YEAR 2000 ISSUES (UNAUDITED)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the fund' s other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The Dreyfus Corporation is working to avoid Year 2000-related problems in its
systems and to obtain assurances from other service providers that they are
taking similar steps. In addition, issuers of securities in which the fund
invests may be adversely affected by Year 2000-related problems. This could have
an impact on the value of the fund's investments and its share price.
DREYFUS VARIABLE INVESTMENT FUND, 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 12-month period ended
December 31, 1998, the Portfolio produced a total return, including share price
charges and dividend income generated of 0.29%,* compared to 2.95% for the
Merrill Lynch High Yield Master II Index.** Income dividends paid from net
investment income during the period amounted to $1.140 per share, representing a
distribution rate per share of 9.66%.***
ECONOMIC REVIEW
During 1998, the main regions of the world had very different economic
fundamentals. The U.S. entered the year with a strong economy and near full
employment, with unemployment only slightly above 4%. The tight labor market led
the Federal Reserve Board (the "Fed") to contemplate a rise in interest rates
early in the year, but world economic weakness generated such powerful
anti-inflation forces that the Fed acted instead to ease credit beginning in
September. After many years of subpar economic growth, continental Europe moved
into a sustained economic expansion. The overall European economy benefited as
interest rates in peripheral countries such as Spain and Italy fell, approaching
the lower levels established by Germany, on the eve of currency unification.
Unlike the U.S., Europe has substantial excess capacity of productive plant and
labor. In Asia, weak economies were pervasive as a result of a financial crisis.
The Latin American economies weakened in turn as the financial stresses spread
throughout that region. On balance, there was a substantial weakening of the
world economy over the course of 1998 moderated mainly by the American
consumer's role as "spender of last resort."
A main influence on the U.S. economy during the year was the foreign
financial crisis and consequent cooling of the world economy. The positive
effects hit first. Actual inflation and expected inflation dropped, causing a
decline in long-term Treasury bond yields and mortgage rates. This caused a boom
in housing. The fall in inflation left more of the growth in consumer income
with which to buy goods and services. Thus, consumers benefited from a
combination of good growth in income after inflation, a strong labor market, and
increases in the prices of assets they owned, including bonds, stocks and real
estate. In a sense, 1998 was a year of disinflationary boom in the U.S., as
above-trend economic growth coincided with negligible inflation.
The negative effect of Asian weakness was felt in the industrial sector more
than in the consumer sector. Corporate profits weakened, especially in sectors
affected by the Asian crisis such as world-traded commodities (oil, metals and
paper) and exports.
Evidence of a weaker world economy accumulated during 1998 as the financial
stresses continued. A worsened financial crisis occurred between the Russian
default in mid-August and the fallout from the Long Term Capital Management
hedge fund crisis through early October. However, energetic steps were taken to
stabilize the Japanese banks, design a support package for Brazil, ease monetary
policy, and help overinvested financial institutions rebuild their cash
reserves. Indications of a calming of financial fears were evident in the final
months of the year. In any case, there appears to have been a shift in the
priorities of key policymakers from fighting potential inflation to
restimulating future world economic growth.
The global economy survived a triple financial crisis in 1998 from Japan,
emerging market countries and overextended financial institutions. Excess
capacity persists in many worldwide industries after years of high capital
spending followed by the onset of a worldwide weakening in demand. Fortunately,
the U.S. has led the world in making the transition from the old manufacturing
industries to the new growth industries, such as biotechnology, software,
computer hardware and the Internet. This contributed to the favorable
combination of low unemployment and low inflation in the U.S., and may yet lead
toward more efficient allocation of capital elsewhere in the world.
As 1998 ended, interest rates set by central banks remained in a downtrend in
most parts of the world including Europe and the U.S. A similar trend had even
begun in many emerging countries, as the stresses of financial crisis relaxed.
MARKET OVERVIEW
The high yield market had an extremely volatile year in 1998. The Merrill
Lynch High Yield Master II Index was up over 5% on the year late in July as the
market rallied and fears that the 1997 Asian crisis would expand subsided.
However, the Russian financial crisis triggered a global flight to quality that
roiled the equity, high yield, and emerging markets. The Index sank to its
lowest point in mid-October at -3.7% on the year, and finished 1998 up only 3%
as the markets began their recovery.
Spreads over Treasuries for all the major high yield indices widened in
October to levels not seen since the high yield market meltdown in 1990. At that
time the high yield market suffered several strong and simultaneous shocks: 1)
the demise of Drexel Burnham Lambert, the predominant market maker of high yield
securities; 2) the incarceration of Michael Milkin, frequently credited as the
founder of the modern high yield market; 3) bankruptcy rates around 10%; and 4)
regulatory changes that forced insurance funds and savings and loan
institutions, the largest holders of high yield debt at that time, to unload
their high yield assets.
What is significant about this level of volatility in the high yield market
in 1998 is that it is largely the result of external events, financial crises in
Russia and Southeast Asia, rather than fundamental and widespread domestic
credit deterioration. There has not yet been a surge in bankruptcy rates or a
slew of credit rating downgrades to justify the depths to which the high yield
market sank in October. In light of this, it could be said the market was too
cheap in the fall.
There was a rebound in November as money flowed into high yield mutual funds.
It was followed by a slight early December correction as too many issuers tried
to complete bond offerings before the holiday break. We think that this balance
between cash inflow and new issue supply should dominate the high yield market.
We believe that the two main concerns will be the potential for too much supply
and for future worldwide economic shocks.
PORTFOLIO REVIEW
The Fund charted a reasonable course through the volatility of 1998. Its
focus on high yield assets with relatively short effective maturities -- inside
three years on average -- protected it somewhat from the recent high yield
market gyrations.
The major factors that negatively affected the total return of the Fund were
the average portfolio rating of single B and yield-to-call bonds. Essentially
all high yield bonds were adversely affected by investors' flight to quality in
the third quarter of 1998. The higher-rated BB bonds tended to fare better than
lower-rated, high yield bonds, however. They were also the first to rebound in
November. In addition, bonds that the market had priced with the expectation of
a call in the near future, suffered from lower expectations of credit
availability.
Two factors that exerted a positive influence on the Fund were its relatively
short average effective maturity and low exposure to emerging market volatility.
Emerging market bonds comprised less than 3% of total assets at the end of the
reporting period.
While the high yield market seems to have stabilized at the end of 1998, its
sharp reaction to economic affairs in Russia revealed its underlying
skittishness. Further economic upsets in other emerging markets are possible and
their effects would be difficult to forecast at this time.
Sincerely,
[Roger King signature]
Roger King
Portfolio Manager
January 15, 1999
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid.
The Portfolio's performance does not reflect the deduction of additional charges
and expenses imposed in connection with investing in variable insurance
contracts, which will reduce returns.
**SOURCE: MERRILL LYNCH, PIERCE, FENNER AND SMITH INC. -- The Merrill Lynch
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, divided by the net asset value per share at
the end of the period.
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO DECEMBER
31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS VARIABLE
INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO AND THE MERRILL LYNCH HIGH
YIELD MASTER II INDEX
Dollars
$11,412
Merrill Lynch High Yield Master II Index*
$10,994
Dreyfus Variable Investment Fund, Limited Term High Income Portfolio
*Source: Merrill Lynch, Pierce, Fenner and Smith Inc.
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended From Inception (4/30/97)
December 31, 1998 to December 31, 1998
____________________ __________________________
0.29% 5.84%
- ---------------
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, Limited Term High Income Portfolio on 4/30/97 (Inception Date)
to a $10,000 investment made in the Merrill Lynch High Yield Master II Index on
that date. All dividends and capital gain distributions are reinvested.
The Portfolio' s performance shown in the line graph takes into account all
applicable fees and expenses of the Portfolio. The Merrill Lynch 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. Further
information relating to Portfolio performance, including expense reimbursements,
if applicable, is contained in the Financial Highlights section of the
Prospectus and elsewhere in this report.
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Principal
Bonds and Notes--97.2% Amount Value
- -------------------------------------------------------- ____________ ___________
<S> <C> <C>
Aircraft & Aerospace--1.7% AM General, Ser. B,
Sr. Notes, 12.875%, 2002 . . . . . . . . . . . . . $ 500,000 $ 452,500
Burke Industries,
Sr. Notes, 9.719%, 2007 . . . . . . . . . . . . . 500,000 (a) 465,000
Sequa,
Sr. Sub. Notes, 9.375%, 2003 . . . . . . . . . . . 500,000 515,624
____________
1,433,124
____________
Automotive--5.7% Aetna Industries,
Sr. Notes, 11.875%, 2006 . . . . . . . . . . . . . 1,000,000 1,055,000
Collins & Aikman Products,
Gtd. Sr. Sub. Notes, 11.5%, 2006 . . . . . . . . . 2,500,000 2,612,500
Hayes Lemmerz International,
Sr. Sub. Notes, 11%, 2006 . . . . . . . . . . . . 1,000,000 1,115,000
____________
4,782,500
____________
Broadcasting--4.3% Azteca Holdings, S.A. de C.V.,
Sr. Secured Notes, 11%, 2002 . . . . . . . . . . . 1,000,000 850,000
Lin Holdings,
Sr. Discount Notes, Zero Coupon, 2003 . . . . . . 1,000,000 (b) 705,000
Paxson Communications,
Sr. Sub. Notes, 11.625%, 2002 . . . . . . . . . . 2,000,000 2,060,000
____________
3,615,000
____________
Cable Television--7.1% Diamond Cable Communications,
Sr. Discount Notes:
Zero Coupon, 1999 . . . . . . . . . . . . . . . 750,000 (b) 742,500
Zero Coupon, 2000 . . . . . . . . . . . . . . . 1,000,000 (b) 832,500
Digital Television Service/Capital, Ser. B,
Sr. Sub. Notes, 12.5%, 2007 . . . . . . . . . . . 1,000,000 1,095,000
EchoStar Communications:
Sr. Discount Notes, Zero Coupon, 1999 . . . . . . 1,000,000 (b) 1,035,000
Sr. Secured Discount Notes, Zero Coupon, 2000 . . 1,000,000 (b) 995,000
Kabelmedia Holdings GMBH,
Sr. Discount Notes, Zero Coupon, 2001 . . . . . . 375,000 (b) 316,875
Marcus Cable,
Sr. Discount Notes, Zero Coupon, 2000 . . . . . . 1,000,000 (b) 952,500
____________
5,969,375
____________
Casinos & Gaming--1.7% Hollywood Casino,
Sr. Secured Notes, 12.75%, 2003 . . . . . . . . . 271,000 288,615
Majestic Star Casino,
Sr. Exchange Secured Notes, 12.75%, 2003 . . . . . 500,000 521,250
Players International,
Sr. Notes, 10.875%, 2005 . . . . . . . . . . . . . 500,000 538,750
Waterford Gaming/Finance,
Sr. Notes, 12.75%, 2003 . . . . . . . . . . . . . 80,000 88,000
____________
1,436,615
____________
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Principal
Bonds and Notes (continued) Amount Value
- -------------------------------------------------------- ____________ ___________
Construction--1.8% ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 . . . . . . . . . . . . $ 2,000,000 $ 1,010,000
KHE Finance (Gtd. by Hovnanian Enterprises),
Sub. Notes, 11.25%, 2002 . . . . . . . . . . . . . 500,000 507,500
____________
1,517,500
____________
Consumer--9.1% BPC Holding, Ser. B,
Sr. Secured Notes, 12.5%, 2006 . . . . . . . . . . 500,000 522,500
Hosiery Corp. of America,
Sr. Sub. Exchange Notes, 13.75%, 2002 . . . . . . 500,000 515,000
Loewen Group,
Putable Asset Trust Securities, 6.7%, 1999 . . . . 6,000,000 (c) 5,790,000
Sharp Do Brazil,
Medium-Term Notes, 9.625%, 2000 . . . . . . . . . 1,500,000 (d) 733,125
____________
7,560,625
____________
Energy--3.1% Kelly Oil & Gas:
Conv. Sub. Deb., 8.5%, 2000 . . . . . . . . . . . 1,021,000 821,905
Conv. Sub. Notes, 7.875%, 1999 . . . . . . . . . . 427,000 415,258
Sr. Notes, 13.5%, 1999 . . . . . . . . . . . . . . 120,000 123,000
Rutherford-Moran Oil,
Sr. Sub. Notes, 10.75%, 2004 . . . . . . . . . . . 1,000,000 1,185,000
____________
2,545,163
____________
Entertainment--4.4% American Skiing, Ser. B,
Sr. Sub. Notes, 12%, 2006 . . . . . . . . . . . . 3,000,000 3,135,000
Discovery Zone,
Sr. Secured Notes, 13.5%, 2002 . . . . . . . . . . 2,000,000 510,000
____________
3,645,000
____________
Financial--1.2% AmeriCredit,
Gtd. Sr. Notes, 9.25%, 2004 . . . . . . . . . . . 1,000,000 985,000
____________
Food & Beverages--6.7% Chiquita Brands International,
Conv. Sub. Notes, 7%, 2001 . . . . . . . . . . . . 800,000 (c) 728,000
Envirodyne Industries:
Ser. B, Sr. Secured Notes, 12%, 2000 . . . . . . . 9,000 9,045
Sr. Notes, 10.25%, 2001 . . . . . . . . . . . . . 180,000 144,900
Pilgrims Pride,
Sr. Sub. Notes, 10.875%, 2003 . . . . . . . . . . 500,000 517,500
RC/Arbys,
Gtd. Sr. Notes, 9.75%, 2000 . . . . . . . . . . . 1,000,000 985,000
Sun World International, Ser. B,
First Mortgage, 11.25%, 2004 . . . . . . . . . . . 2,980,000 3,173,700
____________
5,558,145
____________
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Principal
Bonds and Notes (continued) Amount Value
- -------------------------------------------------------- ____________ ___________
Forest Products--4.5% Maxxam Group Holdings,
Sr. Secured Notes, 12%, 2003 . . . . . . . . . . . $ 3,730,000 $ 3,748,650
____________
Healthcare--.6% Eye Care Centers of America,
Floating Interest Rate Sub. Term Securities,
8.95%, 2008 . . . . . . . . . . . . . . . . . . . 500,000 (a,c) 473,750
____________
Industrial--2.5% Applied Extrusion Technology, Ser. B,
Sr. Notes, 11.5%, 2002 . . . . . . . . . . . . . . 250,000 261,875
Atlantis Group,
Sr. Notes, 11%, 2003 . . . . . . . . . . . . . . . 745,000 761,763
Interlake,
Sr. Sub. Deb., 12.125%, 2002 . . . . . . . . . . . 1,000,000 1,025,000
____________
2,048,638
____________
Metals--6.1% Kaiser Aluminum & Chemical,
Sr. Notes, 9.875%, 2002 . . . . . . . . . . . . . 2,000,000 1,990,000
Renco Metals,
Sr. Notes, 11.5%, 2003 . . . . . . . . . . . . . . 560,000 579,600
Republic Engineered Steels,
First Mortgage, 9.875%, 2001 . . . . . . . . . . . 1,499,000 1,540,222
Russel Metals,
Sr. Notes, 10.25%, 2000 . . . . . . . . . . . . . 1,000,000 995,000
____________
5,104,822
____________
Paper & Paper Related--1.2% Stone Container,
Sr. Sub. Deb., 12.25%, 2002 . . . . . . . . . . . 1,000,000 1,007,500
____________
Publishing--1.2% American Media Operations,
Sr. Sub. Notes, 11.625%, 2004 . . . . . . . . . . 1,000,000 1,025,000
____________
Real Estate--.9% Rockefeller Center Properties,
Conv. Deb., Zero Coupon, 2000 . . . . . . . . . . 1,000,000 755,000
____________
Retail--5.5% Cafeteria Operators,
(Gtd. by Furrs/Bishops Specialty Group),
Sr. Secured Notes, 12%, 2001 . . . . . . . . . . . 1,000,000 1,025,000
Corporate Express,
Conv. Notes, 4.5%, 2000 . . . . . . . . . . . . . 3,000,000 2,595,000
Kmart, Ser. D,
Medium-Term Notes, 7.24%, 1999 . . . . . . . . . . 1,000,000 999,007
____________
4,619,007
____________
Technology--2.0% The Learning Company,
Conv. Sr. Notes, 5.5%, 2000 . . . . . . . . . . . 1,715,000 1,699,994
____________
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Principal
Bonds and Notes (continued) Amount Value
- -------------------------------------------------------- ____________ ___________
Telecommunications/
Carriers--10.9% Call-Net Enterprises,
Sr. Discount Notes, Zero Coupon, 1999 . . . . . . $ 2,500,000 (b) $ 2,437,50
Hermes Europe Railtel,
Sr. Notes, 11.5%, 2007 . . . . . . . . . . . . . . 2,000,000 2,130,000
Intermedia Communications,
Sr. Discount Notes, Zero Coupon, 2001 . . . . . . 1,500,000 (b) 1,181,250
MJD Communications,
Floating Rate Notes, 9.16%, 2008 . . . . . . . . . 1,000,000 (a) 975,000
Qwest Communications International, Ser. B,
Sr. Notes, 10.875%, 2007 . . . . . . . . . . . . . 2,000,000 2,340,000
____________
9,063,750
____________
Textiles--.7% Sassco Fashions,
Sr. Notes, 12.75%, 2004 . . . . . . . . . . . . . 500,000 497,500
Texfi Industries,
Sr. Sub. Deb., 8.75%, 1999 . . . . . . . . . . . . 500,000 47,500
____________
545,000
____________
Transportation--8.8% Atlantic Coast Airlines,
Gtd. Pass-Through Ctfs.,
Ser. 1977-1D, 7.97%, 2000 . . . . . . . . . . . . 134,219 (c) 134,890
Eletson Holdings,
First Preferred Ship Mortgage Notes, 9.25%, 2003 . . 500,000 477,500
MTL,
Floating Interest Rate Sub. Term Securities,
10.5%, 2006 . . . . . . . . . . . . . . . . . . . 2,000,000 (a,c) 1,940,000
Midway Airlines,
Pass-Through Ctfs.,
Ser. 1998-1, Cl. D, 8.86%, 2003 . . . . . . . . . 1,000,000 (c) 1,002,500
Moran Transportation, Ser. B,
First Preferred Ship Mortgage Notes, 11.75%, 2004 . 1,500,000 1,612,500
Petro Stopping Centers/Financial,
Sr. Notes, 10.5%, 2007 . . . . . . . . . . . . . . 1,000,000 1,050,000
Union Pacific,
Sub. Deb., 5.5%, 2033 . . . . . . . . . . . . . . 1,315,000 1,122,632
____________
7,340,022
____________
Wireless Communications--5.5% Communicacion Celular,
Sr. Discount Notes, Zero Coupon, 2000 . . . . . . 500,000 (b) 328,750
Microcell Telecommunications, Ser. B,
Sr. Discount Notes, Zero Coupon, 2001 . . . . . . 1,000,000 (b) 747,500
Orion Network Systems,
Sr. Discount Notes, Zero Coupon, 2002 . . . . . . 4,500,000 (b) 2,835,000
WinStar Communications,
Sr. Discount Notes, Zero Coupon, 2000 . . . . . . 1,000,000 (b) 715,000
____________
4,626,250
____________
TOTAL BONDS AND NOTES
(cost $87,882,698) . . . . . . . . . . . . . . . . $81,105,430
____________
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Equity-Related Securities--1.9% Shares Value
- -------------------------------------------------------- ____________ ___________
Preferred Stocks--1.9%
Food & Beverages--.9% RJR Nabisco Holdings Capital Trust,
Cum., $2.50 . . . . . . . . . . . . . . . . . . . 28,800 $ 723,600
____________
Publishing--1.0% Newscorp Overseas, Ser. A,
Cum., $2.15625 . . . . . . . . . . . . . . . . . . 32,600 808,888
____________
TOTAL PREFERRED STOCKS . . . . . . . . . . . . . . . . 1,532,488
____________
Warrants--0.0%
Entertainment; Discovery Zone . . . . . . . . . . . . . . . . . . . . 2,000 (c,e) 2
____________
TOTAL EQUITY-RELATED SECURITIES
(cost $1,665,650) . . . . . . . . . . . . . . . . $ 1,532,490
____________
____________
TOTAL INVESTMENTS (cost $89,548,348) . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.1% $82,637,920
_______ ____________
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9% $ 780,517
_______ ____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $83,418,437
_______ ____________
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Variable rate security--interest rate subject to periodic change.
(b) Zero coupon until year shown at which time a stated coupon rate becomes
effective.
(c) 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,
1998, these securities amounted to $10,069,142 or 12.1% of net assets.
(d) Reflects date that security can be redeemed at holders' option; the stated
maturity date is 10/30/2005.
(e) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
_____________ ____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . . . $89,548,348 $82,637,920
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551,992
Interest receivable . . . . . . . . . . . . . . . . . . . . . . 2,078,282
_____________
85,268,194
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . . . . 48,018
Bank loan payable--Note 2 . . . . . . . . . . . . . . . . . . . 1,671,900
Payable for investment securities purchased . . . . . . . . . . 80,213
Interest payable--Note 2 . . . . . . . . . . . . . . . . . . . 8,846
Payable for shares of Beneficial Interest redeemed . . . . . . 1,471
Accrued expenses and other liabilities . . . . . . . . . . . . 39,309
_____________
1,849,757
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $83,418,437
_____________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . $90,779,205
Accumulated undistributed investment income--net . . . . . . . 81,340
Accumulated net realized gain (loss) on investments . . . . . . (531,680)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,910,428)
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $83,418,437
_____________
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 7,071,675
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $11.80
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,721,223
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . 123,090
____________
Total Income . . . . . . . . . . . . . . . . . . . . . . $ 6,844,313
EXPENSES: Investment advisory fee--Note 3(a) . . . . . . . . . . . . . . 397,273
Interest expense--Note 2 . . . . . . . . . . . . . . . . . . 196,825
Professional fees . . . . . . . . . . . . . . . . . . . . . . . 30,808
Registration fees . . . . . . . . . . . . . . . . . . . . . . . 16,500
Prospectus and shareholders' reports . . . . . . . . . . . . 9,664
Custodian fees--Note 3(a) . . . . . . . . . . . . . . . . . . . 7,799
Trustees' fees and expenses--Note 3(b) . . . . . . . . . . . 1,091
Shareholder servicing costs . . . . . . . . . . . . . . . . . . 259
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 9,808
____________
Total Expenses . . . . . . . . . . . . . . . . . . . . . 670,027
____________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,174,286
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . . . . $ (536,867)
Net unrealized appreciation (depreciation) on investments . . . (6,905,509)
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . (7,442,376)
____________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . $ (1,268,090)
____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1998 December 31, 1997*
__________________ ___________________
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,174,286 $ 1,401,170
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . (536,867) 84,444
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . (6,905,509) (4,919)
______________ _______________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . (1,268,090) 1,480,695
______________ _______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,120,447) (1,373,669)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . ------ (79,257)
______________ _______________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,120,447) (1,452,926)
______________ _______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . 61,513,865 42,612,122
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,120,210 1,452,926
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,281,472) (12,638,446)
______________ _______________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions . 59,352,603 31,426,602
______________ _______________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . 51,964,066 31,454,371
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,454,371 --
______________ _______________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $83,418,437 $31,454,371
______________ _______________
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . $ 81,340 $ 27,501
______________ _______________
Shares Shares
______________ _______________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,799,002 3,290,062
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . 496,410 112,339
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (665,555) (960,583)
______________ _______________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . 4,629,857 2,441,818
______________ _______________
- -----------------------------
(1) From April 30, 1997 (commencement of operations) to December 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
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.
Year Ended December 31,
_______________________
PER SHARE DATA: 1998 1997(1)
________ ________
<S> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . $12.88 $12.50
________ ________
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14 .78
Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . (1.08) .41
________ ________
Total from Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .06 1.19
________ ________
Distributions:
Dividends from investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . (1.14) (.77)
Dividends from net realized gain on investments . . . . . . . . . . . . . . . . . . . . -- (.04)
________ ________
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.14) (.81)
________ ________
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.80 $12.88
________ ________
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29% 14.27%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets . . . . . . . . . . . . . . . . . . . .77% .89%(2)
Ratio of interest expense to average net assets . . . . . . . . . . . . . . . . . . . . .32% .20%(2)
Ratio of net investment income to average net assets . . . . . . . . . . . . . . . . . 10.10% 10.27%(2)
Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation . . -- .05%(2)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.18% 37.98%(3)
Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . . . . . . . . . $83,418 $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
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 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.
(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 custody agreement, the Series received net
earnings credits of $4,847 during the period ended December 31, 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 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 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 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
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Series has an unused capital loss carryover of approximately $454,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1998. The
carryover does not include net realized securities losses from November 1, 1998
through December 31, 1998 which are treated, for Federal income tax purposes, as
arising in fiscal 1999. If not applied, the carryover expires in fiscal 2006.
NOTE 2--BANK LINE 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
December 31, 1998 was approximately $3,322,000, with a related weighted average
annualized interest rate of 5.92%.
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. During the period
ended December 31, 1998, the Series was charged $61 pursuant to the transfer
agency agreement.
The Series compensates Mellon under a custody agreement to provide custodial
services for the Series. During the period ended December 31, 1998, the Series
was charged $7,799 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 December 31, 1998,
amounted to $79,694,354 and $30,214,112, respectively.
At December 31, 1998, accumulated net unrealized depreciation on investments
was $6,910,428, consisting of $488,880 gross unrealized appreciation and
$7,399,308 gross unrealized depreciation.
At December 31, 1998, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Variable Investment Fund,
Limited Term High Income Portfolio (one of the Series constituting Dreyfus
Variable Investment Fund) as of December 31, 1998, and the related statement of
operations for the year then ended, and the statement of changes in net assets
and financial highlights for each of the two years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund' s management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of December 31, 1998 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Variable Investment Fund, Limited Term High Income Portfolio at December
31, 1998, and the results of its operations for the year then ended, and the
changes in its net assets and financial highlights for each of the two years in
the period then ended, in conformity with generally accepted accounting
principles.
New York, New York
February 4, 1999
DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH INCOME PORTFOLIO
- -----------------------------------------------------------------------------
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Series hereby designates 1.88% of the ordinary
dividends paid during the fiscal year ended December 31, 1998 as qualifying for
the corporate dividends received deduction.
[reg.tm logo]
(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. 156AR9812
Variable
Investment Fund,
LIMITED TERM
HIGH INCOME PORTFOLIO
Annual Report
December 31, 1998
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH
INCOME PORTFOLIO AND THE MERRILL LYNCH HIGH YIELD
MASTER II INDEX
EXHIBIT A:
DREYFUS VARIABLE
MERRILL LYNCH INVESTMENT FUND,
PERIOD HIGH YIELD LIMITED TERM HIGH
MASTER II INDEX * INCOME PORTFOLIO
4/30/97 10,000 10,000
6/30/97 10,368 10,418
9/30/97 10,822 10,845
12/31/97 11,084 10,962
3/31/98 11,414 11,390
6/30/98 11,591 11,576
9/30/98 11,105 10,944
12/31/98 11,412 10,994
* Source: Merrill Lynch, Pierce, Fenner and Smith Inc.
