDE U.S. GOVERNMENT,
MORTGAGE AND INVESTMENT-GRADE CORPORATE SECURITIES RATED A AND BETTER.
NEITHER OF THE FOREGOING INDICES 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.
Average Annual Total Returns AS OF 12/31/99
<TABLE>
Inception From
Date 1 Year 5 Years Inception
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<S> <C> <C> <C> <C>
PORTFOLIO 8/31/90 0.18% 7.50% 8.10%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Portfolio
STATEMENT OF INVESTMENTS
<TABLE>
December 31, 1999
Principal
BONDS AND NOTES--105.2% Amount ($) Value ($)
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<S> <C> <C>
AEROSPACE & DEFENSE--1.8%
Lockheed Martin,
Notes, 8.2%, 2009 2,500,000 2,493,502
ASSET-BACKED/AUTOMOBILE RECEIVABLES--.5%
Provident Auto Lease ABS Trust,
Ser. 1999-1, Cl. A2, 7.025%, 2005 700,000 (a) 690,812
BANKING--1.3%
Capital One Bank,
Sr. Notes, 6.15%, 2001 1,800,000 1,770,847
CABLE TELEVISION--2.3%
Charter Communications Holdings,
Sr. Notes, 8.625%, 2009 1,500,000 1,393,125
RCN,
Sr. Notes, 10.125%, 2010 1,780,000 1,780,000
3,173,125
CHEMICALS--1.4%
Eastman Kodak,
Deb., 9.95%, 2018 400,000 476,146
ICI Wilmington
(Gtd. by Imperial Chemical Industries),
Notes, 7.05%, 2007 1,500,000 1,429,095
1,905,241
COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--2.0%
Resolution Trust,
Ser. 1994-C2, Cl. D, 8%, 2025 2,717,257 2,714,553
COMPUTER SERVICES--2.2%
Electronic Data Systems,
Notes, 7.45%, 2029 3,000,000 2,917,353
ELECTRIC POWER--1.9%
Israel Electric,
Sr. Notes, 8.1%, 2096 3,000,000 (a) 2,514,777
FINANCE--6.3%
DLJ,
Medium-Term Notes, .4%, 2000 6,500,000 (a) 6,565,267
Lehman Brothers Holdings,
Notes, 7.875%, 2009 2,000,000 1,999,416
8,564,683
FOOD RETAILING--2.2%
Fred Meyer,
Bonds, 7.375%, 2005 3,000,000 2,963,862
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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HOTELS & MOTELS--1.5%
Hyatt Equities,
Notes, 6.8%, 2000 2,000,000 (a) 1,999,402
INSURANCE--3.1%
Conseco,
Notes, 9%, 2006 4,100,000 4,251,725
OIL--5.6%
Amerada Hess,
Notes, 7.875%, 2029 2,500,000 2,451,025
K N Energy,
Sr. Notes, 6.65%, 2005 2,800,000 2,687,801
Yosemite Securities Trust I,
Bonds, 8.25%, 2004 2,500,000 (a) 2,463,260
7,602,086
RAILROAD--1.4%
Terminal Railroad Association,
First Mortgage, 4%, 2019 2,601,000 1,870,376
RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--2.9%
Chase Mortgage Finance,
REMIC, Ser. 1998S3, Cl. B3, 6.5%, 2013 632,813 (a) 488,057
GE Capital Mortgage Services:
REMIC, Ser. 1996-14, Cl. 2B1, 7.25%, 2011 712,645 698,150
REMIC, Ser. 1996-17, Cl. 2B1, 7.25%, 2011 679,132 664,381
Norwest Asset Securities,
Ser. 1998-13 Cl. B5, 6.25%, 2028 245,714 (a) 135,296
PNC Mortgage Securities,
Ser. 1997-3, Cl. 1B3, 7%, 2027 333,276 317,699
Residential Funding Mortgage Securities 1:
Ser. 1997-S19, Cl. M2, 6.5%, 2012 1,057,044 950,599
Ser. 1997-S21, Cl. M2, 6.5%, 2012 610,234 575,610
Ser. 1998-NS1, Cl. B1, 6.375%, 2009 141,008 (a) 118,220
3,948,012
RESTAURANTS--1.4%
Tricon Global Restaurants,
Sr. Notes, 7.45%, 2005 2,000,000 1,925,054
RETAIL--1.4%
Saks,
Notes, 8.25%, 2008 2,000,000 1,947,332
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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SPECIAL PURPOSE ENTITY--1.9%
Air 2 US, Ser.A,
Enhanced Equipment Notes, 8.027%, 2019 2,500,000 (a) 2,511,225
U.S. GOVERNMENT--26.4%
U.S. Treasury Bonds,
5.25%, 2/15/2029 3,415,000 2,829,259
U.S. Treasury Notes:
5.25%, 5/31/2001 10,000,000 9,874,500
5.25%, 8/15/2003 11,000,000 10,610,050
5.25%, 5/15/2004 1,100,000 1,053,998
5.75%, 6/30/2001 3,000,000 2,981,850
5.875%, 11/15/2004 2,000,000 1,961,400
6%, 8/15/2009 4,725,000 4,580,510
6.25%, 8/31/2002 2,000,000 1,998,340
35,889,907
U.S. GOVERNMENT AGENCY--7.0%
FICO Coupon Strips,
Ser. 1, Zero Coupon, 5/11/2000 95,000 93,061
Federal National Mortgage Association, Deb.,
5.125%, 2/13/2004 10,000,000 9,391,290
9,484,351
U.S. GOVERNMENT AGENCY/MORTGAGE-BACKED--28.8%
Federal Home Loan Mortgage Association, REMIC Trust,
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1916, Cl. P1, 7%, 12/15/2011
(Interest Only Obligation) 3,379,940 (b) 739,598
Federal National Mortgage Association:
6.5%, 4/1/2014-9/1/2014 4,905,604 4,762,999
6.88%, 2/1/2028 1,375,248 1,290,517
7%, 6/1/2029-9/1/2029 5,926,082 5,733,543
8%, 1/15/2029 4,500,000 (c) 4,536,540
REMIC Trust,
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1993-20, Cl. GC, 7%, 9/25/2019
(Interest Only Obligation) 2,121,428 (b) 312,911
Government National Mortgage Association I:
8%, 9/15/2008-1/15/2030 5,025,984 (d) 5,079,692
Project Loan,
6.9%, 11/15/2038 5,991,866 5,853,274
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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U.S. GOVERNMENT AGENCY/MORTGAGE-BACKED (CONTINUED)
Government National Mortgage Association II,
Adjustable Rate Mortgage:
7%, 9/1/2028-9/20/2029 988,606 952,128
7.5%, 1/1/2030 10,000,000 (c) 9,893,700
39,154,902
YANKEE--1.9%
Pemex Finance,
Ser. 1999-2, Cl. A1, Notes, 9.69%, 2009 2,500,000 2,586,887
TOTAL BONDS AND NOTES
(cost $144,730,697) 142,880,014
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SHORT-TERM INVESTMENTS--8.3%
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COMMERCIAL PAPER--3.5%
Countrywide Home Loans,
5%, 1/3/2000 285,000 284,921
Ford Motor Credit,
6.51%, 1/6/2000 4,500,000 4,495,931
4,780,852
U.S. TREASURY BILLS--4.8%
4.23%, 1/13/2000 5,940,000 5,932,337
5%, 3/30/2000 545,000 538,204
6,470,541
TOTAL SHORT-TERM INVESTMENTS
(cost $11,250,737) 11,251,393
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TOTAL INVESTMENTS (cost $155,981,434) 113.5% 154,131,407
LIABILITIES, LESS CASH AND RECEIVABLES (13.5%) (18,309,091)
NET ASSETS 100.0% 135,822,316
(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 DECEMBER 31,
1999, THESE SECURITIES AMOUNTED TO $17,486,316 OR 12.9% OF NET ASSETS.
(B) NOTIONAL FACE AMOUNT SHOWN.
(C) PURCHASED ON A FORWARD COMMITMENT BASIS.
</TABLE>
(D) PARTIALLY PURCHASED ON A FORWARD COMMITMENT BASIS.
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 155,981,434 154,131,407
Interest receivable 1,683,972
Paydowns receivable 19,134
Prepaid expenses and other assets 321
155,834,834
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 81,433
Cash overdraft due to Custodian 709,161
Payable for investment securities purchased 19,137,350
Payable for shares of Beneficial Interest redeemed 28,932
Accrued expenses 55,642
20,012,518
- --------------------------------------------------------------------------------
NET ASSETS ($) 135,822,316
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 143,402,151
Accumulated undistributed investment income--net 2,698
Accumulated net realized gain (loss) on investments (5,732,506)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (1,850,027)
- --------------------------------------------------------------------------------
NET ASSETS ($) 135,822,316
- --------------------------------------------------------------------------------
SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial Interest authorized)
12,477,662
NET ASSET VALUE, offering and redemption price per share ($) 10.89
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 8,261,502
EXPENSES:
Investment advisory fee--Note 3(a) 839,257
Custodian fees--Note 3(a) 32,541
Professional fees 32,092
Prospectus and shareholders' reports 31,855
Registration fees 5,612
Shareholder servicing costs 1,656
Trustees' fees and expenses--Note 3(b) 1,528
Miscellaneous 8,636
TOTAL EXPENSES 953,177
INVESTMENT INCOME--NET 7,308,325
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (5,309,843)
Net unrealized appreciation (depreciation) on investments (1,588,849)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (6,898,692)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 409,633
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31,
---------------------------
1999 1998
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 7,308,325 5,948,658
Net realized gain (loss) on investments (5,309,843) 1,055,595
Net unrealized appreciation (depreciation)
on investments (1,588,849) (1,773,317)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 409,633 5,230,936
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (7,305,627) (6,012,534)
Net realized gain on investments -- (1,826,296)
TOTAL DIVIDENDS (7,305,627) (7,838,830)
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold 39,622,759 44,681,117
Dividends reinvested 7,305,627 7,838,830
Cost of shares redeemed (25,670,614) (16,743,853)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS 21,257,772 35,776,094
TOTAL INCREASE (DECREASE) IN NET ASSETS 14,361,778 33,168,200
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 121,460,538 88,292,338
END OF PERIOD 135,822,316 121,460,538
Undistributed investment income--net 2,698 --
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 3,556,512 3,785,929
Shares issued for dividends reinvested 660,895 668,662
Shares redeemed (2,302,459) (1,421,510)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,914,948 3,033,081
SEE NOTES TO FINANCIAL STATEMENTS.
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
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value, beginning of period 11.50 11.73 11.50 11.81 10.53
Investment Operations:
Investment income--net .62 .67 .73 .66 .68
Net realized and unrealized
gain (loss) on investments (.61) (.04) .32 (.31) 1.42
Total from Investment Operations .01 .63 1.05 .35 2.10
Distributions:
Dividends from investment income--net (.62) (.68) (.73) (.66) (.69)
Dividends from net realized gain
on investments -- (.18) (.09) -- (.13)
Total Distributions (.62) (.86) (.82) (.66) (.82)
Net asset value, end of period 10.89 11.50 11.73 11.50 11.81
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) .18 5.49 9.42 3.13 20.42
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to
average net assets .74 .73 .75 .79 .81
Ratio of interest expense to
average net assets -- -- .02 -- --
Ratio of net investment income
to average net assets 5.66 5.74 6.27 5.86 6.13
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation -- -- -- -- .04
Portfolio Turnover Rate 521.51 244.95 374.76 258.36 263.53
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 135,822 121,461 88,292 60,936 37,447
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as an open-end management
investment company, operating as a series company currently offering thirteen
series, including the Quality Bond Portfolio (the "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"), 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 (excluding short-term
investments other than U.S. Treasury Bills) are valued each business day by an
independent pricing service (" Service" ) approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the
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.
(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, 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.
The fund has an unused capital loss carryover of approximately $5,587,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1999. If not
applied, the carryover expires in fiscal 2007.
The Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 December
31, 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 December 31, 1999, the portfolio was charged $116 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 $32,541 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.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment
securities, excluding short-term securities, during the period ended December
31, 1999, amounted to $677,643,259 and $654,706,979, respectively.
At December 31, 1999, accumulated net unrealized depreciation on investments was
$1,850,027, consisting of $398,463 gross unrealized appreciation and $2,248,490
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, Quality Bond Portfolio
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Dreyfus Variable Investment Fund, Quality Bond
Portfolio (one of the series constituting the Dreyfus Variable Investment Fund)
as of December 31, 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, Quality Bond 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
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) 2000 Dreyfus Service Corporation 120AR9912
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS VARIABLE INVESTMENT FUND, QUALITY BOND PORTFOLIO
WITH THE MERRILL LYNCH DOMESTIC MASTER INDEX (SUBINDEX D010)
AND THE LEHMAN BROTHERS AGGREGATE BOND INDEX
EXHIBIT A:
MERRILL
LYNCH
DOMESTIC LEHMAN
MASTER BROTHERS DREYFUS VARIABLE
PERIOD INDEX AGGREGATE INVESTMENT FUND,
(SUBINDEX BOND QUALITY BOND
D010)* INDEX** PORTFOLIO
8/31/90 10,000 10,000 10,000
12/31/90 10,626 10,593 10,240
12/31/91 12,299 12,288 11,686
12/31/92 13,219 13,197 13,098
12/31/93 14,522 14,484 15,106
12/31/94 14,112 14,061 14,414
12/31/95 16,702 16,658 17,357
12/31/96 17,299 17,263 17,899
12/31/97 18,954 18,929 19,584
12/31/98 20,651 20,573 20,660
12/31/99 20,453 20,407 20,696
*Source: Bloomberg L.P.
**Source: Lipper Analytical Services, Inc.
