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Previous: DREYFUS VARIABLE INVESTMENT FUND, N-30D, 1998-08-24 |
Next: CLEMENTE GLOBAL GROWTH FUND INC, SC 13G/A, 1998-08-24 |
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for the Dreyfus Variable Investment
Fund -- Limited Term High Income Portfolio. For the six-month reporting period
ended June 30, 1998, the Portfolio produced a total return of 5.60%,* compared
to 4.58% for the Merrill Lynch High Yield Master II Index during the same
period.** Income dividends paid from net investment income during the period
amounted to $0.557 per share, representing an annualized distribution rate per
share of 8.61%.***
ECONOMIC REVIEW
In the first half of 1998, three 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, but the U.S.
economy cooled enough over the course of the half-year that no action was taken.
After many years of subpar economic growth, continental Europe moved into a
better economic expansion. Unlike the U.S., Europe has substantial excess
capacity of productive plant and labor. In Asia, weak economies were pervasive
in the aftermath of the Asian financial crisis late last year.
A main influence on the U.S. economy in the first half of 1998 was Asian
economic weakness. It had both positive and negative effects. 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 and rising asset prices, including bonds, stocks and houses. The fall
in inflation helped the consumer sector as more of the growth in consumer income
was left over after inflation to buy goods and services. Consumers benefited
from a combination of good growth in income after inflation, a strong labor
market and rising prices of assets they owned.
The negative effect of Asian weakness appeared in the industrial sector rather
than the consumer sector. By midyear, there was clear-cut evidence of industrial
weakness in a slowing of inventory accumulation and weakened exports. One result
of this industrial weakness was to cool off a U.S. economy that had been growing
so rapidly that there were fears that the Federal Reserve might raise interest
rates. This favorable shift in expectations about Fed policy was one reason for
the rise in U.S. bond and stock prices. Another background factor was the
increasing evidence of prospects for multi-year budget surpluses in the U.S
MARKET ENVIRONMENT
The high yield market continued to enjoy solid support from the positive
economic environment, the general health of the domestic financial markets, and,
possibly most importantly, investor demand. Steady economic growth such as we
have been experiencing for several years created an excellent business climate
for companies with leveraged balance sheets. The healthy debt and equity markets
provided liquidity, and a broad spectrum of investors continued to search for
yield in the high yield arena.
In the midst of this rosy state of the high yield market are two caution flags
that bear attention. The first is continued economic difficulties in Southeast
Asia, and what effect they might have on the worldwide economy. One fear is that
lower demand for goods and services in Asia combined with excess production
capacity built through the strong capital markets could result in worldwide
price deflation. This has not been realized yet, but it is a possibility that
high yield investors need to watch. The second is that the strong total returns
the high yield market has enjoyed have resulted in record new issuance. Almost
as many new issues came to market in the first half of 1998 as in all of 1997.
This glut caused a widening of spreads to Treasuries and hurt the performance of
the overall high yield market in the second quarter. The Merrill Lynch High
Yield Master II Index had a total return for the first half of 1998 of 4.6%, but
only 1.6% for the second quarter. More importantly, the record new issuance has
placed a heavy burden on investors' research capacities as well as the
underwriters' due diligence function. We believe that the result will be that
credit surprises in the high yield market will probably be more on the negative
side, and the best place to find value should be in the secondary market.
Among other things, investors need to be aware of developments in Asia and
place a premium on research.
PORTFOLIO FOCUS
The Fund' s portfolio of limited term high yield assets have performed well
through the first half of 1998, even as the overall high yield market has
stumbled over a glut of new issuance. Despite the maturity and other
restrictions placed on the Portfolio, its total returns place it in the first
quartile of all high yield funds measured by Lipper for the first half, the
second quarter, and the months of May and June in 1998.
The Portfolio is restricted to an average effective maturity of four years or
less, and was less than three as of the end of the reporting period. Because of
this limited term maturity restriction, the Portfolio should generally
underperform in strong high yield markets. The returns of the Portfolio for the
first half of 1998, combined with the cash distributions, reflect this.
With about 70 issues as of the end of the reporting period, the Portfolio
remained broadly diversified by individual credit and industry sector. It
focused on certain sectors which could be considered defensive against worldwide
economic volatility, such as telecommunications, cable, and entertainment.
Emerging market exposure was low, and no change in this policy currently is
anticipated. Where investments in foreign credits exist, they usually are in
investment grade countries, such as Canada or Germany, or in affiliates of major
multinational investment grade companies, such as Newscorp, Duke Power, or Bell
Canada.
As noted above, cautionary flags have been raised over the high yield sector.
We will continue to use intensive credit research in seeking securities for the
Portfolio.
Sincerely,
[Roger King signature logo]
Roger King
Portfolio Manager
July 20, 1998
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
High Yield Master II Index is a market-capitalization weighted index including
all domestic and Yankee high yield bonds with at least $100 million par amount
outstanding and greater than or equal to one year to maturity. Both interest and
price changes are calculated daily based on an accrued schedule and trader
pricing. 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 (annualized), divided by the net asset value
per share at the end of the period.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
Principal
Bonds & Notes--101.6% % Amount Value
- ------------------------------------------------------- ____________ ____________
<S> <C> <C>
Aircraft & Aerospace--2.8% AM General,
Sr. Notes, 12.875%, 2002 $ 500,000 $ 533,750
Burke Industries,
Sr. Notes, 9.6875%, 2007 500,000 (a,b) 508,750
Rocal, Ltd.,
Collateralized Global Medium-Term Notes
(Gtd. by Embraer-Empresa Brasileira de
Aeronautica S.A.), 10.25%, 1998 288,000 (a) 287,280
Sequa,
Sr. Sub. Notes, 9.375%, 2003 500,000 522,500
____________
1,852,280
____________
Automotive--4.8% Collins & Aikman Products,
Gtd. Sr. Sub. Notes, 11.50%, 2006 2,500,000 2,781,250
Penda,
Sr. Notes, 10.75%, 2004 322,000 328,440
____________
3,109,690
____________
Broadcasting--6.4% Azteca Holdings, S.A. de C.V.,
Sr. Secured Notes, 11%, 2002 2,000,000 2,015,000
Paxson Communications,
Sr. Sub. Notes, 11.625%, 2002 2,000,000 2,155,000
____________
4,170,000
____________
Cable Television--7.1% CCA Holdings,
Sr. Sub. Notes, Zero Coupon, 1999 932,840 765,000
Diamond Cable Communications, PLC:
Sr. Discount Notes:
Zero Coupon, 1999 750,000 (c) 712,500
Zero Coupon, 2000 1,000,000 (c) 830,000
Digital Television Service/Capital,
Secured Sr. Sub. Notes, 12.50%, 2007 1,000,000 1,145,000
EchoStar Communications,
Sr. Discount Notes, Zero Coupon, 1999 1,000,000 (c) 910,000
Kabelmedia Holdings GMBH,
Sr. Discount Notes, Zero Coupon, 2001 375,000 (c) 286,876
____________
4,649,376
____________
Casinos & Gaming--3.7% Casino Magic Finance,
First Mortgage, 11.50%, 2001 1,500,000 1,567,500
Hollywood Casino,
Sr. Notes, 12.75%, 2003 271,000 298,100
Majestic Star Casino, LLC,
Sr. Exchange Secured Notes, 12.75%, 2003 500,000 548,750
____________
2,414,350
____________
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Bonds & Notes (continued) Amount Value
- -------------------------------------------------------
____________ ____________
Construction--4.1% ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 $ 2,000,000 $ 2,190,000
KHE Finance,
Sub. Notes (Gtd. by Hovnanian Enterprises),
11.25%, 2002 500,000 520,000
____________
2,710,000
____________
Consumer--6.4% BPC Holding,
Sr. Secured Notes, 12.50%, 2006 500,000 550,000
Hosiery Corp. of America,
Sr. Sub. Exchange Notes, 13.75%, 2002 500,000 551,250
Revlon Worldwide,
Sr. Secured Discount Notes, Zero Coupon, 2001 2,250,000 1,755,000
Sharp Do Brasil S.A.,
Medium-Term Notes:
9.625%, 2000 500,000 (d) 442,500
9.625%, 2000 1,000,000 (a,d) 882,500
____________
4,181,250
____________
Energy--4.4% DeepTech International,
Sr. Secured Notes, 12%, 2000 450,000 478,125
Kelly Oil & Gas:
Conv. Deb., 8.50%, 2000 796,000 787,045
Conv. Sub. Notes, 7.875%, 1999 427,000 417,392
Sr. Notes, 13.50%, 1999 120,000 126,300
Rutherford-Moran Oil,
Sr. Sub. Notes, 10.75%, 2004 1,000,000 1,071,250
____________
2,880,112
____________
Entertainment--10.5% American Skiing,
Sr. Sub. Notes, 12%, 2006 3,000,000 3,375,000
Discovery Zone,
Sr. Secured Notes, 13.50%, 2002 2,000,000 1,820,000
Intermedia Communications,
Sr. Discount Notes, Zero Coupon, 2001 1,500,000 (c) 1,233,750
Six Flags Theme Parks,
Sr. Sub. Notes, Ser. A, Zero Coupon, 1998 360,000 (c) 410,400
____________
6,839,150
____________
Food and Beverages--2.8% Envirodyne Industries:
Sr. Notes, 10.25%, 2001 180,000 181,800
Sr. Secured Notes, Ser. B, 12%, 2000 75,000 80,062
Pilgrims Pride,
Sr. Sub. Notes, 10.875%, 2003 500,000 522,500
RC/ Arbys,
Gtd. Sr. Notes, 9.75% 2000 1,000,000 1,032,860
____________
1,817,222
____________
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Bonds & Notes (continued) Amount Value
- -------------------------------------------------------
____________ ____________
Forest Products--7.0% Maxxam Group Holdings,
Sr. Secured Notes:
11.25%, 2003 $ 520,000 $ 553,800
12%, 2003 1,730,000 1,937,600
Pacific Lumber,
Sr. Notes, 10.50%, 2003 2,000,000 2,065,000
____________
4,556,400
____________
Healthcare--.8% Eye Care Centers of America,
Floating Interest Rate Sub. Term Securities,
9.223%, 2008 500,000 (a,b) 502,500
____________
Industrial--2.0% Applied Extrusion Technology,
Sr. Notes, Ser. B, 11.50%, 2002 250,000 265,000
Petro Stopping Centers/Financial,
Sr. Notes, 10.50%, 2007 1,000,000 1,065,000
____________
1,330,000
____________
Metals--7.7% Kaiser Aluminum & Chemical,
Gtd. Sr. Notes, 9.875%, 2002 2,000,000 2,065,000
Renco Metals,
Sr. Notes, 11.50%, 2003 410,000 440,750
Republic Engineered Steels,
First Mortgage Notes, 9.875%, 2001 1,499,000 1,499,000
Russel Metals,
Sr. Notes, 10.25%, 2000 1,000,000 1,042,500
____________
5,047,250
____________
Paper & Paper Related--2.2% Stone Container:
Sr. Notes, 11.875%, 1998 400,000 404,000
Sr. Sub. Deb., 12.25%, 2002 1,000,000 1,030,000
____________
1,434,000
____________
Publishing--1.6% American Media Operations,
Sr. Sub. Notes, 11.625%, 2004 1,000,000 1,082,500
____________
Real Estate--1.2% Rockefeller Center Properties,
Conv. Deb., Zero Coupon, 2000 1,000,000 785,000
____________
Retail--3.0% Cafeteria Operators, L.P.
(Gtd. by Furrs/Bishops Specialty Group),
Sr. Secured Notes, 12%, 2001 1,000,000 1,005,000
Corporate Express,
Conv. Notes, 4.50%, 2000 1,000,000 925,000
____________
1,930,000
____________
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Bonds & Notes (continued) Amount Value
- -------------------------------------------------------
____________ ____________
Technology--2.5% The Learning Company,
Conv. Sr. Notes, 5.50%, 2000 $ 1,715,000 (a) $ 1,648,544
____________
Telecommunications--10.0% Call-Net Enterprises,
Sr. Discount Notes, Zero Coupon, 1999 500,000 (c) 480,000
Hermes Europe Railtel B.V.,
Sr. Notes, 11.50%, 2007 2,000,000 2,270,000
MJD Communications,
Floating Rate Notes, 10%, 2008 1,000,000 (a,b) 1,020,000
Microcell Telecommunications,
Sr. Discount Notes, Zero Coupon, 2001 1,000,000 (c) 747,500
Orion Network Systems,
Sr. Discount Notes, Zero Coupon, 2002 1,500,000 (c) 1,147,500
WinStar Communications,
Sr. Discount Notes, Zero Coupon, 2000 1,000,000 (c) 837,500
____________
6,502,500
____________
Textiles--1.6% Sassco Fashions,
Notes, 12.75%, 2004 500,000 542,500
Texfi Industries,
Sr. Sub. Deb., 8.75%, 1999 500,000 483,750
____________
1,026,250
____________
Transportation--9.0% Atlantic Coast Airlines,
Gtd. Pass-Through Ctfs.,
Ser. 1997-1D, 7.97%, 2000 161,954 (a) 161,752
CHC Helicopter,
Sr. Sub. Notes, 11.50%, 2002 (Units) 500,000 (e) 537,500
Eletson Holdings,
First Preferred Ship Mortgage Notes, 9.25%, 2003 500,000 513,750
MTL,
Floating Interest Rate Sub. Term Securities,
10.50%, 2006 2,000,000 (a,b) 2,005,000
Moran Transportation,
First Preferred Ship Mortgage Notes, 11.75%, 2004 1,500,000 1,657,500
Union Pacific,
Sub. Deb., 5.50%, 2033 1,081,000 974,455
____________
5,849,957
____________
TOTAL BONDS AND NOTES
(cost $66,323,020) $66,318,331
____________
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Equity-Related Securities--2.8% Shares Value
- -------------------------------------------------------
____________ ____________
Preferred Stocks--2.8%
Cable Television--.1% Time Warner,
Cum., Ser. K, $102.50 30 $ 33,488
____________
Energy--.4% ELF Overseas, Ltd.,
Ser. A, Gtd. Cum., $2.125 10,800 280,125
____________
Food & Beverage--1.1% RJR Nabisco Holdings Capital Trust,
Cum., $2.50 28,800 726,402
____________
Publishing--1.2% Newscorp Overseas, Ltd.,
Ser. A, Cum., $2.15625 32,600 794,625
____________
TOTAL PREFERRED STOCKS 1,834,640
____________
Warrants--0.0%
Entertainment; Discovery Zone 2,000 10,000
____________
TOTAL EQUITY-RELATED SECURITIES
(cost $1,984,484) $ 1,844,640
____________
TOTAL INVESTMENTS (cost $68,307,504) 104.4% $68,162,971
_______ ____________
LIABILITIES, LESS CASH AND RECEIVABLES (4.4%) $ (2,911,610)
_______ ____________
NET ASSETS 100.0% $65,251,361
_______ ____________
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(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 qualifed institutional buyers. At June 30, 1998, these securities
amounted to $7,016,326 or 10.8% of net assets.
(b) Variable rate security--interest rate subject to periodic change.
(c) Zero coupon until year shown at which time a stated coupon rate becomes
effective.
(d) Reflects date security can be redeemed at holder's option; the stated
maturity date is 10/30/2005.
(e) With warrants to purchase common stock.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED)
Cost Value
___________ __________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $68,307,504 $68,162,971
Cash 178,946
Dividends and interest receivable 1,557,315
Other assets 11,131
____________
69,910,363
____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 34,240
Bank loan payable--Note 2 4,571,000
Interest payable 32,285
Accrued expenses 21,477
____________
4,659,002
____________
NET ASSETS $65,251,361
____________
REPRESENTED BY: Paid-in capital $65,196,315
Accumulated undistributed investment income--net 41,648
Accumulated net realized gain (loss) on investments 157,931
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (144,533)
____________
NET ASSETS $65,251,361
____________
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) 5,005,052
NET ASSET VALUE, offering and redemption price per share $13.04
________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
INCOME: Interest $2,676,827
Cash dividends 42,756
____________
Total Income $2,719,583
EXPENSES: Investment advisory fee--Note 3(a) 152,360
Interest expense--Note 2 176,614
Professional fees 22,887
Registration fees 9,962
Prospectus and shareholders' reports 3,478
Custodian fees--Note 3(a) 3,394
Trustees' fees and expenses--Note 3(b) 419
Shareholder servicing costs 214
Miscellaneous 4,537
____________
Total Expenses 373,865
____________
INVESTMENT INCOME--NET 2,345,718
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments $ 152,744
Net unrealized appreciation (depreciation) on
investments (139,614)
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 13,130
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,358,848
____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997*
_______________ _______________
<S> <C> <C>
OPERATIONS:
Investment income--net $ 2,345,718 $ 1,401,170
Net realized gain (loss) on investments 152,744 84,444
Net unrealized appreciation (depreciation) on investments (139,614) (4,919)
____________ ____________
Net Increase (Decrease) in Net Assets Resulting from Operations 2,358,848 1,480,695
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net (2,331,571) (1,373,669)
Net realized gain on investments ------ (79,257)
____________ ____________
Total Dividends (2,331,571) (1,452,926)
____________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold 33,746,074 42,612,122
Dividends reinvested 2,331,571 1,452,926
Cost of shares redeemed (2,307,932) (12,638,446)
____________ ____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 33,769,713 31,426,602
____________ ____________
Total Increase (Decrease) in Net Assets 33,796,990 31,454,371
NET ASSETS:
Beginning of Period 31,454,371 ------
____________ ____________
End of Period $65,251,361 $31,454,371
____________ ____________
UNDISTRIBUTED INVESTMENT INCOME--NET $ 41,648 $ 27,501
____________ ____________
Shares Shares
____________ ____________
CAPITAL SHARE TRANSACTIONS:
Shares sold 2,559,532 3,290,062
Shares issued for dividends reinvested 178,453 112,339
Shares redeemed (174,751) (960,583)
____________ ____________
Net Increase (Decrease) in Shares Outstanding 2,563,234 2,441,818
____________ ____________
- ------------
* From April 30, 1997 (commencement of operations) to December 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME 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.
Six Months Ended Year Ended
June 30, 1998 December 31,
PER SHARE DATA: (Unaudited) 1997(1)
_______________ _______________
<S> <C> <C>
Net asset value, beginning of period $12.88 $12.50
_______ _______
Investment Operations:
Investment income--net .55 .78
Net realized and unrealized gain (loss) on investments .17 .41
_______ _______
Total from Investment Operations .72 1.19
_______ _______
Distributions:
Dividends from investment income--net (.56) (.77)
Dividends from net realized gain on investments -- (.04)
_______ _______
Total Distributions (.56) (.81)
_______ _______
Net asset value, end of period $13.04 $12.88
_______ _______
_______ _______
TOTAL INVESTMENT RETURN 11.29%(2) 14.27%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets .84%(2) .89%(2)
Ratio of interest expense to average net assets .75%(2) .20%(2)
Ratio of net investment income to average net assets 10.01%(2) 10.27%(2)
Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation -- .05%(2)
Porfolio Turnover Rate 34.07%(3) 37.98%(3)
Net Assets, end of period (000's Omitted) $65,251 $31,454
- ------------
(1) From April 30, 1997 (commencement of operations) to December 31, 1997.
(2) Annualized.
(3) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Variable Investment Fund (the "Fund" ) is registered under the
Investment Company Act of 1940 ("Act") as an open-end management investment
company, operating as a series company, currently offering thirteen series,
including the Limited Term High Income 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 maximize total return, consisting of capital appreciation and
current income. The Dreyfus Corporation (" Dreyfus" ) serves as the Series'
investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A.
("Mellon"). Premier Mutual Fund Services, Inc. is the distributor of the Series'
shares, which are sold without a sales charge.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The Series' financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (excluding short-term
investments other than U.S. Treasury Bills) are valued each business day by an
independent pricing service (" Service" ) approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio 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. Investments denominated in foreign currencies
are translated into U.S. dollars at the prevailing rates of exchange.
(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. 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 custodian agreement, the Series received
net earnings credits of $5,276 during the period ended June 30, 1998 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare and
pay dividends quarterly from investment income-net. Dividends from net realized
capital gain are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the policy
of the Fund 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 Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2--BANK LINES OF CREDIT:
The Series may borrow up to $10 million for leveraging purposes under a
short-term unsecured line of credit and participates with other Dreyfus-managed
funds in a $100 million unsecured line of credit primarily to be utilized for
temporary or emergency purposes, including the financing of redemptions.
Interest is charged to the Series at rates which are related to the Federal
Funds rate in effect at the time of borrowings.
The average daily amount of borrowings outstanding during the period ended
June 30, 1998 was approximately $5,955,000, with a related weighted average
annualized interest rate of 5.98%.
NOTE 3--INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment
advisory fee is computed at the annual rate of .65 of 1% of the value of the
Series' average daily net assets and is payable monthly.
The Series compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Series.
The Series compensates Mellon under a custody agreement for providing
custodial services for the Series. During the period ended June 30, 1998, the
Series was charged $3,394 pursuant to the custody agreement.
(B) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended June 30, 1998, amounted
to $52,781,168 and $17,746,309, respectively.
At June 30, 1998, accumulated net unrealized depreciation on investments was
$144,533, consisting of $520,642 gross unrealized appreciation and $665,175
gross unrealized depreciation.
At June 30, 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).
(reg.tm)
(reg.tm)
DREYFUS VARIABLE INVESTMENT FUND,
LIMITED TERM HIGH INCOME 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. 156SA986
Variable
Investment Fund,
LIMITED TERM
HIGH INCOME PORTFOLIO
Semi-Annual
Report
June 30, 1998
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