Dreyfus Variable Investment Fund, Limited Term High Income Portfolio
SEMIANNUAL REPORT June 30, 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 The
Dreyfus Corporation and the portfolio'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 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
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2 Letter from the President
3 Discussion of Performance
6 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
FOR MORE INFORMATION
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Back Cover
The Portfolio
Dreyfus Variable Investment Fund, Limited Term High Income Portfolio
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment
Fund, Limited Term High Income Portfolio, covering the six-month period from
January 1, 1999 through June 30, 1999. Inside, you'll find valuable information
about how the portfolio was managed during the reporting period, including a
discussion with Roger King, portfolio manager and a member of the Dreyfus
Taxable Fixed Income Team.
The past six months have produced mixed results for fixed-income investors.
That' s because economic growth has been stronger than many analysts expected,
fueling fears that inflation pressures may re-emerge. Overseas economies that
had been in recession -- including Japan and the rest of Asia -- appear to have
begun to gain strength. The U.S. economy, which is now in its eighth year of
expansion, has also grown more robustly than expected. In response, the Federal
Reserve raised short-term interest rates modestly on June 30.
In this economic climate, U.S. Treasury securities declined, giving back all of
the gains they achieved during their remarkable rally last summer and fall.
Prices of other types of bonds fell less sharply or remained relatively
unchanged when investors shifted assets back into market sectors they had
previously avoided. Accordingly, many corporate bonds, mortgage-backed
securities, asset-backed securities and U.S. dollar-denominated foreign bonds
provided higher returns than U.S. Treasuries over the first half of 1999.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Variable Investment Fund, Limited Term
High Income Portfolio.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
July 15, 1999
DISCUSSION OF PERFORMANCE
Roger King, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus Variable Investment Fund, Limited Term High Income Portfolio
perform relative to its benchmark?
For the six-month period ended June 30, 1999, Dreyfus Variable Investment Fund,
Limited Term High Income Portfolio achieved a total return of 0.20%.(1) This
compares to a 2.49% return for the portfolio's benchmark, the Merrill Lynch High
Yield Master II Index for the same period.(2)
Because of its restricted maturity and duration, we also gauge the portfolio's
performance against a shorter-term measure: the Dreyfus Customized Limited Term
High Yield Index, which produced a 3.22% return for the period.(3) This blended
index is composed of four shorter-term sub-indices of the Merrill Lynch High
Yield Master II.
We attribute the portfolio' s performance relative to the Merrill Lynch High
Yield Master II Index to our risk management strategy. In order to reduce
volatility, we reduced the average maturity of our holdings and improved the
portfolio' s credit quality. However, the overall market' s strength was
concentrated in lower rated issues and in bonds with longer maturities.
What is the portfolio's investment approach?
The portfolio seeks to maximize total return, consisting of capital appreciation
and current income. In so doing, the portfolio invests in high yield
fixed-income securities while looking to manage interest rate and credit risk by
limiting the average effective portfolio maturity to four years or less and an
average portfolio duration of 3.5 years or less. In most cases, shorter
maturities can help reduce interest rate and credit risk.
We normally invest most of the portfolio's assets in fixed-income securities of
below-investment-grade credit quality. Issuers of below-investment-grade
securities may be in early stages of development or The Portfoli
DISCUSSION OF PERFORMANCE (CONTINUED)
may have highly leveraged balance sheets. To compensate the buyer for the
greater risk, these companies must offer higher yields than those offered by
more highly rated firms.
Our approach to selecting individual issues is based on careful credit analysis
- -- our projection of each issuer' s ability to meet its obligations as they
become due. We buy debt from a range of different types of issuers. For example,
new companies often must pay higher interest rates than more established firms.
We also buy primarily "seasoned" bonds, which are issued by companies with an
established track record, have been outstanding for a number of years, and now
have a shorter time remaining until final maturity or projected retirement of
the bond. We also seek out bonds that are convertible into the issuer's common
stock, but which we believe probably will not be converted because the target
stock price is not likely to be reached.
What other factors influenced the portfolio's performance?
When the reporting period began, fixed-income investors were concerned that
economic weakness in overseas markets might reduce earnings growth for many U.S.
companies, including issuers of high yield bonds. It quickly became apparent,
however, that these fears were largely unfounded. In fact, the troubled
economies of Japan and Southeast Asia appeared to strengthen, while economic
growth in the U.S. showed few signs of abating.
In this environment, the high yield market recovered from the precipitous drop
it experienced in mid to late 1998. In fact, high-yield bonds outperformed most
other fixed-income market segments over the first three months of 1999. In
addition, different segments of the high yield market recovered at different
times. Near-investment-grade bonds recovered first, followed by defensive
issues, including bonds of companies in industries seen to be resistant to
recession. "Off-the-run" issues -- securities that are bought and sold
infrequently -- rebounded next. Finally, the market's strength broadened to
market segments such as telecommunications and technology.
During May and June, investor sentiment shifted from concern that the economy
might slow to fear that the economy might grow too quickly, awakening dormant
inflation pressures. As a result of these inflation fears, the Federal Reserve
Board increased short-term interest rates modestly on June 30. Accordingly,
toward the end of the reporting period, investor interest in high yield bonds
waned.
What is the portfolio's current strategy?
We have worked to position the portfolio in an effort to take better advantage
of current market strengths and to protect the portfolio from a potential
recurrence of market instability. In attempting to manage volatility, we have
shortened the portfolio's effective maturity and duration. We have improved the
credit quality of the issues in which we invest, moving to a focus on issues at
the high single B/double B level. We continue to place our industry focus on
more defensive sectors -- sectors that tend to do well in all economic
environments -- such as gaming, entertainment and selected areas of financial
services. These strategies are designed to help us provide high levels of
current income, while limiting exposure to broader market risks.
July 15, 1999
(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) 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 $100 MILLION PAR AMOUNT
OUTSTANDING AND GREATER THAN OR EQUAL TO ONE YEAR TO MATURITY.
(3) SOURCE: MERRILL LYNCH, PIERCE, FENNER AND SMITH, INC. -- THE DREYFUS
CUSTOMIZED LIMITED TERM HIGH YIELD INDEX IS COMPOSED OF FOUR SUB-INDICES OF THE
MERRILL LYNCH HIGH-YIELD MASTER INDEX II. THESE SUB-INDICES, BLENDED AND MARKET
WEIGHTED, ARE (I) BB-RATED, 1-3 YEARS, (II) B-RATED 1-3 YEARS, (III) BB-RATED,
3-5 YEARS, AND (IV) B-RATED, 3-5 YEARS. UNLIKE THE DREYFUS CUSTOMIZED LIMITED
TERM HIGH YIELD INDEX, WHICH IS COMPOSED OF BONDS RATED NO LOWER THAN "B", THE
PORTFOLIO CAN INVEST IN BONDS WITH LOWER CREDIT RATINGS THAN "B" AND AS LOW AS
"D."
The Portfolio
STATEMENT OF INVESTMENTS CONTINUED)
(STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
June 30, 1999 (Unaudited)
Principal
BONDS AND NOTES--89.8% Amount ($) Value ($)
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<S> <C> <C>
Aircraft & Aerospace--6.4%
Airplanes Pass-Through Trust,
Pass-Through Ctfs.,
Ser. 1, Cl. D, 10.875%, 2019 3,000,000 2,997,900
AM General, Ser. B,
Sr. Notes, 12.875%, 2002 500,000 347,500
Atlantic Coast Airlines,
Gtd. Pass Through Ctfs.,
Ser. 1977-1D, 7.97%, 2000 84,909 (a) 85,694
Burke Industries,
Sr. Notes, 9.034%, 2007 500,000 (b) 378,125
Midway Airlines,
Pass-Through Ctfs.,
Ser. 1998-1, Cl. D, 8.86%, 2003 1,000,000 (a) 993,595
Sequa,
Sr. Sub. Notes, 9.375%, 2003 500,000 505,000
5,307,814
Automotive--6.8%
Aetna Industries,
Sr. Notes, 11.875%, 2006 1,500,000 1,537,500
Collins & Aikman Products,
Gtd. Sr. Sub. Notes, 11.5%, 2006 2,500,000 2,525,000
Hayes Lemmerz International,
Sr. Sub. Notes, 11%, 2006 1,000,000 1,087,500
Penda, Ser. B,
Sr. Notes, 10.75%, 2004 500,000 492,500
5,642,500
Broadcasting--4.4%
Azteca Holdings, S.A. de C.V.,
Sr. Secured Notes, 11%, 2002 1,000,000 855,000
Lin Holdings,
Sr. Discount Notes, 10%, 2008 1,000,000 (c) 665,000
Paxson Communications,
Sr. Sub. Notes, 11.625%, 2002 2,000,000 2,090,000
3,610,000
Business Services--3.4%
Corporate Express,
Conv. Sub. Notes, 4.5%, 2000 3,000,000 2,797,500
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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Cable Television--3.4%
Diamond Cable Communications:
Sr. Discount Notes, 13.25%, 2004 750,000 (c) 781,875
Sr. Discount Notes, 11.75%, 2005 1,000,000 (c) 905,000
Digital Television Service/Capital, Ser. B,
Sr. Sub. Notes, 12.5%, 2007 1,000,000 1,103,750
2,790,625
Casinos & Gaming--.6%
Players International,
Sr. Notes, 10.875%, 2005 500,000 528,750
Commercial Mortgage
Pass-Through Ctfs.--1.1%
GS Mortgage Securities II,
Ser. 1999-FL2A, Cl. G, 7.094%, 2013 1,000,000 (a,b) 929,844
Construction--1.5%
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 2,000,000 (d) 1,210,000
Consumer--2.5%
BPC Holding, Ser. B,
Sr. Secured Notes, 12.5%, 2006 500,000 497,500
Sharp Do Brazil,
Medium-Term Notes, 9.625%, 2000 1,500,000 (e) 671,250
Sweetheart Cup,
Gtd. Sr. Notes, 9.625%, 2000 900,000 884,250
2,053,000
Entertainment--2.8%
American Skiing, Ser. B,
Sr. Sub. Notes, 12%, 2006 3,000,000 2,295,000
Financial--1.9%
AmeriCredit,
Sr. Notes, 9.25%, 2004 1,000,000 1,011,250
Reliance Group Holdings,
Sr. Sub. Deb., 9.75%, 2003 500,000 518,125
1,529,375
Food & Beverages--8.4%
Chiquita Brands International,
Conv. Sub. Deb., 7%, 2001 800,000 745,000
The Portfolio
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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Envirodyne Industries,
Sr. Notes, 10.25%, 2001 180,000 130,050
Pilgrims Pride,
Sr. Sub. Notes, 10.875%, 2003 500,000 512,500
Sun World International, Ser. B,
First Mortgage, 11.25%, 2004 5,230,000 5,517,650
6,905,200
Forest Products--4.7%
Maxxam Group Holdings,
Sr. Secured Notes, 12%, 2003 3,730,000 3,860,550
Health Care--.5%
Eye Care Centers of America,
Floating Interest Rate Sub. Term
Securities, 9.04%, 2008 500,000 (b) 417,500
Industrial--1.2%
Applied Extrusion Technology, Ser. B,
Sr. Notes, 11.5%, 2002 250,000 255,312
Atlantis Group,
Sr. Notes, 11%, 2003 745,000 764,556
1,019,868
Metals--14.2%
Kaiser Aluminum & Chemical,
Sr. Notes, 9.875%, 2002 2,000,000 2,030,000
Renco Metals,
Sr. Notes, 11.5%, 2003 560,000 571,200
Republic Engineered Steels,
First Mortgage , 9.875%, 2001 8,499,000 8,860,208
Weirton Steel,
Sr. Notes, 10.875%, 1999 200,000 201,250
11,662,658
Paper & Paper Related--1.2%
Stone Container,
Sr. Sub. Deb., 12.75%, 2002 (Units) 1,000,000 (b,f) 1,005,000
Real Estate--1.0%
Rockefeller Center Properties,
Conv. Deb., 0%, 2000 1,000,000 805,000
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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v
Retail--2.4%
Cafeteria Operators
(Gtd. by Furrs/Bishops Specialty Group),
Sr. Secured Notes, 12%, 2001 1,000,000 996,250
K-Mart, Ser. D,
Medium-Term Notes, 7.24%, 1999 1,000,000 1,000,006
1,996,256
Shipping--.6%
Eletson Holdings,
First Pfd. Ship Mortgage, 9.25%, 2003 500,000 471,875
Supermarkets--1.2%
Pathmark Stores,
Discount Notes, 10.75%, 2003 1,000,000 (c) 995,000
Telecommunications-Carriers--7.4%
Hermes Europe Railtel,
Sr. Notes, 11.5%, 2007 2,000,000 2,115,000
Intermedia Communications,
Sr. Discount Notes, 12.5%, 2006 1,500,000 (c) 1,245,000
MJD Communications,
Floating Rate Notes, 9.248%, 2008 1,000,000 (b) 1,003,750
Qwest Communications International, Ser. B,
Sr. Notes, 10.875%, 2007 1,500,000 1,691,250
6,055,000
Textiles--.7%
Sassco Fashions,
Sr. Notes, 12.75%, 2004 500,000 482,500
Texfi Industries,
Sr. Sub. Deb., 8.75%, 1999 500,000 (d) 102,500
585,000
Transportation--4.8%
MTL, Ser. B,
Floating Interest Rate Sub. Term
Securities, 9.954%, 2006 2,000,000 (b) 1,910,000
Petro Stopping Centers/Financial,
Sr. Notes, 10.5%, 2007 1,000,000 1,055,000
The Portfolio
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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Transportation (continued)
Union Pacific,
Sub. Deb, 5.5%, 2033 1,315,000 962,663
3,927,663
Wireless Communications--6.7%
Comunicacion Celular ,
Sr. Discount Notes,14.125%, 2005 500,000 (a,c) 303,125
Microcell Telecommunications, Ser. B,
Sr. Discount Notes, 14%, 2006 1,000,000 (c) 812,500
NEXTEL Communications,
Sr. Discount Notes, 9.75%, 2004 1,000,000 1,022,500
Orion Network Systems,
Sr. Discount Notes, 12.5%, 2007 4,500,000 (c) 2,497,500
WinStar Communications,
Sr. Discount Notes, 14%, 2005 1,000,000 (c) 880,000
5,515,625
Total Bonds and Notes
(cost $80,593,259) 73,916,603
COMMON STOCKS--.0% Shares Value ($)
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Entertainment
Discovery Zone (warrants)
(cost $120,000) 2,000 (a,g) 2
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PREFERRED STOCKS--2.9%
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Broadcasting--1.9%
Spanish Broadcasting System, Ser. A,
Cum., $142.50 1,414 1,534,190
Publishing--1.0%
Newscorp Overseas, Ser. A,
Cum., $2.15625 32,600 817,038
Total Preferred Stocks
(cost $2,373,075) 2,351,228
Principal
SHORT-TERM INVESTMENTS--5.9% Amount ($) Value ($)
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U.S. Government Agency;
Federal Farm Credit Bank,
4.5%, 7/1/1999
(cost $4,895,000) 4,895,000 4,895,000
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Total Investments (cost $87,981,334) 98.6% 81,162,833
Cash and Receivables (Net) 1.4% 1,159,841
Net Assets 100.0% 82,322,674
(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 JUNE 30, 1999,
THESE SECURITIES AMOUNTED TO $2,312,260 OR 2.8% OF NET ASSETS.
(B) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(C) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
(D) NON-INCOME PRODUCING--SECURITY IN DEFAULT.
(E) REFLECTS DATE THE SECURITY CAN BE REDEEMED AT HOLDER'S OPTION: THE STATED
MATURITY IS 10/30/2005.
(F) WITH SUPPLEMENTAL INTEREST CERTIFICATES ATTACHED.
(G) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Portfolio
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
Cost ($) Value
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ASSETS ($):
Investments in securities--See Statement of Investments 87,981,334 81,162,833
Interest receivable 1,770,568
Prepaid expenses and other assets 9,288
82,942,689
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 44,448
Cash overdraft due to Custodian 40,212
Payable for investment securities purchased 516,365
Interest payable--Note 2 3,262
Accrued expenses 15,728
620,015
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NET ASSETS ($) 82,322,674
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COMPOSITION OF NET ASSETS ($):
Paid-in capital 93,848,489
Accumulated undistributed investment income--net 120,207
Accumulated net realized gain (loss) on investments (4,827,521)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (6,818,501)
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NET ASSETS ($) 82,322,674
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SHARES OUTSTANDING
(unlimited number of $.001 par value
shares of Beneficial Interest authorized) 7,340,986
NET ASSET VALUE, offering and redemption price per share ($) 11.21
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999 (Unaudited)
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Investment Income ($):
INTEREST INCOME 4,811,861
EXPENSES:
Investment advisory fee-Note 3(a) 269,867
Interest expense-Note 2 49,687
Professional fees 17,252
Prospectus and shareholder's reports 6,617
Custodian fees--Note 3(a) 3,666
Trustee's fees and expenses-Note 3(b) 574
Registration fees 315
Shareholder servicing costs 125
Miscellaneous 4,159
TOTAL EXPENSES 352,262
Investment Income--Net 4,459,599
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Realized and Unrealized Gain (Loss) on Investments-Note 4 ($):
Net realized gain (loss) on investments (4,295,841)
Net unrealized appreciation (depreciation) on investments 91,927
Net Realized and Unrealized Gain (Loss) on Investments (4,203,914)
Net Increase in Net Assets Resulting from Operations 255,685
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
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OPERATIONS ($):
Investment income--net 4,459,599 6,174,286
Net realized gain (loss) on investments (4,295,841) (536,867)
Net unrealized appreciation (depreciation)
on investments 91,927 (6,905,509)
Net Increase (Decrease) in Net Assets
Resulting from Operations 255,685 (1,268,090)
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DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (4,420,732) (6,120,447)
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BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold 12,560,927 61,513,865
Dividends reinvested 4,420,732 6,120,210
Cost of shares redeemed (13,912,375) (8,281,472)
Increase (Decrease) in Net Assets from
Beneficial Interest Transactions 3,069,284 59,352,603
Total Increase (Decrease) in Net Assets (1,095,763) 51,964,066
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Net Assets ($):
Beginning of Period 83,418,437 31,454,371
End of Period 82,322,674 83,418,437
Undistributed investment income-net 120,207 81,340
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 1,082,327 4,799,002
Shares issued for dividends reinvested 392,654 496,410
Shares redeemed (1,205,670) (665,555)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in SHARES OUTSTANDING 269,311 4,629,857
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>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended December 31,
-------------------
(Unaudited) 1998 1997(a)
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<S> <C> <C> <C>
PER SHARE DATA ($):
Net asset value, beginning of period 11.80 12.88 12.50
Investment Operations:
Investment income--net .61 1.14 .78
Net realized and unrealized
gain (loss) on investments (.59) (1.08) .41
Total from Investment Operations .02 .06 1.19
Distributions:
Dividends from investment income--net (.61) (1.14) (.77)
Dividends from net realized gain on investments -- -- (.04)
Total Distributions (.61) (1.14) (.81)
Net asset value, end of period 11.21 11.80 12.88
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TOTAL RETURN (%) .40(b) .29 14.27(b)
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to average net assets .73(b) .77 .89(b)
Ratio of interest expense to average net assets .12(b) .32 .20(b)
Ratio of net investment income to average
net assets 10.74(b) 10.10 10.27(b)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation -- -- .05(b)
Portfolio Turnover Rate 25.93(c) 50.18 37.98(c)
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 82,323 83,418 31,454
(A) FROM APRIL 30, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997.
(B) ANNUALIZED.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The 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 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 "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 diversified. The portfolio's investment objective is
to maximize total return, consisting of capital appreciation and current income.
The Dreyfus Corporation (" Dreyfus" ) serves as the portfolio's investment
adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). 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's 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 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 portfolio received
net earnings credits of $5,910 during the period ended June 30, 1999 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 portfolio to declare and
pay dividends quarterly from investment income-net. 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 portfolio 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 secu
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
rities 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 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.
The average daily amount of borrowings outstanding during the period ended June
30, 1999 was approximately $1,929,600, with a related weighted average
annualized interest rate of 5.19%.
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. Dreyfus had
undertaken from January 1, 1999 through June 30, 1999 to reduce the management
fee paid by the portfolio, exclusive of taxes, brokerage, interest on
borrowings, commitment fees and extraordinary expenses to the extent that such
expenses exceeded an annual rate of 1% of the value of the portfolio's average
daily net assets. No expense reimbursement was required for the period ended
June 30, 1999.
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.
The portfolio compensates Mellon under a custody agreement to provide custodial
services for the portfolio. During the period ended June 30, 1999, the portfolio
was charged $3,666 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, 1999, amounted to
$21,192,300 and $20,707,140, respectively.
At June 30, 1999, accumulated net unrealized depreciation on investments was
$6,818,501, consisting of $203,370 gross unrealized appreciation and $7,021,871
gross unrealized depreciation.
At June 30, 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
NOTES
For More Information
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
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) 1999, Dreyfus Service Corporation 156SA996
