[dreyfus lion "d" logo] (reg.tm)
[dreyfus logo] (reg.tm)
DREYFUS VARIABLE INVESTMENT FUND,
SMALL CAP 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. 121SA986
Variable
Investment Fund,
SMALL CAP PORTFOLIO
Semi-Annual
Report
June 30, 1998
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
Dreyfus Variable Investment Fund -- Small Cap Portfolio completed the first
half of the current fiscal year on June 30, 1998. This was a difficult period
for small-capitalization stocks compared to large-capitalization stocks,
particularly in the latest three months. For the six-month period, the Small Cap
Portfolio produced a total return of 5.95%.* This compares with a total return
of 4.93% for the Fund's benchmark index, the Russell 2000 Index.**
ECONOMIC REVIEW
In the first half of 1998, three main regions of the world had very different
economic fundamentals. The U.S. entered the year with a strong economy near full
employment with unemployment only slightly above 4%. The tight labor market led
the Federal Reserve Board to contemplate a rise in interest rates, but the U.S.
economy cooled enough over the course of the half-year that no action was taken.
After many years of subpar economic growth, continental Europe moved into a
better economic expansion. Unlike the U.S., Europe has substantial excess
capacity of productive plant and labor. In Asia, weak economies were pervasive
in the aftermath of the Asian financial crisis late last year.
A main influence on the U.S. economy in the first half of 1998 was Asian
economic weakness. It had both positive and negative effects. The positive
effects hit first. Actual inflation and expected inflation dropped, causing a
decline in long-term Treasury bond yields and mortgage rates. This caused a boom
in housing and rising asset prices, including bonds, stocks and houses. The fall
in inflation helped the consumer sector as more of the growth in consumer income
was left over after inflation to buy goods and services. Consumers benefited
from a combination of good growth in income after inflation, a strong labor
market and rising prices of assets they owned.
The negative effect of Asian weakness was directed towards the industrial
sector rather than the consumer sector. By midyear, the evidence of industrial
weakness was clear-cut in response to a slowing of inventory accumulation and
weakened exports. One result of this industrial weakness was to cool off a U.S.
economy that had been growing so rapidly that there were fears that the Federal
Reserve might raise interest rates. This favorable shift in expectations about
Fed policy was one reason for the rise in U.S. bond and stock prices. Another
background factor was the increasing evidence of prospects for multi-year budget
surpluses in the U.S.
MARKET OVERVIEW
The six-month period ended June 30, 1998, was another period of solid advance
for the broad stock market indices. Three major trends could be observed within
the stock market in the first half of 1998. First, the strongest performance
tended to come from the largest stocks, the so-called super caps. The S&P 500,
dominated by large capitalization stocks, generated a total return of 17.72% for
the half-year, while Standard and Poor's MidCap 400 Index returned 8.63% and the
Russell 2000 Index of small cap issues returned only 4.93%.*** Even within most
of the market indices, the strongest gains tended to come from the largest
stocks within the index. One contributor to this pattern was strong buying of
U.S. stocks by foreign investors who often focus on the largest U.S. stocks
Second, the relative performance of different industries revealed the heavy
impact of Asian economic weakness. Most of the leading sectors during the period
were either impervious to its impact or were beneficiaries of the lower
inflation and long-term interest rates precipitated by the Asian crisis. Stock
categories that were strongest during the half-year included financials,
particularly banks, brokerage firms, insurance and diversified financial
services; dominant technology companies; and cyclical consumer stocks such as
advertising, airlines, automotive, broadcasting and home construction.
The sectors that lagged tended to be those negatively influenced by Asia
either via weak industrial demand or weak commodity prices. These categories
included such world traded commodities as oil, metals, papers and chemicals.
Capital goods companies, especially those exporting to Asia, tended to lag. This
included machinery producers, semiconductor equipment companies, and engineering
and construction firms.
A third major trend was the slowing of earnings growth which was accompanied
by stronger stock performance by major blue chip growth companies relative to
many value stocks. As the overall growth rate of corporate profits slowed, the
proportion of companies delivering strong profit growth also fell. A relatively
small group of major growth stocks with undiminished profit growth prospects
drew increased interest. With a stronger rise in the S&P 500 than in earnings,
the price/earnings multiple of the stock market rose, reflecting an environment
of low inflation and lower long-term interest rates.
The stock market's rise in the first half of 1998 reflected a continuation of
the pattern of the last several years of favorable trends in financial asset
prices as low rates of inflation persist in the U.S. economy.
PORTFOLIO FOCUS
Some portfolio managers have on their large caps and others have on their
small caps. We have on our thinking caps as well as our small caps. As you know
our mandate is to be in small caps; however, we think that superior long-term
investment returns generally are driven by stocks that combine good management
and solid fundamentals, and which can be purchased at attractive valuations. We
continually look to uncover these opportunities.
We would like to point out that the April through June quarter is only the
11th negative quarter for the Russell Index of the 1990s to date. With renewed
concerns about the economic fallout from the Asian crisis, many investors fled
in droves apparently to international brand name companies. Nevertheless, we
currently remain optimistic that the market should at some point rotate into
what we believe are attractively valued emerging leaders.
The most rewarding sector for your Portfolio for the first half of the fiscal
year was consumer services. This group was the best contributor to the Russell
2000' s performance during this period, and was the sector where we added the
most value in our selections. The best performing consumer stock was Outdoor
Systems, which was also a big winner last year. Outdoor Systems is one of the
few remaining publicly held pure-play billboard advertising companies. Other
good consumer stocks were Profit Recovery Group International, a provider of
accounts payable auditing systems for retailers, and Tommy Hilfiger. Consumer
stocks that detracted from performance were time-share company Signature
Resorts, Talbots, and one of last year's winners: closeout retailer Consolidated
Stores.
Following very strong outperformance last year, the financial services group
was the second largest contributor to performance in this period. Our results
are in contrast to the lackluster performance of this sector in terms of the
Russell 2000 Index. Duff & Phelps Credit Rating was the top performer for the
period, followed by multi-line insurer Reliance Group Holdings; FBL Financial
Group Cl. A, an Iowa-based insurance holding company; and rounded out by two
reinsurers, Life Re and Terra Nova (Bermuda) Holdings Cl. A. Not all insurers
were good investments, however: W.R. Berkley, Everest Reinsurance Holdings, and
CapMAC Holdings posted losses during this period. Although CapMAC was ultimately
bought out by MBIA, we still own W.R. Berkley and Everest Reinsurance Holdings
and believe that these stocks represent good values at these prices.
Utilities continued their fourth quarter 1997 outperformance into the first
half of 1998. We believe that the managements of these companies are becoming
more proactive and shareholder friendly and, most importantly, the industry has
become less regulated. The best performers for your Portfolio were in the
telecom utilities sector: NEXTLINK Communications Cl. A and ICG Communications,
followed by LG&E Energy, a Louisville, Kentucky-based utility holding company.
Detractors to performance were USN Communications, which experienced
disappointing sales, and National Fuel Gas which was plagued by the weakness in
natural gas.
In the producer segment we maintained our large position in Thiokol. Despite
its name change to Cordant Technologies, the stock has maintained its rocket
booster performance during the period. Other gainers, although lesser ones, were
UNOVA, a manufacturer of auto transfer lines and bar coding equipment, and the
industrial conglomerate Crane. Weaker industrial demand has negatively affected
MagneTek and Coltec Industries. Titan International, a manufacturer of wheels
and tires for agricultural and industrial markets, saw its results hampered by
capacity constraints and a strike.
The energy group had been the best performing sector for the Portfolio in the
past two years, but it has been in a slump recently. One exception is Global
Industries, an offshore construction producer, that continued to be a stellar
investment during the first half, after having been one of the top performers
for the two previous years. The poorest investment was Halter Marine Group, an
oilfield services vessel constructor. This stock had been our top success story
last year, but this year its earnings disappointed with some fixed price
contracts and a slowdown in offshore support vessel activity. Other losers were
land driller Bayard Drilling Technologies, which continued to plummet from a
poorly timed fourth quarter initial public offering, and Superior Energy
Services whose plug and abandonment business is a discretionary expenditure and
thus deferred in periods of weak commodity pricing. We remain convinced that
current energy prices are below equilibrium and hence we continue to overweight
the sector. We think that the valuations of the stocks in this sector indicate
that other investors are assuming that the two-year recovery in the oil patch is
over.
The technology sector can be fickle. Although the Russell 2000 Index posted
good returns, our selections trailed the index. Our winners, which were big
ones, were Aspect Development, a manufacturer of component and supplier
management software; Networks Associates, an enterprise software company; Aspect
Telecommunications, a provider of callcenter processing; and Intuit, a provider
of financial software solutions. Nevertheless, losing positions in Security
Dynamics, VIASOFT, and Learning Tree International, all of whom suffered
earnings disappointments, offset the winners.
Regardless of economic and market fluctuations, we continue to build the
Portfolio one company at a time. We want to assure our investors that we look to
prune our mistakes, support our winners, and keep a keen eye on our stocks'
fundamentals.
We thank you for your interest. You can be sure that we will continue to exert
our best efforts on your behalf.
Sincerely,
[Hilary R. Woods signature logo] [Paul Kandel signature logo]
Hilary R. Woods Paul Kandel
Co-Portfolio Manager Co-Portfolio Manager
July 17, 1998
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid. The
Portfolio's performance does not reflect the deduction of additional charges and
expenses imposed in connection with investing in variable insurance contracts,
which will reduce returns.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The Russell
2000 Index is an unmanaged index of small cap stock performance.
***SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The Standard
& Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index of
U.S. stock market performance. The Standard & Poor's 400 MidCap Index is an
unmanaged index of mid-cap performance.
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
Common Stocks--94.7% Shares Value
- -------------------------------------------------------
_______________ ______________
<S> <C> <C>
Commercial Services--4.4% Outdoor Systems (a) 810,000 $ 22,680,000
Profit Recovery Group International (a) 600,000 16,762,500
Reynolds & Reynolds, Cl. A 850,000 15,459,375
Strategic Distribution (a) 970,000 5,335,000
_______________
60,236,875
_______________
Consumer Durables--2.4% Middleby (a) 330,000 2,021,250
Mohawk Industries (a) 535,000 16,952,813
Sola International (a) 420,000 13,728,750
_______________
32,702,813
_______________
Consumer Non-Durables--6.2% Bush Boake Allen (a) 300,000 8,793,750
Fresh Del Monte Produce 750,000 14,203,125
Movado Group 400,000 12,100,000
Nautica Enterprises (a) 525,000 14,076,562
Tommy Hilfiger (a) 300,000 18,750,000
Warnaco Group, Cl. A 425,000 18,035,938
_______________
85,959,375
_______________
Consumer Services--6.5% AMF Bowling 600,000 17,400,000
ICG Communications (a) 450,000 16,453,125
Meredith 440,000 20,652,500
Signature Resorts (a) 510,000 8,415,000
Sun International Hotels (a) 360,000 16,380,000
TCA Cable TV 175,000 10,500,000
_______________
89,800,625
_______________
Electronic Technology--6.1% Amkor Technology 1,500,000 14,015,625
Aspect Telecommunications (a) 575,000 15,740,625
Cordant Technologies 390,000 17,988,750
Newport News Shipbuilding 550,000 14,712,500
Saville Systems, A.D.R. (a) 250,000 12,531,250
Watkins-Johnson 350,000 9,100,000
_______________
84,088,750
_______________
Energy Minerals--2.7% Bayard Drilling Technologies (b) 1,150,000 9,343,750
Meridian Resource (a,b) 1,900,000 13,418,750
Ocean Energy (a) 750,000 14,671,875
_______________
37,434,375
_______________
Finance--20.0% Amerin (a) 485,000 14,155,937
Berkley (W.R.) 375,000 15,023,437
Capital Re 230,000 16,473,750
Charter One Financial 540,000 18,191,250
D & N Financial 253,550 6,798,309
Dime Bancorp 565,000 16,914,688
Duff & Phelps Credit Rating (b) 280,000 15,610,000
Enhance Financial Services Group 660,000 22,275,000
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
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STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Common Stocks (continued) Shares Value
- -------------------------------------------------------
_______________ ______________
Finance (continued) Everest Reinsurance Holdings 475,000 $ 18,257,813
Executive Risk 275,000 20,281,250
FBL Financial Group, Cl. A 650,000 16,656,250
Horace Mann Educators 450,000 15,525,000
Legg Mason 265,000 15,254,063
Liberty Financial 355,000 12,247,500
Life Re 235,000 19,270,000
Reliance Group Holdings 900,000 15,750,000
Terra Nova (Bermuda) Holdings, Cl. A 570,000 17,883,750
_______________
276,567,997
_______________
Health Services--5.9% AmeriSource Health, Cl. A (a) 300,000 19,706,250
Beverly Enterprises (New) 1,028,900 14,211,681
Concentra Managed Care (a) 360,000 9,360,000
IDX Systems (a) 365,000 16,812,812
PhyCor (a) 425,000 7,039,063
Universal Health Services, Cl. B (a) 245,000 14,301,875
_______________
81,431,681
_______________
Health Technology--4.7% Gilead Sciences (a) 400,000 12,825,000
Mentor 605,000 14,671,250
Pharmacyclics (a) 551,000 13,086,250
Physio-Control International (a) 625,000 16,445,312
Varian Associates 200,900 7,835,100
_______________
64,862,912
_______________
Industrial Services--3.7% Foster Wheeler 500,000 10,718,750
Global Industries (a) 900,000 15,187,500
IMCO Recycling 625,000 11,562,500
Laidlaw Environmental Services (a) 1,050,000 3,806,250
Superior Energy Services (a,b) 1,875,000 9,492,187
_______________
50,767,187
_______________
Non-Energy Minerals--1.8% Birmingham Steel 815,000 10,085,625
Minerals Technologies 300,000 15,262,500
_______________
25,348,125
_______________
Process Industries--3.4% Albany International, Cl. A 522,600 12,509,737
Crompton & Knowles 450,000 11,334,375
OM Group 320,000 13,200,000
RPM 580,000 9,860,000
_______________
46,904,112
_______________
Producer Manufacturing--8.4% Coltec Industries (a) 600,000 11,925,000
Gleason 275,000 7,734,375
Halter Marine Group (a) 760,000 11,447,500
Harsco 375,000 17,179,688
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Common Stocks (continued) Shares Value
- -------------------------------------------------------
_______________ ______________
Producer Manufacturing (continued) MagneTek (a) 693,500 $ 10,922,625
Reliance Steel & Aluminum 425,000 16,415,625
Titan International 660,000 11,220,000
U.S. Can (a) 500,000 7,343,750
UNOVA 550,000 11,825,000
Wyman-Gordon (a) 500,000 9,968,750
_______________
115,982,313
_______________
Retail Trade--4.5% Bed Bath & Beyond (a) 325,000 16,839,062
Consolidated Stores (a) 360,000 13,050,000
Tiffany 400,000 19,200,000
Wolverine World Wide 600,000 13,012,500
_______________
62,101,562
_______________
Technology Services--6.1% Aspect Development (a) 220,000 16,637,500
Checkpoint Software Technologies (a) 350,000 11,462,500
Excite (a) 100,000 9,001,810
Intuit (a) 315,000 19,293,750
JDA Software Group (a) 225,000 9,843,750
Networks Associates (a) 375,000 17,953,125
_______________
84,192,435
_______________
Transportation--2.4% Eagle USA Airfreight (a) 500,000 17,343,750
Expeditors International of Washington 360,000 15,840,000
_______________
33,183,750
_______________
Utilities--5.5% IPALCO Enterprises 235,000 10,442,813
Metromedia Fiber Network, Cl. A 415,000 19,349,375
Montana Power 173,400 6,025,650
National Fuel Gas 295,000 12,850,938
NEXTLINK Communications, Cl. A 450,000 17,043,750
Sierra Pacific Resources 300,000 10,893,750
_______________
76,606,276
_______________
TOTAL COMMON STOCKS
(cost $1,043,770,534) $1,308,171,163
===============
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Short-Term Investments--8.8% Amount Value
- -------------------------------------------------------
_______________ ______________
U.S. Treasury Bills 4.93%, 7/23/1998 $ 2,222,000 $ 2,215,378
4.89%, 7/30/1998 2,176,000 2,167,818
4.96%, 8/6/1998 24,002,000 23,885,590
5.06%, 8/20/1998 5,725,000 5,686,471
4.89%, 8/27/1998 6,022,000 5,975,631
4.94%, 9/3/1998 10,083,000 9,994,975
4.96%, 9/10/1998 27,513,000 27,248,050
4.98%, 9/17/1998 32,654,000 32,308,521
4.88%, 9/24/1998 5,771,000 5,705,038
4.95%, 10/1/1998 1,352,000 1,334,816
4.97%, 10/8/1998 5,257,000 5,185,137
_______________
TOTAL SHORT-TERM INVESTMENTS
(cost $121,689,699) $ 121,707,425
===============
TOTAL INVESTMENTS (cost $1,165,460,233) 103.5% $1,429,878,588
x ====== ===============
LIABILITIES, LESS CASH AND RECEIVABLES (3.5%) $ (48,151,847)
====== ===============
NET ASSETS 100.0% $1,381,726,741
====== ===============
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
(b) Investments in non-controlled affiliates (cost $63,610,456)--see Note 1(d)
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED)
Cost Value
_______________ ______________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $1,165,460,233 $1,429,878,588
Cash 5,840,073
Receivable for investment securities sold 8,497,670
Dividends and interest receivable 472,105
Prepaid expenses 10,696
_______________
1,444,699,132
_______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 856,024
Payable for investment securities purchased 62,077,260
Accrued expenses 39,107
_______________
62,972,391
_______________
NET ASSETS $1,381,726,741
===============
REPRESENTED BY: Paid-in capital $1,043,328,899
Accumulated distribution in excess of
investment (loss) (159,625)
Accumulated net realized gain (loss) on investments 74,139,112
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 264,418,355
_______________
NET ASSETS $1,381,726,741
===============
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) 22,822,773
NET ASSET VALUE, offering and redemption price per share $60.54
======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME
INCOME: Cash dividends:
<S> <C> <C>
Unaffiliated issuers $ 3,408,737
Affiliated issuers 16,800 $ 3,425,537
____________
Interest 1,582,392
____________
Total Income 5,007,929
EXPENSES: Investment advisory fee--Note 3(a) 5,034,590
Custodian fees--Note 3(a) 50,378
Prospectus and shareholders' reports 44,414
Professional fees 12,471
Trustees' fees and expenses--Note 3(b) 10,555
Registration fees 9,401
Loan commitment fees--Note 2 3,541
Shareholder servicing costs 2,170
Miscellaneous 6,479
____________
Total Expenses 5,173,999
____________
INVESTMENT (LOSS) (166,070)
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments:
Unaffiliated issuers $52,013,258
Affiliated issuers (1,323,940)
____________
Net Realized Gain (Loss) 50,689,318
Net unrealized appreciation (depreciation) on investments:
Unaffiliated issuers 33,591,036
Affiliated issuers (8,546,180) 25,044,856
____________ ____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 75,734,174
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $75,568,104
============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
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STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
________________ _______________
OPERATIONS:
<S> <C> <C>
Investment income (loss)--net $ (166,070) $ 1,358,446
Net realized gain (loss) on investments 50,689,318 96,378,291
Net unrealized appreciation (depreciation) on investments 25,044,856 72,300,596
_______________ _______________
Net Increase (Decrease) in Net Assets Resulting from Operations 75,568,104 170,037,333
_______________ _______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net -- (1,354,282)
Net realized gain on investments -- (71,603,959)
_______________ _______________
Total Dividends -- (72,958,241)
_______________ _______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold 73,679,601 203,123,864
Dividends reinvested -- 72,958,241
Cost of shares redeemed (41,812,816) (59,234,781)
_______________ _______________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 31,866,785 216,847,324
_______________ _______________
Total Increase (Decrease) in Net Assets 107,434,889 313,926,416
NET ASSETS:
Beginning of Period 1,274,291,852 960,365,436
_______________ _______________
End of Period $1,381,726,741 $1,274,291,852
=============== ===============
UNDISTRIBUTED INVESTMENT INCOME (INVESTMENT LOSS)--NET $ (159,625) $ 6,445
_______________ _______________
Shares Shares
_______________ _______________
CAPITAL SHARE TRANSACTIONS:
Shares sold 1,224,141 3,591,846
Shares issued for dividends reinvested -- 1,337,947
Shares redeemed (702,606) (1,069,993)
_______________ _______________
Net Increase (Decrease) in Shares Outstanding 521,535 3,859,800
=============== ===============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
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FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This information
has been derived from the Series' financial statements.
Six Months Ended
June 30, 1998 Year Ended December 31,
____________________________________________________
PER SHARE DATA: (Unaudited) 1997 1996 1995 1994 1993
__________ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $57.14 $52.08 $46.13 $36.52 $34.45 $22.71
______ ______ ______ ______ ______ ______
Investment Operations:
Investment income (loss)--net (.01) .07 .10 .16 .17 .14
Net realized and unrealized gain (loss)
on investments 3.41 8.49 7.53 10.54 2.50 14.93
______ ______ ______ ______ ______ ______
Total from Investment Operations 3.40 8.56 7.63 10.70 2.67 15.07
______ ______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net -- (.07) (.10) (.18) (.16) (.14)
Dividends in excess of investment income--net -- -- -- -- -- (.01)
Dividends from net realized gain on investments -- (3.43) (1.51) (.91) (.33) (3.18)
Dividends in excess of net realized gain
on investments -- -- (.07) -- (.11) --
______ ______ ______ ______ ______ ______
Total Distributions -- (3.50) (1.68) (1.09) (.60) (3.33)
______ ______ ______ ______ ______ ______
Net asset value, end of period $60.54 $57.14 $52.08 $46.13 $36.52 $34.45
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN 5.95%* 16.75% 16.60% 29.38% 7.75% 68.31%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . 38%* .78% .79% .83% .55% .25%
Ratio of net investment income (loss)
to average net assets (.01%)* .12% .24% .54% 1.18% .89%
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation -- -- -- -- .52% 1.79%
Portfolio Turnover Rate 37.36%* 79.00% 89.10% 99.02% 106.00% 244.59%
Net Assets, end of period (000's Omitted) $1,381,727 $1,274,292 $960,365 $543,281 $173,215 $18,337
- -----------------------------
* Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Variable Investment Fund (the "Fund" ) is registered under the
Investment Company Act of 1940 ("Act") as an open-end management investment
company, operating as a series company currently offering thirteen series,
including the Small Cap 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 capital
appreciation. 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 (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices, except for open
short positions, where the asked price is used for valuation purposes. Bid price
is used when no asked price is available. 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. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward currency exchange contracts are valued at the forward rate.
(B) FOREIGN CURRENCY TRANSACTIONS: The Series does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities
of short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Series' books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains or losses arise from changes in the value of
assets and liabilities other than investments in securities resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custodian agreement, the Series received
net earnings credits of $11,727 during the period ended June 30, 1998 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(D) AFFILIATED ISSUERS: Issuers in which the Series held 5% or more of the
outstanding voting securities are defined as "affiliated" in the Act. The
following summarizes affiliated issuers during the period ended June 30, 1998:
<TABLE>
Shares
____________________________________________
Name of Issuer Beginning End of Dividend Market
of period Purchases Sales Period Income Value
_________ _________ ________ _________ ________ ____________
<S> <C> <C> <C> <C> <C> <C>
Duff & Phelps Credit Rating 280,000 -- -- 280,000 $16,800 $15,610,000
Superior Energy Services 1,200,000 990,000 315,000 1,875,000 9,492,187
Bayard Drilling Technologies 700,000 450,000 -- 1,150,000 9,343,750
Meridian Resource 999,520 1,075,480 175,000 1,900,000 13,418,750
Pharmacyclics * 550,000 16,000 15,000 551,000 13,086,250
* No longer an affiliated issuser at June 30, 1998.
</TABLE>
(E) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain are normally declared and paid annually, but the Series may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the policy
of the Series not to distribute such gain.
(F) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes
NOTE 2--BANK LINE OF CREDIT:
The Series participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (" Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Series has agreed to pay commitment fees on its pro rata portion
of the Facility. Interest is charged to the Series at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended June
30, 1998, the Series did not borrow under the Facility.
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 .75 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 June 30, 1998, the Series was charged $95 pursuant to the transfer agency
agreement.
The Series compensates Mellon under a custody agreement for providing
custodial services for the Series. During the period ended June 30, 1998, the
Series was charged $50,378 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.
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 4--SECURITIES TRANSACTIONS:
The following summarizes the aggregate amount of purchases and sales of
investment securities, excluding short-term securities, during the period ended
June 30, 1998:
Purchases Sales
_____________ _____________
Unaffiliated issuers $507,599,617 $476,060,139
Affiliated issuers 23,434,629 5,371,461
_____________ _____________
Total $531,034,246 $481,431,600
============= =============
At June 30, 1998, accumulated net unrealized appreciation on investments was
$264,418,355, consisting of $330,255,767 gross unrealized appreciation and
$65,837,412 gross unrealized depreciation.
At June 30, 1998, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
