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, SPECIAL VALUE PORTFOLIO
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
It is a pleasure to have this opportunity to communicate with the shareholders
of the Dreyfus Variable Investment Fund -- Special Value Portfolio.
This letter accompanies the annual report of the Dreyfus Variable Investment
Fund -- Special Value Portfolio for the 12-month period ended December 31, 1998.
Over this period, your Portfolio achieved a total return of 15.69%,* which
compares with a total return of 28.60% for the Standard and Poor's 500 Composite
Stock Price Index (" S&P 500"),** 11.25% for the Wilshire Large Company Value
Index,*** and -2.69% for the Wilshire Midcap Value Index.***
The Portfolio's concentrated equity structure, holding approximately 45 equity
securities when fully invested in equities, will make it more volatile than the
diversified indices referred to above, which are each composed of 250 to 500
equity securities. During most periods, therefore, the performance of the
Portfolio can be expected to differ significantly from these indices.
The Portfolio was fully invested in stocks throughout most of the fiscal year,
benefiting returns as this asset class solidly outperformed fixed income and
money market investments. Some cash was raised during the summer's financial
crisis, but was quickly put back to work in the stock market as it bottomed.
Bonds were used on a special situations basis.
As you know, the Portfolio invests in "value" stocks. Value stocks
underperformed growth stocks during the period. The margin was among the widest
in memory. Any value manager who remained true to his or her discipline could
not hope to have matched the returns of the S&P 500 over the past year. There
will be periods, the past year for example, when value stocks underperform the
S& P 500, and even periods when our particular definition of value underperforms
certain value stock indices. However, while staying true to its value
discipline, as noted above, your Portfolio did achieve returns that exceeded
major value category benchmark indices.
The performance of the S&P 500 during 1998 was largely driven by a relatively
few so-called "mega-cap" growth stocks, or the very largest domestically traded
companies. The S& P 500 and many of its major security components carry
valuations well above those of any historic period by almost any financial
measure, according to our calculations. This concentrated overvaluation, in our
opinion, is reminiscent of the early 1970s' "nifty fifty" stocks, or oil stocks
in the early 1980s. Both of those markets ended with quick and severe
corrections of the overvalued securities. No one can predict such an occurrence
today, but many market participants may conclude that the risk level of the S&P
500, and many of its major security components, is high by historic standards.
Regardless, at least for the time being, positive price momentum in this index
and in many of these mega-cap stocks has continued, even through this past
summer's stock market correction and subsequent recovery.
Our disciplined investment process will keep the Portfolio largely out of what
we considered were overvalued mega-cap securities. Unfortunately, many of these
high-priced mega-cap securities were the best performing stocks in the market,
restraining the Portfolio's relative performance. Quite often, disciplined value
investment processes will underperform when the overall stock market reaches
speculative overvaluation. There is better potential for a performance rebound
as security prices settle and as economic change occurs.
ECONOMIC REVIEW
The U.S. entered 1998 with a strong economy and near full employment. During
the spring months this economic strength led the Federal Reserve Board, our
central bank, to contemplate raising short-term interest rates in order to keep
growth and inflation in check. By midyear, however, the impact of weak Asian
economies on U.S. economic growth had already done the job, permitting the Fed
to leave rates unchanged. More recently, the combination of financial system
stresses and slowing economic growth convinced the Fed to lower interest rates
three times: at the end of September, in mid-October, and in mid-November. As
the year ended, the Fed' s official stance was neutral.
A significant influence on the U.S. economy during the year was slower growth
in the overall world economy and the evolution of a worldwide financial crisis.
Both events caused a drop in inflation, which helped send interest rates lower.
The fall in inflation and lower interest rates benefited companies that sell to
the consumer, as more income was left over after inflation to buy goods and
services, and the cost of debt was reduced. Home mortgages were refinanced at
lower rates, for example, putting more discretionary income in consumers'
pockets.
The negative effect in the U.S. of slower global economies was felt by the
industrial sector. Corporate profits weakened, especially in Asian-impacted
sectors, such as world-traded commodities (paper producers, for example) and
exporters (computer manufacturers, for example). One result of this industrial
weakness was to cool off a U.S. economy that had been growing perhaps too
rapidly.
A financial crisis developed during the midsummer months, primarily in Russia
and Brazil. Panic set in as lenders called in outstanding loans and were
reluctant to issue new debt, sharply reducing the economic outlook for these
areas. The effect on European and U.S. companies was to lower profit growth
expectations, given the decline in export opportunities to these geographies.
Proactive steps were taken late in the year in attempts to stabilize the
Japanese banks, to design a support package for Brazil, and to generally make
money less expensive to lend. In the coming months, economic prospects for the
major developed countries will be powerfully impacted by whether foreign
financial stresses in the coming months calm down, as the consensus appears to
be currently concluding, or intensify, as was the fear just a couple of months
ago.
STOCK MARKET OVERVIEW
The 12-month period ended December 31, 1998, reflected a number of contrasting
phases in the U.S. stock market. There was strength during the early part of the
period, as stocks recovered from the Asian-induced sell-off that occurred during
the fourth quarter of 1997. By midsummer, as large company security valuations
neared all-time highs, there was a sharp market decline sparked by the implosion
of the Russian financial markets. The U.S. stock market declined again in late
September due to the collapse of a major U.S. hedge fund. Finally, there was a
strong rally from mid-October until the end of the year in response to the Fed's
lowering of short-term interest rates.
Over the 12-month period, investment returns for midsized and small companies
were significantly lower than those for large companies, with the Standard &
Poor' s MidCap 400 Index returning 19.11% and the small-company Russell 2000
Index declining to -2.55%.(+) The erosion of expectations for corporate profit
growth over the year contributed to an outperformance by a select few mega-cap
growth stocks. Investors had confidence in the more consistent earnings growth
from this small group of stocks that compose the bulk of the S&P 500 than for
the broader market. Almost every other capitalization and investment style group
lagged far behind these mega-cap growth stocks.
VALUE INVESTING AND OUR INVESTMENT PROCESS
To once again summarize our investment philosophy for the Portfolio, our bias
is to be fully invested in value equity securities, given the historically
superior long-term returns of equities compared to bonds and money market
investments. There will be periods of time, however, when we will raise cash to
protect principal, and times when we purchase bonds as an investment
alternative.
Regarding our stock selection process, while there are other investment
disciplines practiced at Dreyfus, members of the Dreyfus Value Team are
passionate believers in value investing. As value investors, we want to buy
growing companies, but we want to own them at a bargain price. In one sense,
value investing can be a lower risk, more conservative style of equity investing
because the prices of value stocks may decline less in falling markets, due to
their already perceived underpricing. Of course, they can underperform if
company valuations do not improve as expected.
Our approach to the selection of securities begins and ends with our analysts
who are an integral part of our investment team. Our Dreyfus analysts contribute
their proprietary forecasts on corporate earnings and cash flows to our computer
models, their analysis and opinions to our decision-making process, and their
constant flow of information to our ongoing assessment of owned securities.
We screen the universe of stocks by computer, according to two principal
methods. The first computer screen determines value by calculating each
security' s earnings yield (our forecast for earnings divided by the current
security price) which, to justify purchase, should be greater than the yield
available on reasonably long-term U.S. Treasury securities. Being paid more than
this risk-free rate in order to take the risk inherent in equity investing is
central to our value discipline. The second computer screen looks at 19 other
factors that have historically influenced stock returns, including various
growth, valuation and leverage measures. We input into this computer model the
current economic and stock market trends, and the computer calculates each
security' s exposure to this environment. The model is an idea generator, and
further detailed fundamental analysis is conducted on each potential holding to
determine its suitability for the Portfolio. Combining all of this data with our
analysts' in-depth knowledge of the individual companies, we then construct a
fully invested portfolio of approximately 45 or so stocks. We use similar
disciplined criteria and several other factors to determine when selling a
security is in our shareholders' best interest.
EXAMPLES OF OUR INVESTMENT PROCESS
The detailed fundamental analysis, computer modeling, and portfolio strategy
that go into the decision-making process for each security in the Portfolio is
not possible in this short report. Generally, strength was spread among various
securities, most within the health care, communications services, technology and
consumer staples sectors of the market. To illustrate, provided below are
several brief summaries of some of the better and poorer performing securities
within the Portfolio during the annual period.
Biogen, a biotechnology company, was one of the better performing securities
in your Portfolio during the year. Our earnings estimates for the company have
been well above the Wall Street consensus, qualifying this growth stock as a
value stock. We believe that the company's current products and new product
pipeline, both near term and long term, are particularly promising. The security
was sold when an unexpected management change altered our investment thesis.
Xerox has been expanding its core copier business into the computer printer
business with great initial success. The ability to provide quality service can
be a significant competitive advantage. The security was one of the stronger
performers in the Portfolio, and was sold when our investment discipline
indicated that it was fully valued relative to the risk-free alternative.
RJR Nabisco Holdings, largely a tobacco company, was a poor performer during
much of the period. Congress could not agree on tobacco legislation that we
believe would have significantly benefited both the public good and these
securities. The tobacco companies recently resolved many of these same issues
directly with the states, benefiting the security. We sold RJR Nabisco Holdings
during the Portfolio's fiscal year in order to reduce exposure to the industry.
Bankers Trust New York, a major money-center bank, was a poor performing
security in your Portfolio. Almost every financial stock was punished during the
summer months when emerging markets and worldwide bond markets ran into
difficulties. We reacted quickly to reduce exposure to the industry, including
the sale of this security.
In almost any Portfolio there are both strong performing and poor performing
securities. Our job is to maximize the good and minimize the bad, while keeping
risk at tolerable levels. We will not be successful every quarter or every year,
but we work hard to reward our fellow investors over the long term.
Diligent management of your investment is our highest priority. Thank you for
entrusting us with your assets.
Sincerely,
[Timothy M. Ghriskey signature]
Timothy M. Ghriskey
Portfolio Manager
January 11, 1999
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid.
The Portfolio's performance does not reflect the deduction of additional charges
and expenses imposed in connection with investing in variable insurance
contracts, which will reduce returns.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The Standard
& Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index of
U.S. stock market performance.
*** SOURCE: WILSHIRE ASSOCIATES, INC. -- The Wilshire Large Company Value
Index is constructed by using a blend of price-to-book and forecast
price-to-earnings ratios. The largest 750 stocks in the Wilshire 5000 are ranked
based on a style score that is 75% price-to-earnings ratio and 25% forecast P/E.
The universe also is divided so that companies that represent half of the total
capitalization fall into growth and the remainder are placed into value.
Beginning with the fiscal year ended October 31, 1998, this Index will be used
as the Portfolio's primary benchmark index. The Wilshire Midcap Value Index is
constructed by using a blend of price-to-book and forecast price-to-earnings
ratios. The 500 stocks that rank in size from the 501st to the 1000th within the
Wilshire 5000 are ranked based on a style score that is 75% price-to-earnings
ratio and 25% forecast P/E. The universe is divided so that companies that
represent half of the total capitalization fall into growth and the remainder
are placed into value.
(+)SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The Standard
& Poor' s MidCap 400 Index is a broad-based index of 400 companies with market
capitalizations generally ranging from $50 million to $10 billion and is a
widely accepted, unmanaged index of overall mid-cap stock market performance.
The Russell 2000 Index is an unmanaged index and is composed of the 2,000
smallest companies in the Russell 3000 Index. The Russell 3000 Index is composed
of 3,000 of the largest U.S. companies by market capitalization.
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO DECEMBER 31, 1998
- -----------------------------------------------------------------------------
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, THE WILSHIRE MIDCAP VALUE INDEX AND THE DOW JONES
INDUSTRIAL AVERAGE
Dollars
$47,028
Standard & Poor's 500 Composite Stock Price Index*
$43,613
Dow Jones Industrial Average*
$42,232
Wilshire Midcap Value Index**
$19,753
Dreyfus Variable Investment Fund, Special Value Portfolio
* Source: Lipper Analytical Services, Inc.
** Source: Wilshire Associates, Inc.
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended Five Years Ended From Inception (8/31/90)
December 31, 1998 December 31, 1998 to December 31, 1998
____________________ ____________________ __________________________
<S> <C> <C> <C>
15.69% 6.16% 8.50%
- ------------------------
Past performance is not predictive of future performance.
</TABLE>
THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES
AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE
CONTRACTS WHICH WILL REDUCE RETURNS.
The above graph compares a $10,000 investment made in Dreyfus Variable
Investment Fund, Special Value Portfolio on 8/31/90 (Inception Date) to a
$10,000 investment made on that date in each of the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average (DJIA) and the
Wilshire Midcap Value Index, 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 DJIA are widely accepted, unmanaged indices
of overall stock market performance. The Wilshire Midcap Value Index is
constructed by using a blend of price-to-book and forecast price-to-earnings
ratios. The 500 stocks that rank in size from the 501st to the 1000th within the
Wilshire 5000 are ranked based on a style score that is 75% price-to-earnings
ratio and 25% forecast P/E. The universe is divided so that companies that
represent half of the total capitalization fall into growth and the remainder
are placed into value. The Indices do not take into account charges, fees and
other expenses. This is the first year in which performance is being presented
for the Wilshire Midcap Value Index. This Index has been selected as a secondary
benchmark index to reflect the Fund's current value-oriented equity investment
strategy. Pursuant to applicable regulations, performance for the DJIA also is
being provided this year. Subsequently, performance for the DJIA will not be
presented in this comparison. 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, SPECIAL VALUE PORTFOLIO
- ------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Common Stocks--95.7% Shares Value
- ------------------------------------------------------------------------ ---------------- ---------------
<S> <C> <C>
Consumer Non-Durables--6.2% Dean Foods . . . . . . . . . . . . . . . . . . 30,400 $ 1,240,700
Fresh Del Monte Produce . . . . . . . . . . .(a) 54,400 1,179,800
Whitman . . . . . . . . . . . . . . . . . . . . 58,000 1,471,750
____________
3,892,250
____________
Consumer Services--3.9% Cendant . . . . . . . . . . . . . . . . . . .(a) 69,800 1,330,562
Wendy's International . . . . . . . . . . . . . 52,000 1,134,250
____________
2,464,812
____________
Electronic Technology--14.3% Compaq Computer . . . . . . . . . . . . . . . . 39,973 1,676,368
Intel . . . . . . . . . . . . . . . . . . . . . 20,600 2,442,387
International Business Machines . . . . . . . . 7,600 1,404,100
Perkin-Elmer . . . . . . . . . . . . . . . . . 13,100 1,278,069
Raytheon, Cl. B . . . . . . . . . . . . . . . . 16,300 867,975
Storage Technology . . . . . . . . . . . . .(a) 38,700 1,376,269
____________
9,045,168
____________
Energy Minerals--6.0% British Petroleum, A.D.R. . . . . . . . . . . . 9,600 912,000
Conoco, Cl. A . . . . . . . . . . . . . . . . . 14,000 292,250
Texaco . . . . . . . . . . . . . . . . . . . . 35,400 1,871,775
USX-Marathon Group . . . . . . . . . . . . . . 24,000 723,000
____________
3,799,025
____________
Finance--17.2% BankAmerica . . . . . . . . . . . . . . . . . . 37,400 2,248,675
Chase Manhattan . . . . . . . . . . . . . . . . 15,700 1,068,581
Citigroup . . . . . . . . . . . . . . . . . . . 50,000 2,475,000
First Union . . . . . . . . . . . . . . . . . . 13,400 814,888
Fleet Financial Group . . . . . . . . . . . . . 18,000 804,375
St. Paul . . . . . . . . . . . . . . . . . . . 28,500 990,375
Wells Fargo . . . . . . . . . . . . . . . . . . 62,600 2,500,087
____________
10,901,981
____________
Health Services--1.9% Foundation Health Systems, Cl. A . . . . . .(a) 100,000 1,193,750
____________
Health Technology--7.4% Allergan . . . . . . . . . . . . . . . . . . . 15,000 971,250
Pharmacia & Upjohn . . . . . . . . . . . . . . 44,000 2,491,500
Zeneca Group, A.D.R. . . . . . . . . . . . . . 27,600 1,238,550
____________
4,701,300
____________
Insurance--13.4% American General . . . . . . . . . . . . . . . 13,600 1,060,800
Everest Reinsurance Holdings . . . . . . . . . 66,200 2,577,663
EXEL, Cl. A . . . . . . . . . . . . . . . . . . 13,200 990,000
NAC Re . . . . . . . . . . . . . . . . . . . . 10,000 469,375
Sunamerica . . . . . . . . . . . . . . . . . . 31,300 2,539,212
Torchmark . . . . . . . . . . . . . . . . . . . 24,000 847,500
____________
8,484,550
____________
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
- ------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- ---------------- ------------
Non-Energy Minerals--1.9% Lone Star Industries . . . . . . . . . . . . . 33,500 $ 1,233,219
____________
Process Industries--1.0% Owens-Illinois . . . . . . . . . . . . . . .(a) 21,000 643,125
____________
Producer Manufacturing--3.6% General Electric . . . . . . . . . . . . . . . 22,000 2,245,375
____________
Retail--3.8% American Stores . . . . . . . . . . . . . . . . 29,600 1,093,350
K mart . . . . . . . . . . . . . . . . . . .(a) 83,700 1,281,656
____________
2,375,006
____________
Transportation--3.9% CNF Transportation . . . . . . . . . . . . . . 36,800 1,382,300
Union Pacific . . . . . . . . . . . . . . . . . 24,500 1,104,031
____________
2,486,331
____________
Utilities--11.2% Ameritech . . . . . . . . . . . . . . . . . . . 18,000 1,140,750
Bell Atlantic . . . . . . . . . . . . . . . . . 18,000 954,000
Coastal . . . . . . . . . . . . . . . . . . . . 35,400 1,236,788
MCI WorldCom . . . . . . . . . . . . . . . .(a) 35,300 2,532,775
Niagara Mohawk Power . . . . . . . . . . . .(a) 77,000 1,241,625
____________
7,105,938
____________
TOTAL COMMON STOCKS
(cost $52,451,275) . . . . . . . . . . . . . $60,571,830
____________
Principal
Short-Term Investments--5.6% Amount
- ------------------------------------------------------------------------------ -----------------
U.S. Treasury Bills: 4.38%, 2/18/1999 . . . . . . . . . . . . . . . $ 3,320,000 $ 3,301,939
4.40%, 3/18/1999 . . . . . . . . . . . . . . . 240,000 237,876
____________
TOTAL SHORT-TERM INVESTMENTS
(cost $3,538,381) . . . . . . . . . . . . . . $ 3,539,815
____________
TOTAL INVESTMENTS (cost $55,989,656) . . . . . . . . . . . . . . . . . . . . . . . . 101.3% $64,111,645
_______ ____________
LIABILITIES, LESS CASH AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . (1.3%) $ (847,208)
_______ ____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $63,264,437
_______ ____________
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
_____________ ____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . . . $55,989,656 $64,111,645
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,553
Receivable for investment securities sold . . . . . . . . . . . 1,392,020
Dividends receivable . . . . . . . . . . . . . . . . . . . . . 63,721
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 100
_____________
65,756,039
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . . . . 39,330
Payable for investment securities purchased . . . . . . . . . . 2,421,844
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 30,428
_____________
2,491,602
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $63,264,437
_____________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . $54,198,341
Accumulated net realized gain (loss) on investments,
forward currency exchange contracts
and securities sold short. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944,107
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,121,989
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $63,264,437
_____________
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 4,236,853
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $14.93
_______
</TABLE>
<TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME: Cash dividends (net of $4,844 foreign taxes
withheld at source) . . . . . . . . . . . . . . . . . . . . $ 824,197
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,054
____________
Total Income . . . . . . . . . . . . . . . . . . . . . . $ 902,251
EXPENSES: Investment advisory fee--Note 3(a) . . . . . . . . . . . . . . 450,888
Prospectus and shareholders' reports . . . . . . . . . . . . 14,846
Professional fees . . . . . . . . . . . . . . . . . . . . . . . 14,638
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 13,301
Trustees' fees and expenses--Note 3(b) . . . . . . . . . . . 1,027
Registration fees . . . . . . . . . . . . . . . . . . . . . . . 653
Shareholder servicing costs . . . . . . . . . . . . . . . . . . 369
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 1,242
____________
Total Expenses . . . . . . . . . . . . . . . . . . . . . 496,964
____________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405,287
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments:
Long transactions . . . . . . . . . . . . . . . . . . . . . $3,384,891
Short sale transactions . . . . . . . . . . . . . . . . . . (120,669)
Net realized gain (loss) on forward currency exchange contracts . . 55,771
____________
Net Realized Gain (Loss) . . . . . . . . . . . . . . . . 3,319,993
Net unrealized appreciation (depreciation) on investments . . . 4,623,217
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 7,943,210
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $8,348,497
____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1998 December 31, 1997
__________________ __________________
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 405,287 $ 130,235
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . 3,319,993 1,336,281
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . 4,623,217 3,491,638
______________ _______________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . 8,348,497 4,958,154
______________ _______________
DIVIDENDS TO SHAREHOLDERS:
From investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . (412,632) (26,936)
In excess of investment income--net . . . . . . . . . . . . . . . . . . . . . -- (1,224)
From net realized gain on investments . . . . . . . . . . . . . . . . . . . . -- (221,252)
______________ _______________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (412,632) (249,412)
______________ _______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . 14,388,912 30,958,786
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412,632 249,412
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,454,202) (4,036,389)
______________ _______________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions . 2,347,342 27,171,809
______________ _______________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . 10,283,207 31,880,551
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,981,230 21,100,679
______________ _______________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $63,264,437 $52,981,230
______________ _______________
CAPITAL SHARE TRANSACTIONS: Shares Shares
______________ _______________
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,044,993 2,411,671
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . 27,861 19,289
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (914,852) (343,128)
______________ _______________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . 158,002 2,087,832
______________ _______________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
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.
Year Ended December 31,
____________________________________________________________
PER SHARE DATA: 1998 1997 1996 1995 1994
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . $12.99 $10.60 $11.70 $12.37 $12.92
_______ _______ _______ _______ _______
Investment Operations:
Investment income--net . . . . . . . . . . . . . .10 .06 .63 .51 .35
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 1.94 2.40 (1.05) (.54) (.56)
_______ _______ _______ _______ _______
TOTAL FROM INVESTMENT OPERATIONS . . . . . . . . 2.04 2.46 (.42) (.03) (.21)
_______ _______ _______ _______ _______
Distributions:
Dividends from investment income--net . . . . . . (.10) (.01) (.56) (.64) (.32)
Dividends in excess of investment income--net . . -- (.00)* (.06) -- (.02)
Dividends from net realized gain on investments . -- (.06) -- -- --
Paid-in capital . . . . . . . . . . . . . . . . . -- -- (.06) -- --
_______ _______ _______ _______ _______
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . . . (.10) (.07) (.68) (.64) (.34)
_______ _______ _______ _______ _______
Net asset value, end of period . . . . . . . . . $14.93 $12.99 $10.60 $11.70 $12.37
_______ _______ _______ _______ _______
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . 15.69% 23.14% (3.62%) (.26%) (1.56%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets . . .83% .99% .93% .94% .25%
Ratio of dividends on securities sold short to
average net assets . . . . . . . . . . . . . . -- .02% -- -- --
Ratio of net investment income
to average net assets . . . . . . . . . . . . . .67% .38% 4.12% 3.56% 3.54%
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus
Corporation and Comstock Partners, Inc. . . . . -- -- -- -- .88%
Portfolio Turnover Rate . . . . . . . . . . . . 252.24% 188.57% 124.19% 53.88% 25.96%
Net Assets, end of period (000's Omitted) . . . $63,264 $52,981 $21,101 $25,272 $30,510
- -------------------
* Amount represents less than $.01 per share.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE 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 Special Value Portfolio (the "Series") and is
intended to be a funding vehicle for variable annuity contracts and variable
life insurance policies to be offered by the separate accounts of life insurance
companies. The Series is a diversified portfolio. The Series' investment
objective is to maximize total return, consisting of capital appreciation and
current income. The Dreyfus Corporation (" Dreyfus" ) serves as the Series'
investment adviser. Premier Mutual Fund Services, Inc. is the distributor of the
Series' shares, which are sold without a sales charge.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The Series' financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices, except for open
short positions, where the asked price is used for valuation purposes. Bid price
is used when no asked price is available. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Trustees. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward currency exchange contracts are valued at the forward rate.
(B) FOREIGN CURRENCY TRANSACTIONS: The Series does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities
of short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Series' books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains or losses arise from changes in the value of
assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custody agreement, the Series receives net
earnings credits based on available cash balances left on deposit.
(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 DREYFUS VARIABLE INVESTMENT FUND, SPECIAL
VALUE PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Code of 1986, as amended (the "Code" ). To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the policy
of the Series not to distribute such gain.
(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 Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes.
As of December 31, 1998, the Series reclassified certain components of net
assets. The reclassifications resulted in a net increase to accumulated
undistributed net investment income of $8,569, a decrease in accumulated net
realized gain on investments of $819 and a decrease in paid-in capital of
$7,750. These reclassifications were the result of permanent book to tax
differences. Net assets were not affected by these reclassifications.
NOTE 2--BANK LINE OF CREDIT:
In accordance with an agreement with a bank, the Series may borrow up to $5
million under a short-term unsecured line of credit. Interest on borrowings is
charged at rates which are related to the Federal Funds rate in effect from time
to time. During the period ended December 31, 1998, the Series did not borrow
under the line of credit.
NOTE 3--INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to an amended Investment Advisory Agreement with Dreyfus, the
investment advisory fee is computed at the annual rate of .75 of 1% of the value
of the Series' average daily net assets and is payable monthly.
The Series compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Series.
(B) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--SECURITIES TRANSACTIONS:
(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,
1998:
<TABLE>
Purchases Sales
______________ ______________
<S> <C> <C>
Long transactions . . . . . . . . . . . . . . . . . . . $147,318,736 $147,047,541
Short sale transactions . . . . . . . . . . . . . . . . 894,337 773,668
______________ ______________
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . $148,213,073 $147,821,209
______________ ______________
</TABLE>
The Series is engaged in short-selling which obligates the Series to replace
the security borrowed by purchasing the security at current market value. The
Series would incur a loss if the price of the security increases between the
date of the short sale and the date on which the Series replaces the borrowed
security. The Series would realize a gain if the price of the security declines
between those dates. Until the Series replaces the borrowed security, the Series
will maintain daily, a segregated account with a broker or custodian, of cash
and/or liquid securities sufficient to cover its short position. At December 31,
1998, there were no securities sold short outstanding.
DREYFUS VARIABLE INVESTMENT FUND, SPECIAL VALUE PORTFOLIO
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 1998, there were no forward currency exchange
contracts outstanding.
(B) At December 31, 1998, accumulated net unrealized appreciation on
investments was $8,121,989, consisting of $8,879,135 gross unrealized
appreciation and $757,146 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, SPECIAL VALUE PORTFOLIO
- -----------------------------------------------------------------------------
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, 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. Our procedures included confirmation of securities owned as of
December 31, 1998 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, 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, SPECIAL VALUE PORTFOLIO
- -----------------------------------------------------------------------------
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Series hereby designates $.0086 per share as a
long-term capital gain distribution of the $.0980 per share paid on December 30,
1998.
Additionally, the Series hereby designates 100.0% of the ordinary dividends
paid during the fiscal year ended December 31, 1998 as qualifying for the
corporate dividends received deduction.
[This Page Intentionally Left Blank]
[reg.tm logo]
(reg.tm)
DREYFUS VARIABLE INVESTMENT FUND,
SPECIAL VALUE PORTFOLIO
200 Park Avenue
New York, NY 10166
INVESTMENT ADVISER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 118AR9812
Variable
Investment Fund,
SPECIAL VALUE
PORTFOLIO
Annual Report
December 31, 1998
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 , THE WILSHIRE MIDCAP VALUE INDEX
AND THE DOW JONES INDUSTRIAL AVERAGE
EXHIBIT A:
DREYFUS
STANDARD VARIABLE
& POOR'S 500 INVESTMENT
COMPOSITE FUND, WILSHIRE
STOCK DOW JONES SPECIAL MIDCAP
PERIOD PRICE INDUSTRIAL VALUE VALUE
INDEX * AVERAGE * PORTFOLIO INDEX**
8/31/90 10,000 10,000 10,000 10,000
12/31/90 10,366 10,211 10,185 10,222
12/31/91 13,517 12,687 11,264 15,186
12/31/92 14,546 13,626 11,385 18,622
12/31/93 16,009 15,938 14,651 21,013
12/31/94 16,218 16,740 14,423 20,438
12/31/95 22,306 22,924 14,385 28,032
12/31/96 27,424 29,551 13,865 31,948
12/31/97 36,570 36,912 17,073 43,396
12/31/98 47,613 43,613 19,753 42,232
*Source: Lipper Analytical Services, Inc.
** Source: Wilshire Associates, Inc.
