DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
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LETTER TO SHAREHOLDERS
Dear Shareholder:
It is a pleasure to have this opportunity to communicate with our shareholders
in the Dreyfus Variable Investment Fund -- Special Value Portfolio.
This letter accompanies the semi-annual report of the Dreyfus Variable
Investment Fund -- Special Value Portfolio for the six-month period ended June
30, 1998. During this period, your Portfolio produced a total return of 8.85%*
which compares with a total return of 17.72% for the Standard and Poor's 500
Composite Stock Price Index (the "S&P 500"),** 10.06% for the Wilshire Large
Company Value Index,*** and 1.18% for the Wilshire Midcap Value Index.****
The Portfolio' s return trailed the two large company indices detailed above,
as we found limited value among many of the largest components of these indexes.
The construction of the Portfolio during the period was closer to that of a
midcap benchmark of medium-sized companies like the Wilshire Midcap Value Index
noted above. Midcap stocks possessed more fundamental value than large caps
according to our analysis. Obviously, relative to the two large company indices,
we left some money on the table. We believe, however, that over time our risk
management and value-seeking style of management should prove to be in our
shareholders' best interests.
Value stocks underperformed growth stocks during the period. The margin was
among the widest in memory. It is our view that any value managers who remained
true to their discipline could not hope to have matched the returns of the S&P
500 which has become largely dominated by growth stocks due to increases in
major component security valuations. The S&P 500 and many of its major security
components carry valuations well above those of any historic period by almost
any financial measure according to our calculations. These major security
components, the so-called "mega caps" or the very largest domestically traded
companies, continued to drive the performance of the S&P 500. We believe this
market is reminiscent of the early 1970s "nifty-fifty" stocks or oil stocks in
the early 1980s. Both of those markets ended with quick and severe corrections
of the overvalued securities. No one can predict what will occur, but many
market participants may conclude that the risk level of the S&P 500 and many of
its major security components is high by historic standards. Regardless, at
least for the time being, positive price momentum in this Index and in many of
these mega cap stocks continued.
The Portfolio' s solid performance during the semi-annual period versus the
Wilshire Midcap Value Index was due in part to being overweight in consumer
cyclicals, health care and transportation, all strong performing midcap value
sectors. Near index weights in energy, consumer staples and technology, all weak
performing sectors, restrained relative performance.
Economic Review
During the first half of 1998, three major regions of the world had very
different economic fundamentals. The United States entered the year with a
strong but not overheated economy and at near full employment. After many years
of subpar economic growth, continental Europe moved into a period of improving
economic expansion. In Asia, weak economies were pervasive in the aftermath of
the Asian financial crisis that began late last year.
A main influence on the U.S. economy during the first half of 1998 was Asian
economic weakness. It had both positive and negative effects. On the positive
side, actual inflation and expected inflation in the U.S. dropped, causing a
decline in long-term Treasury bond yields and mortgage rates. These lower rates
contributed to the boom in real estate prices and benefited stock prices as
well. The fall in inflation helped the consumer sector as more income was left
over after inflation to buy goods and services.
The negative effect of the Asian weakness was directed toward the industrial
sector. By midyear, the evidence of industrial weakness was clear-cut, given
slowing inventory accumulation and weakening exports. One result of this
industrial weakness was to cool off the overall U.S. economy, at least keeping
the Federal Reserve Board neutral toward the level of interest rates, and
perhaps increasing the possibility of an eventual easing or lowering of rates.
This favorable shift in expectations about Federal Reserve policy was clearly a
major reason for the rise in U.S. bond and stock prices during the period
Stock Market Overview
The half-year ended June 30, 1998, was another period of solid advance for the
broad stock market indices, although the strength of this advance was decidedly
narrow.
Three major trends could be observed within the stock market in the first half
of 1998. First, the strongest performance came by far from the largest stocks,
the so-called "mega caps." The S&P 500, dominated by the stocks of the largest
companies, generated a total return of 17.72% for the half-year, while the S&P
Midcap 400 Index of mid-sized companies returned 8.63%, and the Russell 2000
Index of small company issues returned only 4.93%. Even within most of the
market indices, the strongest gains tended to come from the largest stocks
within that index. One contributor to this pattern was strong buying of U.S.
stocks by foreign investors who often simply focus on the largest companies
A second and related major trend in the stock market during the first half was
the significantly stronger stock performance by most large growth companies
relative to most value stocks. With the expectations for corporate earnings
growth being reduced as the period progressed due to concerns about the impact
of Asia, large growth companies which are better able to control short-term
earnings results were in demand.
Finally, the relative performance of different industries revealed the
significant impact of Asian economic weakness. Most of the leading sectors of
securities in the S& P 500 during the period were either impervious to Asia's
impact or were beneficiaries of the lower inflation and the lower interest rates
precipitated by the Asian impact. Stock categories that were strongest during
the half-year included the consumer cyclical sector (primarily retailers and two
of the big three automotive companies), the health care sector (both managed
care providers and pharmaceuticals) , and the dominant electronic technology
companies, primarily Microsoft.
The sectors within the S& P 500 that lagged during the semi-annual period
tended to be those negatively impacted by Asia from either weak industrial
demand or weak commodity prices. These categories included world traded
commodities such as oil, metals, papers and chemicals. Transportation companies
and electric utilities also lagged in the strong stock market environment.
The stock market's rise during the first half of 1998 reflected a continuation
of the pattern of favorable trends in financial asset prices as low rates of
inflation and overall stable growth persist in the U.S. economy.
Value Investing and Our Investment Process
To once again summarize our investment philosophy, while there are other
investment disciplines practiced at Dreyfus, we are passionate believers in
value investing. Paying attention to the value of securities has proven in
numerous industry and academic studies to result in superior and more consistent
long-term investment returns. As value investors, generally we want to buy
companies with growth potential, but we want to pay as little for them as we
have to. In this sense, it is a lower risk, more conservative style of equity
investing.
Our approach to the selecting of securities starts with and ends with our
analysts who are an integral part of our investment team. Our Dreyfus analysts
contribute their proprietary forecasts on corporate earnings and cash flows to
our computer models, their analysis and opinions to our decision-making process,
and their constant flow of information to our on-going assessment of owned
securities. We screen the universe of stocks by computer according to two
principal methods. The first computer screen determines value by calculating
each security's earnings yield (our forecast for earnings divided by the current
security price) which, to justify purchase, must be greater than the risk-free
yield available on reasonably long-term U.S. Treasury securities. Being paid
more than this risk-free rate for the risk inherent in equity investing is
central to our value discipline. The second computer screen looks at 19 other
factors that have historically influenced stock returns including various
growth, valuation and leverage measures. We input into this computer model the
current economic and stock market trends, and the computer calculates each
security' s exposure to this environment. The model is an idea generator, and
further detailed fundamental analysis is conducted on each potential holding to
determine its suitability for the Portfolio. Combining all of this data with our
analysts' in-depth knowledge of the individual companies, we then construct a
portfolio of approximately 50 securities. We use similar disciplined criteria
and several other factors to determine when selling a security is in our
shareholders' best interest.
Examples of Our Investment Process
Discussing the detailed fundamental analysis, computer modeling and portfolio
strategy that goes into the decision-making process for each security in the
Portfolio is not possible in this short report. Instead, provided below, are
several brief summaries of some of the better and poorer performing securities
within the Portfolio during the first half of 1998.
Biogen, a biotechnology company, was one of the better performing securities
during the semi-annual period. Our earnings estimates for the company have been
well above the Wall Street consensus, qualifying this growth stock as a value
security. We believe that the company's new product pipeline, both near term and
long term, is particularly promising. The security remained a holding at the end
of the period.
Sears, Roebuck & Co. was another strong performer. The company has been
buffeted by customer credit problems, but management appears to have wrapped
arms around the issue and it seems well on the way to resolution. Sales
especially in appliances have generally been above expectations. The security
was held in the Portfolio at the end of the period.
Lone Star Industries is a cement manufacturer. The cement industry is enjoying
one of its better cycles, with strong construction demand and well-controlled
supply. The stock continued to be a holding as the period ended.
Xerox has been expanding its core copier business into the computer printer
business with great initial success. We think that the ability to provide
quality service can be a significant competitive advantage. The security was
sold during the semi-annual period when it reached our valuation sell
discipline, at approximately the same price level as today.
Sunbeam was bought, owned briefly, and sold during the period, resulting in a
loss. The company announced disappointing first quarter earnings, and the
subsequent market reaction dropped the security into our valuation range at
which point we bought the stock. Unfortunately, we were too early, and the stock
continued to underperform as more bad news was reported.
RJR Nabisco Holdings, Philip Morris and UST, all primarily tobacco companies,
were poor performers during the period. Congress could not agree on tobacco
legislation that we believe would have significantly benefited both the public
good and these securities. The tobacco companies are now working with the states
to attempt to come to an agreement. We reduced the Portfolio's industry exposure
during the period by selling UST, but remained attracted to the high dividend
yields and what we believe are ludicrously inexpensive valuations of the other
two companies.
Sealed Air is a specialty packaging company (including those sheets of plastic
air bubbles) that was bought and sold during the period. We were attracted to
the stock because it was selling at a low historic valuation and recently made
an attractive long-term acquisition. Unfortunately, selling shareholders from
that acquisition depressed the share price which triggered one of our sell
disciplines.
We will continue to manage your investments with dedication and discipline in
an effort to produce rewarding returns on your behalf. Diligent management of
your investments is our highest priority. Thank you for entrusting us with your
assets.
Sincerely,
[Timothy M. Ghriskey signature logo]
Timothy M. Ghriskey
Portfolio Manager
July 23, 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 Standard
& Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index of
U.S. stock market performance.
*** SOURCE: WILSHIRE ASSOCIATES, INC. -- The Wilshire Large Company Value Index
is constructed by using a blend of price-to-book and forecast price-to-earnings
ratios. The largest 750 stocks in the Wilshire 5000 are ranked based on a style
score that is 75% price-to-book and 25% forecast price-to-earnings ratio. The
universe is divided so that companies that represent half of the total
capitalization fall into growth and the remainder are placed into value.
****SOURCE: WILSHIRE ASSOCIATES, INC. -- The Wilshire Midcap Value Index is
constructed by using a blend of price-to-book and forecast price-to-earnings
ratios. The mid-cap universe consists of 500 stocks that rank in size from the
501st to the 1000th within the Wilshire 5000. These stocks are ranked based on a
style score that is 75% price-to-book and 25% forecast price-to-earnings ratio.
The universe is divided so that companies that represent half of the total
capitalization fall into growth and the remainder are placed into value.
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
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STATEMENT OF INVESTMENTS JUNE 30,1998 (UNAUDITED)
Common Stocks--98.1% Shares Value
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____________ ____________
<S> <C> <C>
Consumer Non-Durables--7.9% Kimberly-Clark 17,000 $ 779,875
NIKE, Cl. B 17,300 842,294
Philip Morris 50,600 1,992,375
RJR Nabisco Holdings 30,000 712,500
Vlasic Foods International 39,000 784,875
____________
5,111,919
____________
Consumer Services--5.0% Cendant (a) 50,000 1,043,750
La Quinta Inns 102,000 2,154,750
____________
3,198,500
____________
Electronic Technology--6.2% Celestica 3,600 67,500
Ceridian (a) 17,500 1,028,125
Compaq Computer 39,973 1,134,234
International Business Machines 7,600 872,575
Storage Technology (a) 21,000 910,875
____________
4,013,309
____________
Energy Minerals--7.4% British Petroleum, A.D.S. 9,600 847,200
Phillips Petroleum 16,300 785,456
Tosco 79,000 2,320,625
USX-Marathon Group 24,000 823,500
____________
4,776,781
____________
Finance--13.7% Chase Manhattan 27,000 2,038,500
Citicorp 6,000 895,500
Executive Risk 12,700 936,625
Fleet Financial Group 9,000 751,500
Horace Mann Educators 75,000 2,587,500
Morgan (J.P.) 6,400 749,600
NationsBank 11,400 872,100
____________
8,831,325
____________
Health Services--5.1% Aetna 31,600 2,405,550
Concentra Managed Care (a) 34,000 884,000
____________
3,289,550
____________
Health Technology--9.0% Allergan 19,000 881,125
Amgen (a) 38,000 2,484,250
Biogen (a) 50,000 2,450,000
____________
5,815,375
____________
Industrial Services--1.4% Waste Management 25,000 875,000
____________
Insurance--13.0% Chubb 31,700 2,547,888
CIGNA 36,600 2,525,400
Everest Reinsurance Holdings 65,000 2,498,438
St. Paul 19,000 799,187
____________
8,370,913
____________
Non-Energy Minerals--2.7% Lone Star Industries 22,500 1,733,906
____________
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
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STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30,1998 (UNAUDITED)
Common Stocks (continued) Shares Value
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____________ ___________
Process Industries--3.7% Owens-Illinois (a) 21,000 $ 939,750
Triarc, Cl. A (a) 65,200 1,430,325
____________
2,370,075
____________
Producer Manufacturing--2.9% General Electric 11,000 1,001,000
Harsco 19,500 893,344
____________
1,894,344
____________
Retail Trade--6.0% American Stores 90,000 2,176,875
Federated Department Stores (a) 14,200 764,138
Sears, Roebuck & Co. 15,000 915,937
____________
3,856,950
____________
Transportation--5.7% CNF Transportation 58,000 2,465,000
Covenant Transport, Cl.A (a) 60,000 1,170,000
____________
3,635,000
____________
Utilities--8.4% Ameritech 58,000 2,602,750
Bell Atlantic 18,000 821,250
Coastal 28,600 1,996,637
____________
5,420,637
____________
TOTAL COMMON STOCKS
(cost $58,347,174) $63,193,584
____________
Principal
Short-Term Investments--1.0% Amount
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____________
U.S. Treasury Bills: 4.88%, 9/24/1998 $.....387,000 $ 382,576
4.97%, 10/8/1998 223,000 219,952
____________
TOTAL SHORT-TERM INVESTMENTS
(cost $602,493) $ 602,528
____________
TOTAL INVESTMENTS (cost $58,949,667) 99.1% $63,796,112
_______ ____________
CASH AND RECEIVABLES (NET) .9% $ 605,031
_______ ____________
NET ASSETS 100.0% $64,401,143
_______ ____________
Notes to Statement of Investments:
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(a) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
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STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED)
Cost Value
____________ ____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $58,949,667 $63,796,112
Cash 157,025
Receivable for investment securities sold 2,299,913
Dividends and interest receivable 115,836
Prepaid expenses 184
____________
66,369,070
____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 38,685
Payable for investment securities purchased 1,910,102
Accrued expenses 19,140
____________
1,967,927
____________
NET ASSETS $64,401,143
____________
REPRESENTED BY: Paid-in capital $58,408,995
Accumulated undistributed investment income--net 213,258
Accumulated net realized gain (loss) on investments,
forward currency exchange contracts and
securities sold short 932,445
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4(b) 4,846,445
____________
NET ASSETS $64,401,143
____________
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) 4,555,775
NET ASSET VALUE, offering and redemption price per share $14.14
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
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STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME
INCOME: Cash dividends (net of $2,606 foreign taxes
<S> <C> <C>
withheld at source) $ 398,542
Interest 59,554
___________
Total Income $ 458,096
EXPENSES: Investment advisory fee--Note 3(a) 224,884
Custodian fees 5,656
Professional fees 5,109
Prospectus and shareholders' reports 4,512
Registration fees 1,932
Trustees' fees and expenses--Note 3(b) 501
Shareholder servicing costs 217
Miscellaneous 803
___________
Total Expenses 243,614
___________
INVESTMENT INCOME--NET 214,482
___________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments:
Long transactions $3,372,410
Short sale transactions (120,669)
Net realized gain (loss) on forward currency
exchange contracts
Short transactions 55,771
___________
Net Realized Gain (Loss) 3,307,512
Net unrealized appreciation (depreciation) on investments 1,347,673
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 4,655,185
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,869,667
___________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE 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--net $ 214,482 $ 130,235
Net realized gain (loss) on investments 3,307,512 1,336,281
Net unrealized appreciation (depreciation) on investments 1,347,673 3,491,638
____________ ____________
Net Increase (Decrease) in Net Assets Resulting from Operations 4,869,667 4,958,154
____________ ____________
DIVIDENDS TO SHAREHOLDERS:
From investment income--net -------- (26,936)
In excess of investment income--net -------- (1,224)
From net realized gain on investments -------- (221,252)
____________ ____________
Total Dividends -------- (249,412)
____________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold 10,833,713 30,958,786
Dividends reinvested -------- 249,412
Cost of shares redeemed (4,283,467) (4,036,389)
____________ ____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 6,550,246 27,171,809
____________ ____________
Total Increase (Decrease) in Net Assets 11,419,913 31,880,551
NET ASSETS:
Beginning of Period 52,981,230 21,100,679
____________ ____________
End of Period $64,401,143 $52,981,230
____________ ____________
UNDISTRIBUTED INVESTMENT INCOME (DISTRIBUTIONS IN EXCESS OF INVESTMENT INCOME)--NET $ 213,258 $ (1,224)
____________ ____________
Shares Shares
____________ ____________
CAPITAL SHARE TRANSACTIONS:
Shares sold 789,450 2,411,671
Shares issued for dividends reinvested -------- 19,289
Shares redeemed (312,526) (343,128)
____________ ____________
Net Increase (Decrease) in Shares Outstanding 476,924 2,087,832
____________ ____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE 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 $12.99 $10.60 $11.70 $12.37 $12.92 $10.14
______ ______ ______ ______ ______ ______
Investment Operations:
Investment income--net .05 .06 .63 .51 .35 .20
Net realized and unrealized gain (loss)
on investments 1.10 2.40 (1.05) (.54) (.56) 2.71
______ ______ ______ ______ ______ ______
Total from Investment Operations 1.15 2.46 (.42) (.03) (.21) 2.91
______ ______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net -- (.01) (.56) (.64) (.32) (.13)
Dividends in excess of investment income--net -- (.00)(1) (.06) -- (.02) --
Dividends from net realized gain on investments -- (.06) -- -- -- --
Paid-in capital -- -- (.06) -- -- --
______ ______ ______ ______ ______ ______
Total Distributions -- (.07) (.68) (.64) (.34) (.13)
______ ______ ______ ______ ______ ______
Net asset value, end of period $14.14 $12.99 $10.60 $11.70 $12.37 $12.92
______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______
TOTAL INVESTMENT RETURN 8.85%(2) 23.14% (3.62%) (.26%) (1.56%) 28.59%
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets .40%(2) .99% .93% .94% .25% .27%
Ratios of dividends on securities sold short to
average net assets -- . 02% -- -- -- --
Ratio of net investment income
to average net assets .35%(2) .38% 4.12% 3.56% 3.54% 1.87%
Decrease reflected in above expense ratios due
to undertakings by The Dreyfus Corporation
and Comstock Partners, Inc. -- -- -- -- .88% 2.25%
Portfolio Turnover Rate 116.49%(2) 188.57% 124.19% 53.88% 25.96% 99.08%
Net Assets, end of period (000's Omitted) $64,401 $52,981 $21,101 $25,272 $30,510 $7,957
- -----------------------------
(1) Amount represents less than $.01 per share.
(2) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
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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 Special Value Portfolio (the "Series") and is intended to be a
funding vehicle for variable annuity contracts and variable life insurance
policies to be offered by the separate accounts of life insurance companies. The
Series is a diversified portfolio. The Series' investment objective is to
maximize total return, consisting of capital appreciation and current income.
The Dreyfus Corporation ("Dreyfus") serves as the Series' investment adviser.
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 $229 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.
(D) 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 the 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.
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(E) 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:
In accordance with an agreement with a bank, the Series may borrow up to $5
million under a short-term unsecured line of credit. Interest on borrowings is
charged at rates which are related to the Federal Funds rate in effect from time
to time. During the period ended June 30, 1998, the Series did not borrow under
the line of credit.
NOTE 3--INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to an amended 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.
(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:
<TABLE>
(A) The following summarizes the aggregate amount of purchases and sales of
investment securities and securities sold short, excluding short-term securities
and forward currency exchange contracts during the period ended June 30, 1998:
Purchases Sales
____________ ____________
<S> <C> <C>
Long transactions ....................................................................... .. $75,317,026 $69,138,634
Short sale transactions ................................................................. 894,337 773,668
____________ ____________
TOTAL ....................................................................................... $76,211,363 $69,912,302
____________ ____________
</TABLE>
The Series is engaged in short-selling which obligates the Series to replace
the security borrowed by purchasing the security at current market value. The
Series would incur a loss if the price of the security increases between the
date of the short sale and the date on which the Series replaces the borrowed
security. The Series would realize a gain if the price of the security declines
between those dates. Until the Series replaces the borrowed security, the Series
will maintain daily, a segregated account with a broker or custodian, of cash
and/or liquid securities sufficient to cover its short position. At June 30,
1998, there were no securities sold short outstanding.
The Series enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings. When executing forward currency exchange contracts, the
Series is obligated to buy or sell a foreign currency at a specified rate on a
certain date in the future. With respect to sales of forward currency exchange
contracts, the Series would incur a loss if the value of the contract increases
between the date the forward contract is opened and the date the forward
contract is closed. The Series realizes a gain if the value of the contract
decreases between those dates. With respect to purchases of forward currency
exchange contracts, the Series would incur a loss if the value of the contract
decreases between the date the forward contract is opened and the date the
forward contract is closed. The Series realizes a gain if the value of the
contract increases between those dates. The Series is also exposed to credit
risk associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gain on each
open contract. At June 30, 1998, there were no forward currency exchange
contracts outstanding.
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(B) At June 30, 1998, accumulated net unrealized appreciation on investments
was $4,846,445, consisting of $6,145,017 gross unrealized appreciation and
$1,298,572 gross unrealized depreciation.
At June 30, 1998, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
(reg.tm)
(reg.tm)
DREYFUS VARIABLE INVESTMENT FUND,
SPECIAL VALUE PORTFOLIO
200 Park Avenue
New York, NY 10166
INVESTMENT ADVISER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 118SA986
Variable
Investment Fund,
SPECIAL VALUE
PORTFOLIO
Semi-Annual
Report
June 30, 1998
