<PAGE>
Dreyfus
Variable
Investment Fund,
Special Value
Portfolio
Annual Report
December 31, 1997
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
- --------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
We are pleased to provide you with this annual report for the Dreyfus
Variable Investment Fund -- Special Value Portfolio for the year ended December
31, 1997. Over this period, your Portfolio produced a total return of 23.14%,*
which compares with a total return of 33.35% for the Standard and Poor's 500
Composite Stock Price Index (the "S&P 500")** and 29.99% for the Standard and
Poor's Barra Value Index.*** Regardless, the Portfolio finished the year well
within the first quartile in the Lipper Variable Annuities Flexible Funds
category.****
The financial sector was by far the best performing economic sector of most
major indices for the year. While the Portfolio did have significant exposure to
the financial sector during the year, this sector was underweighted compared to
the S&P 500. This is because of our concerns that valuations of many financial
companies were at historically high levels. This decision slightly handicapped
the Portfolio during 1997. Similarly, the Portfolio was generally underweighted
in the utility sector for much of the year. Nonetheless, utilities turned out to
be one of the best performing sectors during the fourth quarter of 1997. On the
other hand, decisions to underweight technology-related companies based on our
assessment of their generally high valuation levels and to overweight the
consumer services sector contributed positively to your Portfolio's performance.
ECONOMIC REVIEW
In 1997, the U.S. economy put in its best growth performance of this business
cycle to date. In tandem, the labor market tightened markedly, marginally
boosting wage inflation towards year-end. Yet price inflation decelerated and
bond yields fell. Although corporate profit growth was robust for much of the
year, strains began to appear in the second half in some sectors. The Federal
Reserve Board (the "Fed") tightened credit early in the year, then subsequently
stayed on hold, torn between strong economic reports at home and worsening
financial crises overseas. While the problems overseas may slow the U.S. economy
somewhat in 1998, incoming evidence indicates little adverse impact on economic
activity to date.
Real Gross Domestic Product ("GDP") grew 3.8% in 1997, its best annual growth
since 1988. Almost all the major sectors contributed to growth. Households
enjoyed rising real incomes as wage increases outpaced price inflation. Moderate
interest rates buoyed housing demand. Tightening factory capacity boosted
capital spending, and until late in the year, steady foreign growth kept exports
robust. That all these sectors grew simultaneously in a late phase of the
business cycle was unusual. The year 1997 also saw a dramatic narrowing of the
Federal budget deficit. It is likely that the associated drop in Federal
borrowing boosted the supply of credit available to the private sector.
As mentioned, overall corporate profit growth rebounded in 1997, after
slowing in 1996. Profits from domestic sources generally did well. However,
profits from international sources began to show strains in the second half,
impacted by the rising dollar and by financial stresses overseas. More recently,
profits at some companies have been slowed by price weakness.
Economic data this winter show the economy still quite strong although some
leading statistics have begun to signal somewhat slower economic growth for
1998. First, recently slowing export orders and rising import orders imply a
widening trade deficit. Second, the number of announced layoffs has begun to
rise, indicating some future easing of labor market pressures. Once these
leading indicators actually show up in a slowing of the economy, market
expectations may shift to anticipate the possibility of a move by the Fed to
ease credit. At the start of 1998, there was uncertainty about both the severity
of Asian stresses and their impact on the U.S. economy.
Performance this past year was penalized by our disciplined value investing
approach. Only the strong returns from financial stocks saved the performance of
value benchmarks like the Standard & Poor's Barra Value Index. While we
certainly had exposure to this sector, we chose not to overweight it relative to
the overall market, as the value stock indices
<PAGE>
do, believing that the risks were too high given historically excessive
valuations for financial stocks. As a result, performance of the Portfolio was
handicapped. Further, we believed that the valuation of most major market
benchmarks was excessive during this past year, and constructed an investment
portfolio with a relatively low correlation to the major market indices. In
doing so, we believed that, while performance was ultimately penalized, the
risk level of the Portfolio was significantly lower than that of these
benchmarks.
VALUE INVESTING AND OUR INVESTMENT PROCESS
To briefly review our investment philosophy, while there are other investment
disciplines practiced at Dreyfus, we are passionate believers in value
investing. Paying attention to the value of securities has proven in numerous
industry and academic studies to result in superior and more consistent
long-term investment returns. As value investors, we want to buy companies with
growth potential, but we want to pay as little for them as we have to. In this
sense, we believe it is generally a lower risk, more conservative style of
equity investing.
Our approach to the selection of securities starts and ends with our analysts
who are an integral part of our investment team. Our Dreyfus analysts contribute
their proprietary forecasts to our computer models, their analysis and opinions
to our decision-making process, and their constant flow of information to our
ongoing assessment of portfolio securities. We screen the universe of stocks by
computer according to two principal methods. The first computer screen
determines value by calculating each security's earnings yield (our forecast for
earnings divided by the security price) which, to justify purchase, must be
greater than the risk-free yield available on reasonably long-term U.S. Treasury
securities. Being paid more than this risk-free rate for the risk inherent in
equity investing is central to our value discipline. The second computer screen
looks at 19 other factors which have historically influenced stock returns. We
input into this model the current economic and stock market trends, and the
computer calculates each security's exposure to this environment. Combining all
of this data with our analysts' in-depth knowledge of the individual companies,
we then construct a portfolio of approximately 50 securities. We use the same
disciplined criteria and several other factors to determine when selling a
security is in our shareholders' best interest.
EXAMPLES OF OUR INVESTMENT PROCESS
While examining all the detail that goes into the decision-making and
implementation process of buying, owning and eventually selling a security in
the Portfolio is not possible in this short report, provided below are several
brief summaries of actual transactions made during 1997.
One of the securities owned within the Portfolio, which appreciated
significantly during the year was Owens-Illinois, primarily a manufacturer of
glass containers for consumable items like food and beverages. We bought the
stock in January 1997 and continued to own it at the end of the year.
When we evaluated Owens-Illinois, our computer model showed it to be a
competitively priced value stock. We expected to be paid more in total earnings
power than the risk-free interest rate that we would have received from a fairly
long-term U.S. Treasury investment. Additionally, our multifactor computer model
calculated an overall score for Owens-Illinois of +3 (with zero being the
average security score). Various factors in the model demonstrated that this
security's growth was being offered for sale at a discount, that its reported
earnings would likely be above consensus expectations, and that the company was
well positioned for the current economic and market environment. The glass
container industry had consolidated from about sixteen North American
manufacturers in 1981 to only three major players today, and this oligopoly was
expected to lead to higher prices. Further, the trend away from glass appeared
to be stabilizing, if not reversing, as glass gives a perception of quality.
International was the primary growth engine for the company since, by offering
to share its proprietary manufacturing technology, Owens-Illinois had the inside
track on making foreign
<PAGE>
acquisitions. Finally, management itself owned 20% of the company, and we
believe it to be an advantage when management's financial interests are the
same as our shareholders.
Owens-Illinois remained an attractive investment for the Portfolio throughout
1997. Operations remained fundamentally strong. For the year, the company
delivered earnings per share more than ten cents greater than Wall Street
analysts had been forecasting a year before, when we had first started our
analysis of the company.
Digital Equipment was a holding within the Portfolio during 1997 that,
unfortunately, did not perform well. This computer hardware and services company
became tarnished by the Asian economic crisis through its significant exposure
to these markets. When we purchased the stock in November, we believed that the
impact of Asia was already factored into the stock price. Evidently, it was not,
and in early December the stock price declined significantly, triggering one of
our security sale rules that attempt to protect the Portfolio from large losses.
After carefully reconsidering the investment thesis behind our holding and all
available fundamental data, we decided to retain ownership at least temporarily.
Digital's stock price subsequently stopped declining, appreciated sharply in
mid-January of 1998, and the company received a takeover proposal from Compaq
Computer later that month. The result was that Digital became a huge winner for
the Portfolio, but only in 1998.
Intel, the computer microprocessor manufacturer, or the actual "brains" of
computers, was added to the Portfolio during April 1997. According to our
computer valuation model, Intel was a value stock, with an earnings yield
greater than the 5-year U.S. Treasury Bond yield. Our multifactor computer-model
score was only average for the security, but we believed that this data told
only part of the story, and that other strong fundamental factors existed to
warrant purchase. Primarily, Wall Street analysts had become pessimistic about
the stock, depressing the share price, because of its product transition to the
new Pentium II microprocessor. Delays and fire-sale pricing of old
microprocessors were the primary concerns of the consensus analyst. In all of
this pessimism and concern over what we believed were transitory issues, we saw
opportunity.
Intel remained in the Portfolio only until mid-August, when the valuation of
the security could no longer be justified. Due to appreciation in the stock
price, Intel's earnings yield had dropped below the minimum risk-free interest
rate, that of the 90-day U.S. Treasury Bill. At this point, we were no longer
being paid even the minimum risk-free rate to own the security and,
theoretically at such a level, we would prefer to own the risk-free security. We
sold the stock, and looked for another inexpensive equity security to reinvest
the proceeds. Additionally, while Intel's operating fundamentals at the time
remained strong, we were worried that Wall Street analysts had become too
optimistic about the company and that expectations had become too high. In fact,
soon after our sale, overly optimistic Wall Street earnings estimates were cut
and the stock entered a period of underperformance which lasted through the end
of the year. During the relatively short period that we owned the stock, it made
a significant contribution to the Portfolio's total return.
This type of detailed fundamental analysis is performed every day for your
Portfolio. Obviously, not all Portfolio investments will be as rewarding as
these examples, but every current and potential new holding is subjected to
the same rigorous standards on a regular basis.
PORTFOLIO REVIEW
Investment results during this annual period benefited from holdings such as
Owens-Illinois, Intel, Watson Pharmaceuticals, Travelers Group, Airborne
Freight, Stone Container, Lone Star Industries, Cooper Cameron, Texas Utilities,
Yellow Freight, Equitable Companies, and Raychem. In addition to Digital
Equipment, relative performance results during the fiscal year were penalized by
holdings including Micron Technology, Read-Rite, Cabletron Systems, Fruit of the
Loom, Cl. A, Applied Materials, 3 Com, and PacifiCare Health Systems, Cl. B.
<PAGE>
We should note the change in the name of your Portfolio made during the year.
At about midyear, we changed it in name only from Managed Assets to Special
Value, which we believe more accurately reflects its disciplined yet flexible
value-oriented investment style.
We will continue to manage your investments with dedication and discipline in
an effort to produce rewarding returns on your behalf.
Sincerely,
/s/ Timothy M. Ghriskey
Timothy M. Ghriskey
Portfolio Manager
January 20, 1998
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
The Portfolio's performance does not reflect the deduction of additional
charges and expenses imposed in connection with investing in variable
insurance contracts, which will reduce returns.
** SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
*** The Standard & Poor's Barra Value Index is a capitalization-weighted
index of all the stocks in the Standard & Poor's 500 Composite Stock
Price Index that have low price-to-book ratios. It is designed so that
approximately 50% of the S&P 500's market capitalization is in the Value
Index.
**** SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Allocates its investments
across various asset classes, including domestic common stocks, bonds and
money market instruments, with a focus on total return.
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio December 31, 1997
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS VARIABLE
INVESTMENT FUND, SPECIAL VALUE PORTFOLIO WITH THE STANDARD & POOR'S 500
COMPOSITE STOCK PRICE INDEX AND THE DOW JONES INDUSTRIAL AVERAGE
$36,912
Dow Jones
Industrial Average*
Dollars
$36,570
Standard & Poor's 500 Composite Stock
Price Index*
$17,073
Dreyfus Variable
Investment Fund,
Special Value Portfolio
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- --------------------------------------------------------------------------------
One Year Ended Five Years Ended From Inception (8/31/90)
December 31, 1997 December 31, 1997 to December 31, 1997
----------------- ----------------- ------------------------
23.14% 8.44% 7.56%
- ------------
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, Special Value Portfolio on 8/31/90 (Inception Date) to a
$10,000 investment made on that date in the Standard & Poor's 500 Composite
Stock Price Index as well as to the Dow Jones Industrial Average which are
described below. 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 Standard & Poor's 500
Composite Stock Price Index and the Dow Jones Industrial Average are widely
accepted, unmanaged indices of overall stock market performance, which do 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>
<CAPTION>
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
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Statement of Investments December 31, 1997
Common Stocks--98.7% Shares Value
- ------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
Commercial Services--5.3% Ikon Office Solutions......................... 20,700 $ 582,188
Primark....................................(a) 54,400 2,213,400
-----------
2,795,588
-----------
Consumer Non-Durables--10.5% Dean Foods.................................... 11,800 702,100
Dreyer's Grand Ice Cream...................... 20,600 496,975
Kimberly-Clark................................ 6,700 330,394
Philip Morris ................................ 11,600 525,625
RJR Nabisco Holdings.......................... 18,800 705,000
Revlon, Cl. A..............................(a) 57,000 2,012,813
UST........................................... 21,000 775,687
-----------
5,548,594
-----------
Consumer Services--3.7% La Quinta Inns................................ 102,000 1,969,875
-----------
Electronic Technology--6.7% Adaptec....................................(a) 11,500 426,937
Ceridian...................................(a) 14,400 659,700
Digital Equipment..........................(a) 11,700 432,900
International Business Machines............... 3,600 376,425
Lockheed Martin............................... 10,300 1,014,550
Storage Technology.........................(a) 10,500 650,344
-----------
3,560,856
-----------
Energy Minerals--4.0% British Petroleum, A.D.R. .................... 7,500 597,656
Phillips Petroleum............................ 6,300 306,338
Tosco......................................... 17,000 642,812
USX-Marathon Group............................ 16,400 553,500
-----------
2,100,306
-----------
Finance--13.7% Allstate...................................... 5,800 527,075
Avis Rent A Car............................... 6,500 207,594
BankAmerica................................... 6,600 481,800
Bankers Trust New York........................ 14,700 1,652,831
Chase Manhattan............................... 4,400 481,800
Equitable..................................... 11,700 582,075
Fleet Financial Group......................... 9,000 674,438
Istituto Bancario San Paolo di Torino......... 75,000 720,322
Morgan (J.P.)................................. 5,800 654,675
NationsBank................................... 9,600 583,800
Travelers Group............................... 12,750 686,906
-----------
7,253,316
-----------
Health Services--.8% PacifiCare Health Systems, Cl.B............(a) 7,800 408,525
-----------
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
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Statement of Investments (continued) December 31, 1997
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
Health Technology--6.7% Allergan...................................... 18,300 $ 614,194
Amgen......................................(a) 12,700 687,387
Biogen.....................................(a) 50,000 1,818,750
Genzyme-General Division...................(a) 15,800 438,450
-----------
3,558,781
-----------
Industrial Services--1.2% Cooper Cameron.............................(a) 10,400 634,400
-----------
Non-Energy Minerals--2.2% Lone Star Industries.......................... 22,500 1,195,312
-----------
Process Industries--3.9% Archer-Daniels-Midland........................ 26,600 576,887
Crown Cork & Seal............................. 13,600 681,700
Owens-Illinois.............................(a) 12,100 459,044
Premark International......................... 12,600 365,400
-----------
2,083,031
-----------
Producer Manufacturing--9.1% Harsco........................................ 16,500 711,563
MagneTek...................................(a) 91,700 1,788,150
Masco......................................... 13,700 696,987
Xerox......................................... 22,000 1,623,875
-----------
4,820,575
-----------
Retail Trade--8.1% American Stores............................... 90,000 1,850,625
Federated Department Stores................(a) 14,200 611,488
Sears, Roebuck & Co........................... 40,500 1,832,625
-----------
4,294,738
-----------
Transportation--5.1% Airborne Freight.............................. 10,000 621,250
CNF Transportation............................ 10,500 402,938
Yellow.....................................(a) 66,000 1,658,250
-----------
2,682,438
-----------
Utilities--17.7% Ameritech..................................... 8,300 668,150
Coastal....................................... 28,600 1,771,413
Empresa Nacional de Electricidad, A.D.R....... 65,000 1,149,687
McLeodUSA, Cl. A...........................(a) 45,000 1,440,000
Telefonos de Mexico, Cl. L, A.D.R............. 39,200 2,197,650
Texas Utilities............................... 52,000 2,161,250
-----------
9,388,150
-----------
TOTAL COMMON STOCKS
(cost $48,795,839)......................... $52,294,485
===========
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
- --------------------------------------------------------------------------------
Statement of Investments (continued) December 31, 1997
Principal
Short-Term Investments--1.9% Amount Value
- ------------------------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
U.S. Treasury Bills; 5.22%, 3/5/1998
(cost $999,783)............................ $ 1,009,000 $ 999,909
===========
TOTAL INVESTMENTS (cost $49,795,622)........................................... 100.6% $53,294,394
====== ===========
LIABILITIES, LESS CASH AND RECEIVABLES......................................... (.6%) $ (313,164)
====== ===========
NET ASSETS..................................................................... 100.0% $52,981,230
====== ===========
<FN>
Notes to Statement of Investments:
- --------------------------------------------------------------------------------
(a) Non-income producing.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus Variable Investment Fund, Special Value Portfolio
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1997
Cost Value
----------- -----------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $49,795,622 $53,294,394
Cash............................................. 311,302
Dividends and interest receivable................ 96,424
Receivable for investment securities sold........ 35,663
Prepaid expenses................................. 86
-----------
53,737,869
-----------
LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 32,328
Payable for investment securities purchased...... 684,740
Accrued expenses................................. 39,571
-----------
756,639
-----------
NET ASSETS..................................................................... $52,981,230
===========
REPRESENTED BY: Paid-in capital.................................. $51,858,749
Accumulated distributions in excess of investment
income--net.................................... (1,224)
Accumulated net realized gain (loss) on investments,
foreign currency transactions, forward currency
exchange contracts and securities sold short... (2,375,067)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 5(b)...................... 3,498,772
-----------
NET ASSETS..................................................................... $52,981,230
===========
SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial Interest authorized). 4,078,851
NET ASSET VALUE, offering and redemption price per share....................... $12.99
======
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Dreyfus Variable Investment Fund, Special Value Portfolio
- --------------------------------------------------------------------------------
Statement of Operations Year Ended December 31, 1997
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Cash dividends (net of $8,255 foreign taxes
withheld at source)...................... $ 382,694
Interest................................... 92,939
----------
Total Income.......................... $ 475,633
EXPENSES: Investment advisory fee--Note 4(a)......... 250,293
Auditing fees.............................. 29,873
Legal fees................................. 19,659
Prospectus and shareholders' reports....... 17,644
Custodian fees............................. 12,187
Dividends on securities sold short......... 7,676
Registration fees.......................... 6,004
Trustees' fees and expenses--Note 4(b)..... 889
Shareholder servicing costs................ 406
Miscellaneous.............................. 767
----------
Total Expenses........................ 345,398
----------
INVESTMENT INCOME--NET................................................... 130,235
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 5:
Net realized gain (loss) on investments and
foreign currency transactions......... $1,371,649
Short sale transactions.................. (57,371)
Net realized gain (loss) on forward currency
exchange contracts
Short transactions.................... 22,003
----------
Net Realized Gain (Loss).............. 1,336,281
Net unrealized appreciation (depreciation) on
investments and foreign currency transactions 3,491,638
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................... 4,827,919
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $4,958,154
==========
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
----------------- -----------------
OPERATIONS:
<S> <C> <C>
Investment income--net.................................................. $ 130,235 $ 1,016,129
Net realized gain (loss) on investments................................. 1,336,281 (2,021,735)
Net unrealized appreciation (depreciation) on investments............... 3,491,638 291,402
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations...... 4,958,154 (714,204)
----------- -----------
DIVIDENDS TO SHAREHOLDERS:
From investment income--net............................................. (26,936) (1,062,506)
In excess of investment income--net..................................... (1,224) (107,997)
From net realized gain on investments................................... (221,252) --
From paid-in capital.................................................... -- (114,865)
----------- -----------
Total Dividends...................................................... (249,412) (1,285,368)
----------- -----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................... 30,958,786 5,860,638
Dividends reinvested.................................................... 249,412 1,285,368
Cost of shares redeemed................................................. (4,036,389) (9,317,556)
----------- -----------
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 27,171,809 (2,171,550)
----------- -----------
Total Increase (Decrease) in Net Assets........................... 31,880,551 (4,171,122)
NET ASSETS:
Beginning of Period..................................................... 21,100,679 25,271,801
----------- -----------
End of Period........................................................... $52,981,230 $21,100,679
=========== ===========
(Distributions in excess of investment income--net)........................ $ (1,224) $ (107,997)
----------- -----------
Shares Shares
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 2,411,671 480,990
Shares issued for dividends reinvested.................................. 19,289 120,516
Shares redeemed......................................................... (343,128) (769,628)
----------- -----------
Net Increase (Decrease) in Shares Outstanding........................ 2,087,832 (168,122)
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Variable Investment Fund, Special Value 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.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
PER SHARE DATA: 1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $10.60 $11.70 $12.37 $12.92 $10.14
------ ------ ------ ------ ------
Investment Operations:
Investment income--net............................ .06 .63 .51 .35 .20
Net realized and unrealized gain (loss) on investments 2.40 (1.05) (.54) (.56) 2.71
------ ------ ------ ------ ------
Total from Investment Operations.................. 2.46 (.42) (.03) (.21) 2.91
------ ------ ------ ------ ------
Distributions:
Dividends from investment income--net............. (.01) (.56) (.64) (.32) (.13)
Dividends in excess of investment income--net..... (.00)(1) (.06) -- (.02) --
Dividends from net realized gain on investments... (.06) -- -- -- --
Paid-in capital................................... -- (.06) -- -- --
------ ------ ------ ------ ------
Total Distributions............................... (.07) (.68) (.64) (.34) (.13)
------ ------ ------ ------ ------
Net asset value, end of period.................... $12.99 $10.60 $11.70 $12.37 $12.92
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN.............................. 23.14% (3.62%) (.26%) (1.56%) 28.59%
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets. .99% .93% .94% .25% .27%
Ratio of dividends on securities sold short to
average net assets............................. .02% -- -- -- --
Ratio of net investment income to average net assets .38% 4.12% 3.56% 3.54% 1.87%
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus Corporation and
Comstock Partners, Inc......................... -- -- -- .88% 2.25%
Portfolio Turnover Rate........................... 188.57% 124.19% 53.88% 25.96% 99.08%
Average commission rate paid(2)................... $.0495 $.0250 -- -- --
Net Assets, end of period (000's Omitted)......... $52,981 $21,101 $25,272 $30,510 $7,957
<FN>
- ----------
(1) Amount represents less than $.01 per share.
(2) For fiscal years beginning January 1, 1996, the Series is required to
disclose its average commission rate paid per share for purchases and
sales of investment securities.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--General:
Dreyfus Variable Investment Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as an open-end management investment
company, operating as a series company currently offering thirteen series,
including the Special Value Portfolio (the "Series") and is intended to be a
funding vehicle for variable annuity contracts and variable life insurance
policies to be offered by the separate accounts of life insurance companies. The
Series is a diversified portfolio. The Series' investment objective is to
maximize total return, consisting of capital appreciation and current income.
The Dreyfus Corporation ("Dreyfus") serves as the Series' investment adviser.
Premier Mutual Fund Services, Inc. is the distributor of the Series' shares,
which are sold without a sales charge.
On September 8, 1997, the shareholders of the Special Value Portfolio
approved, effective October 1, 1997, a change of the Series' name from "Managed
Assets Portfolio" to "Special Value Portfolio".
The Fund currently functions as the funding vehicle for the Dreyfus Series
2000 Variable Annuity Contract (the "Account") issued by Mutual Benefit Life
Insurance Company ("Mutual Benefit Life"). On July 16, 1991, the Superior Court
of New Jersey entered an Order (the "Order") appointing the New Jersey Insurance
Commissioner as Rehabilitator of Mutual Benefit Life. The Commissioner was
granted immediate exclusive possession and control of, and title to, the
business and assets of Mutual Benefit Life, including the assets and liabilities
of the Account.
The Commissioner was empowered by the Order to take such steps as he deemed
appropriate toward removing the cause and conditions that made rehabilitation
necessary. On January 15, 1993, the Commissioner filed the First Amended Plan of
Rehabilitation ("Plan") with the Court. The Plan stipulated that the assets and
liabilities of the Account would be transferred to a separate account of MBL
Life Assurance Corporation ("MBLLAC"), a wholly-owned subsidiary of Mutual
Benefit Life. The Plan also provided for the transfer of the ownership of the
stock of MBLLAC to a Trust. The Commissioner was designated as the sole Trustee
of the Trust. On August 12, 1993, the Court rendered an opinion approving the
Plan with certain modifications. Two subsequent amendments to the Plan were
filed and approved by the Court. None of the modifications or amendments
affected the status of the Account. On November 10, 1993, the Court issued an
Order of Confirmation permitting the implementation of the Plan.
An order was also issued by the Court on January 28, 1994, approving the form
of the Third Amended Plan of Rehabilitation, the Election Materials and related
documents. On April 29, 1994, the Plan was implemented. Substantially all of the
assets of Mutual Benefit Life were transferred to MBLLAC which assumed and
reinsured Mutual Benefit Life's restructured insurance liabilities. The stock of
MBLLAC was assigned to the Stock Trust and the Commissioner was designated as
Trustee.
In view of the terms and conditions of both the Order and the Plan,
applications for new contracts and additional purchase payments under existing
contracts are currently not being accepted by the Account. The terms of the
Order and the Plan permit redemptions from the Account to continue as requested.
The proceedings of the New Jersey Insurance Commissioner with respect to
Mutual Benefit Life or the Account do not apply to the separate accounts of
other life insurance companies that may use the Fund as a funding vehicle for
contracts or policies issued by them.
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.
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
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NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 2--Significant Accounting Policies:
(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. 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.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and dividends from net realized
capital gain are normally declared and paid annually, but the Series may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. This may result in distributions that
are in excess of investment income-net on a fiscal year basis. To the extent
that the net realized capital gain can be offset by capital loss carryovers, it
is the policy of the Series not to distribute such gain.
Dividends in excess of investment income-net result from Federal income tax
distribution requirements, primarily from foreign currency transactions.
During the period ended December 31, 1997, the Series reclassified $4,698
from accumulated net realized gain (loss) on investments to accumulated
undistributed investment income-net.
(E) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 3--Bank Line of Credit:
In accordance with an agreement with a bank, the Series may borrow up to $5
million under a short-term unsecured line of credit. Interest on borrowings is
charged at rates which are related to the Federal Funds rate in effect from time
to time. During the period ended December 31, 1997, the Series did not borrow
under the line of credit.
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4--Investment Advisory Fee and Other Transactions With Affiliates:
(A) Pursuant to an amended Investment Advisory Agreement with Dreyfus,
effective February 1, 1997, 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. Prior to February 1, 1997, the investment advisory fee
was computed at the annual rate of .375 of 1% of the value of the Series'
average daily net assets and was payable monthly.
The Series compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Series.
(B) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 5--Securities Transactions:
(A) The following summarizes the aggregate amount of purchases and sales of
investment securities and securities sold short, excluding short-term securities
and forward currency exchange contracts, during the period ended December 31,
1997:
Purchases Sales
------------- -------------
Long transactions.......... $106,346,840 $60,163,454
Short sale transactions.... 492,313 434,942
------------- -------------
TOTAL.......... $106,839,153 $60,598,396
============= =============
The Series is engaged in short-selling which obligates the Series to replace
the security borrowed by purchasing the security at current market value. The
Series would incur a loss if the price of the security increases between the
date of the short sale and the date on which the Series replaces the borrowed
security. The Series would realize a gain if the price of the security declines
between those dates. Until the Series replaces the borrowed security, the Series
will maintain daily, a segregated account with a broker or custodian, of cash
and/or liquid securities sufficient to cover its short position. At December 31,
1997, there were no securities sold short outstanding.
The Series enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings. When executing forward currency exchange contracts, the
Series is obligated to buy or sell a foreign currency at a specified rate on a
certain date in the future. With respect to sales of forward currency exchange
contracts, the Series would incur a loss if the value of the contract increases
between the date the forward contract is opened and the date the forward
contract is closed. The Series realizes a gain if the value of the contract
decreases between those dates. With respect to purchases of forward currency
exchange contracts, the Series would incur a loss if the value of the contract
decreases between the date the forward contract is opened and the date the
forward contract is closed. The Series realizes a gain if the value of the
contract increases between those dates. The Series is also exposed to credit
risk associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gain on each
open contract. At December 31, 1997, there were no forward currency exchange
contracts outstanding.
(B) At December 31, 1997, accumulated net unrealized appreciation on
investments was $3,498,772, consisting of $5,057,558 gross unrealized
appreciation and $1,558,786 gross unrealized depreciation.
At December 31, 1997, 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).
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
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Report of Ernst & Young LLP, Independent Auditors
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Variable Investment Fund,
Special Value Portfolio (one of the series constituting the Dreyfus Variable
Investment Fund) as of December 31, 1997, 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 of
securities owned as of December 31, 1997 by correspondence with the custodian
and brokers. 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, Special Value Portfolio at December 31, 1997,
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.
Ernst & Young LLP
New York, New York
February 5, 1998
<PAGE>
Dreyfus Variable Investment Fund, Special Value Portfolio
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Important Tax Information (Unaudited)
In accordance with Federal tax law, the Series hereby designates 100% of the
ordinary dividends paid during the fiscal year ended December 31, 1997 as
qualifying for the corporate dividends received deduction.
<PAGE>
Dreyfus Variable Investment Fund,
Special Value Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 118AR9712
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE
PORTFOLIO WITH THE STANDARD & POOR'S 500 COMPOSITE
STOCK PRICE INDEX AND THE DOW JONES INDUSTRIAL AVERAGE
EXHIBIT A:
DREYFUS
STANDARD VARIABLE
& POOR'S 500 INVESTMENT
COMPOSITE DOW JONES FUND,
PERIOD STOCK INDUSTRIAL SPECIAL VALUE
PRICE INDEX * AVERAGE * PORTFOLIO
8/31/90 10,000 10,000 10,000
12/31/90 10,366 10,211 10,185
12/31/91 13,517 12,687 11,264
12/31/92 14,546 13,626 11,385
12/31/93 16,009 15,938 14,651
12/31/94 16,218 16,740 14,423
12/31/95 22,306 22,924 14,385
12/31/96 27,424 29,551 13,865
12/31/97 36,570 36,912 17,073
*Source: Lipper Analytical Services, Inc.
