Dreyfus Variable
Investment Fund,
Limited Term
High Income Portfolio
ANNUAL REPORT December 31, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the portfolio are subject to change at any time based on
market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
Year 2000 Issues (Unaudited)
The portfolio could be adversely affected if the computer systems used by
Dreyfus and the portfolio's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. Dreyfus has
taken steps designed to avoid year 2000-related problems in its systems and to
monitor the readiness of other service providers. In addition, issuers of
securities in which the portfolio invests may be adversely affected by year
2000-related problems. This could have an impact on the value of the portfolio's
investments and its share price.
Contents
THE PORTFOLIO
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2 Letter from the President
3 Discussion of Performance
6 Portfolio Performance
8 Statement of Investments
13 Statement of Assets and Liabilities
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Financial Highlights
17 Notes to Financial Statements
21 Report of Independent Auditors
22 Important Tax Information
FOR MORE INFORMATION
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Back Cover
Dreyfus Variable Investment Fund,
Limited Term High Income Portfolio
The Portfolio
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Variable Investment
Fund, Limited Term High Income Portfolio, covering the 12-month period from
January 1, 1999 through December 31, 1999. Inside, you' ll find valuable
information about how the portfolio was managed during the reporting period,
including a discussion with Roger King, the portfolio manager and a member of
the Dreyfus Taxable Fixed Income Team.
The past year was challenging for most fixed-income investors. Faster than
expected economic growth in the U.S. and overseas fueled concerns that
long-dormant inflationary pressures might re-emerge, potentially reducing the
future value of bonds' interest and principal payments. These concerns prompted
the Federal Reserve Board to raise key short-term interest rates three times
during the summer and fall of 1999 in an attempt to prevent a reacceleration of
inflation.
While U.S. Treasury and agency securities declined sharply in this environment
during 1999, prices of higher yielding securities -- such as corporate bonds and
mortgage-backed securities -- fell less severely. In an environment of robust
economic growth, investors appeared more comfortable owning bonds that are
influenced primarily by credit risk, and they avoided securities that are most
affected by interest-rate risk.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Variable Investment Fund, Limited Term High
Income Portfolio.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
January 14, 2000
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 12-month period ended December 31, 1999, the portfolio achieved a total
return of -1.54% .(1) This compares to a 2.51% 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 (a measure of sensitivity to
changing interest rates) , we also gauge the portfolio's performance against a
shorter term measure: a Customized Limited Term High Yield Index, which achieved
a 5.23% return for the period.(3) This blended index is composed of four shorter
term sub-indices of the Merrill Lynch High Yield Master II Index.
We attribute the portfolio's relative underperformance primarily to the average
credit rating of the portfolio. A significant portion of our holdings are rated
B or below. However, the market's strength was concentrated in higher quality
credits within the high yield market as investors generally avoided credit risk
What is the portfolio's investment approach?
The portfolio seeks to maximize total return, consisting of capital appreciation
and current income, by investing in high yield, fixed-income securities rated,
when purchased, below investment grade or the unrated equivalent as determined
by Dreyfus. We limit the average effective portfolio maturity to four years or
less and the average portfolio duration to three-and-a-half years or less.
Issuers of below investment-grade securities may be in early stages of
development or may have highly leveraged balance sheets. To compensate buyers
for taking greater risk, these companies typically offer higher yields than
those offered by more highly rated firms.
The Portfolio
DISCUSSION OF PERFORMANCE (CONTINUED)
Our approach to selecting individual issues is based on careful credit analysis.
We analyze the business, management and financial strength of the companies
whose bonds we buy, and then project each issuer's ability to repay its debt.
What other factors influenced the portfolio's performance?
As 1999 began, it quickly became apparent that fears of economic weakness in
overseas markets were largely unfounded. The troubled economies of Japan and
Southeast Asia strengthened while the U.S. economy barreled ahead. In this
environment, the high yield market recovered from the steep drop it experienced
in late 1998, outperforming most other fixed-income market segments over the
first three months of 1999. This recovery, however, proved short-lived as lack
of investor demand brought negative returns back to the high yield market.
Investor sentiment quickly shifted away from concerns that the economy might
slow to fears it might grow too quickly. As a result of concerns that
unsustainable economic growth might reignite inflationary pressures, the Federal
Reserve Board increased short-term interest rates three times during the summer
and fall. In response to these rate hikes, the fixed-income market experienced a
general decline.
While the decline of the high yield market has not been as precipitous as was
the drop in the October 1998 financial crisis, it has been just as deep. A major
force driving the decline was concern over year-end liquidity issues during the
transition from 1999 to 2000. In anticipation of Y2K problems that ultimately
proved to be overblown, investors stepped up redemptions of high yield mutual
funds, and fund managers sold securities in order to have more cash on hand in
anticipation of potential further redemptions. At the same time, to a large
extent institutional investors stopped buying and selling high yield securities,
further reducing liquidity. This created a market in which a large supply of
high yield issues was met with weak demand. In such a market, prices inevitably
decline.
Other factors have continued to pressure the high yield market. The threat of
higher interest rates has had a negative influence on investor psychology
throughout the entire bond market. Default rates have risen, as some bonds
issued in 1997 and 1998 have not met interest payments. While it is difficult to
quantify, many investors who have traditionally participated in the high yield
market appear to have lost interest, finding other types of investments that
they consider more appealing. As a result, the net flow of money into high yield
mutual funds has turned negative for the first time since 1994.
What is the portfolio's current strategy?
We have continued our efforts to restructure the portfolio with the current high
yield market environment in mind. First, we are shortening the portfolio's
effective maturity and duration. Second, our focus on bonds rated double-B has
improved the portfolio' s credit quality. Third, we have continued to focus on
defensive sectors -- such as broadcasting and entertainment -- that historically
have been less volatile in various economic environments. These steps are
designed to help us lessen performance volatility.
January 14, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES
NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN
CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE
RETURNS.
(2) SOURCE: BLOOMBERG L.P. -- 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: BLOOMBERG L.P. -- THE 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 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
PORTFOLIO PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Variable
Investment Fund, Limited Term High Income Portfolio with the Merrill Lynch High
Yield Master II Index and a Customized Limited Term High Yield Index
((+)) SOURCE: BLOOMBERG L.P.
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 ON THAT DATE IN TWO DIFFERENT INDICES: (1) THE
MERRILL LYNCH HIGH YIELD MASTER II INDEX AND (2) THE CUSTOMIZED LIMITED TERM
HIGH YIELD INDEX WHICH HAS BEEN CONSTRUCTED BY THE DREYFUS CORPORATION. ALL
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE CUSTOMIZED LIMITED
TERM HIGH YIELD INDEX IS CALCULATED ON A YEAR-TO-YEAR BASIS.
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 AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. DOMESTIC
AND YANKEE BONDS RATED BELOW INVESTMENT GRADE WITH AT LEAST $100 MILLION PAR
AMOUNTS OUTSTANDING AND GREATER THAN OR EQUAL TO ONE YEAR TO MATURITY. THE
CUSTOMIZED LIMITED TERM HIGH YIELD INDEX IS COMPOSED OF FOUR SUB-INDICES OF THE
MERRILL LYNCH HIGH YIELD MASTER II INDEX. THESE SUB-INDICES, BLENDED AND MARKET
WEIGHTED, ARE (I) BB-RATED 1-3 YEARS, (II) B-RATED 1-3 YEARS, (III) BB-RATED 3-5
YEARS, AND (IV) B-RATED 3-5 YEARS. UNLIKE THE CUSTOMIZED LIMITED TERM HIGH YIELD
INDEX, WHICH IS COMPOSED OF BONDS RATED NO LOWER THAN "B", THE FUND CAN INVEST
IN BONDS WITH LOWER CREDIT RATINGS THAN "B" AND AS LOW AS "D".
NEITHER OF THE FOREGOING INDICES TAKE INTO ACCOUNT CHARGES, FEES AND OTHER
EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING
EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS
SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
<TABLE>
Average Annual Total Returns AS OF 12/31/99
Inception From
Date 1 Year Inception
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<S> <C> <C> <C>
PORTFOLIO 4/30/97 (1.54)% 3.01%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Portfolio
STATEMENT OF INVESTMENTS
December 31, 1999
Principal
BONDS AND NOTES--88.0% Amount ($) Value ($)
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AIRCRAFT & AEROSPACE--6.4%
AM General, Ser. B,
Sr. Notes, 12.875%, 2002 456,000 409,260
Airplanes Pass-Through Trust,
Pass-Through Ctfs.,
Ser. 1, Cl. D, 10.875%, 2019 3,000,000 2,596,830
Atlantic Coast Airlines,
Gtd. Pass-Through Ctfs.,
Ser. 1977-1D, 7.97%, 2000 84,901 (a) 84,956
Burke Industries,
Sr. Notes, 9.881%, 2007 500,000 (b) 192,500
Midway Airlines,
Gtd. Pass-Through Ctfs.,
Ser. 1998-1, Cl. D, 8.86%, 2003 1,000,000 (a) 981,945
4,265,491
AUTOMOTIVE--4.5%
Aetna Industries,
Sr. Notes, 11.875%, 2006 1,500,000 1,464,375
Hayes Lemmerz International,
Sr. Sub. Notes, 11%, 2006 1,000,000 1,050,000
Penda, Ser. B,
Sr. Notes, 10.75%, 2004 500,000 480,000
2,994,375
BROADCASTING--4.2%
Lin Holdings,
Sr. Discount Notes, 0/10%, 2008 1,000,000 (c) 678,750
Paxson Communications,
Sr. Sub. Notes, 11.625%, 2002 2,000,000 2,090,000
2,768,750
CABLE TELEVISION--6.2%
Adelphia Communications:
Sr. Discount Notes, 0%, 2003 1,500,000 1,080,000
Sr. Notes, 9.25%, 2002 1,000,000 1,000,000
Diamond Cable Communications,
Sr. Discount Notes, 0/11.75%, 2005 1,000,000 (c) 950,000
Pegasus Communications, Ser. A,
Sr. Sub. Notes, 12.5%, 2007 1,000,000 (a) 1,095,000
4,125,000
CASINOS & GAMING--.8%
Players International,
Sr. Notes, 10.875%, 2005 500,000 527,500
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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CHEMICALS--2.0%
ISP Holdings, Ser. B,
Sr. Notes, 9.75%, 2002 1,328,000 1,336,300
COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--1.4%
GS Mortgage Securities II,
Ser. 1999-FL2A, Cl. G, 8.549%, 2013 1,000,000 (a,b) 924,940
CONSTRUCTION--1.5%
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 2,000,000 (d) 1,005,000
CONSUMER--7.1%
BPC Holding, Ser. B,
Sr. Secured Notes, 13.25%, 2006 533,000 (b) 514,345
Coinmachine, Ser. D,
Sr. Notes, 11.75%, 2005 500,000 517,500
Hosiery Corp. of America,
Sr. Sub. Notes, 13.75%, 2002 1,000,000 1,045,000
Sharp Do Brazil,
Medium-Term Notes, 9.625%, 2000 1,500,000 (d,e) 228,750
Southland,
Deb., 5%, 2003 1,750,000 1,509,375
Sweetheart Cup,
Sr. Sub. Notes, 9.625%, 2000 900,000 895,500
4,710,470
ENTERTAINMENT--4.2%
American Skiing, Ser. B,
Sr. Sub. Notes, 12%, 2006 3,000,000 2,752,500
FINANCIAL--4.8%
AmeriCredit,
Sr. Notes, 9.25%, 2004 1,000,000 1,003,750
Reliance Group Holdings:
Sr. Notes, 9%, 2000 2,000,000 1,775,000
Sr. Sub. Deb., 9.75%, 2003 500,000 391,250
3,170,000
FOOD & BEVERAGES--5.9%
CKE Restaurants,
Conv. Sub. Deb., 4.25%, 2004 763,000 408,205
Chiquita Brands International,
Conv. Sub. Deb., 7%, 2001 800,000 624,000
Envirodyne Industries,
Sr. Notes, 10.25%, 2001 180,000 108,000
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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FOOD & BEVERAGES (CONTINUED)
Pilgrims Pride,
Sr. Sub. Notes, 10.875%, 2003 500,000 507,500
Sun World International, Ser. B,
First Mortgage, 11.25%, 2004 2,230,000 2,285,750
3,933,455
FOREST PRODUCTS--5.3%
Maxxam Group Holdings,
Sr. Secured Notes, 12%, 2003 3,730,000 3,487,550
HEALTH CARE--.5%
Eye Care Centers of America,
Floating Interest Rate Sub. Term
Securities, 10.114%, 2008 500,000 (b) 352,500
INDUSTRIAL--4.1%
Applied Extrusion Technology, Ser. B,
Sr. Notes, 11.5%, 2002 750,000 772,500
Atlantis Group,
Sr. Notes, 11%, 2003 745,000 748,725
Oregon Steel Mills,
First Mortgage, 11%, 2003 1,125,000 1,172,812
2,694,037
METALS--.7%
Renco Metals,
Sr. Notes, 11.5%, 2003 560,000 473,200
REAL ESTATE--3.9%
Meditrust:
Medium-Term Notes, 7.77%, 2002 1,500,000 1,236,974
Notes, 7.375%, 2000 500,000 472,836
Rockefeller Center Properties,
Conv. Deb., 0%, 2000 1,000,000 840,000
2,549,810
RETAIL--2.9%
Cafeteria Operators
(Gtd. by Furrs/Bishops Specialty Group),
Sr. Secured Notes, 12%, 2001 1,000,000 995,000
Petro Stopping Centers/Financial,
Sr. Notes, 10.5%, 2007 1,000,000 932,500
1,927,500
SUPERMARKETS--.2%
Pathmark Stores,
Notes, 10.75%, 2003 1,000,000 125,000
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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TELECOMMUNICATIONS/CARRIERS--7.1%
Hermes Europe Railtel,
Sr. Notes, 11.5%, 2007 2,000,000 2,070,000
MJD Communications,
Floating Rate Notes, 10.321%, 2008 1,000,000 (b) 936,500
Qwest Communications International, Ser. B,
Sr. Notes, 10.875%, 2007 1,500,000 1,687,500
4,694,000
TEXTILES--.7%
Sassco Fashions,
Sr. Notes, 12.75%, 2004 500,000 467,500
Texfi Industries,
Sr. Sub. Deb., 8.75%, 2000 500,000 (d) 20,000
487,500
TRANSPORTATION--7.3%
Eletson Holdings,
First Pfd. Ship Mortgage, 9.25%, 2003 500,000 462,500
International Shipholding,
Sr. Notes, 9%, 2003 1,750,000 1,706,250
MTL, Ser. B,
Floating Interest Rate Sub. Term
Securities, 10.931%, 2006 2,000,000 (b) 1,787,500
Union Pacific,
Sub. Deb, 5.5%, 2033 1,315,000 912,232
4,868,482
WIRELESS COMMUNICATIONS--6.3%
Comunicacion Celular,
Sr. Discount Notes, 0/14.125%, 2005 500,000 (a,c) 240,000
Microcell Telecommunications, Ser. B,
Sr. Discount Notes, 0/14%, 2006 1,000,000 (c) 887,500
Orion Network Systems,
Sr. Discount Notes, 0/12.5%, 2007 4,500,000 (c) 2,092,500
WinStar Communications,
Sr. Discount Notes, 0/14%, 2005 1,000,000 (c) 975,000
4,195,000
TOTAL BONDS AND NOTES
(cost $69,036,439) 58,368,360
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS--.0% Shares Value ($)
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ENTERTAINMENT
Discovery Zone (warrants)
(cost $120,000) 2,000 (a,f) 2
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PREFERRED STOCKS--1.0%
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PUBLISHING
Newscorp Overseas, Ser. A,
Cum., $2.15625
(cost $819,075) 32,600 700,900
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Principal
SHORT-TERM INVESTMENTS--11.8% Amount ($) Value ($)
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U.S. TREASURY BILLS:
4.25%, 1/13/2000 2,527,000 2,523,740
4.97%, 3/30/2000 5,360,000 5,293,161
TOTAL SHORT-TERM INVESTMENTS
(cost $7,817,530) 7,816,901
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TOTAL INVESTMENTS (cost $77,793,044) 100.8% 66,886,163
LIABILITIES, LESS CASH AND RECEIVABLES (.8%) (528,936)
NET ASSETS 100.0% 66,357,227
(A) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT DECEMBER 31,
1999, THESE SECURITIES AMOUNTED TO $3,326,843 OR 5.0% OF NET ASSETS.
(B) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(C) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
(D) NON-INCOME PRODUCING--SECURITY IN DEFAULT.
(E) REFLECTS DATE SECURITY CAN BE REDEEMED AT HOLDER'S OPTION; THE STATED
MATURITY IS 10/30/2005.
(F) NON-INCOME PRODUCING.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
Cost Value
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ASSETS ($):
Investments in securities--See Statement of Investments 77,793,044 66,886,163
Dividends and interest receivable 1,640,242
Prepaid expenses and other assets 16,231
68,542,636
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 41,379
Cash overdraft due to Custodian 1,976,649
Payable for shares of Beneficial Interest redeemed 141,420
Accrued expenses 25,961
2,185,409
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NET ASSETS ($) 66,357,227
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COMPOSITION OF NET ASSETS ($):
Paid-in capital 82,874,635
Accumulated undistributed investment income--net 219,262
Accumulated net realized gain (loss) on investments (5,829,789)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (10,906,881)
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NET ASSETS ($) 66,357,227
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SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial Interest authorized)
6,353,026
NET ASSET VALUE, offering and redemption price per share ($) 10.44
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
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INVESTMENT INCOME ($):
Interest 8,725,787
Cash dividends 306,701
TOTAL INCOME 9,032,488
EXPENSES:
Investment advisory fee--Note 3(a) 516,571
Interest expense--Note 2 82,841
Professional fees 29,413
Prospectus and shareholders' reports 16,988
Custodian fees--Note 3(a) 9,696
Trustees' fees and expenses--Note 3(b) 1,113
Shareholder servicing costs 248
Miscellaneous 9,260
TOTAL EXPENSES 666,130
INVESTMENT INCOME--NET 8,366,358
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (5,298,109)
Net unrealized appreciation (depreciation) on investments (3,996,453)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (9,294,562)
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (928,204)
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31,
------------------------------
1999 1998
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OPERATIONS ($):
Investment income--net 8,366,358 6,174,286
Net realized gain (loss) on investments (5,298,109) (536,867)
Net unrealized appreciation (depreciation)
on investments (3,996,453) (6,905,509)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (928,204) (1,268,090)
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DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (8,228,436) (6,120,447)
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BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold 13,764,126 61,513,865
Dividends reinvested 8,228,436 6,120,210
Cost of shares redeemed (29,897,132) (8,281,472)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (7,904,570) 59,352,603
TOTAL INCREASE (DECREASE) IN NET ASSETS (17,061,210) 51,964,066
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NET ASSETS ($):
Beginning of Period 83,418,437 31,454,371
END OF PERIOD 66,357,227 83,418,437
Undistributed investment income--net 219,262 81,340
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CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 1,189,786 4,799,002
Shares issued for dividends reinvested 748,768 496,410
Shares redeemed (2,657,203) (665,555)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (718,649) 4,629,857
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the portfolio would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been derived from the
portfolio's financial statements.
<TABLE>
Year Ended December 31,
----------------------------------------
1999 1998 1997a
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<S> <C> <C> <C>
PER SHARE DATA ($):
Net asset value, beginning of period 11.80 12.88 12.50
Investment Operations:
Investment income--net 1.21 1.14 .78
Net realized and unrealized gain (loss) on investments (1.38) (1.08) .41
Total from Investment Operations (.17) .06 1.19
Distributions:
Dividends from investment income--net (1.19) (1.14) (.77)
Dividends from net realized gain on investments -- -- (.04)
Total Distributions (1.19) (1.14) (.81)
Net asset value, end of period 10.44 11.80 12.88
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TOTAL RETURN (%) (1.54) .29 14.27(b)
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to average net assets .73 .77 .89(b)
Ratio of interest expense to average net assets .11 .32 .20(b)
Ratio of net investment income to average net assets 10.53 10.10 10.27(b)
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus Corporation -- -- .05(b)
Portfolio Turnover Rate 52.08 50.18 37.98(c)
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Net Assets, end of period ($ x 1,000) 66,357 83,418 31,454
(A) FROM APRIL 30, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997.
(B) ANNUALIZED
(C) NOT ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Variable Investment Fund (the "fund") is registered under the Investment
Company Act of 1940 as amended (the "Act"), as an open-end management investment
company, operating as a series company, currently offering thirteen series,
including the 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 a diversified series. 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"), which is a wholly-owned subsidiary of Mellon Financial Corporation.
Premier Mutual Fund Services, Inc. is the distributor of the portfolio's shares,
which are sold without a sales charge.
The fund accounts separately for the assets, liabilities and operations of each
series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The portfolio' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(a) Portfolio valuation: Investments in securities (excluding short-term
investments other than U.S. Treasury Bills) are valued each business day by an
independent pricing service (" Service" ) approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
The Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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 $14,660 during the period ended December 31, 1999 based
on available cash balances left on deposit. Income earned under this
arrangement is included in interest income.
(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, if any, 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 $5,771,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1999. This
amount is calculated based on Federal income tax regulations which may differ
from financial reporting in accordance with generally accepted accounting
principles. If not applied, $454,000 of the carryover expires in fiscal 2006 and
$5,317,000 expires in fiscal 2007.
NOTE 2--Bank Lines of Credit:
The portfolio may borrow up to $10 million for leveraging purposes under a
short-term unsecured line of credit and participates with other Dreyfus-managed
funds in a $100 million unsecured line of credit primarily to be utilized for
temporary or emergency purposes, including the financing of redemptions.
Interest is charged to the portfolio at rates which are related to the Federal
Funds rate in effect at the time of borrowings.
The average daily amount of borrowings outstanding during the period ended
December 31, 1999 was approximately $1,550,000, with a related weighted average
annualized interest rate of 5.34%.
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 December 31, 1999 to reduce the
investment advisory fee paid by the portfolio, to the extent that the
portfolio' s aggregate expenses, exclusive of taxes, brokerage, interest on
borrowings, and extraordinary 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 December 31, 1999.
The Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended December 31, 1999, the portfolio was charged $38 pursuant to the
transfer agency agreement.
The portfolio compensates Mellon under a custody agreement to provide custodial
services for the portfolio. During the period ended December 31, 1999, the
portfolio was charged $9,696 pursuant to the custody agreement.
(b) Each trustee who is not an "affiliated person" as defined in the Act
received from the fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board received an additional 25% of such
compensation.
Each non-affiliated trustee is a Board member of one or more funds comprising a
certain group of funds ("Fund Group") within the Dreyfus complex. Effective
January 1, 2000, for their participation as a trustee in a Fund Group, the
trustees receive an annual fee of $40,000 each, $6,000 for each meeting attended
in person and $500 for each telephonic meeting in which they participate. These
fees are allocated among the funds in the Fund Group. The Chairman of the Board
receives an additional 25% of such compensation.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended December 31, 1999, amounted to
$38,967,741 and $50,543,978, respectively.
At December 31, 1999, accumulated net unrealized depreciation on investments was
$10,906,881, consisting of $74,384 gross unrealized appreciation and $10,981,265
gross unrealized depreciation.
At December 31, 1999, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
REPORT OF 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 the Dreyfus Variable
Investment Fund) as of December 31, 1999, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and financial highlights for
each of the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
verification by examination of securities held by the custodian as of December
31, 1999, and confirmation of securities not held by the custodian by
correspondence with others. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Variable Investment Fund, Limited Term High Income Portfolio at December
31, 1999, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
accounting principles generally accepted in the United States.
New York, New York
February 3, 2000
The Portfolio
IMPORTANT TAX INFORMATION (Unaudited)
The portfolio also designates 3.71% of the ordinary dividend paid during the
fiscal year ended December 31, 1999 as qualifying for the corporate dividends
received deduction.
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) 2000 Dreyfus Service Corporation 156AR9912
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS VARIABLE INVESTMENT FUND, LIMITED TERM HIGH
INCOME PORTFOLIO WITH THE MERRILL LYNCH HIGH YIELD
MASTER II INDEX AND A CUSTOMIZED LIMITED TERM HIGH YIELD INDEX
EXHIBIT A:
MERRILL
LYNCH CUSTOMIZED DREYFUS VARIABLE
PERIOD HIGH YIELD LIMITED TERM INVESTMENT FUND,
MASTER II HIGH YIELD LIMITED TERM HIGH
INDEX * INDEX * INCOME PORTFOLIO
4/30/97 10,000 10,000 10,000
12/31/97 11,084 10,799 10,962
12/31/98 11,412 11,303 10,994
12/31/99 11,698 11,895 10,825
* Source: Bloomberg L.P.
