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 COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
The Dreyfus Variable Investment Fund -- Small Company Stock Portfolio
completed its 1998 fiscal year with performance results that were significantly
affected by the stock market's extraordinary volatility during that period. For
the 12-month period ended December 31, 1998, your Portfolio produced a negative
return of -5.97% * compared to a positive return of 0.38% for the Russell 2500
Index, the Portfolio benchmark.**
According to a recent study, overall stock prices in the past year have been
the most volatile in the past 50 years. However, volatility for smaller stocks
was even greater over the same time period and it more than confirmed another
research finding that small-cap stocks are roughly 50% more volatile than
large-cap stocks in the Standard & Poor' s 500 Composite Stock Price Index.
Indeed, it was a very difficult and challenging year for small-cap investors and
for your 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 (the "Fed") to contemplate a rise in interest rates
early in the year, but world economic weakness generated powerful enough
disinflationary 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 away 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 amidst 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 -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; 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
In the 14 years that we have been managing smaller-cap portfolios under our
three-step process of quantitative screening, fundamental analysis and portfolio
risk control, we have never underperformed our benchmark by as much as in the
past year. The main reasons are as follows:
First, our quantitative model did not demonstrate its usual success in
identifying issues to buy and sell. There has been a constant style shift
between growth and value. Our process has been effective in identifying
sustained trends, but has struggled in periods of daily price volatility.
Second, even with about 165 names in the Portfolio, disappointing stock
developments had a much greater impact on overall performance than in the
Russell 2500 Index. Nearly all of our underperformance can be attributed to the
10 worst performing stocks.
Some of those stocks were Sirrom Capital and Philip Services, which were hurt
by questionable accounting practices. Silicon Valley Group, Adaptec and CompUSA
were hurt by the slowdown in semiconductor orders and PC sales. AGCO and ESC
Medical Systems were hurt by considerable weakness in their foreign markets. All
of these stocks were sold from the Portfolio at various times throughout the
reporting period.
Third, the liquidity costs to buy and sell a position have been much greater
than normal, especially on the downside when companies announced disappointing
results. Because of our decision to realize some capital losses late in the year
to offset previously realized capital gains, there are no capital gain
distributions to be paid for the Portfolio's 1998 tax year. Nevertheless, the
Portfolio turnover rate of 45.1% for the 1998 fiscal year was below most
managers and consistent with our usual 40% to 50% range.
In our effort to improve the Portfolio's performance, we have expanded our
stock selection universe and are evaluating new quantitative data to better
guide our selections. Our analytical staff has been enlarged. In addition, steps
have been taken to expedite the execution of trades with the growth in assets.
Your Portfolio' s improved absolute performance of 16.44% in the final three
months of 1998 was a welcome recovery and in part reflects some improvement in
valuations.
Sincerely,
[Anthony J. Galise signature] [James C. Wadsworth signature]
Anthony J. Galise James C. Wadsworth
Portfolio Co-Manager Portfolio Co-Manager
January 12, 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
imposed in connection with investing in variable insurance contracts, which will
reduce returns.
**SOURCE: THE FRANK RUSSELL COMPANY -- Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Russell 2500
Index is an unmanaged index and is composed of the 2,500 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 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. The Russell 2000 Index 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. All indices are
unmanaged and include reinvested dividends.
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO DECEMBER 31,
1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS VARIABLE
INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO AND THE RUSSELL 2500 INDEX
Dollars
$13,417
Russell 2500 Index*
$12,449
Dreyfus Variable Investment Fund, Small Company Stock Portfolio
*Source: The Frank Russell Company
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended From Inception (5/1/96)
December 31, 1998 to December 31, 1998
____________________ __________________________
-5.97% 8.55%
- ---------------
Past performance is not predictive of future performance.
THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES
AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE
CONTRACTS WHICH WILL REDUCE RETURNS.
The above graph compares a $10,000 investment made in Dreyfus Variable
Investment Fund, Small Company Stock Portfolio on 5/1/96 (Inception Date) to a
$10,000 investment made in the Russell 2500 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 2500 Index is an
unmanaged index and is composed of the 2,500 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 COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Common Stocks--98.1% Shares Value
- ------------------------------------------------------------------------------- ---------------- ----------------------
<S> <C> <C>
Basic Industries--6.7% ACX Technologies . . . . . . . . . . . . .(a) 8,450 $ 111,963
Agrium . . . . . . . . . . . . . . . . . . . 12,400 107,725
American Building . . . . . . . . . . . .(a) 3,400 83,300
AptarGroup . . . . . . . . . . . . . . . . . 6,700 188,019
Cabot . . . . . . . . . . . . . . . . . . . 8,900 248,644
Caraustar Industries . . . . . . . . . . . . 4,450 127,103
Clayton Homes . . . . . . . . . . . . . . . 15,046 207,826
Comfort Systems USA . . . . . . . . . . .(a) 4,600 82,225
Crompton & Knowles . . . . . . . . . . . .(a) 9,700 200,669
Cytec Industries . . . . . . . . . . . . .(a) 7,050 149,813
Jacobs Engineering Group . . . . . . . . .(a) 3,700 150,775
Louisiana Pacific . . . . . . . . . . . . . 5,300 97,056
Mail-Well . . . . . . . . . . . . . . . .(a) 16,300 186,431
Southdown . . . . . . . . . . . . . . . . . 3,476 205,736
Sybron International . . . . . . . . . . .(a) 6,600 179,438
____________
2,326,723
____________
Capital Spending--17.4% Allied Waste Industries . . . . . . . . .(a) 6,100 144,113
Apple Computer . . . . . . . . . . . . . .(a) 8,000 327,500
Applied Power, Cl. A . . . . . . . . . . . . 5,200 196,300
CellStar . . . . . . . . . . . . . . . . .(a) 12,000 81,750
Cognex . . . . . . . . . . . . . . . . . .(a) 4,650 93,000
Cordant Technologies . . . . . . . . . . . . 3,200 120,000
Dallas Semiconductor . . . . . . . . . . . . 5,050 205,788
Duke Realty Investments . . . . . . . . . . 8,200 190,650
ECI Telecommunications . . . . . . . . . . . 9,400 334,875
Electronics For Imaging . . . . . . . . .(a) 8,100 325,519
Fairchild, Cl. A . . . . . . . . . . . . .(a) 5,000 78,750
FORE Systems . . . . . . . . . . . . . . .(a) 15,300 280,181
Gulfstream Aerospace . . . . . . . . . . .(a) 3,400 181,050
Jabil Circuit . . . . . . . . . . . . . .(a) 4,000 298,500
Neomagic . . . . . . . . . . . . . . . . .(a) 11,800 261,075
OmniQuip International . . . . . . . . . . . 9,800 147,000
Plantronics . . . . . . . . . . . . . . .(a) 6,500 559,000
PMC-Sierra . . . . . . . . . . . . . . . .(a) 3,700 233,563
Sanmina . . . . . . . . . . . . . . . . .(a) 8,004 500,250
SMART Modular Technologies . . . . . . . .(a) 11,100 308,025
SPX . . . . . . . . . . . . . . . . . . .(a) 2,700 180,900
Tech Data . . . . . . . . . . . . . . . .(a) 7,850 315,946
Uniphase . . . . . . . . . . . . . . . . .(a) 2,800 194,250
Waters . . . . . . . . . . . . . . . . . .(a) 3,600 314,100
Zebra Technologies, Cl. A . . . . . . . .(a) 6,800 195,500
____________
6,067,585
____________
Consumer Cyclical--15.9% Abercrombie & Fitch Co., Cl. A . . . . . .(a) 4,300 304,225
Action Performance Cos. . . . . . . . . .(a) 4,500 159,188
Black Box . . . . . . . . . . . . . . . .(a) 6,000 227,250
Borg-Warner Automotive . . . . . . . . . . . 4,950 276,272
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- ---------------- --------------------
Consumer Cyclical (continued) CKE Restaurants . . . . . . . . . . . . . . 3,520 $ 103,620
Darden Restaurants . . . . . . . . . . . . . 8,100 145,800
Dollar Tree Stores . . . . . . . . . . . .(a) 4,300 187,856
Ethan Allen Interiors . . . . . . . . . . . 4,900 200,900
Fingerhut . . . . . . . . . . . . . . . . . 8,100 125,044
General Nutrition . . . . . . . . . . . .(a) 4,700 76,375
Heftel Broadcasting, Cl. A . . . . . . . .(a) 4,200 206,850
Hollinger International, Cl. A . . . . . . . 11,300 157,494
Interface, Cl. A . . . . . . . . . . . . . . 15,500 143,859
King World Productions . . . . . . . . . .(a) 6,900 203,119
Lear . . . . . . . . . . . . . . . . . . .(a) 2,600 100,100
Promus Hotel . . . . . . . . . . . . . . .(a) 4,730 153,134
Richfood Holdings . . . . . . . . . . . . . 4,775 99,081
Ross Stores . . . . . . . . . . . . . . . . 5,100 200,813
Ryan's Family Steak House . . . . . . . .(a) 19,650 243,169
Sinclar Broadcast Group, Cl. A . . . . . .(a) 18,300 357,994
Speedway Motorsports . . . . . . . . . . .(a) 6,500 185,250
Tommy Hilfiger . . . . . . . . . . . . . .(a) 3,850 231,000
Tower Automotive . . . . . . . . . . . . .(a) 9,500 236,906
United Natural Foods . . . . . . . . . . .(a) 5,100 123,038
Valassis Communication . . . . . . . . . .(a) 3,200 165,200
Wallace Computer Services . . . . . . . . . 7,400 195,175
Warnaco Group, Cl. A . . . . . . . . . . . . 6,900 174,225
World Color Press . . . . . . . . . . . .(a) 3,100 94,356
Zale . . . . . . . . . . . . . . . . . . .(a) 10,450 337,013
Ziff-Davis . . . . . . . . . . . . . . . .(a) 8,800 139,150
____________
5,553,456
____________
Consumer Staples--3.7% Canandaigua Brands, Cl. A . . . . . . . .(a) 2,700 156,094
Central Garden & Pet . . . . . . . . . . .(a) 8,200 117,875
Dial . . . . . . . . . . . . . . . . . . . . 10,300 297,413
Interstate Bakeries . . . . . . . . . . . . 4,700 124,256
Mylan Laboratories . . . . . . . . . . . . . 3,800 119,700
Ralcorp Holdings . . . . . . . . . . . . .(a) 6,200 113,150
Suiza Foods . . . . . . . . . . . . . . .(a) 7,117 362,522
____________
1,291,010
____________
Energy--4.1% BJ Services . . . . . . . . . . . . . . .(a) 6,600 103,125
Devon Energy . . . . . . . . . . . . . . . . 5,800 177,988
Holly . . . . . . . . . . . . . . . . . . . 3,650 61,594
KN Energy . . . . . . . . . . . . . . . . . 5,050 183,694
Newfield Exploration . . . . . . . . . . .(a) 6,500 135,688
Noble Affiliates . . . . . . . . . . . . . . 4,200 103,425
Sempra Energy . . . . . . . . . . . . . . . 9,899 251,187
Transocean Offshore . . . . . . . . . . .(a) 3,600 96,525
Ultramar Diamond Shamrock . . . . . . . . . 6,000 145,500
WICOR . . . . . . . . . . . . . . . . . . . 8,200 178,863
____________
1,437,589
____________
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- ---------------- --------------------
Health Care--8.3% AmeriSource Health, Cl. A . . . . . . . .(a) 4,600 $ 299,000
Genzyme - General Division . . . . . . . .(a) 6,100 303,475
Lincare Holdings . . . . . . . . . . . . .(a) 7,400 300,163
Orthodontic Centers of America . . . . . .(a) 15,100 293,506
PharMerica . . . . . . . . . . . . . . . .(a) 17,600 105,600
PSS World Medical . . . . . . . . . . . .(a) 15,000 345,000
Steris . . . . . . . . . . . . . . . . . .(a) 9,900 281,531
Total Renal Care Holdings . . . . . . . .(a) 8,600 254,238
Universal Health Services, Cl. B . . . . .(a) 4,800 249,000
Watson Pharmaceuticals . . . . . . . . . .(a) 7,300 458,988
____________
2,890,501
____________
Interest Sensitive--18.1% AMBAC . . . . . . . . . . . . . . . . . . . 5,800 349,088
AmeriCredit . . . . . . . . . . . . . . .(a) 10,000 138,125
Amerin . . . . . . . . . . . . . . . . . .(a) 6,900 163,013
Apartment Investment & Management, Cl. A . . 5,700 211,969
Bank United, Cl. A . . . . . . . . . . . . . 6,000 235,500
Boston Properties . . . . . . . . . . . . . 10,000 305,000
Camden Property Trust . . . . . . . . . . . 6,600 171,600
City National . . . . . . . . . . . . . . . 9,600 399,600
CMAC Investment . . . . . . . . . . . . . . 5,500 252,656
Equity Office Properties . . . . . . . . . . 8,276 198,624
Everen Capital . . . . . . . . . . . . . . . 9,240 210,210
FelCor Lodging Trust . . . . . . . . . . . . 4,400 101,475
Franchise Finance Corp. of America . . . . . 6,300 151,200
Hambrecht & Quist Group . . . . . . . . .(a) 3,600 81,675
Health Care Property Investors . . . . . . . 4,850 149,138
Hibernia, Cl. A . . . . . . . . . . . . . . 15,000 260,625
Highwoods Properties . . . . . . . . . . . . 5,000 128,750
Investment Technology Group . . . . . . .(a) 200 12,413
M&T Bank . . . . . . . . . . . . . . . . . . 539 279,707
Mack-Cali Realty . . . . . . . . . . . . . . 6,340 195,748
Mercantile Bankshares . . . . . . . . . . . 8,400 323,400
Old Kent Financial . . . . . . . . . . . . . 8,858 411,897
Pacific Gulf Properties . . . . . . . . . . 8,600 172,538
People's Bank . . . . . . . . . . . . . . . 6,100 168,513
Peoples Heritage Financial Group . . . . . . 13,500 270,000
Protective Life Corp. . . . . . . . . . . . 7,100 282,669
Reliance Group Holdings . . . . . . . . . . 15,500 199,563
Sovereign Bancorp . . . . . . . . . . . . . 11,360 161,880
TCF Financial Corp. . . . . . . . . . . . . 9,000 217,688
Waddell & Reed Financial, Cl. A . . . . . . 4,300 101,856
____________
6,306,120
____________
Mining And Metals--2.0% Cable Design Technologies . . . . . . . .(a) 6,475 119,788
General Cable . . . . . . . . . . . . . . . 7,100 145,550
IMCO Recycling . . . . . . . . . . . . . . . 8,300 128,131
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- ---------------- --------------------
Mining And Metals (continued) Texas Industries . . . . . . . . . . . . . . 4,300 $ 115,831
USEC . . . . . . . . . . . . . . . . . . . . 13,200 183,150
____________
692,450
____________
Services--13.0% Analysts International . . . . . . . . . . . 5,000 96,250
Avis Rent A Car . . . . . . . . . . . . .(a) 7,000 169,313
Ciber . . . . . . . . . . . . . . . . . .(a) 5,500 153,656
Cognos . . . . . . . . . . . . . . . . . .(a) 7,800 195,000
Excite . . . . . . . . . . . . . . . . . . . 4,800 201,900
First Health Group . . . . . . . . . . . . . 10,200 168,938
Galilieo International . . . . . . . . . . . 7,700 334,950
Gallagher (Arthur J.) . . . . . . . . . . . 3,500 154,438
Hummingbird Communications . . . . . . . .(a) 6,650 130,506
Intuit . . . . . . . . . . . . . . . . . .(a) 8,200 594,500
Keane . . . . . . . . . . . . . . . . . .(a) 3,800 151,763
Mutual Risk Management . . . . . . . . . . . 9,066 354,707
Pittston Brinks Group . . . . . . . . . . . 8,150 259,781
Rental Service . . . . . . . . . . . . . .(a) 8,100 127,069
Sotheby's Holdings, Cl. A . . . . . . . . . 10,100 323,200
Sterling Commerce . . . . . . . . . . . .(a) 7,072 318,240
Sterling Software . . . . . . . . . . . .(a) 9,800 265,213
SunGuard Data Systems . . . . . . . . . .(a) 9,100 361,156
Young & Rubicam . . . . . . . . . . . . .(a) 4,900 158,638
____________
4,519,218
____________
Transportation--2.1% Air Express International . . . . . . . . . 4,750 103,313
Airborne Freight . . . . . . . . . . . . . . 5,500 198,344
CNF Transportation . . . . . . . . . . . .(a) 2,900 108,931
Comair Holdings . . . . . . . . . . . . . . 4,700 158,625
Wisconsin Central Transportation . . . . .(a) 9,700 166,719
____________
735,932
____________
Utilities--6.8% Calenergy . . . . . . . . . . . . . . . .(a) 9,400 326,063
Calpine . . . . . . . . . . . . . . . . .(a) 11,800 297,950
DQE . . . . . . . . . . . . . . . . . . . . 7,350 322,941
Montana Power . . . . . . . . . . . . . . . 5,900 333,719
New England Electric System . . . . . . . . 3,800 182,875
NIPSCO Industries . . . . . . . . . . . . . 10,100 307,419
Pacific Gateway Exchange . . . . . . . . .(a) 7,100 341,244
Transaction Network Services . . . . . . .(a) 13,500 270,844
____________
2,383,055
____________
TOTAL COMMON STOCKS
(cost $31,977,193) . . . . . . . . . . . . $34,203,639
____________
____________
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Principal
Short Term Investments--1.5% Amount Value
- ------------------------------------------------------------------------------- ------------------ -----------------
U.S. Treasury Bills: 3.87%, 1/14/1999 . . . . . . . . . . . . . . $ 59,000 $ 58,923
4.32%, 2/4/1999 . . . . . . . . . . . . . . 100,000 99,590
4.27%, 2/18/1999 . . . . . . . . . . . . . . 141,000 140,233
4.44%, 3/25/1999 . . . . . . . . . . . . . . 132,000 130,679
4.47%, 4/1/1999 . . . . . . . . . . . . . . 101,000 99,899
____________
TOTAL SHORT-TERM INVESTMENTS
(cost $529,227) . . . . . . . . . . . . . $ 529,324
____________
TOTAL INVESTMENTS (cost $32,506,420) . . . . . . . . . . . . . . . . . . . . . . 99.6% $34,732,963
_______ ____________
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . .4% $ 123,639
_______ ____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $34,856,602
_______ ____________
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
_____________ ____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . . . $32,506,420 $34,732,963
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,133
Receivable for investment securities sold . . . . . . . . . . . 39,248
Dividends receivable . . . . . . . . . . . . . . . . . . . . . 32,352
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 454
_____________
34,903,150
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . . . . 26,595
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 19,953
_____________
46,548
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,856,602
_____________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . $34,904,510
Accumulated undistributed investment income--net . . . . . . . 11,874
Accumulated net realized gain (loss) on investments . . . . . . (2,286,325)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,226,543
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,856,602
_____________
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 2,310,597
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $15.09
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME: Cash dividends (net of $434 foreign taxes
withheld at source) . . . . . . . . . . . . . . . . . . . . $ 372,838
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,427
_____________
Total Income . . . . . . . . . . . . . . . . . . . . . . $ 412,265
EXPENSES: Investment advisory fee--Note 3(a) . . . . . . . . . . . . . . 249,468
Custodian fees--Note 3(a) . . . . . . . . . . . . . . . . . . . 24,605
Prospectus and shareholders' reports . . . . . . . . . . . . 24,124
Auditing fees . . . . . . . . . . . . . . . . . . . . . . . . . 20,923
Registration fees . . . . . . . . . . . . . . . . . . . . . . . 2,596
Shareholder servicing costs . . . . . . . . . . . . . . . . . . 1,306
Trustees' fees and expenses--Note 3(b) . . . . . . . . . . . 526
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . 409
Loan commitment fees--Note 2 . . . . . . . . . . . . . . . . . 235
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 1,052
_____________
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . 325,244
____________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,021
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . . . . $(2,270,701)
Net unrealized appreciation (depreciation) on investments . . . (273,737)
_____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . (2,544,438)
____________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . $(2,457,417)
____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1998 December 31, 1997
__________________ __________________
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,021 $ 79,878
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . (2,270,701) 535,237
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . (273,737) 1,941,468
______________ _______________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . (2,457,417) 2,556,583
______________ _______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84,817) (70,208)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . (93,031) (467,411)
______________ _______________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (177,848) (537,619)
______________ _______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . 15,037,525 19,389,206
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,848 537,619
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,877,575) (1,940,009)
______________ _______________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions . 9,337,798 17,986,816
______________ _______________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . 6,702,533 20,005,780
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,154,069 8,148,289
______________ _______________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,856,602 $28,154,069
______________ _______________
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . $ 11,874 $ 9,670
______________ _______________
Shares Shares
______________ _______________
CAPITAL SHARES TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 947,780 1,246,716
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . 11,117 34,650
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (394,173) (137,983)
______________ _______________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . 564,724 1,143,383
______________ _______________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK 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(1)
_______ _______ _______
<S> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . . . . . $16.13 $13.52 $12.50
_______ _______ _______
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . .04 .05 .05
Net realized and unrealized gain (loss) on investments . . . . . . . . . (.99) 2.89 1.03
_______ _______ _______
Total from Investment Operations . . . . . . . . . . . . . . . . . . . . (.95) 2.94 1.08
_______ _______ _______
Distributions:
Dividends from investment income--net . . . . . . . . . . . . . . . . . . (.04) (.04) (.05)
Dividends from net realized gain on investments . . . . . . . . . . . . . (.05) (.29) (.01)
_______ _______ _______
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . (.09) (.33) (.06)
_______ _______ _______
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . $15.09 $16.13 $13.52
_______ _______ _______
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . . . . . . . . (5.97%) 21.77% 8.73%(2,3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . .98% 1.12% .75%(2)
Ratio of net investment income to average net assets . . . . . . . . . . .26% .53% .39%(2)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation . . . . . . . . . . . . . . . -- -- .19%(2)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . 45.09% 34.48% 35.68%(2)
Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . . $34,857 $28,154 $8,148
- ---------
(1) From April 30, 1996 (commencement of operations) to December 31, 1996.
(2) Not annualized.
(3) Calculated based on net asset value on the close of business on May 1, 1996
(commencement of initial offering) to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK 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 Company Stock 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 provide investment results that are greater than the total
return performance of publicly-traded common stocks in the aggregate, as
represented by the Russell 2500 Index. 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 may 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.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custody agreement, the Series received net
earnings credits of $293 for the period ended December 31, 1998 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
(C) 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.
(D) 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.
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Series has an unused capital loss carryover of approximately $1,444,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1998. The
carryover does not include net realized securities losses from November 1, 1998
through December 31, 1998 which are treated, for Federal income tax purposes, as
arising in fiscal 1999. If not applied, the carryover expires in fiscal 2006.
NOTE 2--BANK LINE OF CREDIT:
The 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
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.
The Series compensates Mellon under a custody agreement for providing
custodial services for the Series. During the period ended December 31, 1998,
$24,605 was charged by Mellon pursuant to the custody agreement.
(B) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended December 31, 1998
amounted to $23,519,835 and $14,605,243, respectively.
At December 31, 1998, accumulated net unrealized appreciation on investments
was $2,226,543, consisting of $5,409,983 gross unrealized appreciation and
$3,183,440 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 COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY STOCK PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Variable Investment Fund,
Small Company Stock Portfolio (one of the Series constituting 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 verification 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 Company Stock 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 COMPANY STOCK PORTFOLIO
- -----------------------------------------------------------------------------
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Series hereby designates $.045 per share as
long-term capital gain distribution of the $.047 per share paid on March 31,
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 COMPANY STOCK 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. 151AR9812
Variable
Investment Fund,
SMALL COMPANY
STOCK PORTFOLIO
Annual Report
December 31, 1998
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS VARIABLE INVESTMENT FUND, SMALL COMPANY
STOCK PORTFOLIO AND THE RUSSELL 2500 INDEX
EXHIBIT A:
DREYFUS VARIABLE
INVESTMENT FUND,
PERIOD RUSSELL 2500 SMALL COMPANY
INDEX * STOCK PORTFOLIO
5/1/96 10,000 10,000
12/31/96 10,748 10,873
12/31/97 13,366 13,240
12/31/98 13,417 12,449
* Source: The Frank Russell Company
