YEAR 2000 ISSUES (UNAUDITED)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the fund' s other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The Dreyfus Corporation is working to avoid Year 2000-related problems in its
systems and to obtain assurances from other service providers that they are
taking similar steps. In addition, issuers of securities in which the fund
invests may be adversely affected by Year 2000-related problems. This could have
an impact on the value of the fund's investments and its share price.
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report for the Dreyfus Variable
Investment Fund -- Small Cap Portfolio for the 12-month period ended December,
31, 1998. During that period, the Portfolio registered a negative total return
of -3.44% ,* which compares with a negative total return of -2.55% for the
Russell 2000 Index.**
In your Portfolio, we have assembled what we believe are some of the best
small capitalization companies in the country, but the investing public is
disinterested in these stocks. It appears to us that for five straight years,
the investing herd has chosen to plow their hard-earned money into the same 50
stocks without regard to traditional valuation methods. What did we do? As
investors continued to neglect smaller, well-managed companies, our menu of
investment opportunities continued to expand in our efforts to seek capital
appreciation for the Portfolio.
ECONOMIC REVIEW
During 1998, the main regions of the world had very different economic
fundamentals. The U.S. entered the year with a strong economy 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 early in the
year, but world economic weakness generated such powerful anti-inflation forces
that the Fed acted instead to ease credit beginning in September. After many
years of subpar economic growth, continental Europe moved into a sustained
economic expansion. The overall European economy benefited as interest rates in
peripheral countries such as Spain and Italy fell, approaching the lower levels
established by Germany, on the eve of currency unification. Unlike the U.S.,
Europe has substantial excess capacity of productive plant and labor. In Asia,
weak economies were pervasive as a result of a financial crisis. The Latin
American economies weakened in turn as the financial stresses spread throughout
that region. On balance, there was a substantial weakening of the world economy
over the course of 1998 moderated mainly by the American consumer's role as
"spender of last resort."
A main influence on the U.S. economy during the year was the foreign financial
crisis and consequent cooling of the world economy. The positive effects hit
first. Actual inflation and expected inflation dropped, causing a decline in
long-term Treasury bond yields and mortgage rates. This caused a boom in
housing. The fall in inflation left more of the growth in consumer income with
which to buy goods and services. Thus, consumers benefited from a combination of
good growth in income after inflation, a strong labor market, and increases in
the prices of assets they owned, including bonds, stocks and real estate. In a
sense, 1998 was a year of disinflationary boom in the U.S., as above-trend
economic growth coincided with negligible inflation.
The negative effect of Asian weakness was felt in the industrial sector more
than in the consumer sector. Corporate profits weakened, especially in sectors
affected by the Asian crisis such as world-traded commodities (oil, metals and
paper) and exports.
Evidence of a weaker world economy accumulated during 1998 as the financial
stresses continued. A worsened financial crisis occurred between the Russian
default in mid-August and the fallout from the Long Term Capital Management
hedge fund crisis through early October. However, energetic steps were taken to
stabilize the Japanese banks, design a support package for Brazil, ease monetary
policy, and help overinvested financial institutions rebuild their cash
reserves. Indications of a calming of financial fears were evident in the final
months of the year. In any case, there appears to have been a shift in the
priorities of key policymakers from fighting potential inflation to
restimulating future world economic growth.
The global economy survived a triple financial crisis in 1998 from Japan,
emerging market countries and overextended financial institutions. Excess
capacity persists in many worldwide industries after years of high capital
spending followed by the onset of a worldwide weakening in demand. Fortunately,
the U.S. has led the world in making the transition from the old manufacturing
industries to the new growth industries, such as biotechnology, software,
computer hardware and the Internet. This contributed to the favorable
combination of low unemployment and low inflation in the U.S., and may yet lead
toward more efficient allocation of capital elsewhere in the world.
As 1998 ended, interest rates set by central banks remained in a downtrend in
most parts of the world including Europe and the U.S. A similar trend had even
begun in many emerging countries, as the stresses of financial crisis relaxed.
MARKET OVERVIEW
Volatility was the overriding characteristic of equity markets in the year
ended December 31. There was stock market strength during the early part of the
year. Small-cap indices started to erode in the spring and were joined by
large-cap indices by midsummer. Indices declined sharply until the end of August
followed by a rebound and then a renewed decline amid financial fears until
early October. A strong rally followed in the last three months of the year in
response to the easing of monetary policy. Over the 12-month period, the total
return on the Standard and Poor's 500 Composite Stock Price Index was 28.60%.
Returns on mid-cap and small-cap stock indices continued to be weaker, with a
negative total return on small-cap indices.
Three key trends influenced stock market behavior during the year. First, the
Federal Reserve kept the Federal Funds rate flat at 5.5% for nearly nine months
of the year, but then began a succession of easing moves. Second, weakness in
the economies of emerging countries contributed to declining commodity prices
and a drop in long-term Treasury bond yields to multidecade lows. Third,
expectations for corporate profits dropped, first in the sectors sensitive to
Asian developments such as oil, basic materials and exports and then for a
broader list of stocks.
The trigger for the sharp decline in stocks in August appeared to be the
Russian default that month. This resulted in deepening concerns about weaker
economic growth and corporate profits. There was also a global margin call on
risky assets held by hedge funds and financial institutions. This raised the
cost of debt financing for many corporations and many emerging countries.
Expectations for economic activity in emerging countries in Asia and Latin
America sank; those for U.S. corporate profits were put on hold. Despite the
fall in Treasury bond yields, financial stocks led the summer selloff due to
concerns that financial difficulties might spread among emerging countries, who
might fail to repay loans. However, in the last three months of the year, these
fears began to ebb in response to Federal Reserve easing moves.
The erosion of expectations for corporate profit growth over the last year
contributed to an outperformance by a small group of "supercap" growth stocks
for much of the year. Investors had more confidence in the prospect for strong
persistent earnings growth for this small group of stocks than for the broad
market. Value stocks, which often have greater cyclical sensitivity to earnings
fluctuations, lagged behind these supercap growth stocks. In addition, many of
the financial stocks that fall into the value category fell sharply following
the Russian default and global margin call concerns, before rebounding strongly
after the Federal Reserve acted.
The year ended December 31, 1998 was characterized by very different
performances of the various market sectors. For example, the total return for
the year on the Russell 1000 Index, with a heavy large-cap representation, was
27.02%, while the Russell 1000 Growth Index returned 38.71% and the Russell 1000
Value Index returned 15.63%.** The return on the Russell Midcap Index was 10.09%
** while the small-cap Russell 2000 Index return was negative 2.55%.**
Another pattern in 1998 was that high quality assets outperformed medium and
low quality assets. Treasury bonds outperformed junk bonds; U.S. and European
stocks outperformed emerging market stocks; and blue chip stocks, especially
major growth stocks, generally rose more than the average stock. In an
environment of concern about financial risks, the high-grade assets were the
market leaders.
PORTFOLIO FOCUS
The biggest winner by far for your Portfolio in 1998 was the
telecommunications utility, Metromedia Fiber Network, Cl. A. Tapping into the
increase in demand for bandwidth by telephone companies and corporations,
Metromedia Fiber Network, Cl. A has installed fiber rings in over 40 major
metropolitan areas. Another utility, Montana Power, saw its share price
appreciate by much more than the average utility when investors started to put a
telecom valuation on its Touch America fiber optic network subsidiary.
Unfortunately, not all lines in a fiber network are paved in gold. We mistimed
our investment in NEXTLINK Communications, Cl. A, a provider of local
facilities-based telecommunication services to small- and medium-size
businesses. In addition, USN Communications, a reseller of Ameritech's services
to small- and medium-size businesses, missed its growth targets too soon after
going public, a common occurrence with initial public offerings. In spite of
these two misses, the utility sector provided the largest impetus to performance
in the Portfolio for the year.
The broad consumer segment was another sector where your Portfolio benefited
from fortuitous stock selection. The standout performer was The Profit Recovery
Group International, the leading global provider of accounts payable and other
audit recovery services to large retailers and wholesalers. The shares of Mohawk
Industries have risen, reflecting the company's growth into the second largest
carpet manufacturer as low interest rates helped to fuel the strength of the new
construction and refurbishment markets. A major market billboard company,
Outdoor Systems, was a winner for us in 1997 and 1998. Other strong contributors
in the consumer category were SFX Entertainment, Cl. A which is creating the
nation' s first integrated live entertainment network, and Premier Parks, the
world' s largest operator of regional theme parks. Some consumer concepts ran
into rough spots last year. AMF Bowling saw its international growth derailed
when the financial crises hit their targeted Asian and Latin American markets.
Consolidated Stores, which was a big winner for your Portfolio in 1997,
experienced disappointing traffic in their Odd Lots and Big Lots stores and a
competitive toy environment for the all-important Christmas season in its KB
Toys division.
We have become more sanguine about opportunities in the materials and
processing sector. This segment, which includes companies in the process
industries such as steel, paper and chemicals, has borne the brunt of the Asian
crisis. Much of the demand for these commodity products comes from this region.
Some industry participants have reacted to global overcapacity by merging with
their major competitors and taking high cost capacity out of the system. A
better supply-and-demand balance could improve industry pricing if the global
economic picture merely stabilizes. The steel producer, AK Steel Holding, and
the aggregate producer, Martin Marietta Materials, were the two best stocks in
this segment of your Portfolio last year. A third, Culligan Water Technologies,
was acquired at a substantial premium by U.S. Filter Corp. last summer. On the
negative side, Foster Wheeler continued to be weighed down by its ill-fated
Robbins waste-to-energy plant, its dependence on Asia for its boiler business,
and its heavy debt load. Birmingham Steel was buffeted by start-up problems and
a poorly executed acquisition program.
After two stupendous years of outsized returns in the Portfolio from the
energy sector, our luck ran out in 1998. The group was the worst performer by
far in the Russell Index for the year, and we overstayed our welcome in all of
our selections in this sector. The weakening global economy, worldwide
overproduction and OPEC infighting have caused commodity prices to drop to their
lowest levels in 12 years. Our best stock was oilfield services outfit Cooper
Cameron because we initiated the position late enough in the year that it
reflected all the negative oil patch news. The exploration and production
company, Devon Energy, outperformed its peer group because of its low financial
and operating risk, higher natural gas content, and well-thought-of acquisition
of Northstar Energy, a Canadian independent. After having been the best
contributor to your Portfolio in 1997, ship and barge builder Halter Marine
Group was the worst performer in 1998. The company continues to experience cost
overruns, project delays and supervisory problems on some production projects.
Ocean Energy was a big stock for us in 1996 and 1997; however, the company's
merger with United Meridian, another exploration and production outfit, has
resulted in more financial and operating leverage in an industry environment
that has deteriorated since the time of the merger.
Although the technology sector was a strong contributor to the Russell 2000
Index, our winners were offset by our losers. Technology is arguably the
trickiest segment in the market to get right. These companies generally have the
greatest growth potential combined with the quickest product obsolescence, and
they sell at the highest valuations in the market. We are overweight in
technology as we enter 1999 because we think investors will continue to pay a
premium for unit growth and pricing power which are scarce in a slowing global
environment. As is typical for this sector, there were some huge winners.
Network Associates has been a top contributor to your Portfolio in each of the
past three years. It has benefited as concerns about computer viruses and
network security have fueled demand for the software products it designs. The
tremendous popularity of the Internet and its stocks propelled the shares of CMG
Information Services which is a holding company for public and private Internet
investments. Intuit, Inc. produces Quicken and Turbotax and is expanding into
financial services over the Internet. We no longer own any shares of our three
worst performing technology stocks. Amkor Technology, which makes packaging for
semiconductor chips and the semiconductor industry, was the hardest hit by the
Asian crisis. Security Dynamics Technologies experienced a delay in their secure
computing product, SecurSight, and JDA Software Group had an earnings
disappointment in their product for retailers.
Although the healthcare sector of the Russell posted a positive return, our
selections did not. Our biggest winner was Physio-Control International which
produces cardiac arrest emergency equipment. To illustrate the vicissitudes of
small-cap investing, this stock was one of our best performing stocks in 1996,
one of the worst performing in 1997, and the champ in 1998 by virtue of its
takeover by Medtronic, Inc. at a substantial premium. IDX Systems and National
Data both rode the wave of increased demand for information systems and services
by the healthcare industry. On the other hand, there are segments of healthcare
that are rethinking their business strategy in the new political and health
benefits environment. Beverly Enterprises (New), as the largest nursing home
provider, is having trouble adjusting to the new Medicare reimbursement rules
and is under investigation by the Federal government. Concentra Managed Care, a
physician practice management company that is temporarily out of favor with
investors, has had to change its business model.
In conclusion, small and medium-sized companies generally should, in our
opinion, continue to grow their businesses in the current market environment.
Therefore, we currently remain positive on small-cap equities. We believe that
there is opportunity for growth in the industries in which we invest and the
niche markets in which these companies are positioned. We want to assure our
investors, both old and new, that we direct our resources into those companies
and industries that we believe can propel your Portfolio into the new
millennium.
We thank you for your interest. You may be sure we will continue to exert our
best efforts on your behalf.
Sincerely,
[Hilary R. Woods signature] [Paul Kandel signature]
Hilary R. Woods Paul Kandel
Co-Portfolio Manager Co-Portfolio Manager
January 11, 1999
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid.
The Portfolio's performance does not reflect the deduction of additional charges
and expenses imposed in connection with investing in variable insurance
contracts, which will reduce returns.
**SOURCE: 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 and is composed
of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000
Index is composed of the largest U.S. companies by market capitalization. The
Russell 1000 Index measures the performance of the 1,000 largest companies in
the Russell 3000 Index, which represents approximately 89% of the total market
capitalization of the Russell 3000 Index. The Russell 1000 Growth Index measures
the performance of those Russell 1000 companies with higher price-to-book ratios
and higher forecasted growth values. The Russell 1000 Value Index measures the
performance of those Russell 1000 companies with lower price-to-book ratios and
lower forecasted growth values. The Russell Midcap Index consists of the bottom
800 securities in the Russell 1000 Index as ranked by total market
capitalization and is a widely accepted measure of medium-cap stock market
performance. All indices are unmanaged and include reinvested dividends.
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO DECEMBER 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS VARIABLE
INVESTMENT FUND, SMALL CAP PORTFOLIO AND THE RUSSELL 2000 INDEX
Dollars
$140,081
Dreyfus Variable Investment Fund, Small Cap Portfolio
$34,490
Russell 2000 Index*
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended Five Years Ended From Inception (8/31/90)
December 31, 1998 December 31, 1998 to December 31, 1998
____________________ ____________________ _________________________
<S> <C> <C> <C>
-3.44% 12.88% 37.23%
- ------------------------
Past performance is not predictive of future performance.
</TABLE>
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, Small Cap Portfolio on 8/31/90 (Inception Date) to a $10,000
investment made in the Russell 2000 Index on that date. All dividends and
capital gain distributions are reinvested.
The Portfolio' s performance shown in the line graph takes into account all
applicable fees and expenses of the Portfolio. The Russell 2000 Index is an
unmanaged index and is composed of the 2,000 smallest companies in the Russell
3000 Index. The Russell 3000 Index is composed of 3,000 of the largest U.S.
companies by market capitalization. The Index does not take into account
charges, fees and other expenses. Further information relating to Portfolio
performance, including expense reimbursements, if applicable, is contained in
the Financial Highlights section of the Prospectus and elsewhere in this report
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Common Stocks--95.5% Shares Value
- --------------------------------------------------------- ____________ _______________
<S> <C> <C>
Commercial Services--5.1% Outdoor Systems . . . . . . . . . . . . . . . . . . .(a) 700,000 $ 21,000,000
Profit Recovery Group International . . . . . . . . .(a) 575,000 21,526,563
Reynolds & Reynolds, Cl. A . . . . . . . . . . . . . . . 825,000 18,923,437
Strategic Distribution . . . . . . . . . . . . . . . .(a) 945,000 2,303,437
_______________
63,753,437
_______________
Consumer Durables--1.5% Mohawk Industries . . . . . . . . . . . . . . . . . .(a) 435,000 18,297,187
_______________
Consumer Non-Durables--5.4% Fresh Del Monte Produce . . . . . . . . . . . . . . .(a) 800,000 17,350,000
Movado Group . . . . . . . . . . . . . . . . . . . . . . 550,000 14,643,750
Nautica Enterprises . . . . . . . . . . . . . . . . .(a) 625,000 9,375,000
Tommy Hilfiger . . . . . . . . . . . . . . . . . . . .(a) 250,000 15,000,000
Warnaco Group, Cl. A . . . . . . . . . . . . . . . . . . 425,000 10,731,250
_______________
67,100,000
_______________
Consumer Services--7.5% Meredith . . . . . . . . . . . . . . . . . . . . . . . . 440,000 16,665,000
Premier Parks . . . . . . . . . . . . . . . . . . . .(a) 700,000 21,175,000
SFX Entertainment, Cl. A . . . . . . . . . . . . . . . . 400,000 21,950,000
Sun International Hotels . . . . . . . . . . . . . . .(a) 380,000 17,266,250
TCA Cable TV . . . . . . . . . . . . . . . . . . . . . . 450,000 16,059,375
_______________
93,115,625
_______________
Electronic Technology--10.3% CMGI . . . . . . . . . . . . . . . . . . . . . . . . .(a) 155,000 16,507,500
Cordant Technologies . . . . . . . . . . . . . . . . . . 360,000 13,500,000
FORE Systems . . . . . . . . . . . . . . . . . . . . .(a) 950,000 17,396,875
Lattice Semiconductor . . . . . . . . . . . . . . . .(a) 500,000 22,953,125
Newport News Shipbuilding . . . . . . . . . . . . . . . 550,000 18,390,625
Novellus Systems . . . . . . . . . . . . . . . . . . .(a) 350,000 17,325,000
Sanmina . . . . . . . . . . . . . . . . . . . . . . .(a) 350,000 21,875,000
_______________
127,948,125
_______________
Energy Minerals--1.2% Devon Energy . . . . . . . . . . . . . . . . . . . . . . 335,000 10,280,312
Ocean Energy . . . . . . . . . . . . . . . . . . . . . . 842,000 5,315,125
_______________
15,595,437
_______________
Finance--17.8% Berkley (W.R.) . . . . . . . . . . . . . . . . . . . . . 375,000 12,773,438
CCB Financial . . . . . . . . . . . . . . . . . . . . . 180,000 10,260,000
Charter One Financial . . . . . . . . . . . . . . . . . 567,000 15,734,250
D&N Financial . . . . . . . . . . . . . . . . . . . . . 253,550 5,990,119
Dime Bancorp . . . . . . . . . . . . . . . . . . . . . . 500,000 13,218,750
Duff & Phelps Credit Rating . . . . . . . . . . . . .(b) 280,000 15,347,500
Enhance Financial Services Group . . . . . . . . . . . . 420,000 12,600,000
Everest Reinsurance Holdings . . . . . . . . . . . . . . 475,000 18,495,313
Executive Risk . . . . . . . . . . . . . . . . . . . . . 332,500 18,266,719
FBL Financial Group, Cl. A . . . . . . . . . . . . . . . 650,000 15,762,500
Fremont General . . . . . . . . . . . . . . . . . . . . 520,000 12,870,000
Horace Mann Educators . . . . . . . . . . . . . . . . . 500,000 14,250,000
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- --------------------------------------------------------- ____________ _______________
Finance (continued) Legg Mason . . . . . . . . . . . . . . . . . . . . . . . 155,600 $ 4,911,125
Liberty Financial . . . . . . . . . . . . . . . . . . . 305,000 8,235,000
Protective Life . . . . . . . . . . . . . . . . . . . . 400,000 15,925,000
Reliance Group Holdings . . . . . . . . . . . . . . . . 1,000,000 12,875,000
Terra Nova (Bermuda) Holdings, Cl. A . . . . . . . . . . 570,000 14,392,500
_______________
221,907,214
_______________
Health Services--4.6% Beverly Enterprises . . . . . . . . . . . . . . . . .(a) 1,250,000 8,437,500
Covance . . . . . . . . . . . . . . . . . . . . . . .(a) 350,000 10,193,750
Foundation Health Systems, Cl. A . . . . . . . . . . .(a) 870,000 10,385,625
IDX Systems . . . . . . . . . . . . . . . . . . . . .(a) 365,000 16,060,000
Universal Health Services, Cl. B . . . . . . . . . . .(a) 245,000 12,709,375
_______________
57,786,250
_______________
Health Technology--3.2% Gilead Sciences . . . . . . . . . . . . . . . . . . .(a) 500,000 20,531,250
Mentor . . . . . . . . . . . . . . . . . . . . . . . . . 240,000 5,625,000
Pharmacyclics . . . . . . . . . . . . . . . . . . . .(a) 551,000 14,050,500
_______________
40,206,750
_______________
Industrial Services--4.0% Cooper Cameron . . . . . . . . . . . . . . . . . . . .(a) 350,000 8,575,000
Global Industries . . . . . . . . . . . . . . . . . .(a) 900,000 5,512,500
Granite Construction . . . . . . . . . . . . . . . . . . 400,000 13,425,000
IMCO Recycling . . . . . . . . . . . . . . . . . . . . . 625,000 9,648,438
Safety-Kleen . . . . . . . . . . . . . . . . . . . . .(a) 750,000 10,593,750
Superior Energy Services . . . . . . . . . . . . . . .(a) 625,000 1,777,344
_______________
49,532,032
_______________
Non-Energy Minerals--3.6% AK Steel Holding . . . . . . . . . . . . . . . . . . . . 755,000 17,742,500
Martin Marietta Materials . . . . . . . . . . . . . . . 245,000 15,235,937
Minerals Technologies . . . . . . . . . . . . . . . . . 300,000 12,281,250
_______________
45,259,687
_______________
Process Industries--5.1% Albany International, Cl. A . . . . . . . . . . . . . . 714,000 13,521,375
Crompton & Knowles . . . . . . . . . . . . . . . . . . . 625,000 12,929,687
OM Group . . . . . . . . . . . . . . . . . . . . . . . . 320,000 11,680,000
RPM . . . . . . . . . . . . . . . . . . . . . . . . . . 700,000 11,200,000
Smurfit-Stone Container . . . . . . . . . . . . . . .(a) 900,000 14,231,250
_______________
63,562,312
_______________
Producer Manufacturing--5.8% Crane . . . . . . . . . . . . . . . . . . . . . . . . . 475,000 14,339,063
Halter Marine Group . . . . . . . . . . . . . . . . .(a) 700,000 3,412,500
Harsco . . . . . . . . . . . . . . . . . . . . . . . . . 325,000 9,892,187
MagneTek . . . . . . . . . . . . . . . . . . . . . . .(a) 1,293,500 14,956,094
Titan International . . . . . . . . . . . . . . . . .(b) 1,250,000 11,875,000
U.S. Can . . . . . . . . . . . . . . . . . . . . . . .(a) 500,000 8,937,500
Wyman-Gordon . . . . . . . . . . . . . . . . . . . . .(a) 855,000 8,763,750
_______________
72,176,094
_______________
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- --------------------------------------------------------- ____________ _______________
Retail Trade--2.2% Consolidated Stores . . . . . . . . . . . . . . . . .(a) 360,000 $ 7,267,500
Tiffany & Co. . . . . . . . . . . . . . . . . . . . . . 400,000 20,750,000
_______________
28,017,500
_______________
Technology Services--8.2% Aspect Development . . . . . . . . . . . . . . . . . .(a) 375,000 16,617,187
Intuit . . . . . . . . . . . . . . . . . . . . . . . .(a) 350,000 25,375,000
National Data . . . . . . . . . . . . . . . . . . . . . 300,000 14,606,250
Network Associates . . . . . . . . . . . . . . . . . .(a) 450,000 29,812,500
Rational Software . . . . . . . . . . . . . . . . . .(a) 600,000 15,900,000
_______________
102,310,937
_______________
Transportation--1.3% Expeditors International of Washington . . . . . . . . . 375,000 15,750,000
_______________
Utilities--8.7% IPALCO Enterprises . . . . . . . . . . . . . . . . . . . 235,000 12,998,438
Metromedia Fiber Network, Cl. A . . . . . . . . . . .(a) 1,350,000 45,225,000
Minnesota Power . . . . . . . . . . . . . . . . . . . . 265,000 11,660,000
Montana Power . . . . . . . . . . . . . . . . . . . . . 250,000 14,140,625
National Fuel Gas . . . . . . . . . . . . . . . . . . . 295,000 13,330,312
Sierra Pacific Resources . . . . . . . . . . . . . . . . 300,000 11,400,000
_______________
. 108,754,375
_______________
TOTAL COMMON STOCKS
(cost $911,477,544) . . . . . . . . . . . . . . . . . . $1,191,072,962
_______________
Principal
Short-Term Investments--4.6% Amount
- ----------------------------------------------------------------------------------------------- -------------- ---------------
U.S. Treasury Bills: 4.01%, 1/7/1999 . . . . . . . . . . . . . . . . . . . . $ 224,000 $ 223,870
3.99%, 1/14/1999 . . . . . . . . . . . . . . . . . . . . 562,000 561,271
4.27%, 1/21/1999 . . . . . . . . . . . . . . . . . . . . 33,864,000 33,781,203
4.19%, 1/28/1999 . . . . . . . . . . . . . . . . . . . . 9,980,000 9,951,956
4.38%, 2/18/1999 . . . . . . . . . . . . . . . . . . . . 804,000 799,626
4.35%, 3/4/1999 . . . . . . . . . . . . . . . . . . . . 1,758,000 1,744,768
4.41%, 3/18/1999 . . . . . . . . . . . . . . . . . . . . 2,021,000 2,003,114
4.43%, 3/25/1999 . . . . . . . . . . . . . . . . . . . . 5,664,000 5,607,320
4.47%, 4/1/1999 . . . . . . . . . . . . . . . . . . . . 1,871,000 1,850,606
_______________
TOTAL SHORT-TERM INVESTMENTS
(cost $56,519,954) . . . . . . . . . . . . . . . . . . . $ 56,523,734
_______________
TOTAL INVESTMENTS (cost $967,997,498). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.1% $1,247,596,696
_______ ______________
LIABILITIES, LESS CASH AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.1%) $ (792,801)
_______ ______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $1,246,803,895
_______ ______________
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
(b) Investments in non-controlled affiliates (cost $20,111,683)--see Note 1(d).
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
________________ _______________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . . . $ 967,997,498 $1,247,596,696
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527,657
Receivable for investment securities sold . . . . . . . . . . . 4,280,982
Dividends and interest receivable . . . . . . . . . . . . . . . 688,170
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 13,088
_______________
1,253,106,593
_______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . . . . 760,164
Payable for investment securities purchased . . . . . . . . . . 5,504,848
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 37,686
_______________
6,302,698
_______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,246,803,895
_______________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . $1,055,098,539
Accumulated undistributed investment income--net . . . . . . . 858,211
Accumulated net realized gain (loss) on investments . . . . . . (88,752,053)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279,599,198
_______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,246,803,895
_______________
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 23,128,720
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $53.91
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME: Cash dividends:
Unaffiliated issuers . . . . . . . . . . . . . . . . . . . . $ 6,887,163
Affiliated issuers--Note 1(d) . . . . . . . . . . . . . . . 52,350
______________
$ 6,939,513
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,514,803
______________
Total Income . . . . . . . . . . . . . . . . . . . . . . 10,454,316
EXPENSES: Investment advisory fee--Note 3(a) . . . . . . . . . . . . . . 9,335,756
Custodian fees--Note 3(a) . . . . . . . . . . . . . . . . . . . 91,263
Prospectus and shareholders' reports . . . . . . . . . . . . 78,473
Professional fees . . . . . . . . . . . . . . . . . . . . . . . 28,670
Trustees' fees and expenses--Note 3(b) . . . . . . . . . . . 19,658
Registration fees . . . . . . . . . . . . . . . . . . . . . . . 12,131
Loan commitment fees--Note 2 . . . . . . . . . . . . . . . . . 6,825
Shareholder servicing costs . . . . . . . . . . . . . . . . . . 4,138
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 21,152
______________
Total Expenses . . . . . . . . . . . . . . . . . . . . . 9,598,066
______________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856,250
______________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments:
Unaffiliated issuers . . . . . . . . . . . . . . . . . . . . $ (65,656,620)
Affiliated issuers . . . . . . . . . . . . . . . . . . . . . (22,794,648)
______________
Net Realized Gain (Loss) . . . . . . . . . . . . . . . . (88,451,268)
Net unrealized appreciation (depreciation) on investments:
Unaffiliated issuers . . . . . . . . . . . . . . . . . . . . 39,029,449
Affiliated issuers . . . . . . . . . . . . . . . . . . . . . 1,196,250 40,225,699
______________ ______________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . (48,225,569)
______________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . $ (47,369,319)
______________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1998 December 31, 1997
__________________ __________________
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 856,250 $ 1,358,446
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . (88,451,268) 96,378,291
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . 40,225,699 72,300,596
________________ ________________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . (47,369,319) 170,037,333
________________ ________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,484) (1,354,282)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . (23,750,579) (71,603,959)
________________ ________________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,755,063) (72,958,241)
________________ ________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . 208,013,634 203,123,864
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,755,063 72,958,241
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (188,132,272) (59,234,781)
________________ ________________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions . 43,636,425 216,847,324
________________ ________________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . (27,487,957) 313,926,416
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,274,291,852 960,365,436
________________ ________________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,246,803,895 $1,274,291,852
________________ ________________
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . $ 858,211 $ 6,445
________________ ________________
Shares Shares
________________ ________________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,992,161 3,591,846
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . 525,438 1,337,947
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,690,117) (1,069,993)
________________ ________________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . 827,482 3,859,800
________________ ________________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This information
has been derived from the Series' financial statements.
Year Ended December 31,
____________________________________________________________
PER SHARE DATA: 1998 1997 1996 1995 1994
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . $57.14 $52.08 $46.13 $36.52 $34.45
______ ______ ______ ______ ______
Investment Operations:
Investment income--net . . . . . . . . . . . . .04 .07 .10 .16 .17
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . (2.21) 8.49 7.53 10.54 2.50
______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS . . . . . . . (2.17) 8.56 7.63 10.70 2.67
______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net . . . . . (.00)* (.07) (.10) (.18) (.16)
Dividends from net realized gain on investments . (1.06) (3.43) (1.51) (.91) (.33)
Dividends in excess of net realized gain on
investments . . . . . . . . . . . . . . . . . -- -- (.07) -- (.11)
______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . . (1.06) (3.50) (1.68) (1.09) (.60)
______ ______ ______ ______ ______
Net asset value, end of period . . . . . . . . $53.91 $57.14 $52.08 $46.13 $36.52
______ ______ ______ ______ ______
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . (3.44%) 16.75% 16.60% 29.38% 7.75%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . .. .77% .78% .79% .83% .55%
Ratio of net investment income
to average net assets . . . . . . . . . . . . .07% .12% .24% .54% 1.18%
Decrease reflected in above expense ratios due
to undertakings by The Dreyfus Corporation . -- -- -- -- .52%
Portfolio Turnover Rate . . . . . . . . . . . 75.04% 79.00% 89.10% 99.02% 106.00%
Net Assets, end of period (000's Omitted) . . $1,246,804 $1,274,292 $960,365 $543,281 $173,215
- ------------
* Amount represents less than $.01 per share.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Variable Investment Fund (the "Fund" ) is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end management
investment company, operating as a series company currently offering thirteen
series, including the 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 custody agreement, the Series received
net earnings credits of
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
$35,176 during the period ended December 31, 1998 based on available cash
balances left on deposit. Income earned under this arrangement is included in
interest income.
(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 December 31,
1998:
<TABLE>
SHARES
________________________________________________
BEGINNING END OF DIVIDEND MARKET
NAME OF ISSUER OF PERIOD PURCHASES SALES PERIOD INCOME VALUE
_____________ _________ _________ ________ __________ ________ _____________
<S> <C> <C> <C> <C> <C> <C>
Duff & Phelps Credit Rating. . . . . . . . 280,000 -- -- 280,000 $33,600 $15,347,500
Pharmacyclics* . . . . . . . . . . . . . . 550,000 16,000 15,000 551,000 -- 14,050,500
Titan International. . . . . . . . . . . . 660,000 590,000 -- 1,250,000 18,750 11,875,000
- ------------
* No longer an affiliated issuer at December 31, 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 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 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 Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes.
The Series has an unused capital loss carryover of approximately $87,485,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1998. If not
applied, the carryover expires in fiscal 2006.
NOTE 2--BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (the "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
December 31, 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 December 31, 1998, the Series was charged $204 pursuant to the transfer
agency agreement.
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Series compensates Mellon under a custody agreement for providing custodial
services for the Series. During the period ended December 31, 1998, the Series
was charged $91,263 pursuant to the custody agreement.
(B) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--SECURITIES TRANSACTIONS:
The following summarizes the aggregate amount of purchases and sales of
investment securities, excluding short-term securities, during the period ended
December 31, 1998:
<TABLE>
PURCHASES SALES
______________ ______________
<S> <C> <C>
Unaffiliated issuers . . . . . . . . . . . . . . . . . . . . . $935,166,920 $875,764,395
Affiliated issuers . . . . . . . . . . . . . . . . . . . . . . 5,682,375 8,617,712
______________ ______________
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . $940,849,295 $884,382,107
______________ ______________
</TABLE>
At December 31, 1998, accumulated net unrealized appreciation on investments
was $279,599,198, consisting of $342,641,754 gross unrealized appreciation and
$63,042,556 gross unrealized depreciation.
At December 31, 1998, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Variable Investment Fund,
Small Cap Portfolio, (one of the series constituting the Dreyfus Variable
Investment Fund) as of December 31, 1998, 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation by
examination of securities held by the custodian as of December 31, 1998 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Variable Investment Fund, Small Cap Portfolio at December 31, 1998, 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 generally accepted
accounting principles.
New York, New York
February 4, 1999
DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
- -----------------------------------------------------------------------------
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Series hereby designates $1.0582 per share as a
long-term capital gain distribution of the $1.0596 per share paid on September
14, 1998.
The Series also designates 100% of the ordinary dividends paid during the
fiscal year ended December 31, 1998 as qualifying for the corporate dividends
received deduction.
[reg.tm logo]
(reg.tm)
DREYFUS VARIABLE INVESTMENT FUND,
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. 121AR9812
Variable
Investment Fund,
SMALL CAP PORTFOLIO
Annual Report
December 31, 1998
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS VARIABLE INVESTMENT FUND, SMALL CAP PORTFOLIO
AND THE RUSSELL 2000 INDEX
EXHIBIT A:
DREYFUS VARIABLE
INVESTMENT FUND,
PERIOD RUSSELL 2000 SMALL CAP
INDEX * PORTFOLIO
8/31/90 10,000 10,000
12/31/90 9,569 10,210
12/31/91 13,976 26,519
12/31/92 16,548 45,422
12/31/93 19,676 76,451
12/31/94 19,319 82,376
12/31/95 24,828 106,579
12/31/96 28,923 124,263
12/31/97 35,392 145,074
12/31/98 34,490 140,081
* Source: Lipper Analytical Services, Inc.
