Securities Act File No. 333-47011
Investment Company Act File No. 811-08673
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. __ / /
Post-Effective Amendment No. 2 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 2 /X/
(Check appropriate box or boxes)
DREYFUS INVESTMENT PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6130
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
copy to:
Lewis G. Cole, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
It is proposed that this filing will become effective (check
appropriate box)
____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(i)
____ on (date) pursuant to paragraph (a)(i)
__X_ 75 days after filing pursuant to paragraph (a)(ii)
____ on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
____ this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
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<PAGE>
DREYFUS INVESTMENT PORTFOLIOS
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
FORM N-1A CAPTION PAGE
1 Cover Cover Page
2 Synopsis 2
3 Condensed Financial Information *
4 General Description of Registrant 3
5 Management of the Fund 7
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 14
7 Purchase of Securities Being Offered 10
8 Redemption or Repurchase 11
9 Pending Legal Proceedings *
Items in
Part B of
FORM N-1A
10 Cover Page B-1
11 Table of Contents B-1
12 General Information and History *
13 Investment Objectives and Policies B-2
14 Management of the Fund B-12
15 Control Persons and Principal Holders
of Securities B-15
16 Investment Advisory and Other Services B-15
17 Brokerage Allocation B-21
18 Capital Stock and Other Securities B-23
19 Purchase, Redemption and Pricing of
Securities Being Offered B-16
20 Tax Status B-18
21 Underwriters *
22 Calculations of Performance Data B-22
23 Financial Statements B-33
Items in
Part C of
FORM N-1A
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under Common
Control with Registrant C-1
26 Number of Holders of Securities C-1
27 Indemnification C-1
28 Business and Other Connections of
Investment Adviser C-2
29 Principal Underwriters C-5
30 Location of Accounts and Records C-7
31 Management Services C-7
32 Undertakings C-7
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*Omitted since answer is negative or inapplicable.
<PAGE>
PROSPECTUS SEPTEMBER 30, 1998
DREYFUS INVESTMENT PORTFOLIOS
Dreyfus Investment Portfolios (the "Fund") is an open-end, management
investment company, known as a mutual fund. SHARES ARE OFFERED ONLY TO VARIABLE
ANNUITY AND VARIABLE LIFE INSURANCE SEPARATE ACCOUNTS ESTABLISHED BY INSURANCE
COMPANIES TO FUND VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES AND TO QUALIFIED PENSION AND RETIREMENT PLANS. Individuals may not
purchase shares directly from the Fund. For offers to separate accounts, this
Prospectus should be read in conjunction with the prospectus of the separate
accounts of the specific insurance product. By this Prospectus, the Fund is
offering three separate portfolios (each, a "Portfolio"), each with a different
investment policy. A general description of each Portfolio is set forth on the
following page.
The Dreyfus Corporation serves as each Portfolio's investment adviser.
Founders Asset Management LLC ("Founders") serves as each Portfolio's
sub-investment adviser.
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This Prospectus sets forth concisely information about the Fund that
an investor should know before investing in a Portfolio. It should be read and
retained for future reference.
The Statement of Additional Information, dated September 30, 1998,
which may be revised from time to time, provides a further discussion of certain
areas in this Prospectus and other matters which may be of interest to some
investors. It has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Securities and Exchange Commission
maintains a Web site (http://www.sec.gov) that contains the Statement of
Additional Information, material incorporated by reference, and other
information regarding the Fund. For a free copy of the Statement of Additional
Information, write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144, or call 1-800-554-4611. When telephoning, ask for Operator 144.
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MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. MUTUAL
FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
o The FOUNDERS GROWTH PORTFOLIO'S investment objective is to
provide long-term growth of capital. This Portfolio invests primarily in equity
securities of issuers which are characterized as "growth" companies according to
criteria established by Founders.
o The FOUNDERS INTERNATIONAL EQUITY PORTFOLIO'S investment objective
is to provide long-term growth of capital. This Portfolio invests primarily in
equity securities of foreign issuers which are characterized as "growth"
companies according to criteria established by Founders.
o The FOUNDERS PASSPORT PORTFOLIO'S investment objective is to provide
capital appreciation. This Portfolio invests primarily in equity securities of
foreign issuers in countries with established or emerging economies which have
market capitalizations or annual revenues of $1 billion or less and are
characterized as "growth" companies according to criteria established by
Founders.
TABLE OF CONTENTS
Page
Annual Fund Operating Expenses............................................
Description of the Fund...................................................
Management of the Fund....................................................
How to Buy Shares.........................................................
How to Redeem Shares......................................................
Dividends, Distributions and Taxes........................................
Performance Information...................................................
General Information.......................................................
Appendix..................................................................
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Founders
Founders International Founders
Growth Equity Passport
Portfolio Portfolio Portfolio
Management Fees .75% 1.00% 1.00%
Other Expenses .25% .25% .25%
Total Operating Expenses 1.00% 1.25% 1.25%
EXAMPLE
AN INVESTOR WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 INVESTMENT, ASSUMING A
5% ANNUAL RETURN (CUMULATIVELY THROUGH THE END OF EACH TIME PERIOD):
Founders Founders Founders
Growth International Passport
Portfolio Equity Portfolio Portfolio
1 Year......................... $10 $13 $13
3 Years........................ $32 $40 $40
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, EACH
PORTFOLIO'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
The purpose of the foregoing table is to assist investors in
understanding the costs and expenses borne by each Portfolio, the payment of
which will reduce investors' annual return. Other Expenses noted above are based
on estimated amounts for the current fiscal year. The information in the
foregoing table does not reflect deduction of account fees and charges to
separate accounts or related insurance policies that may be imposed by insurance
companies, nor does it reflect any fee waiver or expense reimbursement
arrangements that may be in effect. For a further description of the various
costs and expenses incurred in the operation of the Fund, as well as expense
reimbursement or waiver arrangements, see "Management of the Fund."
DESCRIPTION OF THE FUND
GENERAL
Shares of the Portfolios are offered to variable annuity and variable
life insurance separate accounts established by affiliated and unaffiliated life
insurance companies ("Participating Insurance Companies") to fund variable
annuity contracts ("VA contracts") and variable life insurance policies ("VLI
policies" and, together with VA contracts, "Policies"). The Policies are
described in the separate prospectuses and statements of additional information
issued by the Participating Insurance Companies for which the Fund assumes no
responsibility. Shares of the Portfolios also are offered to qualified pension
and retirement plans and accounts permitting accumulation of assets on a
tax-deferred basis ("Eligible Plans" or "Plans"). Individuals may not purchase
shares directly from the Fund.
Differences in tax treatment or other considerations may cause the
interests of VA contract owners, VLI policy owners or Eligible Plan participants
to conflict, although the Fund currently does not foresee any disadvantages to
VA contract owners, VLI policy owners or Eligible Plan participants arising
therefrom. Nevertheless, the Fund's Board intends to monitor events in order to
identify any material conflicts which may arise and to determine what action, if
any, should be taken in response thereto. Resolution of an irreconcilable
conflict might result in the withdrawal of a substantial amount of a Portfolio's
assets which could adversely affect the Portfolio's net asset value per share.
Individual Policy owners and Plan participants are not the
"shareholders" of the Portfolios. Rather, the Participating Insurance Companies
and their separate accounts and the Eligible Plans, respectively, are the
shareholders (the "shareholders"), although the Participating Insurance
Companies and Eligible Plans anticipate passing voting rights through to their
Policy owners and Plan participants, respectively.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
Each Portfolio pursues its investment objective through separate
investment policies, as described herein. The differences in objectives and
policies among the Portfolios determine the types of portfolio securities in
which each Portfolio invests, and can be expected to affect the degree of risk
to which each Portfolio is subject and each Portfolio's yield or return. Each
Portfolio's investment objective cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of such Portfolio's outstanding voting shares. There
can be no assurance that a Portfolio's investment objective will be achieved.
The types of portfolio securities in which each Portfolio may invest are
described in greater detail below and under "Appendix--Certain Portfolio
Securities."
FOUNDERS GROWTH PORTFOLIO
The Founders Growth Portfolio is a diversified portfolio, the
investment objective of which is to provide long-term growth of capital. The
Portfolio anticipates that at least 65% of the value of its total assets will be
invested in equity securities of well-established high quality "growth"
companies pursuant to criteria established by Founders, the Portfolio's
sub-investment adviser. These companies tend to have strong performance records,
solid market positions and reasonable financial strength, and have continuous
operating records of three years or more. The Portfolio will seek investment
opportunities generally in companies which Founders believes have fundamental
strengths indicating the potential for growth in earnings per share. Founders
will focus on individual stock selection (a "bottom-up" approach), rather than
on forecasting stock market trends (a "top-down" approach), to identify
companies that may offer the best potential for significant earnings growth.
Equity securities consist of common stocks, convertible securities and preferred
stocks. The convertible securities and preferred stocks in which the Portfolio
may invest must be rated not lower than B by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P"), Fitch IBCA, Inc. ("Fitch")
and Duff & Phelps Credit Rating Co. ("Duff"), or, if unrated, deemed to be of
comparable quality by Founders. See "Investment Considerations and Risks--Lower
Rated Securities" below.
The Portfolio may invest up to 30% of its total assets in foreign
securities, and up to 25% of its total assets in any one foreign country. In
addition, the Portfolio may invest in debt securities of domestic or foreign
issuers that management believes, based on market conditions, the financial
condition of the issuer, general economic conditions and other relevant factors,
offer opportunities for capital growth. The bonds, debentures and corporate
obligations (other than convertible securities and preferred stock) in which the
Portfolio may invest must be rated not lower than Baa by Moody's or BBB by S&P,
Fitch and Duff, or, if unrated, deemed to be of comparable quality by Founders.
See "Investment Considerations and Risks--Fixed-Income Securities" below.
While seeking desirable investments, the Portfolio may invest in money
market instruments (collectively, "Money Market Instruments") consisting of U.S.
Government securities, certificates of deposit, time deposits, bankers'
acceptances, short-term investment grade corporate bonds and other short-term
debt instruments, and repurchase agreements, as set forth under
"Appendix--Certain Portfolio Securities--Money Market Instruments." Under normal
market conditions, the Portfolio does not expect to have a substantial portion
of its assets invested in Money Market Instruments. However, when Founders
determines that adverse market conditions exist, the Portfolio may adopt a
temporary defensive posture and invest all its assets in Money Market
Instruments. The Portfolio also may invest in Money Market Instruments in
anticipation of investing cash positions.
In an effort to increase returns, the Portfolio expects to trade
actively and that the annual portfolio turnover rate could exceed 150%. A
turnover rate of 100% is equivalent to the Portfolio buying and selling all of
the securities in its portfolio once in the course of a year. Higher portfolio
turnover rates usually generate additional brokerage commissions and transaction
costs, and the short-term gains realized from these transactions are taxable to
shareholders as ordinary income. The Portfolio may engage in various investment
techniques, such as options, futures and foreign currency transactions, and
lending portfolio securities. For a discussion of the investment techniques and
their related risks, see "Investment Considerations and Risks" and
"Appendix--Investment Techniques" below and "Investment Objectives and
Management Policies--Management Policies" in the Statement of Additional
Information.
FOUNDERS INTERNATIONAL EQUITY PORTFOLIO
The Founders International Equity Portfolio is a diversified
portfolio, the investment objective of which is to provide long-term growth of
capital. The Portfolio anticipates that at least 65% of the value of its total
assets will be invested in equity securities of foreign issuers from a minimum
of three countries outside the United States. The Portfolio will not invest more
than 50% of its assets in the securities of issuers in any one foreign country.
The Portfolio ordinarily will invest in the securities of foreign issuers in
countries with established or emerging economies which are characterized as
"growth" companies according to criteria established by Founders, the
Portfolio's sub-investment adviser. The Portfolio will seek investment
opportunities generally in companies which Founders believes have fundamental
strengths indicating the potential for growth in earnings per share. Founders
will focus on individual stock selection (a "bottom-up" approach), rather than
on forecasting stock market trends (a "top-down" approach), to identify
companies that may offer the best potential for significant earnings growth.
Equity securities consist of common stocks, convertible securities and preferred
stocks. The convertible securities and preferred stocks in which the Portfolio
may invest must be rated not lower than B by Moody's, S&P, Fitch and Duff, or,
if unrated, deemed to be of comparable quality by Founders. See "Investment
Considerations and Risks--Lower Rated Securities" below.
The Portfolio may invest in debt securities of foreign issuers that
management believes, based on market conditions, the financial condition of the
issuer, general economic conditions and other relevant factors, offer
opportunities for capital growth. The bonds, debentures and corporate
obligations (other than convertible securities and preferred stock) in which the
Portfolio may invest must be rated not lower than Baa by Moody's or BBB by S&P,
Fitch and Duff, or, if unrated, deemed to be of comparable quality by Founders.
See "Investment Considerations and Risks--Fixed-Income Securities" below.
While seeking desirable investments, the Portfolio may invest in Money
Market Instruments. Under normal market conditions, the Portfolio does not
expect to have a substantial portion of its assets invested in Money Market
Instruments. However, when Founders determines that adverse market conditions
exist, the Portfolio may adopt a temporary defensive posture and invest all its
assets in Money Market Instruments. The Portfolio also may invest in Money
Market Instruments in anticipation of investing cash positions.
In an effort to increase returns, the Portfolio expects to trade
actively and that the annual portfolio turnover rate could exceed 150%. A
turnover rate of 100% is equivalent to the Portfolio buying and selling all of
the securities in its portfolio once in the course of a year. Higher portfolio
turnover rates usually generate additional brokerage commissions and transaction
costs, and the short-term gains realized from these transactions are taxable to
shareholders as ordinary income. The Portfolio may engage in various investment
techniques, such as options, futures and foreign currency transactions, and
lending portfolio securities. For a discussion of the investment techniques and
their related risks, see "Investment Considerations and Risks" and
"Appendix--Investment Techniques" below and "Investment Objectives and
Management Policies--Management Policies" in the Statement of Additional
Information.
FOUNDERS PASSPORT PORTFOLIO
The Founders Passport Portfolio is a diversified portfolio, the
investment objective of which is to provide capital appreciation. The Portfolio
ordinarily will invest in equity securities of foreign issuers in countries with
established or emerging economies, which have market capitalizations or annual
revenues of $1 billion or less and are characterized as "growth" companies
according to criteria established by Founders, the Portfolio's sub-investment
adviser. At least 65% of the value of the Fund's total assets ordinarily will be
invested in securities of foreign issuers from a minimum of three countries. The
Portfolio may invest in securities of larger foreign issuers or in U.S. issuers
if management believes these securities offer attractive opportunities for
capital appreciation. Equity securities consist of common stocks, convertible
securities and preferred stocks. The convertible securities and preferred stocks
in which the Portfolio may invest must be rated not lower than B by Moody's,
S&P, Fitch and Duff, or, if unrated, deemed to be of comparable quality by
Founders. See "Investment Considerations and Risks--Lower Rated Securities"
below.
The Portfolio will seek investment opportunities generally in
companies which Founders believes have fundamental strengths indicating the
potential for growth in earnings per share. Founders will focus on individual
stock selection (a "bottom up" approach), rather than on forecasting stock
market trends (a "top-down" approach), to identify companies that may offer the
best potential for significant earnings growth.
The Portfolio may invest in debt securities of domestic or foreign
issuers that management believes, based on market conditions, the financial
condition of the issuer, general economic conditions and other relevant factors,
offer opportunities for capital appreciation. The bonds, debentures and
corporate obligations (other than convertible securities and preferred stock) in
which the Portfolio may invest must be rated not lower than Baa by Moody's or
BBB by S&P, Fitch and Duff, or, if unrated, deemed to be of comparable quality
by Founders. See "Investment Considerations and Risks--Fixed-Income Securities"
below.
While seeking desirable investments, the Portfolio may invest in Money
Market Instruments. Under normal market conditions, the Portfolio does not
expect to have a substantial portion of its assets invested in Money Market
Instruments. However, when Founders determines that adverse market conditions
exist, the Portfolio may adopt a temporary defensive posture and invest all its
assets in Money Market Instruments. The Portfolio also may invest in Money
Market Instruments in anticipation of investing cash positions.
In an effort to increase returns, the Portfolio expects to trade
actively and that the annual portfolio turnover rate could exceed 100%. A
turnover rate of 100% is equivalent to the Portfolio buying and selling all of
the securities in its portfolio once in the course of a year. Higher portfolio
turnover rates usually generate additional brokerage commissions and transaction
costs, and the short-term gains realized from these transactions are taxable to
shareholders as ordinary income. The Portfolio may engage in various investment
techniques, such as options, futures and foreign currency transactions, and
lending portfolio securities. For a discussion of the investment techniques and
their related risks, see "Investment Considerations and Risks" and
"Appendix--Investment Techniques" below and "Investment Objectives and
Management Policies--Management Policies" in the Statement of Additional
Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL--Since each Portfolio will pursue different types of investments, the
risks of investing will vary depending on the Portfolio selected for investment.
Before selecting a Portfolio in which to invest, the investor should assess the
risks associated with the types of investments made by the Portfolio. The net
asset value per share of each Portfolio should be expected to fluctuate.
Investors should consider each Portfolio as a supplement to an overall
investment program and should invest only if they are willing to undertake the
risks involved. See "Investment Objectives and Management Policies " in the
Statement of Additional Information for a further discussion of certain risks.
EQUITY SECURITIES--Equity securities fluctuate in value, often based on factors
unrelated to the value of the issuer of the securities, and such fluctuations
can be pronounced. Changes in the value of a Portfolio's investments will result
in changes in the value of its shares and thus the Portfolio's total return to
investors. Each Portfolio may purchase securities in all available securities
trading markets, including initial public offerings and the aftermarket.
Each Portfolio may purchase securities of smaller capitalization
companies, the prices of which may be subject to more abrupt or erratic market
movements than larger, more established companies, because these securities
typically are traded in lower volume and the issuers typically are more subject
to changes in earnings and prospects.
FIXED-INCOME SECURITIES--Each Portfolio may invest in fixed-income securities to
the extent described under "Investment Objectives and Management Policies"
above. Even though interest- bearing securities are investments which promise a
stable stream of income, the prices of such securities generally are inversely
affected by changes in interest rates and, therefore, are subject to the risk of
market price fluctuations. Certain securities that may be purchased by each
Portfolio, such as those with interest rates that fluctuate directly or
indirectly based on multiples of a stated index, are designed to be highly
sensitive to changes in interest rates and can subject the holders thereof to
extreme reductions of yield and possibly loss of principal.
The values of fixed-income securities also may be affected by changes
in the credit rating or financial condition of the issuer. Certain debt
securities that may be purchased by each Portfolio, such as those rated Baa by
Moody's and BBB by S&P, Fitch and Duff, may be subject to such risk with respect
to the issuing entity and to greater market fluctuations than certain lower
yielding, higher rated fixed-income securities. Once the rating of a portfolio
security has been changed, the Fund will consider all circumstances deemed
relevant in determining whether to continue to hold the security. See
"Appendix--Certain Portfolio Securities--Ratings" below and "Appendix" in the
Statement of Additional Information.
LOWER RATED SECURITIES--Each Portfolio may invest a portion of its assets in
convertible securities and preferred stocks, which are higher yielding (and,
therefore, higher risk), such as those rated Ba by Moody's or BB by S&P, Fitch
or Duff or as low as those rated B by such rating agencies. The retail secondary
market for these securities may be less liquid than that of higher rated
securities; adverse conditions could make it difficult at times for the
Portfolio to sell certain securities or could result in lower prices than those
used in calculating the Portfolio's net asset value. See "Appendix--Certain
Portfolio Securities--Ratings" below and "Appendix" in the Statement of
Additional Information.
FOREIGN SECURITIES--Each Portfolio may invest in foreign securities to the
extent described under "Investment Objectives and Management Policies" above.
Foreign securities markets generally are not as developed or efficient as those
in the United States. Securities of some foreign issuers are less liquid and
more volatile than securities of comparable U.S. issuers. Similarly, volume and
liquidity in most foreign securities markets are less than in the United States
and, at times, volatility of price can be greater than in the United States.
Because evidences of ownership of foreign securities usually are held
outside the United States, a Portfolio investing in such securities will be
subject to additional risks which include possible adverse political and
economic developments, seizure or nationalization of foreign deposits and
adoption of governmental restrictions which might adversely affect or restrict
the payment of principal and interest on the foreign securities to investors
located outside the country of the issuer, whether from currency blockage or
otherwise. Moreover, foreign securities held by a Portfolio may trade on days
when the Portfolio does not calculate its net asset value and thus affect the
Portfolio's net asset value on days when investors have no access to the
Portfolio.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Portfolios have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations.
USE OF DERIVATIVES--Each Portfolio may invest in derivatives ("Derivatives").
These are financial instruments which derive their performance, at least in
part, from the performance of an underlying asset, index or interest rate. The
Derivatives the Portfolios may use include options and futures. While
Derivatives can be used effectively in furtherance of the Portfolio's investment
objective, under certain market conditions, they can increase the volatility of
the Portfolio's net asset value, decrease the liquidity of the Portfolio's
investments and make more difficult the accurate pricing of the Portfolio's
investments. See "Appendix--Investment Techniques--Use of Derivatives" below,
and "Investment Objectives and Management Policies-- Management
Policies--Derivatives" in the Statement of Additional Information.
STATE INSURANCE REGULATION--The Fund is intended to be a funding vehicle for VA
contracts and VLI policies to be offered by Participating Insurance Companies
and will seek to be offered in as many jurisdictions as possible. Certain states
have regulations concerning concentration of investments, purchase and sale of
futures contracts and short sales of securities, among other techniques. If
applied to the Fund, each Portfolio may be limited in its ability to engage in
such techniques and to manage its portfolio with the flexibility provided
herein. It is the Fund's intention that each Portfolio operate in material
compliance with current insurance laws and regulations, as applied, in each
jurisdiction in which the Portfolio is offered.
SIMULTANEOUS INVESTMENT--Investment decisions for each Portfolio are made
independently from those of the other Portfolios and investment companies
managed by The Dreyfus Corporation and, where applicable, Founders. However, if
such other Portfolios or investment companies desire to invest in, or dispose
of, the same securities as the Portfolio, available investments or opportunities
for sales will be allocated equitably to each. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by a
Portfolio or the price paid or received by a Portfolio.
YEAR 2000 RISKS--Like other mutual funds, financial and business organizations
and individuals around the world, the Fund could be adversely affected if the
computer systems used by The Dreyfus Corporation and, where applicable, Founders
and the Fund's other service providers do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Dreyfus Corporation and, where
applicable, Founders is taking steps to address the Year 2000 Problem with
respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Fund's other major service providers. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES--The business affairs of the Fund are managed under the
general supervision of its Board of Trustees. The Statement of Additional
Information contains the name and general business experience of each Trustee.
INVESTMENT ADVISERS--The Dreyfus Corporation, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947 and serves as the Fund's investment
adviser. The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
As of July 31, 1998, The Dreyfus Corporation managed or administered
approximately $110 billion in assets for approximately 1.7 million investor
accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Massachusetts
law.
The Dreyfus Corporation has engaged Founders to serve as the
sub-investment adviser to each Portfolio. Founders, a registered investment
adviser located at Founders Financial Center, 2930 East Third Avenue, Denver,
Colorado 80206, is a 90%-owned subsidiary of Mellon Bank, N.A. Founders and its
predecessor companies have been offering tools to help investors pursue their
financial goals since 1938. As of June 30, 1998, Founders managed mutual funds
and other client assets having an aggregate value of approximately $7.7 billion.
Founders, subject to the supervision and approval of The Dreyfus Corporation,
provides investment advisory assistance and day-to-day management of each
Portfolio's investments, as well as investment research and statistical
information, under a Sub-Investment Advisory Agreement with The Dreyfus
Corporation, subject to the overall authority of the Fund's Board in accordance
with Massachusetts law.
The primary portfolio managers of the Portfolios are as follows:
FOUNDERS GROWTH PORTFOLIO--Paul A. LaRocco. He has been the Portfolio's primary
portfolio manager since the Portfolio commenced operations and has been employed
by Founders since March 1998. Prior to joining Founders, Mr. LaRocco was
employed for five years at Oppenheimer Funds Inc. as a Vice President and
portfolio manager.
FOUNDERS INTERNATIONAL EQUITY PORTFOLIO--Douglas A. Loeffler. He has been the
Portfolio's primary portfolio manager since the Portfolio commenced operations
and has been employed by Founders since 1995. Prior to joining Founders, Mr.
Loeffler was employed for seven years at Scudder, Stevens & Clark as an
international equities and quantitative analyst.
FOUNDERS PASSPORT PORTFOLIO--Michael W. Gerding. He has been the Portfolio's
primary portfolio manager since the Portfolio commenced operations and has been
employed by Founders since 1990. Prior to joining Founders, Mr. Gerding was
employed for several years at NCNB Texas as a portfolio manager and research
analyst.
The Dreyfus Corporation also provides research services for the Fund
and for other funds advised by The Dreyfus Corporation through a professional
staff of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the twenty-five largest bank holding companies in the United
States based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, N.A., Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known as
Mellon Financial Services Corporations. Through its subsidiaries, including The
Dreyfus Corporation, Mellon managed more than $350 billion in assets as of June
30, 1998, including approximately $125 billion in proprietary mutual fund
assets. As of June 30, 1998, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for more
than $1.7 trillion in assets including approximately $54 billion in mutual fund
assets.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate set forth below as
a percentage of the relevant Portfolio's average daily net assets:
Name of Portfolio Management Fee
Founders Growth Portfolio .75%
Founders International Equity Portfolio 1.00%
Founders Passport Portfolio 1.00%
Under the terms of the Sub-Investment Advisory Agreement, The Dreyfus
Corporation has agreed to pay Founders a monthly sub-advisory fee at the annual
rate set forth below as a percentage of the relevant Portfolio's average daily
net assets:
NAME OF PORTFOLIO
Sub-Investment
FOUNDERS GROWTH PORTFOLIO ADVISORY FEE
0 to $100 million of average daily net assets .25%
$100 million to $1 billion of average daily net assets .20%
$1 billion to $1.5 billion of average daily net assets .16%
$1.5 billion or more of average daily net assets .10%
FOUNDERS INTERNATIONAL EQUITY
PORTFOLIO AND FOUNDERS PASSPORT PORTFOLIO
0 to $100 million of average daily net assets .35%
$100 million to $1 billion of average daily net assets .30%
$1 billion to $1.5 billion of average daily net assets .26%
$1.5 billion or more of average daily net assets .20%
In allocating brokerage transactions, The Dreyfus Corporation and
Founders seek to obtain the best execution of orders at the most favorable net
price. Subject to this determination, The Dreyfus Corporation and Founders may
consider, among other things, the receipt of research services and/or the sale
of shares of the Fund or other funds managed, advised or administered by The
Dreyfus Corporation or its affiliates as factors in the selection of broker-
dealers to execute portfolio transactions for the Fund. Brokerage transactions
for the Fund may be conducted through Dreyfus Investment Services Corporation,
an affiliate of The Dreyfus Corporation, in accordance with procedures adopted
by the Fund's Board. See "Portfolio Transactions" in the Statement of Additional
Information.
The Dreyfus Corporation, from time to time, may make payments from its
own assets to Participating Insurance Companies and Eligible Plans in connection
with the provision of certain administrative services to one or more Portfolios
and/or to purchasers of VA contracts or VLI policies or Plan participants.
EXPENSES--All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by The Dreyfus Corporation or,
where applicable, Founders. The expenses borne by the Fund include:
organizational costs, taxes, interest, loan commitment fees, interest and
distributions paid on securities sold short, brokerage fees and commissions, if
any, fees of Board members who are not officers, directors, employees or holders
of 5% or more of the outstanding voting securities of The Dreyfus Corporation or
Founders or any of their affiliates, Securities and Exchange Commission fees,
state Blue Sky qualification fees, advisory fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
independent pricing services, costs of maintaining the Fund's existence, costs
attributable to investor services (including, without limitation, telephone and
personnel expenses), costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders, costs of shareholders' reports and meetings, and any
extraordinary expenses. Expenses attributable to a particular Portfolio are
charged against the assets of that Portfolio; other expenses of the Fund are
allocated among the Fund's portfolios on the basis determined by the Board,
including, but not limited to, proportionately in relation to the net assets of
each portfolio.
From time to time, The Dreyfus Corporation may waive receipt of its
fees and/or voluntarily assume certain expenses of a Portfolio, which would have
the effect of lowering the expense ratio of that Portfolio and increasing yield
to investors. The Fund will not pay The Dreyfus Corporation at a later time for
any amounts it may waive nor will the Fund reimburse The Dreyfus Corporation for
any amounts it may assume.
DISTRIBUTOR--The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109. The
Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN--Dreyfus Transfer, Inc., a
wholly- owned subsidiary of The Dreyfus Corporation, P.O. Box 9671, Providence,
Rhode Island 02940- 9671, is the Fund's Transfer and Dividend Disbursing Agent
(the "Transfer Agent"). Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258, is the Fund's Custodian with respect to the Founders Growth
Portfolio. The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's Custodian with respect to the Founders International Equity and
Founders Passport Portfolios.
HOW TO BUY SHARES
INDIVIDUALS MAY NOT PLACE PURCHASE ORDERS DIRECTLY WITH THE FUND.
INDIVIDUALS SHOULD CONSULT A PARTICIPATING INSURANCE COMPANY, THE ADMINISTRATOR
OF AN ELIGIBLE PLAN OR A FINANCIAL INTERMEDIARY FOR INFORMATION ON THE PURCHASE
OF PORTFOLIO SHARES. THE FUND DOES NOT ISSUE SHARE CERTIFICATES. Purchase orders
received by the Participating Insurance Company or Eligible Plan on a given
business day will be effected at the net asset value of the applicable Portfolio
determined on such business day if the orders and Fed Funds (monies of member
banks within the Federal Reserve System which are held on deposit at a Federal
Reserve Bank) are received by the Fund on the next business day in accordance
with applicable requirements. It is each Participating Insurance Company's or
Eligible Plan administrator's or trustee's responsibility to transmit purchase
orders in accordance with applicable requirements.
Fund shares are sold on a continuous basis. Net asset value per share
is determined as of the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), on each day that the New York
Stock Exchange is open for business. For purposes of determining net asset
value, options and futures will be valued 15 minutes after the close of trading
on the floor of the New York Stock Exchange. Net asset value per share is
computed by dividing the value of the net assets of each Portfolio (i.e., the
value of its assets less liabilities) by the total number of Portfolio shares
outstanding. Each Portfolio's investments are valued based on market value, or
where market quotations are not readily available, based on fair value as
determined in good faith by the Fund's Board. For further information regarding
the methods employed in valuing each Portfolio's investments, see "Determination
of Net Asset Value" in the Statement of Additional Information.
HOW TO REDEEM SHARES
Portfolio shares may be redeemed at any time by the separate accounts
of the Participating Insurance Companies or by Eligible Plans. INDIVIDUALS MAY
NOT PLACE REDEMPTION ORDERS DIRECTLY WITH THE FUND. Redemption requests received
by the Participating Insurance Company or Eligible Plan on a given business day
will be effected at the net asset value of the applicable Portfolio determined
on such business day if the requests are received by the Fund in proper form and
in accordance with applicable requirements on the next business day. It is each
Participating Insurance Company's or Eligible Plan administrator's or trustee's
responsibility to properly transmit redemption requests in accordance with
applicable requirements. The value of the shares redeemed may be more or less
than their original cost, depending on the Portfolio's then-current net asset
value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent or other entity authorized to
accept orders on behalf of the Fund of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio declares and pays dividends from net investment income
annually. Each Portfolio will make distributions from net realized securities
gains, if any, once a year, but may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code of
1986, as amended (the "Code"), in all events in a manner consistent with the
provisions of the 1940 Act. No Portfolio will make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. Dividends are automatically reinvested in additional
shares at net asset value unless payment in cash is elected by the Participating
Insurance Company or Eligible Plan. Shares begin earning dividends on the day
the purchase order is effective. If all shares in an account are redeemed at any
time, all dividends to which the shareholder is entitled will be paid along with
the proceeds of the redemption. An omnibus accountholder may indicate in a
partial redemption request that a portion of any accrued dividends to which such
account is entitled belongs to an underlying accountholder who has redeemed all
shares in his or her account, and such portion of the accrued dividends will be
paid to the accountholder along with the proceeds of the redemption. All
expenses are accrued daily and deducted before declaration of dividends to
investors.
Section 817(h) of the Code and regulations thereunder set standards
for diversification of the investments underlying Policies in order for the
Policies to be treated as life insurance. These requirements, which are in
addition to diversification requirements applicable to the Portfolios under
Subchapter M of the Code, may affect the composition of a Portfolio's
investments. Since the shares of the Portfolios currently are sold to segregated
asset accounts underlying such Policies, each Portfolio intends to comply with
the diversification requirements as set forth in the regulations.
By meeting these and other requirements, the Participating Insurance
Companies, rather than the Policy owners, should be subject to tax on
distributions received with respect to Portfolio shares. The tax treatment on
distributions made to a Participating Insurance Company will depend on the
Participating Insurance Company's tax status.
Dividends and distributions made by the Portfolios to Eligible Plans
are not taxable to the Plans or to the participants thereunder. The Portfolios
will be managed without regard to tax ramifications.
Since the Fund's shareholders are the Participating Insurance
Companies, their separate accounts and Eligible Plans, no discussion is included
herein as to the Federal income tax consequences to Policy owners and Eligible
Plan participants. For information concerning the Federal income tax
consequences, Policy owners should consult the applicable prospectus of the
separate account of the Participating Insurance Company and Eligible Plan
participants should consult the Plan's administrator or trustee.
Management of the Fund expects that each Portfolio will qualify as a
"regulated investment company" under the Code so long as such qualification is
in the best interests of its shareholders. Qualification as a regulated
investment company relieves the Portfolio of any liability for Federal income
taxes to the extent its earnings are distributed in accordance with applicable
provisions of the Code. The Portfolios may be subject to a non-deductible 4%
excise tax, measured with respect to certain undistributed amounts of investment
income and capital gains. Participating Insurance Companies and Eligible Plans
should consult their tax advisers regarding specific questions as to Federal,
state or local taxes.
PERFORMANCE INFORMATION
GENERAL--Each Portfolio may calculate performance on an average annual total
return or total return basis. Average annual total return is calculated pursuant
to a standardized formula which assumes that an investment in the Portfolio was
purchased with an initial payment of $1,000 and that the investment was redeemed
at the end of a stated period of time, after giving effect to the reinvestment
of dividends and distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result in
the redeemable value of the investment at the end of the period. Advertisements
of the Portfolios' performance will include the Portfolios' average annual total
return for one, five and ten year periods, or for shorter time periods depending
upon the length of time the Portfolio has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is expressed
as a percentage rate which is calculated by combining the income and principal
changes for a specified period and dividing by the net asset value per share at
the beginning of the period. Advertisements may include the percentage rate of
total return or may include the value of a hypothetical investment at the end of
the period, which assumes the application of the percentage rate of total
return.
In addition, from time to time, each Portfolio may advertise "yield"
and "actual distribution rate" quotations. A Portfolio's "yield" for any 30-day
period is computed by dividing the net investment income per share earned during
such period by the maximum public offering price per share on the last day of
the period, and then annualizing such 30-day yield in accordance with a formula
prescribed by the Securities and Exchange Commission which provides for
compounding on a semi-annual basis. A Portfolio's "actual distribution rate" is
computed in the same manner as yield except that actual income dividends
declared per share during the period in question is substituted for net
investment income per share.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance. Performance information for a
Portfolio should not be compared with other funds that offer their shares
directly to the public since the figures provided do not reflect charges imposed
by Participating Insurance Companies under their VA contracts or VLI policies or
any charges imposed by Plans. The effective yield and total return for a
Portfolio should be distinguished from the rate of return of a corresponding
sub-account or investment division of a separate account of a Participating
Insurance Company, which rate will reflect the deduction of additional charges,
including mortality and expense risk charges, and will therefore be lower.
Policy owners should consult the prospectus for their Policy.
Calculations of the Portfolios' performance information may reflect
absorbed expenses pursuant to any undertaking that may be in effect. See
"Management of the Fund." Comparative performance information may be used from
time to time in advertising a Portfolio's shares, including data from Lipper
Analytical Services, Inc., IBC's Money Fund Report(TM), Money Magazine, Bank
Rate Monitor(TM), Standard & Poor's 500 Composite Stock Price Index ("S&P 500
Index"), Standard & Poor's MidCap 400 Index, Russell 2500(R) Index, Morgan
Stanley Capital International World (ex US) Index ("MSCI World (ex US) Index"),
the Dow Jones Industrial Average, Morningstar, Inc., Value Line Mutual Fund
Survey and other industry publications.
PERFORMANCE INFORMATION FOR PUBLIC FUNDS--Although the Portfolios do not yet
have their own performance records, each Portfolio has the same investment
objective and follows substantially the same investment policies and strategies
as a corresponding series of another open-end investment company advised by
Founders (the "Public Funds"). Set forth below is total return and average
annual total return information for the Public Funds which correspond to the
Portfolios offered in this Prospectus, calculated as described above, and for an
appropriate securities index. Each Portfolio currently has the same primary
portfolio manager as its corresponding Public Fund. Investors should not
consider this performance data as an indication of the future performance of the
Portfolios offered in this Prospectus. The performance figures below reflect the
deduction of the historical fees and expenses paid by the existing Public Funds,
and not those to be paid by the respective Portfolio. The figures also do not
reflect the deduction of charges or expenses attributable to VA contracts or VLI
policies or Plans, which would lower the performance quoted. Policy owners
should refer to the applicable insurance company disclosure documents and Plan
participants should contact their Plan administrator or trustee for information
on such charges and expenses. Additionally, although it is anticipated that each
of the Portfolios and its corresponding Public Fund will hold similar
securities, their investment results are expected to differ. In particular,
differences in asset size and in cash flow resulting from purchases and
redemptions of Portfolio shares may result in different security selections,
differences in the relative weightings of securities or differences in the price
paid for particular portfolio holdings. Historical performance information for
the corresponding Public Funds and for the securities indexes for various
periods ended June 30, 1998 is set forth below:
<TABLE>
<CAPTION>
Year-to-Date
Total Return
Name of Public Fund Period Ended Average Annual Total Return
and Index June 30, 1998 Period Ended June 30, 1998
One Three Five Ten
Year Years Years Years
<S> <C> <C> <C> <C> <C>
Founders Growth Fund.................... 19.50% 27.91% 28.08% 22.04% 19.83%
S&P 500 Index........................... 17.63% 30.13% 30.21% 23.07% 18.54%
Founders International Equity Fund...... 22.41% 22.05% 23.23%* N/A N/A
MSCI World (ex US) Index................ 15.60% 6.30% 9.81%* N/A N/A
Founders Passport Fund.................. 22.95% 15.77% 18.49% 13.03% ** N/A
MSCI World (ex US) Index................ 15.60% 6.30% 11.01% 11.09%** N/A
- -------------
1 The S&P 500 Index is an unmanaged, market value weighted index composed of
500 common stocks from a wide range of industries that are traded on the
NYSE, the AMEX and the Nasdaq Market. The performance data for the S&P 500
assumes the reinvestment of all dividends, but does not deduct any fees or
expenses.
2 The MSCI World (ex US) Index is an arithmetical average of the performance
of over 1,000 securities listed on the stock exchanges of Europe, Canada,
Australia, New Zealand and the Far East. Total return figures for the Index
assume change in share price and reinvestment of dividends after deduction
of local taxes.
* The performance data for the Portfolio is from December 29, 1995 (inception
of the Public Fund) through June 30, 1998; the performance data for the
Index is from December 31, 1995 through June 30, 1998.
** The performance data for the Portfolio is from November 16, 1993 (inception
of the Public Fund) through June 30, 1998; the performance data for the
Index is from November 30, 1993 through June 30, 1998.
</TABLE>
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated May 14, 1993, and commenced
operations on May 1, 1998. The Fund is authorized to issue an unlimited number
of shares of beneficial interest, par value $.001 per share. Each share has one
vote. The Fund ordinarily will not hold shareholder meetings; however,
shareholders under certain circumstances may have the right to call a meeting of
shareholders for the purpose of voting to remove Trustees.
In accordance with current law, the Fund anticipates that a
Participating Insurance Company issuing a VA contract or VLI policy or an
Eligible Plan that participates in the Fund will request voting instructions
from Policy holders or Plan participants and will vote shares in proportion to
the voting instructions received. A Participating Insurance Company could, from
time to time, be deemed to control a Portfolio to the extent that its separate
account(s) may own in the aggregate more than 25% of the Portfolio's shares. For
further information on voting rights, Policy holders should refer to the
prospectus for their policies and Plan participants should consult the Plan's
administrator or trustee.
The Fund is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for certain
matters under the 1940 Act and for other purposes. A shareholder of one
portfolio is not deemed to be a shareholder of any other portfolio. For certain
matters shareholders vote together as a group; as to others they vote separately
by portfolio.
To date, the Board has authorized the creation of five portfolios of
shares. The other portfolios are not being offered by this Prospectus. All
consideration received by the Fund for shares of one of the portfolios, and all
assets in which such consideration is invested, will belong to that portfolio
(subject only to the rights of creditors of the Fund) and will be subject to the
liabilities related thereto. The income attributable to, and the expenses of,
one portfolio would be treated separately from those of the other portfolios.
The Fund has the ability to create, from time to time, new portfolios without
shareholder approval.
The Transfer Agent maintains a record of each shareholder's ownership
and will send confirmations and statements of account. Shareholder inquiries may
be made by writing to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144, or by calling 516-338-3300.
Owners of VLI policies and VA contracts issued by Participating
Insurance Companies for which Portfolio shares are an investment vehicle will
receive from the Participating Insurance Companies audited year-end financial
statements certified by the Fund's independent public accountants and unaudited
semi-annual financial statements. Each report will show the investments owned by
each Portfolio and the market values thereof and will provide other information
about the Portfolio and its operations.
<PAGE>
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY--(All Portfolios) Each Portfolio is permitted to borrow to the
extent permitted under the 1940 Act, which permits an investment company to
borrow in an amount up to 33-1/3% of the value of its total assets. Each
Portfolio currently intends to borrow money only for temporary or emergency (not
leveraging) purposes. While borrowings exceed 5% of such Portfolio's total
assets, the Portfolio will not make any additional investments.
USE OF DERIVATIVES--(All Portfolios) Each Portfolio may invest in the types of
Derivatives enumerated under "Description of the Fund--Investment Considerations
and Risks--Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objectives and Management
Policies--Management Policies--Derivatives" in the Statement of Additional
Information.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives could
have a large potential impact on the Portfolio's performance.
If a Portfolio invests in Derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Portfolio's return
or result in a loss. The Portfolio also could experience losses if its
Derivatives were poorly correlated with its other investments, or if the
Portfolio were unable to liquidate its position because of an illiquid secondary
market. The market for many Derivatives is, or suddenly can become, illiquid.
Changes in liquidity may result in significant, rapid and unpredictable changes
in the prices for Derivatives.
Although neither the Fund nor any Portfolio will be a commodity pool,
certain Derivatives subject the Portfolios to the rules of the Commodity Futures
Trading Commission which limit the extent to which a Portfolio can invest in
such Derivatives. Each Portfolio may invest in futures contracts and options
with respect thereto for hedging purposes without limit. However, no Portfolio
may invest in such contracts and options for other purposes if the sum of the
amount of initial margin deposits and premiums paid for unexpired options with
respect to such contracts, other than for bona fide hedging purposes, exceeds 5%
of the liquidation value of the Portfolio's assets, after taking into account
unrealized profits and unrealized losses on such contracts and options;
provided, however, that in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
Each Portfolio may purchase call and put options and write (i.e.,
sell) covered call and put option contracts. When required by the Securities and
Exchange Commission, the Portfolio will set aside permissible liquid assets in a
segregated account to cover its obligations relating to its purchase of
Derivatives. To maintain this required cover, the Portfolio may have to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a Derivative position at a reasonable price.
LENDING PORTFOLIO SECURITIES--(All Portfolios) Each Portfolio may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. In
connection with such loans, the Portfolio continues to be entitled to payments
in amounts equal to the dividends, interest or other distributions payable on
the loaned securities which affords the Portfolio an opportunity to earn
interest on the amount of the loan and at the same time to earn income on the
loaned securities' collateral. Loans of portfolio securities may not exceed
33-1/3% of the value of the Portfolio's total assets, and the Portfolio will
receive collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. Such loans are
terminable by the Portfolio at any time upon specified notice. The Portfolio
might experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Portfolio.
FOREIGN CURRENCY TRANSACTIONS--(All Portfolios) Foreign currency transactions
may be entered into for a variety of purposes, including: to fix in U.S.
dollars, between trade and settlement date, the value of a security the
Portfolio has agreed to buy or sell; to hedge the U.S. dollar value of
securities the Portfolio already owns, particularly if it expects a decrease in
the value of the currency in which the foreign security is denominated; or to
gain exposure to the foreign currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the
Portfolio's purchase of foreign currencies for U.S. dollars or the maintenance
of short positions in foreign currencies, which would involve the Portfolio
agreeing to exchange an amount of a currency it did not currently own for
another currency at a future date in anticipation of a decline in the value of
the currency sold relative to the currency the Fund contracted to receive in the
exchange. The Portfolio's success in these transactions will depend principally
on Founders' ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar.
Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
FORWARD COMMITMENTS--(All Portfolios) Each Portfolio may purchase securities on
a forward commitment or when-issued basis, which means that delivery and payment
take place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate receivable on a forward commitment or
when-issued security are fixed when the Portfolio enters into the commitment,
but the Portfolio does not make a payment until it receives delivery from the
counter party. The Portfolio will commit to purchase such securities only with
the intention of actually acquiring the securities, but the Portfolio may sell
these securities before the settlement date if it is deemed advisable. The
Portfolio will set aside in a segregated account permissible liquid assets at
least equal at all times to the amount of the commitments.
CERTAIN PORTFOLIO SECURITIES
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES--(All
Portfolios) Each Portfolio may invest in obligations issued or guaranteed by one
or more foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by Founders to be of comparable quality to
the other obligations in which the Portfolio may invest. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
CONVERTIBLE SECURITIES--(All Portfolios) Convertible securities are fixed-income
securities that may be converted at either a stated price or stated rate into
underlying shares of common stock. Convertible securities have characteristics
similar to both fixed-income and equity securities. Convertible securities
generally are subordinated to other similar but non-convertible securities of
the same issuer, although convertible bonds, as corporate debt obligations,
enjoy seniority in right of payment to all equity securities, and convertible
preferred stock is senior to common stock, of the same issuer. Because of the
subordination feature, however, convertible securities typically have lower
ratings than similar non-convertible securities.
WARRANTS--(All Portfolios) A warrant is an instrument issued by a corporation
which gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time. Each
Portfolio may invest up to 5% of its net assets in warrants, except that this
limitation does not apply to warrants purchased by the Portfolio that are sold
in units with, or attached to, other securities.
DEPOSITARY RECEIPTS--(All Portfolios) Each Portfolio may invest in the
securities of foreign issuers in the form of American Depositary Receipts and
American Depositary Shares (collectively, "ADRs") and Global Depositary Receipts
and Global Depositary Shares (collectively, "GDRs"). These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a United States
bank or trust company which evidence ownership of underlying securities issued
by a foreign corporation. GDRs are receipts issued outside the United States
typically by non-United States banks and trust companies that evidence ownership
of either foreign or domestic securities. Generally, ADRs in registered form are
designed for use in the United States securities markets and GDRs in bearer form
are designed for use outside the United States.
MONEY MARKET INSTRUMENTS--(All Portfolios) Each Portfolio may invest in the
following types of Money Market Instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury; others
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government provides financial support to such
U.S. Government-sponsored agencies and instrumentalities, no assurance can be
given that it will always do so since it is not so obligated by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio buys,
and the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the seller's
obligation to repurchase is secured by the value of the underlying security.
Repurchase agreements could involve risks in the event of a default or
insolvency of the other party to the agreement, including possible delays or
restrictions upon the Portfolio's ability to dispose of the underlying
securities. The Portfolio may enter into repurchase agreements with certain
banks or non-bank dealers.
BANK OBLIGATIONS. Each Portfolio may purchase certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Portfolio may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund--Investment Considerations and
Risks--Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial paper
purchased by the Portfolios will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's, A-1
by S&P, F-1 by Fitch or Duff-1 by Duff, (b) issued by companies having an
outstanding unsecured debt issue currently rated at least A3 by Moody's or A- by
S&P, Fitch or Duff, or (c) if unrated, determined by Founders to be of
comparable quality to those rated obligations which may be purchased by the
Portfolio.
INVESTMENT COMPANIES--(All Portfolios) Each Portfolio may invest in securities
issued by investment companies. Under the 1940 Act, the Portfolio's investment
in such securities, subject to certain exceptions, currently is limited to (i)
3% of the total voting stock of any one investment company, (ii) 5% of the
Portfolio's total assets with respect to any one investment company and (iii)
10% of the Portfolio's total assets in the aggregate. Investments in the
securities of other investment companies may involve duplication of advisory
fees and certain other expenses.
ILLIQUID SECURITIES--(All Portfolios) Each Portfolio may invest up to 15% of the
value of its net assets in securities as to which a liquid trading market does
not exist, provided such investments are consistent with the Portfolio's
investment objective. Such securities may include securities that are not
readily marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Portfolio is subject to a risk that should
the Portfolio desire to sell them when a ready buyer is not available at a price
the Portfolio deems representative of their value, the value of the Portfolio's
net assets could be adversely affected.
RATINGS--Securities rated Baa by Moody's are considered medium grade
obligations; they are neither highly protected nor poorly secured, and are
considered by Moody's to have speculative characteristics. Bonds rated BBB by
S&P, Fitch and Duff are investment grade and regarded as having adequate
capacity to pay interest and repay principal; however, adverse changes in
economic conditions and circumstances are more likely to have an adverse impact
on these bonds and, therefore, impair timely payment. Securities rated Ba by
Moody's are judged to have speculative elements; their future cannot be
considered as well assured and often the protection of interest and principal
payments may be very moderate. Securities rated BB by S&P, Fitch or Duff are
regarded as having predominantly speculative characteristics and, while such
obligations have less near-term vulnerability to default than other speculative
grade debt, they face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. Securities rated B by
Moody's, S&P, Fitch and Duff are highly speculative and assurance of principal
or interest payments over any long period of time may be small. Such securities,
though high yielding, are characterized by great risk. See "Appendix" in the
Statement of Additional Information for a general description of securities
ratings.
The ratings of Moody's, S&P, Fitch and Duff represent their opinions
as to the quality of the obligations which they undertake to rate. Ratings are
relative and subjective and, although ratings may be useful in evaluating the
safety of interest and principal payments, they do not evaluate the market value
risk of such obligations. Although these ratings may be an initial criterion for
selection of portfolio investments, Founders also will evaluate these securities
and the ability of the issuers of such securities to pay interest and principal.
A Portfolio's ability to achieve its investment objective may be more dependent
on Founders' credit analysis than might be the case for a fund that invested in
higher rated securities.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
DREYFUS INVESTMENT PORTFOLIOS
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
SEPTEMBER 30, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Core Value Portfolio and MidCap Stock Portfolio, dated May 1, 1998, and Founders
Growth Portfolio, Founders International Equity Portfolio and Founders Passport
Portfolio, dated September 30, 1998 (collectively, the "Portfolios"), each a
separate series of Dreyfus Investment Portfolios (the "Fund"), as each
Prospectus may be revised from time to time. To obtain a copy of the relevant
Portfolio's Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call (516) 338-3300.
Shares of the Portfolios are offered only to variable annuity and variable
life insurance separate accounts established by insurance companies
("Participating Insurance Companies") to fund variable annuity contracts and
variable life insurance policies (collectively, "Policies") and qualified
pension and retirement plans and accounts permitting accumulation of assets on a
tax-deferred basis (collectively, "Eligible Plans") outside the separate
account context.
The Dreyfus Corporation (the "Manager") serves as each Portfolio's
investment adviser. The Manager has engaged Founders Asset Management LLC
("Founders") to serve as sub-investment adviser to each of Founders Growth
Portfolio, Founders International Equity Portfolio and Founders Passport
Portfolio (collectively, the "Founders Portfolios") and to provide day-to-day
management of the Founders Portfolios' investments, subject to the supervision
of the Manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor
of the Portfolios' shares.
TABLE OF CONTENTS
PAGE
Investment Objectives and Management Policies.............................B-2
Management of The Fund....................................................B-11
Management Arrangements...................................................B-15
Purchase of Shares........................................................B-17
Redemption of Shares......................................................B-18
Determination of Net Asset Value..........................................B-18
Dividends, Distributions and Taxes........................................B-19
Portfolio Transactions....................................................B-21
Performance Information...................................................B-22
Information About the Fund................................................B-23
Transfer And Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors.......................................B-24
Appendix..................................................................B-26
Financial Statement and Report of Independent Auditors....................B-34
<PAGE>
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE RELEVANT PROSPECTUS ENTITLED "DESCRIPTION OF THE FUND"
AND "APPENDIX."
PORTFOLIO SECURITIES
DEPOSITARY RECEIPTS. (All Portfolios) These securities may be purchased
through "sponsored" or "unsponsored" facilities. A sponsored facility is
established jointly by the issuer of the underlying security and a depositary,
whereas a depositary may establish an unsponsored facility without participation
by the issuer of the deposited security. Holders of unsponsored depositary
receipts generally bear all the costs of such facilities and the depositary of
an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited security or
to pass through voting rights to the holders of such receipts in respect of the
deposited securities.
REPURCHASE AGREEMENTS. (All Portfolios) The Fund's custodian or
sub-custodian will have custody of, and will hold in a segregated account,
securities acquired by a Portfolio under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange Commission
to be loans by the Portfolio. In an attempt to reduce the risk of incurring a
loss on a repurchase agreement, each Portfolio will enter into repurchase
agreements only with domestic banks with total assets in excess of $1 billion,
or primary government securities dealers reporting to the Federal Reserve Bank
of New York, with respect to securities of the type in which the Portfolio may
invest, and will require that additional securities be deposited with it if the
value of the securities purchased should decrease below the resale price.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE Obligations. (All
Portfolios) These instruments include variable amount master demand notes, which
are obligations that permit a Portfolio to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Portfolio, as
lender, and the borrower. These notes permit daily changes in the amounts
borrowed. Because these obligations are direct lending arrangements between the
lender and borrower, it is not contemplated that such instruments generally will
be traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value, plus accrued interest,
at any time. Accordingly, where these obligations are not secured by letters of
credit or other credit support arrangements, the Portfolio's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Such obligations frequently are not rated by credit rating agencies, and
a Portfolio may invest in them only if at the time of an investment the borrower
meets the criteria set forth in the Fund's Prospectus for other commercial paper
issuers.
CONVERTIBLE SECURITIES. (All Portfolios) Although to a lesser extent than
with fixed- income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stock. A unique
feature of convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
Convertible securities are investments that provide for a stable stream of
income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
ILLIQUID SECURITIES. (All Portfolios) When purchasing securities that have
not been registered under the Securities Act of 1933, as amended, and are not
readily marketable, a Portfolio will endeavor, to the extent practicable, to
obtain the right to registration at the expense of the issuer. Generally, there
will be a lapse of time between the Portfolio's decision to sell any such
security and the registration of the security permitting sale. During any such
period, the price of the securities will be subject to market fluctuations.
However, where a substantial market of qualified institutional buyers has
developed for certain unregistered securities purchased by the Portfolio
pursuant to Rule 144A under the Securities Act of 1933, as amended, the
Portfolio intends to treat such securities as liquid securities in accordance
with procedures approved by the Fund's Board. Because it is not possible to
predict with assurance how the market for specific restricted securities sold
pursuant to Rule 144A will develop, the Fund's Board has directed the Manager
(and Founders with respect to the Founders Portfolios) to monitor carefully the
relevant Portfolio's investments in such securities with particular regard to
trading activity, availability of reliable price information and other relevant
information. To the extent that, for a period of time, qualified institutional
buyers cease purchasing restricted securities pursuant to Rule 144A, a
Portfolio's investing in such securities may have the effect of increasing the
level of illiquidity in its investment portfolio during such period.
MANAGEMENT POLICIES
LEVERAGE. (Core Value Portfolio and MidCap Stock Portfolio) For borrowings
for investment purposes, the Investment Company Act of 1940, as amended (the
"1940 Act"), requires the Portfolio to maintain continuous asset coverage (that
is, total assets including borrowings, less liabilities exclusive of borrowings)
of 300% of the amount borrowed. If the required coverage should decline as a
result of market fluctuations or other reasons, the Portfolio may be required to
sell some of its portfolio securities within three days to reduce the amount of
its borrowings and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
The Portfolio also may be required to maintain minimum average balances in
connection with such borrowing or pay a commitment or other fee to maintain a
line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate. To the extent a Portfolio enters into a
reverse repurchase agreement, the Portfolio will maintain in a segregated
account permissible liquid assets at least equal to the aggregate amount of its
reverse repurchase obligations, plus accrued interest, in certain cases, in
accordance with releases promulgated by the Securities and Exchange Commission.
The Securities and Exchange Commission views reverse repurchase transactions as
collateralized borrowings by a Portfolio.
LENDING PORTFOLIO SECURITIES. (All Portfolios) In connection with its
securities lending transactions, a Portfolio may return to the borrower or a
third party which is unaffiliated with the Portfolio, and which is acting as a
"placing broker," a part of the interest earned from the investment of
collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Portfolio must receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Portfolio must be
able to terminate the loan at any time; (4) the Portfolio must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Portfolio may pay only reasonable custodian fees in connection
with the loan; and (6) while voting rights on the loaned securities may pass to
the borrower, the Fund's Board must terminate the loan and regain the right to
vote the securities if a material event adversely affecting the investment
occurs.
DERIVATIVES. (All Portfolios) A Portfolio may invest in Derivatives (as
defined in the Fund's Prospectus) for a variety of reasons, including to hedge
certain market risks, to provide a substitute for purchasing or selling
particular securities or to increase potential income gain. Derivatives may
provide a cheaper, quicker or more specifically focused way for the Portfolio to
invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit a Portfolio to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Portfolio can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily payment system (i.e., variation margin requirements)
operated by the clearing agency in order to reduce overall credit risk. As a
result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with Derivatives purchased on an exchange.
By contrast, no clearing agency guarantees over- the-counter Derivatives.
Therefore, each party to an over-the-counter Derivative bears the risk that the
counterparty will default. Accordingly, the Manager (or Founders with respect to
the Founders Portfolios) will consider the creditworthiness of counterparties to
over-the-counter Derivatives in the same manner as it would review the credit
quality of a security to be purchased by a Portfolio. Over-the-counter
Derivatives are less liquid than exchange-traded Derivatives since the other
party to the transaction may be the only investor with sufficient understanding
of the Derivative to be interested in bidding for it.
FUTURES TRANSACTIONS--IN GENERAL. A Portfolio may enter into futures contracts
in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange, or, except for
the MidCap Stock Portfolio, on exchanges located outside the United States, such
as the London International Financial Futures Exchange and the Sydney Futures
Exchange Limited. Foreign markets may offer advantages such as trading
opportunities or arbitrage possibilities not available in the United States.
Foreign markets, however, may have greater risk potential than domestic markets.
For example, some foreign exchanges are principal markets so that no common
clearing facility exists and an investor may look only to the broker for
performance of the contract. In addition, any profits that a Portfolio might
realize in trading could be eliminated by adverse changes in the exchange rate,
or the Portfolio could incur losses as a result of those changes. Transactions
on foreign exchanges may include both commodities which are traded on domestic
exchanges and those which are not. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to a Portfolio which
could adversely affect the value of the Portfolio's net assets. Although each
Portfolio intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid market
will exist for any particular contract at any particular time. Many futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Portfolio to
substantial losses.
Successful use of futures by a Portfolio also is subject to the ability of
the Manager (or Founders with respect to the Founders Portfolios) to predict
correctly movements in the direction of the relevant market and, to the extent
the transaction is entered into for hedging purposes, to ascertain the
appropriate correlation between the transaction being hedged and the price
movements of the futures contract. For example, if a Portfolio uses futures to
hedge against the possibility of a decline in the market value of securities
held in its portfolio and the prices of such securities instead increase, the
Portfolio will lose part or all of the benefit of the increased value of
securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Portfolio has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. A Portfolio may have to sell such securities at a time when it may
be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, a Portfolio may be required to segregate permissible liquid
assets in connection with its commodities transactions in an amount generally
equal to the value of the underlying commodity. The segregation of such assets
will have the effect of limiting the Portfolio's ability otherwise to invest
those assets.
SPECIFIC FUTURES TRANSACTIONS. Each Portfolio may purchase and sell stock index
futures contracts. A stock index future obligates the Portfolio to pay or
receive an amount of cash equal to a fixed dollar amount specified in the
futures contract multiplied by the difference between the settlement price of
the contract on the contract's last trading day and the value of the index based
on the stock prices of the securities that comprise it at the opening of trading
in such securities on the next business day.
The Core Value Portfolio and the Founders Portfolios may purchase and sell
currency futures. A foreign currency future obligates the Portfolio to purchase
or sell an amount of a specific currency at a future date at a specific price.
Each Portfolio may purchase and sell interest rate futures contracts. An
interest rate future obligates the Portfolio to purchase or sell an amount of a
specific debt security at a future date at a specific price.
OPTIONS--IN GENERAL. Each Portfolio may purchase and write (i.e., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date. Conversely, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy, the
underlying security or securities at the exercise price at any time during the
option period, or at a specific date.
A covered call option written by a Portfolio is a call option with respect
to which the Portfolio owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written by a
Portfolio is covered when, among other things, cash or liquid securities having
a value equal to or greater than the exercise price of the option are placed in
a segregated account to fulfill the obligation undertaken. The principal reason
for writing covered call and put options is to realize, through the receipt of
premiums, a greater return than would be realized on the underlying securities
alone. A Portfolio receives a premium from writing covered call or put options
which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Portfolio is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
SPECIFIC OPTIONS TRANSACTIONS. Each Portfolio may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities exchanges or traded
in the over-the-counter market. An option on a stock index is similar to an
option in respect of specific securities, except that settlement does not occur
by delivery of the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. Thus, the effectiveness of
purchasing or writing stock index options will depend upon price movements in
the level of the index rather than the price of a particular stock.
Each Portfolio may purchase and sell call and put options on foreign
currency. These options convey the right to buy or sell the underlying currency
at a price which is expected to be lower or higher than the spot price of the
currency at the time the option is exercised or expires.
Each Portfolio may purchase cash-settled options on equity index swaps in
pursuit of its investment objective. Equity index swaps involve the exchange by
the Portfolio with another party of cash flows based upon the performance of an
index or a portion of an index of securities which usually includes dividends. A
cash-settled option on a swap gives the purchaser the right, but not the
obligation, in return for the premium paid, to receive an amount of cash equal
to the value of the underlying swap as of the exercise date. These options
typically are purchased in privately negotiated transactions from financial
institutions, including securities brokerage firms.
Successful use by a Portfolio of options will be subject to the ability of
the Manager (or Founders with respect to the Founders Portfolios) to predict
correctly movements in the prices of individual stocks, the stock market
generally, foreign currencies or interest rates. To the extent such predictions
are incorrect, a Portfolio may incur losses.
FUTURE DEVELOPMENTS. (All Portfolios) A Portfolio may take advantage of
opportunities in the area of options and futures contracts and options on
futures contracts and any other Derivatives which are not presently contemplated
for use by the Portfolio or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the
Portfolio's investment objective and legally permissible for the Portfolio.
Before entering into such transactions or making any such investment on behalf
of a Portfolio, the Fund will provide appropriate disclosure in its Prospectus
or Statement of Additional Information.
FORWARD COMMITMENTS. (All Portfolios) Securities purchased on a forward
commitment or when-issued basis are subject to changes in value (generally
changing in the same way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the level of
interest rates. Securities purchased on a forward commitment or when-issued
basis may expose a Portfolio to risks because they may experience such
fluctuations prior to their actual delivery. Purchasing securities on a
when-issued basis can involve the additional risk that the yield available in
the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when a Portfolio is fully or almost fully
invested may result in greater potential fluctuation in the value of the
Portfolio's net assets and its net asset value per share.
INVESTMENT CONSIDERATIONS AND RISKS
LOWER RATED SECURITIES. (All Portfolios, except MidCap Stock Portfolio) The
Core Value Portfolio is permitted to invest up to 5% of the value of its net
assets in securities rated Ba or lower by Moody's Investors Service, Inc.
("Moody's") or BB or lower by Standard & Poor's Ratings Group ("S&P"), Fitch
IBCA, Inc. ("Fitch") and Duff & Phelps Credit Rating Co. ("Duff") and as low as
the lowest rating assigned by Moody's, S&P, Fitch and Duff. Each Founders
Portfolio is permitted to invest a portion of the value of its net assets in
convertible securities and preferred stocks rated as low as B by Moody's, S&P,
Fitch or Duff, or if unrated, deemed to be of comparable quality by Founders.
These lower rated securities, though higher yielding, are characterized by risk.
See "Appendix" for a general description of Moody's, S&P, Fitch and Duff
ratings. Although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these
securities. These Portfolios will rely on the Manager's (or Founders' with
respect to the Founders Portfolios) judgment, analysis and experience in
evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities. These securities generally are considered by S&P, Moody's,
Fitch and Duff to be, on balance, predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than securities in the
higher rating categories.
Companies that issue certain of these securities often are highly leveraged
and may not have available to them more traditional methods of financing.
Therefore, the risk associated with acquiring the securities of such issuers
generally is greater than is the case with higher rated securities and will
fluctuate over time. For example, during an economic downturn or a sustained
period of rising interest rates, highly leveraged issuers of these securities
may experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be affected adversely by
specific corporate developments, or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing. The
risk of loss because of default by the issuer is significantly greater for the
holders of these securities because such securities generally are unsecured and
often are subordinated to other creditors of the issuer.
Because there is no established retail secondary market for many of these
securities, the Fund anticipates that such securities could be sold only to a
limited number of dealers or institutional investors. To the extent a secondary
trading market for these securities does exist, it generally is not as liquid as
the secondary market for higher rated securities. The lack of a liquid secondary
market may have an adverse impact on market price and yield and the Portfolio's
ability to dispose of particular issues when necessary to meet such Portfolio's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
security market for certain securities also may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes of valuing its
portfolio and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.
These securities may be particularly susceptible to economic downturns. It
is likely that any economic recession could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default for such securities.
The Core Value Portfolio and the Founders Portfolios may acquire these
securities during an initial offering. Such securities may involve special risks
because they are new issues. The Fund has no arrangement with any persons
concerning the acquisition of such securities, and the Manager (or Founders with
respect to the Founders Portfolios) will review carefully the credit and other
characteristics pertinent to such new issues.
INVESTMENT RESTRICTIONS
Each Portfolio has adopted investment restrictions numbered 1 through 10 as
fundamental policies. These restrictions cannot be changed, as to a Portfolio,
without approval by the holders of a majority (as defined in the 1940 Act) of
such Portfolio's outstanding voting shares. Investment restrictions numbered 11
through 15 are not fundamental policies and may be changed, as to a Portfolio,
by vote of a majority of the Fund's Board members at any time. No Portfolio may:
1. Invest more than 25% of the value of its total assets in the securities
of issuers in any single industry, provided that there shall be no limitation on
the purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
2. Invest more than 5% of its assets in the obligations of any one issuer,
except that up to 25% of the value of the Portfolio's total assets may be
invested, and securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities may be purchased, without regard to any such
limitations.
3. Purchase the securities of any issuer if such purchase would cause the
Portfolio to hold more than 10% of the voting securities of such issuer. This
restriction applies only with respect to 75% of the Portfolio's total assets.
4. Invest in commodities, except that a Portfolio may purchase and sell
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
5. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but a Portfolio may purchase and
sell securities that are secured by real estate or issued by companies that
invest or deal in real estate or real estate investment trusts.
6. Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the
Portfolio's total assets). For purposes of this Investment Restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
7. Make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements. However, a Portfolio may lend its
portfolio securities in an amount not to exceed 33-1/3% of the value of its
total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the Fund's
Board.
8. Act as an underwriter of securities of other issuers, except to the
extent a Portfolio may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.
9. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent the activities permitted in Investment
Restriction Nos. 4, 6, 12 and 13 may be deemed to give rise to a senior
security.
10. Purchase securities on margin, but a Portfolio may make margin deposits
in connection with transactions in options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
11. Invest in the securities of a company for the purpose of exercising
management or control, but the Portfolio will vote the securities it owns as a
shareholder in accordance with its views.
12. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when- issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
13. Purchase, sell or write puts, calls or combinations thereof, except as
described in the Prospectus and Statement of Additional Information.
14. Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 15% of the value of its net assets would be so invested.
15. Purchase securities of other investment companies, except to the extent
permitted under the 1940 Act.
* * *
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will not
constitute a violation of such restriction.
In addition, each Portfolio has adopted the following policies as
non-fundamental policies. Each Portfolio intends (i) to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) to comply
in all material respects with insurance laws and regulations that the Fund has
been advised are applicable to investments of separate accounts of Participating
Insurance Companies. As non-fundamental policies, these policies may be changed
by vote of a majority of the Board members at any time.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
BOARD MEMBERS OF THE FUND
JOSEPH S. DiMARTINO, CHAIRMAN OF THE BOARD. Since January 1995, Chairman of the
Board of various funds in the Dreyfus Family of Funds. He also is a
director of The Muscular Dystrophy Association, The Noel Group, Inc., a
venture capital company (for which, from February 1995 until November 1997,
he was Chairman of the Board), Career Blazers, Inc. (formerly, Staffing
Resources, Inc.), a temporary placement agency, HealthPlan Services
Corporation, a provider of marketing, administrative and risk management
services to health and other benefit programs, Carlyle Industries, Inc.
(formerly, Belding Heminway Company, Inc.), a button packager and
distributor, and Century Business Services, Inc. (formerly, International
Alliance Services, Inc.), a provider of various outsourcing functions for
small and medium sized companies. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief Operating
Officer of the Manager and Executive Vice President and a director of
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager. From
August 1994 until December 31, 1994, he was a director of Mellon Bank
Corporation. He is 55 years old and his address is 200 Park Avenue, New
York, New York 10166.
CLIFFORD L. ALEXANDER, JR., BOARD MEMBER. President of Alexander & Associates,
Inc., a management consulting firm. From 1977 to 1981, Mr. Alexander served
as Secretary of the Army and Chairman of the Board of the Panama Canal
Company, and from 1975 to 1977, he was a member of the Washington, D.C. law
firm of Verner, Liipfert, Bernhard, McPherson and Alexander. He is a
director of American Home Products Corporation, Cognizant Corporation, a
service provider of marketing information and information technology, The
Dun & Bradstreet Corporation, MCI Communications Corporation, Mutual of
America Life Insurance Company and TLC Beatrice International Holdings,
Inc. He is 64 years old and his address is 400 C Street, N.E., Washington,
D.C. 20002.
LUCY WILSON BENSON, BOARD MEMBER. President of Benson and Associates,
consultants to business and government. Mrs. Benson is a director of COMSAT
Corporation, General Re Corporation and Logistics Management Institute. She
is also a Trustee of the Alfred P. Sloan Foundation, Vice Chairman of the
Board of Trustees of Lafayette College, Vice Chairman of the Citizens
Network for Foreign Affairs, and a member of the Council on Foreign
Relations. Mrs. Benson served as a consultant to the U.S. Department of
State and to SRI International from 1980 and 1981. From 1977 to 1980, she
was Under Secretary of State for Security Assistance, Science and
Technology. She is 69 years old and her address is 46 Sunset Avenue,
Amherst, Massachusetts 01002.
There ordinarily will be no meetings of shareholders for the purpose of
electing Board members unless and until such time as less than a majority of the
Board members holding office have been elected by shareholders, at which time
the Board members then in office will call a shareholders' meeting for the
election of Board members. Under the 1940 Act, shareholders of record of not
less than two-thirds of the outstanding shares of the Fund may remove a Board
member through a declaration in writing or by vote cast in person or by proxy at
a meeting called for that purpose. The Board members are required to call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Board member when requested in writing to do so by the shareholders of
record of not less than 10% of the Fund's outstanding shares.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation
estimated to be paid by the Fund to each Board member for the fiscal year ending
December 31, 1998, and paid by all other funds in the Dreyfus Family of Funds
for which such person is a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation) for the year ended
December 31, 1997, is as follows:
Total Compensation
From Fund and Fund
Aggregate Estimated Complex Paid
Name of Board Member Compensation From Fund To Board Member
Joseph S. DiMartino $3,750 $597,128 (94)
Clifford L. Alexander, Jr. $3,000 $ 91,350 (18)
Lucy Wilson Benson $3,000 $ 77,055 (16)
OFFICERS OF THE FUND
MARIE E. CONNOLLY, PRESIDENT AND TREASURER. President, Chief Executive Officer,
Chief Compliance Officer and a director of the Distributor and Funds
Distributor, Inc., the ultimate parent of which is Boston Institutional
Group, Inc., and an officer of other investment companies advised or
administered by the Manager. She is 40 years old.
MARGARET W. CHAMBERS, VICE PRESIDENT AND SECRETARY. Senior Vice President and
General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From August
1996 to March 1998, she was Vice President and Assistant General Counsel
for Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was
an associate with the law firm of Ropes & Gray. She is 38 years old.
MICHAEL S. PETRUCELLI, VICE PRESIDENT, ASSISTANT TREASURER AND ASSISTANT
SECRETARY. Senior Vice President of Funds Distributor, Inc., and an officer
of other investment companies advised or administered by the Manager. From
December 1989 through November 1996, he was employed by GE Investments
where he held various financial, business development and compliance
positions. He also served as Treasurer of the GE Funds and as a Director of
GE Investment Services. He is 36 years old.
STEPHANIE D. PIERCE, VICE PRESIDENT, ASSISTANT TREASURER AND ASSISTANT
SECRETARY. Vice President and Client Development Manager of Funds
Distributor, Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, N.A. From August 1995 to
April 1997, she was an Assistant Vice President with Hudson Valley Bank,
and from September 1990 to August 1995, she was a Second Vice President
with Chase Manhattan Bank. She is 30 years old.
MARY A. NELSON, VICE PRESIDENT AND ASSISTANT TREASURER. Vice President of the
Distributor and Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. From September 1989 to
July 1994, she was an Assistant Vice President and Client Manager for The
Boston Company, Inc. She is 33 years old.
GEORGE A. RIO, VICE PRESIDENT AND ASSISTANT TREASURER. Executive Vice President
and Client Service Director of Funds Distributor, Inc., and an officer of
other investment companies advised or administered by the Manager. From
June 1995 to March 1998, he was Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he was
Director of Business Development for First Data Corporation. From September
1983 to May 1994, he was Senior Vice President and Manager of Client
Services and Director of Internal Audit at The Boston Company, Inc. He is
43 years old.
JOSEPH F. TOWER, III, VICE PRESIDENT AND ASSISTANT TREASURER. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. From July 1988 to August
1994, he was employed by The Boston Company, Inc. where he held various
management positions in the Corporate Finance and Treasury areas. He is 35
years old.
DOUGLAS C. CONROY, VICE PRESIDENT AND ASSISTANT SECRETARY. Assistant Vice
President of Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank & Trust
Company. He is 28 years old.
CHRISTOPHER J. KELLEY, VICE PRESIDENT AND ASSISTANT SECRETARY. Vice President
and Senior Associate General Counsel of the Distributor and Funds
Distributor, Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1994 to July 1996, he was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, he was
employed by Putnam Investments in legal and compliance capacities. He is 33
years old.
KATHLEEN K. MORRISEY, VICE PRESIDENT AND ASSISTANT SECRETARY. Vice President and
Assistant Secretary of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From July 1994
to November 1995, she was a Fund Accountant for Investors Bank & Trust
Company. She is 25 years old.
ELBA VASQUEZ, VICE PRESIDENT AND ASSISTANT SECRETARY. Assistant Vice President
of Funds Distributor, Inc., and an officer of other investment companies
advised or administered by the Manager. From March 1990 to May 1996, she
was employed by U.S. Trust Company of New York, where she held various
sales and marketing positions. She is 36 years old.
The address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166.
As of September 14, 1998, none of the Fund's Board members or officers
owned shares of any Portfolio.
MANAGEMENT ARRANGEMENTS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE RELEVANT PROSPECTUS ENTITLED "MANAGEMENT OF THE FUND."
MANAGEMENT AGREEMENT. The Manager provides management services pursuant to
the Management Agreement (the "Agreement") with the Fund dated April 16, 1998,
as amended July 16, 1998. As to each Portfolio, the Agreement is subject to
annual approval by (i) the Fund's Board or (ii) vote of a majority (as defined
in the 1940 Act) of the outstanding voting securities of such Portfolio,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. As to each Portfolio, the Agreement is
terminable without penalty, on 60 days' notice, by the Fund's Board or by vote
of the holders of a majority of the shares of such Portfolio, or, upon not less
than 90 days' notice, by the Manager. The Agreement will terminate
automatically, as to the relevant Portfolio, in the event of its assignment (as
defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E. Canter,
Vice Chairman, Chief Investment Officer and a director; Lawrence S. Kash, Vice
Chairman-Distribution and a director; J. David Officer, Vice Chairman and a
director; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr.,
Executive Vice President; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Patrice M. Kozlowski, Vice President-Corporate Communications; Mary
Beth Leibig, Vice President- Human Resources; Andrew S. Wasser, Vice
President-Information Services; Richard Terres, Vice President; Wendy Strutt,
Vice President; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and
Richard F. Syron, directors.
SUB-INVESTMENT ADVISORY AGREEMENT. With respect to the Founders Portfolios,
the Manager has entered into a Sub-Investment Advisory Agreement with Founders
dated July 16, 1998 (the "Founders Sub-Advisory Agreement"). As to each Founders
Portfolio, the Founders Sub-Advisory Agreement is subject to annual approval by
(i) the Fund's Board or (ii) vote of a majority (as defined in the 1940 Act) of
the Portfolio's outstanding voting securities, provided that in either event the
continuance also is approved by a majority of the Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund or Founders, by
vote cast in person at a meeting called for the purpose of voting on such
approval. As to each Founders Portfolio, the Founders Sub-Advisory Agreement is
terminable without penalty, (i) by the Manager on 60 days' notice, (ii) by the
Fund's Board or by vote of the holders of a majority of the Portfolio's
outstanding voting securities on 60 days' notice, or (iii) upon not less than 90
days' notice, by Founders. The Founders Sub-Advisory Agreement will terminate
automatically, as to the relevant Founders Portfolio, in the event of its
assignment (as defined in the 1940 Act).
The following persons are officers of Founders: Christopher M. Condron,
Chairman; Stephen E. Canter, Acting Chief Executive Officer; Gregory P.
Contillo, Senior Vice President and Chief Marketing Officer; Michael W. Gerding,
Senior Vice President; Michael K. Haines, Senior Vice President; David L. Ray,
Senior Vice President, Treasurer and Assistant Secretary; Robert T. Ammann, Vice
President; Angelo Barr, Vice President and National Sales Manager; Kenneth R.
Christoffersen, Vice President, General Counsel and Secretary; Frank Gaffney,
Vice President; Roberto Galindo, Jr., Vice President; Laurine Garrity, Vice
President; Brian F. Kelly, Vice President; Paul A. LaRocco, Vice President;
Douglas A. Loeffler, Vice President; John B. Mezger, Vice President and Director
of Private Advisory Services; and Linda M. Ripley, Vice President.
The Manager manages the investments of each Portfolio in accordance with
the stated policies of the Portfolio, subject to the approval of the Fund's
Board. With respect to each Founders Portfolio, Founders provides day-to-day
management of the Portfolio's investments, subject to the supervision of the
Manager and the Fund's Board. The Manager and Founders are responsible for
investment decisions with respect to the Core Value and MidCap Stock Portfolios
and Founders Portfolios, respectively, and provide the Fund with portfolio
managers who are authorized by the Fund's Board to execute purchases and sales
of securities for the relevant Portfolio. The portfolio managers who comprise
the committee responsible for making investment decisions for Core Value
Portfolio are Francis DeAngelis, William Goldenberg and Valerie Sill. The
primary portfolio manager of Founders Growth Portfolio is Paul A. LaRocco. The
primary portfolio manager of Founders International Equity Portfolio is Douglas
A. Loeffler. The primary portfolio manager of Founders Passport Portfolio is
Michael W. Gerding. The portfolio managers of MidCap Stock Portfolio are John
O'Toole, Ronald Gala, Steven Falci, Robert Wilke, Mark Sickorski, Harry Grosse
and Jocelyn Reed.
The Manager and Founders maintain research departments with professional
portfolio managers and securities analysts who provide research services for the
Portfolios and for other funds advised by the Manager or Founders.
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the Manager (or, if applicable,
Founders). The expenses borne by the Fund include: organizational costs, taxes,
interest, loan commitment fees, dividends and interest on securities sold short,
brokerage fees and commissions, if any, fees of Board members who are not
officers, directors, employees or holders of 5% or more of the outstanding
voting securities of the Manager or Founders or any of their affiliates,
Securities and Exchange Commission fees, state Blue Sky qualification fees,
advisory fees, charges of custodians, transfer and dividend disbursing agents'
fees, certain insurance premiums, industry association fees, outside auditing
and legal expenses, costs of maintaining the Fund's existence, costs of
independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and printing prospectuses
and statements of additional information for regulatory purposes and for
distribution to existing shareholders, and any extraordinary expenses. Expenses
attributable to a particular Portfolio are charged against the assets of that
Portfolio; other expenses of the Fund are allocated among the Portfolios on the
basis determined by the Fund's Board, including, but not limited to,
proportionately in relation to the net assets of each Portfolio.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and promotional
expenditures, using its own resources, as it from time to time deems
appropriate.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Portfolio's assets increases.
PURCHASE OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE RELEVANT PROSPECTUS ENTITLED "HOW TO BUY SHARES."
THE DISTRIBUTOR. The Distributor serves as the Fund's distributor on a best
efforts basis pursuant to an agreement which is renewable annually. The
Distributor also acts as distributor for the other funds in the Dreyfus Family
of Funds and for certain other investment companies.
REDEMPTION OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE RELEVANT PROSPECTUS ENTITLED "HOW TO REDEEM SHARES."
REDEMPTION COMMITMENT. The Fund has committed to pay in cash all redemption
requests by any shareholder of record, limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the value of a Portfolio's net assets
at the beginning of such period. Such commitment is irrevocable without the
prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amount, the Fund's Board reserves the
right to make payments in whole or part in securities or other assets of the
Portfolio in case of an emergency or any time a cash distribution would impair
the liquidity of the Portfolio to the detriment of the existing shareholders. In
such event, the securities would be valued in the same manner as the Portfolio's
investments are valued. If the recipient sold such securities, brokerage charges
might be incurred.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the New York Stock Exchange
is closed (other than customary weekend and holiday closings), (b) when trading
in the markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the Securities and Exchange Commission so that disposal
of the Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Fund's shareholders.
DETERMINATION OF NET ASSET VALUE
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE RELEVANT PROSPECTUS ENTITLED "HOW TO BUY SHARES."
Each Portfolio's investment securities are valued at the last sale price on
the securities exchange or national securities market on which such securities
are primarily traded. Securities not listed on an exchange or national
securities market, or securities in which there were no transactions, are valued
at the average of the most recent bid and asked prices, except in the case of
open short positions where the asked price is used for valuation purposes. Bid
price is used when no asked price is available. Market quotations for foreign
securities denominated in foreign currencies are translated into U.S. dollars at
the prevailing rates of exchange. Because of the need to obtain prices as of the
close of trading on various exchanges throughout the world, the calculation of
net asset value may not take place contemporaneously with the determination of
prices of the Core Value Portfolio's or any Founders Portfolio's foreign
investment securities. If events materially affecting the value of such
securities occur between the time when their price is determined and the time
when the Portfolio's net asset value is calculated, such securities may be
valued at fair value as determined in good faith by the Board. Short-term
investments are carried at amortized cost, which approximates value. Any
securities or other assets for which recent market quotations are not readily
available are valued at fair value as determined in good faith by the Fund's
Board. Expenses and fees, including the management fee (reduced by the expense
limitation, if any), are accrued daily and taken into account for the purpose of
determining the net asset value of shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Fund's Board, are valued at fair value as determined in
good faith by the Fund's Board. The Fund's Board will review the method of
valuation on a current basis. In making their good faith valuation of restricted
securities, the Board members generally will take the following factors into
consideration: restricted securities which are, or are convertible into,
securities of the same class of securities for which a public market exists
usually will be valued at market value less the same percentage discount at
which purchased. This discount will be revised periodically by the Fund's Board
if the Board members believe that it no longer reflects the value of the
restricted securities. Restricted securities not of the same class as securities
for which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Fund's Board.
NEW YORK STOCK EXCHANGE CLOSINGS. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE RELEVANT PROSPECTUS ENTITLED "DIVIDENDS, DISTRIBUTIONS
AND TAXES."
It is expected that each Portfolio will qualify as a regulated investment
company under the Code. Each Portfolio intends to continue to so qualify as long
as such qualification is in the best interests of its shareholders. As a
regulated investment company, each Portfolio will pay no Federal income tax on
net investment income and net realized securities gains to the extent that such
income and gains are distributed to shareholders in accordance with applicable
provisions of the Code. To qualify as a regulated investment company, the
Portfolio must meet several requirements. These requirements include the
following: (1) at least 90% of the Portfolio's gross income must be derived from
dividends, interest, payments with respect to securities loans, gains from the
sale or disposition of stock, securities or foreign currencies or other income
(including gain from options, futures or forward contracts) derived in
connection with the Portfolio's investment business, (2) at the close of each
quarter of the Portfolio's taxable year, (a) at least 50% of the value of the
Portfolio's assets must consist of cash, United States Government securities,
securities of other regulated investment companies and other securities (limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Portfolio and not more than 10% of the outstanding voting securities of
such issuer) and (b) not more than 25% of the value of the Portfolio's assets
may be invested in the securities of any one issuer (other than United States
Government securities or securities of other regulated investment companies) or
of two or more issuers which the Portfolio controls and which are determined to
be engaged in similar or related trades or businesses and (3) at least 90% of
the Portfolio's net income (consisting of net investment income and net
short-term capital gain) must be distributed to its shareholders. The Portfolios
may be subject to a non-deductible 4% excise tax, measured with respect to
certain undistributed amount of investment income and capital gains. The term
"regulated investment company" does not imply the supervision of management or
investment practices or policies by any government agency.
Founders International Equity Portfolio and Founders Passport Portfolio may
qualify for and may make an election permitted under Section 853 of the Code so
that shareholders may be eligible to claim a credit or deduction on their
Federal income tax returns for, and will be required to treat as part of the
amounts distributed to them, their pro rata portion of qualified taxes paid or
incurred by the Portfolio to foreign countries (which taxes relate primarily to
investment income). The Portfolio may make an election under Section 853 of the
Code, provided that more than 50% of the value of the Portfolio's total assets
at the close of the taxable year consists of securities in foreign corporations,
and the Portfolio satisfies the applicable distribution provisions of the Code.
The foreign tax credit available to shareholders is subject to certain
limitations imposed by the Code.
If a Portfolio invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for Federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result in
the imposition of certain Federal income taxes on the Portfolio. In addition,
gain realized from the sale or other disposition of PFIC securities may be
treated as ordinary income under Section 1291 of the Code and gain realized with
respect to PFIC securities that are marked to market will be treated as ordinary
income under Section 1296 of the Code.
Investment by a Portfolio in securities issued or acquired at a discount,
or providing for deferred interest or for payment of interest in the form of
additional obligations could under special tax rules affect the amount, timing
and character of distributions to shareholders by causing the Portfolio to
recognize income prior to the receipt of cash payments. For example, the
Portfolio could be required to accrue a portion of the discount (or deemed
discount) at which the securities were issued each year and to distribute such
income in order to maintain its qualification as a regulated investment company.
In such case, the Portfolio may have to dispose of securities which it might
otherwise have continued to hold in order to generate cash to satisfy these
distribution requirements.
Shareholders of the Fund will be variable annuity and variable life
insurance separate accounts established by insurance companies to fund Policies
and Eligible Plans. Section 817(h) of the Code and the regulations thereunder
set standards for diversification of the investments underlying Policies in
order for the Policies to be treated as life insurance. These requirements,
which are in addition to diversification requirements applicable to the
Portfolios under Subchapter M of the Code, may affect the composition of a
Portfolio's investments.
The Secretary of the Treasury may in the future issue additional
regulations or revenue rulings that will prescribe the circumstances in which a
Policy owner's control of the investments of a separate account may cause the
Policy owner, rather than the insurance company, to be treated as the owner of
assets of the separate account. Failure to comply with Section 817(h) of the
Code or any regulation thereunder, or with any regulations or revenue rulings on
Policy owner control, if promulgated, would cause earnings regarding a Policy
owner's interest in the separate account to be includable in the Policy owner's
gross income in the year earned.
The Fund will not report dividends paid to Eligible Plans to the Internal
Revenue Service ("IRS"). Generally, distributions from Eligible Plans, except
those representing returns of non- deductible contributions thereto, will be
taxable as ordinary income and, if made prior to the time the participant
reaches age 59-1/2, generally will be subject to an additional tax equal to 10%
of the taxable portion of the distribution. If the distribution from an Eligible
Plan (other than certain governmental or church plans) for any taxable year
following the year in which the participant reaches age 70-1/2 is less than the
"minimum required distribution" for that taxable year, an excise tax equal to
50% of the deficiency may be imposed by the IRS. (In some cases, minimum
required distributions need not commence until the participant retires, if
later.) The administrator, trustee or custodian of such a Plan will be
responsible for reporting distributions from the Plan to the IRS. Participants
in Eligible Plans will receive a disclosure statement describing the
consequences of a distribution from the Plan from the administrator, trustee or
custodian of the Plan prior to receiving the distribution. Moreover, certain
contributions to an Eligible Plan in excess of the amounts permitted by law may
be subject to an excise tax. For more information concerning the Federal income
tax consequences, Policy owners should refer to the prospectus for their
contracts or policies and Eligible Plan participants should consult the Plan's
administrator or trustee.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities on a securities exchange are
effected by the Manager (or Founders with respect to the Founders Portfolios)
through brokers who charge a negotiated commission for their services based on
the quality and quantity of execution services provided by the broker in the
light of generally prevailing rates. In the over-the-counter market, securities
are generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission, although the price of the security
usually includes a profit to the dealer. In underwritten offerings, securities
are purchased at a fixed price that includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
Transactions are allocated to various dealers by the Fund's portfolio managers
in their best judgment. The primary consideration is prompt and effective
execution of orders at the most favorable price.
Subject to that primary consideration, dealers may be selected for
research, statistical or other services to enable the Manager and Founders to
supplement their own research and analysis with the views and information of
other securities firms. Such services may include advice concerning the value of
securities; the advisability of investing in, purchasing, or selling securities;
and the availability of securities or the purchasers or sellers of securities.
In addition, such broker-dealers may furnish analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio
strategy, and performance of accounts; and effect securities transactions, and
perform functions incidental thereto (such as clearance and settlement).
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager and Founders in advising
other funds or accounts and, conversely, research services furnished to the
Manager and Founders by brokers in connection with other funds or accounts may
be used in advising a Portfolio. Although it is not possible to place a dollar
value on these services, it is the opinion of the Manager that the receipt and
study of such services should not reduce the overall research department
expenses.
Brokers also will be selected because of their ability to handle special
executions such as are involved in large block trades or broad distributions,
provided the primary consideration is met. Large block trades may, in certain
cases, result from two or more funds in the Dreyfus Family of Funds being
engaged simultaneously in the purchase or sale of the same security. Certain of
the Portfolios' transactions in securities of foreign issuers may not benefit
from the negotiated commission rates available for transactions in securities of
domestic issuers. Higher portfolio turnover rates are likely to result in
comparatively greater brokerage expenses. The overall reasonableness of
brokerage commissions paid is evaluated based upon knowledge of available
information as to the general level of commissions paid by other institutional
investors for comparable services.
The Fund contemplates that, consistent with the policy of obtaining the
most favorable net price, brokerage transactions may be conducted through the
Manager or Founders or their affiliates, including Dreyfus Investment Services
Corporation. The Fund's Board has adopted procedures in conformity with Rule
17e-1 under the 1940 Act to ensure that all brokerage commissions paid to the
Manager or Founders or their affiliates are reasonable and fair.
PERFORMANCE INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE RELEVANT PROSPECTUS ENTITLED "PERFORMANCE INFORMATION."
Performance figures for the Portfolios will not reflect the separate
charges applicable to the variable annuity contracts and variable life policies
offered by Participating Insurance Companies.
Current yield is computed pursuant to a formula which operates as follows:
The amount of the relevant Portfolio's expenses accrued for the 30-day period
(net of reimbursements) is subtracted from the amount of the dividends and
interest earned (computed in accordance with regulatory requirements) by such
Portfolio during the period. That result is then divided by the product of: (a)
the average daily number of such Portfolio's shares outstanding during the
period that were entitled to receive dividends, and (b) the net asset value per
share on the last day of the period less any undistributed earned income per
share reasonably expected to be declared as a dividend shortly thereafter. The
quotient is then added to 1, and that sum is raised to the 6th power, after
which 1 is subtracted. The current yield is then arrived at by multiplying the
result by 2.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
distributions), dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in the period) and
subtracting 1 from the result.
Total return is calculated by subtracting the amount of the relevant
Portfolio's net asset value per share at the beginning of a stated period from
the net asset value per share at the end of the period (after giving effect to
the reinvestment of dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning of the period.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic or financial conditions, developments
and/or events. From time to time advertising materials for the Fund also may
refer to Morningstar ratings and related analyses supporting the rating. From
time to time, advertising materials from the Fund may refer to, or include,
commentary by the Fund's portfolio managers relating to their investment
strategy, asset growth of the Portfolio, current or past business, political,
economic or financial conditions and other matters of general interest to
shareholders.
INFORMATION ABOUT THE FUND
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE RELEVANT PROSPECTUS ENTITLED "GENERAL INFORMATION."
Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Portfolio shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights and
are freely transferable.
Under Massachusetts law, shareholders, under certain circumstances, could
be held personally liable for the obligations of the Fund. However, the Fund's
Agreement and Declaration of Trust (the "Trust Agreement") disclaims shareholder
liability for acts or obligations of the Fund and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Fund or a Trustee. The Trust Agreement provides for
indemnification from the Fund's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations, a possibility which management believes is remote. Upon
payment of any liability incurred by the Fund, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the Fund.
The Fund intends to conduct its operations in such a way so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the Fund.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of any investment
company, such as the Fund, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each portfolio affected by such matter. Rule 18f-2 further provides that a
portfolio shall be deemed to be affected by a matter unless it is clear that the
interests of each portfolio in the matter are identical or that the matter does
not affect any interest of such portfolio. However, the Rule exempts the
selection of independent accountants and the election of Board members from the
separate voting requirements of the rule.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the Transfer
Agent arranges for the maintenance of shareholder account records for the Fund,
the handling of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses.
Mellon Bank, N.A., the Manager's parent, One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, serves as the Fund's Custodian with respect to
the Core Value, Founders Growth, and MidCap Stock Portfolios. Under a custody
agreement with the Fund, Mellon Bank, N.A. holds each such Portfolio's
securities and keeps all necessary accounts and records. For its custody
services, Mellon Bank, N.A. receives a monthly fee based on the market value of
each such Portfolio's assets held in custody and receives certain securities
transaction charges.
The Bank of New York, 90 Washington Street, New York, New York 10286,
serves as the Fund's custodian with respect to the Founders International Equity
and Founders Passport Portfolios. The Bank of New York has no part in
determining the investment policies of the Portfolios or which securities are to
be purchased or sold by the Portfolios.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectuses.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund. The auditors
examine the Fund's financial statements and provide other audit, tax and related
services.
<PAGE>
APPENDIX
Description of certain ratings:
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned to a debt obligation.
Capacity to pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB
Bonds rated BB have less near-term vulnerability to default than other
speculative grade bonds. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B
Bonds rated B have a greater vulnerability to default but presently have
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Bonds rated CCC have a current identifiable vulnerability to default, and
are dependent upon favorable business, financial and economic conditions to meet
timely payments of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.
CC
The rating CC is typically applied to bonds subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to bonds subordinated to senior debt
which is assigned an actual or implied CCC- rating.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or a minus
sign, which is used to show relative standing within the major ratings
categories, except in the AAA (Prime Grade) category.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Issues assigned an A rating are regarded as having the greatest capacity for
timely payment. Issues in this category are delineated with the numbers 1, 2 and
3 to indicate the relative degree of safety.
A-1
This designation indicates the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted with a plus sign (+)
designation.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Moody's
Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a rating for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual default of interest and/or
principal payments. Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or reorganization of
the obligor. DDD represents the highest potential for recovery on these bonds
and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
Duff
Bond Ratings
AAA
Bonds rated AAA are considered highest credit quality. The risk factors are
negligible, being only slightly more than for risk-free U.S. Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
A
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
BBB
Bonds rated BBB are considered to have below average protection factors but
still considered sufficient for prudent investment. Considerable variability in
risk exists during economic cycles.
BB
Bonds rated BB are below investment grade but are deemed by Duff as likely
to meet obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company fortunes. Overall
quality may move up or down frequently within the category.
B
Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating within
this category or into a higher or lower quality rating grade.
CCC
Bonds rated CCC are well below investment grade securities. Such bonds may
be in default or have considerable uncertainty as to timely payment of interest,
preferred dividends and/or principal. Protection factors are narrow and risk can
be substantial with unfavorable economic or industry conditions and/or with
unfavorable company developments.
DD
Defaulted debt obligations. Issuer has failed to meet scheduled principal
and/or interest payments.
Plus (+) and minus (-) signs are used with a rating symbol (except AAA) to
indicate the relative position of a credit within the rating category.
Commercial Paper Rating
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor.
<PAGE>
FINANCIAL STATEMENT AND REPORT OF INDEPENDENT AUDITORS
STATEMENT OF ASSETS AND LIABILITIES
April 20, 1998
<TABLE>
<CAPTION>
Core Value Midcap
PORTFOLIO STOCK PORTFOLIO
ASSETS
<S> <C> <C>
Cash................................... $50,000 $50,000
Deferred organization
expenses............................. 30,250 30,250
------ ------
Total Assets........................... 80,250 80,250
LIABILITIES
Accrued organization
expenses............................. 30, 250 30, 250
======= =======
NET ASSETS applicable to the
shares of beneficial
interest ($.001 par value)
issued and outstanding
(unlimited number of
shares authorized)..................... $50,000 $50,000
====== ======
SHARES OUTSTANDING......................... 4,000 4,000
NET ASSET VALUE
PER SHARE.............................. $12.50 $12.50
====== ======
</TABLE>
NOTE - Dreyfus Investment Portfolios (the "Fund") is organized as a
Massachusetts business trust and has had no operations as of the date hereof
other than matters relating to its organization and registration as an open-end
investment company under the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended, and the sale and issuance of 4,000 shares of
beneficial interest each of the Core Value Portfolio and MidCap Stock Portfolio,
respectively, to Premier Mutual Fund Services, Inc. ("Initial Shares").
Organization expenses payable by the Fund have been deferred and will be
amortized to operations from the date operations commence over a period which it
is expected that a benefit will be realized, not to exceed five years. If any of
the Initial Shares are redeemed during the amortization period by any holder
thereof, the redemption proceeds will be reduced by any unamortized organization
expenses in the same proportion as the number of Initial Shares being redeemed
bears to the number of Initial Shares outstanding at the time of the redemption.
Pursuant to a management agreement with The Dreyfus Corporation, the
management fee for each Portfolio is computed at the annual rate of .75 of 1% of
the value of the average daily net assets of each Portfolio and is payable
monthly.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Trustees
Dreyfus Investment Portfolios
We have audited the accompanying statement of assets and liabilities of
Dreyfus Investment Portfolios (comprised of Core Value Portfolio and MidCap
Stock Portfolio) as of April 20, 1998. This statement of assets and liabilities
is the responsibility of the Fund's management. Our responsibility is to express
an opinion on this statement of assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Dreyfus
Investment Portfolios at April 20, 1998, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New York, New York
April 22, 1998
<PAGE>
DREYFUS INVESTMENT PORTFOLIOS
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements included in the Statement of Additional
Information:
(1) Statements of Assets and Liabilities as of April 20, 1998.
(2) Reports of Ernst & Young LLP, Independent Auditors, dated
April 22, 1998.
(b) Exhibits:
(1) Agreement and Declaration of Trust*
(2) By-Laws*
(5)(a) Management Agreement
(5)(b) Sub-Investment Advisory Agreement+
(6) Distribution Agreement
(8) Custody Agreement**
(10) Opinion, including consent, of Stroock & Stroock & Lavan
LLP**
(11) Consent of Independent Auditors
Other Exhibit: (a) Secretary's Certificate**
(b) Rule 18f-1 Election Assistant**
- ---------
* Incorporated by reference to Registrant's Registration Statement filed
February 28, 1998.
** Incorporated by reference to Pre-Effective Amendment No 1. to Registrant's
Registration Statement filed April 24, 1998.
+ Incorporated by reference to Post-Effective Amendment No. 1 to Registrant's
Registration Statement filed July 17, 1998.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
Number of Record
Title of Class Holders
As of September 14, 1998
Beneficial Interests, par value
$.001 per share
Core Value Portfolio -3-
MidCap Stock Portfolio -3-
Founders Growth Portfolio -1-
Founders International Equity Porfolio -1-
Founders Passport Portfolio -1-
ITEM 27. INDEMNIFICATION
Reference is made to Article EIGHTH of the Registrant's Agreement and
Declaration of Trust filed as Exhibit 1. The application of these provisions is
limited by Article 10 of the Registrant's By-Laws filed as Exhibit 2 and by the
following undertaking set forth in the rules promulgated by the Securities and
Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Board members, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a Board member, officer or controlling person of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such Board member, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue.
Reference also is made to the form of Distribution Agreement filed as
Exhibit 6.
ITEM 28(A). BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Dreyfus Corporation ("Dreyfus") and its subsidiary companies
comprise a financial service organization whose business consists primarily of
providing investment management services as the investment adviser and manager
for investment companies registered under the Investment Company Act of 1940 and
as an investment adviser to institutional and individual accounts. Dreyfus also
serves as sub investment adviser to and/or administrator of other investment
companies. Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus,
serves primarily as a registered broker-dealer of shares of investment companies
sponsored by Dreyfus and of other investment companies for which Dreyfus acts as
investment adviser, sub-investment adviser or administrator. Dreyfus Management,
Inc., another wholly-owned subsidiary, provides investment management services
to various pension plans, institutions and individuals.
OFFICERS AND DIRECTORS OF DREYFUS
Name and Position
WITH DREYFUS OTHER BUSINESSES
MANDELL L. BERMAN Real estate consultant and
Director private investor
29100 Northwestern Highway
Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of
Trustees:
Skillman Foundation;
Member of the Board of Vintners
International
BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive
Officer and Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
W. KEITH SMITH Chairman and Chief Executive
Chairman of the Board Officer:
The Boston Company****;
Vice Chairman of the Board:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Executive Mellon Bank Corporation***;
Officer, Chief Operating Officer The Boston Company****;
and a Director Deputy Director:
Mellon Trust***;
Chief Executive Officer:
The Boston Company Asset
Management, Inc.****;
President:
Boston Safe Deposit and Trust
Company****
STEPHEN E. CANTER Director:
Vice Chairman, Chief Investment The Dreyfus Trust Company++;
Officer and Former Chairman and Chief Executive
a Director Officer:
Kleinwort Benson Investment
Management Americas Inc.*
LAWRENCE S. KASH
Vice Chairman - Distribution and
a Director Chairman, President and Chief
Executive Officer:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109;
Executive Vice President and
Director:
Dreyfus Service Organization,
Inc.**;
Director:
Dreyfus America Fund+++;
The Dreyfus Consumer Credit
Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****
RICHARD F. SYRON Chairman of the Board and
Director Chief Executive Officer:
American Stock Exchange
86 Trinity Place
New York, New York 10006;
Director:
John Hancock Mutual Life Insurance
Company John Hancock Place, Box
111 Boston, Massachusetts 02117;
Thermo Electron Corporation 81
Wyman Street, Box 9046 Waltham,
Massachusetts 02254-9046; American
Business Conference 1730 K Street,
NW, Suite 120 Washington, D.C.
20006;
Trustee:
Boston College - Board of Trustees
140 Commonwealth Avenue
Chestnut Hill, Massachusetts
02167-3934
J. DAVID OFFICER Vice Chairman:
Vice Chairman and a Director The Dreyfus Corporation*;
Director:
Dreyfus Financial Services
Corporation*****;
Dreyfus Investment Services
Corporation*****;
Mellon Trust of Florida
2875 Northeast 191st Street
North Miami Beach, Florida 33180;
Mellon Preferred Capital
Corporation****;
Boston Group Holdings, Inc.****;
Mellon Trust of New York 1301
Avenue of the Americas - 41st Floor
New York, New York 10019; Mellon
Trust of California 400 South Hope
Street Los Angeles, California
90071-2806;
Executive Vice President:
Mellon Bank, N.A.***;
Vice Chairman and Director:
The Boston Company; Inc.****;
President and Director:
RECO, Inc.****;
The Boston Company Financial
Services, Inc.****;
Boston Safe Deposit and
Trust Company****;
RONALD P. O'HANLEY III Vice Chairman:
Vice Chairman The Dreyfus Corporation*;
Director:
The Boston Company Asset
Management, LLC****;
TBCAM Holding, Inc.****;
Franklin Portfolio Holdings, Inc.
Two International Place - 22nd Fl.
Boston, Massachusetts 02110;
Mellon Capital Management
Corporation
595 Market Street, Suite #3000
San Francisco, California 94105;
Certus Asset Advisors Corporation
One Bush Street, Suite 450
San Francisco, California 94104;
Mellon-France Corporation***;
Chairman and Director:
Boston Safe Advisors, Inc.****;
Partner Representative:
Pareto Partners
271 Regent Street
London, England W1R 8PP;
Chairman and Trustee:
Mellon Bond Associates, LLP***;
Mellon Equity Associates, LLP***;
Trustee:
Laurel Capital Advisors, LLP***;
Chairman, President and Chief
Executive Officer:
Mellon Global Investing Corp.***;
Partner:
McKinsey & Company, Inc.
Boston, Massachusetts
WILLIAM T. SANDALLS, JR. Director:
Executive Vice President Dreyfus Partnership Management,
Inc.*;
Seven Six Seven Agency, Inc.*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903;
President and Director:
Lion Management, Inc.*;
Executive Vice President and
Director:
Dreyfus Service Organization,
Inc.*;
Vice President, Chief Financial
Officer and Director:
Dreyfus America Fund+++;
Vice President and Director:
The Dreyfus Consumer Credit
Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and
Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
MARK N. JACOBS Vice President, Secretary and
Vice President, Director:
General Counsel Lion Management, Inc.*;
and Secretary Secretary:
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization,
Inc.**;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation***
Services
JAMES BITETTO None
Assistant Secretary
STEVEN F. NEWMAN Vice President, Secretary and
Assistant Secretary Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Provience, Rhode Island 02903;
Assistant Secretary:
Dreyfus Service Organization,
Inc.****
- ------------------------
* The address of the business so indicated is 200 Park Avenue, New York,
New York 10166.
** The address of the business so indicated is 131 Second Street, Lewes,
Delaware 19958.
*** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
**** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
***** The address of the business so indicated is Union Trust Building, 501
Grant Street, Room 179, Pittsburgh, Pennsylvania 15259.
+ The address of the business so indicated is Atrium Building, 80 Route 4
East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144.
+++ The address of the business so indicated is 69, Route 'd' Esch, L-1470,
Luxembourg.
++++ The address of the business so indicated is 69, Route 'd' Esch, L-2953,
Luxembourg.
+++++ The address of the business so indicated is 53 State Street, Boston,
Massachusetts 02103.
ITEM 28(B). BUSINESS AND OTHER CONNECTIONS OF SUB-INVESTMENT ADVISER
Registrant is fulfilling the requirement of this Item 28(b) to provide
a list of the officers and directors of Founders Asset Managemnt LLC, the
sub-investment adviser of the Registrant's Founders Portfolios (the
"Sub-Adviser"), together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by the Sub-Adviser or
those of its officers and directors during the past two years, by incorporating
by reference the information contained in the Form ADV filed with the SEC
pursuant to the Investment Advisers Act of 1940 by the Sub-Adviser (SEC File No.
801-55220).
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal
underwriter or exclusive distributor:
1. Comstock Partners Funds, Inc.
2. Dreyfus A Bonds Plus, Inc.
3. Dreyfus Appreciation Fund, Inc.
4. Dreyfus Asset Allocation Fund, Inc.
5. Dreyfus Balanced Fund, Inc.
6. Dreyfus BASIC GNMA Fund
7. Dreyfus BASIC Money Market Fund, Inc.
8. Dreyfus BASIC Municipal Fund, Inc.
9. Dreyfus BASIC U.S. Government Money Market Fund
10. Dreyfus California Intermediate Municipal Bond Fund
11. Dreyfus California Tax Exempt Bond Fund, Inc.
12. Dreyfus California Tax Exempt Money Market Fund
13. Dreyfus Cash Management
14. Dreyfus Cash Management Plus, Inc.
15. Dreyfus Connecticut Intermediate Municipal Bond Fund
16. Dreyfus Connecticut Municipal Money Market Fund, Inc.
17. Dreyfus Florida Intermediate Municipal Bond Fund
18. Dreyfus Florida Municipal Money Market Fund
19. The Dreyfus Fund Incorporated
20. Dreyfus Global Bond Fund, Inc.
21. Dreyfus Global Growth Fund
22. Dreyfus GNMA Fund, Inc.
23. Dreyfus Government Cash Management Funds
24. Dreyfus Growth and Income Fund, Inc.
25. Dreyfus Growth and Value Funds, Inc.
26. Dreyfus Growth Opportunity Fund, Inc.
27. Dreyfus Income Funds
28. Dreyfus Index Funds, Inc.
29. Dreyfus Institutional Money Market Fund
30. Dreyfus Institutional Preferred Money Market Fund
31. Dreyfus Institutional Short Term Treasury Fund
32. Dreyfus Insured Municipal Bond Fund, Inc.
33. Dreyfus Intermediate Municipal Bond Fund, Inc.
34. Dreyfus International Funds, Inc.
35. Dreyfus Investment Grade Bond Funds, Inc.
36. The Dreyfus/Laurel Funds, Inc.
37. The Dreyfus/Laurel Funds Trust
38. The Dreyfus/Laurel Tax-Free Municipal Funds
39. Dreyfus Lifetime Portfolios, Inc.
40. Dreyfus Liquid Assets, Inc.
41. Dreyfus Massachusetts Intermediate Municipal Bond Fund
42. Dreyfus Massachusetts Municipal Money Market Fund
43. Dreyfus Massachusetts Tax Exempt Bond Fund
44. Dreyfus MidCap Index Fund
45. Dreyfus Money Market Instruments, Inc.
46. Dreyfus Municipal Bond Fund, Inc.
47. Dreyfus Municipal Cash Management Plus
48. Dreyfus Municipal Money Market Fund, Inc.
49. Dreyfus New Jersey Intermediate Municipal Bond Fund
50. Dreyfus New Jersey Municipal Bond Fund, Inc.
51. Dreyfus New Jersey Municipal Money Market Fund, Inc.
52. Dreyfus New Leaders Fund, Inc.
53. Dreyfus New York Insured Tax Exempt Bond Fund
54. Dreyfus New York Municipal Cash Management
55. Dreyfus New York Tax Exempt Bond Fund, Inc.
56. Dreyfus New York Tax Exempt Intermediate Bond Fund
57. Dreyfus New York Tax Exempt Money Market Fund
58. Dreyfus 100% U.S. Treasury Intermediate Term Fund
59. Dreyfus 100% U.S. Treasury Long Term Fund
60. Dreyfus 100% U.S. Treasury Money Market Fund
61. Dreyfus 100% U.S. Treasury Short Term Fund
62. Dreyfus Pennsylvania Intermediate Municipal Bond Fund
63. Dreyfus Pennsylvania Municipal Money Market Fund
64. Dreyfus Premier California Municipal Bond Fund
65. Dreyfus Premier Equity Funds, Inc.
66. Dreyfus Premier International Funds, Inc.
67. Dreyfus Premier GNMA Fund
68. Dreyfus Premier Worldwide Growth Fund, Inc.
69. Dreyfus Premier Insured Municipal Bond Fund
70. Dreyfus Premier Municipal Bond Fund
71. Dreyfus Premier New York Municipal Bond Fund
72. Dreyfus Premier State Municipal Bond Fund
73. Dreyfus Premier Value Fund
74. Dreyfus Short-Intermediate Government Fund
75. Dreyfus Short-Intermediate Municipal Bond Fund
76. The Dreyfus Socially Responsible Growth Fund, Inc.
77. Dreyfus Stock Index Fund, Inc.
78. Dreyfus Tax Exempt Cash Management
79. The Dreyfus Third Century Fund, Inc.
80. Dreyfus Treasury Cash Management
81. Dreyfus Treasury Prime Cash Management
82. Dreyfus Variable Investment Fund
83. Dreyfus Worldwide Dollar Money Market Fund, Inc.
84. General California Municipal Bond Fund, Inc.
85. General California Municipal Money Market Fund
86. General Government Securities Money Market Fund, Inc.
87. General Money Market Fund, Inc.
88. General Municipal Bond Fund, Inc.
89. General Municipal Money Market Funds, Inc.
90. General New York Municipal Bond Fund, Inc.
91. General New York Municipal Money Market Fund
(b)
Positions and offices Positions and
Name and principal with Premier Mutual offices with
BUSINESS ADDRESS FUND SERVICES, INC. REGISTRANT
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Treasurer
Compliance Officer
Joseph F. Tower, III+ Senior Vice President, Vice President
Director, Treasurer and Assistant
and Chief Financial Treasurer
Officer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
- ----------------
+ Principal business address is 60 State Street, Boston, Massachusetts 02109.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
3. The Bank of New York
90 Washington Street
New York, New York 10286
4. Dreyfus Transfer Inc.
P.O. Box 9671
Providence, Rhode Island 02903-9671
5. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
6. Founders Asset Management LLC
Founders Financial Center
2930 East Third Center
Denver, Colorado 80206
ITEM 31. MANAGEMENT SERVICES
Not Applicable
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes
(1) to call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, on the 15th day of
September, 1998.
DREYFUS INVESTMENT PORTFOLIOS
(Registrant)
By:/S/MARIE E. CONNOLLY*
Marie E. Connolly, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/S/MARIE E. CONNOLLY* President (Principal September 15, 1998
Marie E. Connolly Executive Officer),
Treasurer and Board Member
/S/JOHN F. TOWER, III* Assistant Treasurer September 15, 1998
John F. Tower, III (Principal Financial
and Accounting Officer)
/S/ JOSEPH S. DIMARTINO* Chairman of the Board September 15, 1998
Joseph S. DiMartino
/S/ CLIFFORD L. ALEXANDER, JR.* Board Member September 15, 1998
Clifford L. Alexander, Jr.
/S/ LUCY WILSON BENSON* Board Member September 15, 1998
Lucy Wilson Benson
* By: /s/ Michael S. Petrucelli
Michael S. Petrucelli
<PAGE>
DREYFUS VARIABLE INSURANCE PORTFOLIOS
Post-Effective Amendment No. 2 to
Registration Statement on Form N-1A under
the Securities Act of 1933 and
the Investment Company Act of 1940
--------------------------------------
EXHIBITS
--------------------------------------
<PAGE>
INDEX TO EXHIBITS
PAGE
(5)(a) Management Agreement...........................................
(6) Distribution Agreement.........................................
(11) Consent of Independent Auditors................................
EXHIBIT (5)(a)
MANAGEMENT AGREEMENT
DREYFUS INVESTMENT PORTFOLIOS
200 Park Avenue
New York, New York 10166
April 16, 1998
As Amended, July 16, 1998
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Ladies and Gentlemen:
The above-named investment company (the "Fund") consisting of the series
named on Schedule 1 hereto, as such Schedule may be revised from time to time
(each, a "Series"), herewith confirms its agreement with you as follows:
The Fund desires to employ its capital by investing and reinvesting the
same in investments of the type and in accordance with the limitations specified
in its charter documents and in its Prospectus and Statement of Additional
Information as from time to time in effect, copies of which have been or will be
submitted to you, and in such manner and to such extent as from time to time may
be approved by the Fund's Board. The Fund desires to employ you to act as the
Fund's investment adviser.
In this connection it is understood that from time to time you will employ
or associate with yourself such person or persons as you may believe to be
particularly fitted to assist you in the performance of this Agreement. Such
person or persons may be officers or employees who are employed by both you and
the Fund. The compensation of such person or persons shall be paid by you and no
obligation may be incurred on the Fund's behalf in any such respect. We have
discussed and concur in your employing on this basis for as long as you deem it
appropriate the indicated sub-adviser (the "Sub-Investment Adviser") named on
Schedule 1 hereto to act as the Fund's sub-investment adviser with respect to
the Series indicated on Schedule 1 hereto (the "Sub-Advised Series") to provide
day-to-day management of the Sub-Advised Series' investments.
Subject to the supervision and approval of the Fund's Board, you will
provide investment management of each Series' portfolio in accordance with such
Series' investment objectives and policies as stated in the Fund's Prospectus
and Statement of Additional Information as from time to time in effect. In
connection therewith, you will obtain and provide investment research and will
supervise each Series' investments and conduct, or with respect to the
Sub-Advised Series, supervise, a continuous program of investment, evaluation
and, if appropriate, sale and reinvestment of such Series' assets. You will
furnish to the Fund such statistical information, with respect to the
investments which a Series may hold or contemplate purchasing, as the Fund may
reasonably request. The Fund wishes to be informed of important developments
materially affecting any Series' portfolio and shall expect you, on your own
initiative, to furnish to the Fund from time to time such information as you may
believe appropriate for this purpose.
In addition, you will supply office facilities (which may be in your own
offices), data processing services, clerical, accounting and bookkeeping
services, internal auditing and legal services, internal executive and
administrative services, and stationery and office supplies; prepare reports to
each Series' stockholders, tax returns, reports to and filings with the
Securities and Exchange Commission and state Blue Sky authorities; calculate the
net asset value of each Series' shares; and generally assist in all aspects of
the Fund's operations. You shall have the right, at your expense, to engage
other entities to assist you in performing some or all of the obligations set
forth in this paragraph, provided each such entity enters into an agreement with
you in form and substance reasonably satisfactory to the Fund. You agree to be
liable for the acts or omissions of each such entity to the same extent as if
you had acted or failed to act under the circumstances.
You shall exercise your best judgment in rendering the services to be
provided to the Fund hereunder and the Fund agrees as an inducement to your
undertaking the same that neither you nor the Sub-Investment Adviser shall be
liable hereunder for any error of judgment or mistake of law or for any loss
suffered by one or more Series, provided that nothing herein shall be deemed to
protect or purport to protect you or the Sub-Investment Adviser against any
liability to the Fund or a Series or to its security holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder, or to which the
Sub-Investment Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
under its Sub-Investment Advisory Agreement with you or by reason of its
reckless disregard of its obligations and duties under said Agreement.
In consideration of services rendered pursuant to this Agreement, the Fund
will pay you on the first business day of each month a fee at the rate set forth
opposite each Series' name on Schedule 1 hereto. Net asset value shall be
computed on such days and at such time or times as described in the Fund's then
current Prospectus and Statement of Additional Information. The fee for the
period from the date of the commencement of the public sale of a Series' shares
to the end of the month during which such sale shall have been commenced shall
be pro-rated according to the proportion which such period bears to the full
monthly period, and upon any termination of this Agreement before the end of any
month, the fee for such part of a month shall be pro-rated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to you, the value of each
Series' net assets shall be computed in the manner specified in the Fund's
charter documents for the computation of the value of each Series' net assets.
You will bear all expenses in connection with the performance of your
services under this Agreement and will pay all fees of the Sub-Investment
Adviser in connection with its duties in respect of the Fund. All other expenses
to be incurred in the operation of the Fund (other than those borne by the Sub-
Investment Adviser) will be borne by the Fund, except to the extent specifically
assumed by you. The expenses to be borne by the Fund include, without
limitation, the following: organizational costs, taxes, interest, loan
commitment fees, interest and distributions paid on securities sold short,
brokerage fees and commissions, if any, fees of Board members who are not your
officers, directors or employees or holders of 5% or more of the outstanding
voting securities of you or the Sub- Investment Adviser or any affiliate of you
or the Sub-Investment Adviser, Securities and Exchange Commission fees and state
Blue Sky qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Fund's existence, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
stockholders, costs of stockholders' reports and meetings, and any extraordinary
expenses.
The Fund understands that you and the Sub-Investment Adviser now act, and
that from time to time hereafter you or the Sub-Investment Adviser may act, as
investment adviser to one or more other investment companies and fiduciary or
other managed accounts, and the Fund has no objection to your and the Sub-
Investment Adviser's so acting, provided that when the purchase or sale of
securities of the same issuer is suitable for the investment objectives of two
or more companies or accounts managed by you which have available funds for
investment, the available securities will be allocated in a manner believed by
you to be equitable to each company or account. It is recognized that in some
cases this procedure may adversely affect the price paid or received by one or
more Series or the size of the position obtainable for or disposed of by one or
more Series.
In addition, it is understood that the persons employed by you to assist in
the performance of your duties hereunder will not devote their full time to such
service and nothing contained herein shall be deemed to limit or restrict your
right or the right of any of your affiliates to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
Neither you nor the Sub-Investment Adviser shall be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, except for a loss resulting
from willful misfeasance, bad faith or gross negligence on your part in the
performance of your duties or from reckless disregard by you of your obligations
and duties under this Agreement and, in the case of the Sub-Investment Adviser,
for a loss resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under its Sub-Investment Advisory Agreement. Any
person, even though also your officer, director, partner, employee or agent, who
may be or become an officer, Board member, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting on any business of the
Fund, to be rendering such services to or acting solely for the Fund and not as
your officer, director, partner, employee or agent or one under your control or
direction even though paid by you.
As to each Series, this Agreement shall continue until the date set forth
opposite such Series' name on Schedule 1 hereto (the "Reapproval Date") and
thereafter shall continue automatically for successive annual periods ending on
the day of each year set forth opposite the Series' name on Schedule 1 hereto
(the "Reapproval Day"), provided such continuance is specifically approved at
least annually by (i) the Fund's Board or (ii) vote of a majority (as defined in
the Investment Company Act of 1940) of such Series' outstanding voting
securities, provided that in either event its continuance also is approved by a
majority of the Fund's Board members who are not "interested persons" (as
defined in said Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. As to each Series,
this Agreement is terminable without penalty, on 60 days' notice, by the Fund's
Board or by vote of holders of a majority of such Series' shares or, upon not
less than 90 days' notice, by you. This Agreement also will terminate
automatically, as to the relevant Series, in the event of its assignment (as
defined in said Act).
The Fund recognizes that from time to time your directors, officers and
employees may serve as directors, trustees, partners, officers and employees of
other corporations, business trusts, partnerships or other entities (including
other investment companies) and that such other entities may include the name
"Dreyfus" as part of their name, and that your corporation or its affiliates may
enter into investment advisory or other agreements with such other entities. If
you cease to act as the Fund's investment adviser, the Fund agrees that, at your
request, the Fund will take all necessary action to change the name of the Fund
to a name not including "Dreyfus" in any form or combination of words.
In addition, the Fund recognizes that from time to time the Sub-Investment
Adviser's directors, officers and employees may serve as directors, trustees,
partners, officers and employees of other corporations, business trusts,
partnerships or other entities (including other investment companies) and that
such other entities may include the Sub-Investment Adviser's primary name as
part of their name, and that the Sub-Investment Adviser's corporation or its
affiliates may enter into sub- investment advisory or other agreements with such
other entities. If the Sub-Investment Adviser ceases to act as the Sub-Advised
Series' sub-investment adviser, and none of the Sub-Investment Adviser's
directors, officers or employees act as a portfolio manager for such Sub-Advised
Series, the Fund agrees that, at the Sub-Investment Adviser's request, the Fund
will take all necessary action to change the name of the Sub-Advised Series to a
name not including the Sub-Investment Adviser's primary name in any form or
combination of words.
The Fund is agreeing to the provisions of this Agreement that limit the
Sub-Investment Adviser's liability and other provisions relating to the
Sub-Investment Adviser so as to induce the Sub-Investment Adviser to enter into
its Sub- Investment Advisory Agreement with you and to perform its obligations
thereunder. The Sub-Investment Adviser is expressly made a third party
beneficiary of this Agreement with rights as respects the Sub-Advised Series to
the same extent as if it had been a party hereto.
This Agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The obligations
of this Agreement shall only be binding upon the assets and property of the Fund
or the affected Series, as the case may be, and shall not be binding upon any
Board member, officer or shareholder of the Fund individually.
If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
DREYFUS INVESTMENT PORTFOLIOS
By:___________________________
Accepted:
THE DREYFUS CORPORATION
By:_______________________________
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Annual Fee as
a Percentage
of Average
Daily Net
NAME OF SERIES ASSETS REAPPROVAL DATE REAPPROVAL DAY
<S> <C> <C> <C>
Core Value Portfolio .75% April 16, 2000 April 16th
MidCap Stock .75% April 16, 2000 April 16th
Portfolio
Founders Growth .75% April 16, 2000 April 16th
Portfolio1
Founders International 1.00% April 16, 2000 April 16th
Equity Portfolio1
Founders Passport 1.00% April 16, 2000 April 16th
Portfolio1
Revised: July 16, 1998
- --------
1 The Dreyfus Corporation has employed Founders Asset Management LLC to act as
sub-investment adviser to this Series.
</TABLE>
EXHIBIT (6)
DISTRIBUTION AGREEMENT
DREYFUS INVESTMENT PORTFOLIOS
200 Park Avenue
New York, New York 10166
April 16, 1998
Premier Mutual Fund Services, Inc.
60 State Street
Boston, Massachusetts 02109
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Fund") has agreed that you
shall be, for the period of this agreement, the distributor of (a) shares of
each Series of the Fund set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, a "Series") or (b) if no Series are set forth
on such Exhibit, shares of the Fund. For purposes of this agreement the term
"Shares" shall mean the authorized shares of the relevant Series, if any, and
otherwise shall mean the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered by, and in
accordance with, the registration statement and prospectus then in effect under
the Securities Act of 1933, as amended, and will transmit promptly any orders
received by you for purchase or redemption of Shares to the Transfer and
Dividend Disbursing Agent for the Fund of which the Fund has notified you in
writing.
1.2 You agree to use your best efforts to solicit orders for the sale of
Shares. It is contemplated that you will enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitation, all rules
and regulations made or adopted pursuant to the Investment Company Act of 1940,
as amended, by the Securities and Exchange Commission or any securities
association registered under the Securities Exchange Act of 1934, as amended.
1.4 Whenever in their judgment such action is warranted by market, economic
or political conditions, or by abnormal circumstances of any kind, the Fund's
officers may decline to accept any orders for, or make any sales of, any Shares
until such time as they deem it advisable to accept such orders and to make such
sales and the Fund shall advise you promptly of such determination.
1.5 The Fund agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided, however,
that nothing contained herein shall be deemed to require the Fund to pay any of
the costs of advertising the sale of Shares.
1.6 The Fund agrees to execute any and all documents and to furnish any and
all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection with the
qualification of Shares for sale in such states as you may designate to the Fund
and the Fund may approve, and the Fund agrees to pay all expenses which may be
incurred in connection with such qualification. You shall pay all expenses
connected with your own qualification as a dealer under state or Federal laws
and, except as otherwise specifically provided in this agreement, all other
expenses incurred by you in connection with the sale of Shares as contemplated
in this agreement.
1.7 The Fund shall furnish you from time to time, for use in connection
with the sale of Shares, such information with respect to the Fund or any
relevant Series and the Shares as you may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information, when so signed
by the Fund's officers, shall be true and correct. The Fund also shall furnish
you upon request with: (a) semi-annual reports and annual audited reports of the
Fund's books and accounts made by independent public accountants regularly
retained by the Fund, (b) quarterly earnings statements prepared by the Fund,
(c) a monthly itemized list of the securities in the Fund's or, if applicable,
each Series' portfolio, (d) monthly balance sheets as soon as practicable after
the end of each month, and (e) from time to time such additional information
regarding the Fund's financial condition as you may reasonably request.
1.8 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the Shares have been carefully prepared in
conformity with the requirements of said Acts and rules and regulations of the
Securities and Exchange Commission thereunder. As used in this agreement the
terms "registration statement" and "prospectus" shall mean any registration
statement and prospectus, including the statement of additional information
incorporated by reference therein, filed with the Securities and Exchange
Commission and any amendments and supplements thereto which at any time shall
have been filed with said Commission. The Fund represents and warrants to you
that any registration statement and prospectus, when such registration statement
becomes effective, will contain all statements required to be stated therein in
conformity with said Acts and the rules and regulations of said Commission; that
all statements of fact contained in any such registration statement and
prospectus will be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any prospectus when
such registration statement becomes effective will include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Fund may
but shall not be obligated to propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus as, in the light of future developments, may, in the opinion of
the Fund's counsel, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request from you to do so, you may,
at your option, terminate this agreement or decline to make offers of the Fund's
securities until such amendments are made. The Fund shall not file any amendment
to any registration statement or supplement to any prospectus without giving you
reasonable notice thereof in advance; provided, however, that nothing contained
in this agreement shall in any way limit the Fund's right to file at any time
such amendments to any registration statement and/or supplements to any
prospectus, of whatever character, as the Fund may deem advisable, such right
being in all respects absolute and unconditional.
1.9 The Fund authorizes you to use any prospectus in the form furnished to
you from time to time, in connection with the sale of Shares. The Fund agrees to
indemnify, defend and hold you, your several officers and directors, and any
person who controls you within the meaning of Section 15 of the Securities Act
of 1933, as amended, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which you, your officers and directors, or any such
controlling person, may incur under the Securities Act of 1933, as amended, or
under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Fund's
agreement to indemnify you, your officers or directors, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of any untrue statement or alleged untrue statement or omission or
alleged omission made in any registration statement or prospectus in reliance
upon and in conformity with written information furnished to the Fund by you
specifically for use in the preparation thereof. The Fund's agreement to
indemnify you, your officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Fund's being notified of any action
brought against you, your officers or directors, or any such controlling person,
such notification to be given by letter or by telegram addressed to the Fund at
its address set forth above within ten days after the summons or other first
legal process shall have been served. The failure so to notify the Fund of any
such action shall not relieve the Fund from any liability which the Fund may
have to the person against whom such action is brought by reason of any such
untrue, or alleged untrue, statement or omission, or alleged omission, otherwise
than on account of the Fund's indemnity agreement contained in this paragraph
1.9. The Fund will be entitled to assume the defense of any suit brought to
enforce any such claim, demand or liability, but, in such case, such defense
shall be conducted by counsel of good standing chosen by the Fund and approved
by you. In the event the Fund elects to assume the defense of any such suit and
retain counsel of good standing approved by you, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Fund does not elect to assume the defense of any
such suit, or in case you do not approve of counsel chosen by the Fund, the Fund
will reimburse you, your officers and directors, or the controlling person or
persons named as defendant or defendants in such suit, for the fees and expenses
of any counsel retained by you or them. The Fund's indemnification agreement
contained in this paragraph 1.9 and the Fund's representations and warranties in
this agreement shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of you, your officers and directors, or
any controlling person, and shall survive the delivery of any Shares. This
agreement of indemnity will inure exclusively to your benefit, to the benefit of
your several officers and directors, and their respective estates, and to the
benefit of any controlling persons and their successors. The Fund agrees
promptly to notify you of the commencement of any litigation or proceedings
against the Fund or any of its officers or Board members in connection with the
issue and sale of Shares.
1.10 You agree to indemnify, defend and hold the Fund, its several officers
and Board members, and any person who controls the Fund within the meaning of
Section 15 of the Securities Act of 1933, as amended, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its officers or
Board members, or any such controlling person, may incur under the Securities
Act of 1933, as amended, or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Fund, its officers or
Board members, or such controlling person resulting from such claims or demands,
shall arise out of or be based upon any untrue, or alleged untrue, statement of
a material fact contained in information furnished in writing by you to the Fund
specifically for use in the Fund's registration statement and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by you to the Fund and
required to be stated in such answers or necessary to make such information not
misleading. Your agreement to indemnify the Fund, its officers and Board
members, and any such controlling person, as aforesaid, is expressly conditioned
upon your being notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification to be given by
letter or telegram addressed to you at your address set forth above within ten
days after the summons or other first legal process shall have been served. You
shall have the right to control the defense of such action, with counsel of your
own choosing, satisfactory to the Fund, if such action is based solely upon such
alleged misstatement or omission on your part, and in any other event the Fund,
its officers or Board members, or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any such
action. The failure so to notify you of any such action shall not relieve you
from any liability which you may have to the Fund, its officers or Board
members, or to such controlling person by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission, otherwise than on account of
your indemnity agreement contained in this paragraph 1.10. This agreement of
indemnity will inure exclusively to the Fund's benefit, to the benefit of the
Fund's officers and Board members, and their respective estates, and to the
benefit of any controlling persons and their successors. You agree promptly to
notify the Fund of the commencement of any litigation or proceedings against you
or any of your officers or directors in connection with the issue and sale of
Shares.
1.11 No Shares shall be offered by either you or the Fund under any of the
provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission; provided, however, that nothing contained in
this paragraph 1.11 shall in any way restrict or have an application to or
bearing upon the Fund's obligation to repurchase any Shares from any shareholder
in accordance with the provisions of the Fund's prospectus or charter documents.
1.12 The Fund agrees to advise you immediately in
writing:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect
or for additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation
of any proceeding for that purpose;
(c) of the happening of any event which makes untrue any
statement of a material fact made in the registration statement or
prospectus then in effect or which requires the making of a change in
such registration statement or prospectus in order to make the
statements therein not misleading; and
(d) of all actions of the Securities and Exchange Commission with
respect to any amendments to any registration statement or prospectus
which may from time to time be filed with the Securities and Exchange
Commission.
2. Offering Price
Shares of any class of the Fund offered for sale by you shall be offered
for sale at a price per share (the "offering price") approximately equal to (a)
their net asset value (determined in the manner set forth in the Fund's charter
documents) plus (b) a sales charge, if any and except to those persons set forth
in the then-current prospectus, which shall be the percentage of the offering
price of such Shares as set forth in the Fund's then-current prospectus. The
offering price, if not an exact multiple of one cent, shall be adjusted to the
nearest cent. In addition, Shares of any class of the Fund offered for sale by
you may be subject to a contingent deferred sales charge as set forth in the
Fund's then-current prospectus. You shall be entitled to receive any sales
charge or contingent deferred sales charge in respect of the Shares. Any
payments to dealers shall be governed by a separate agreement between you and
such dealer and the Fund's then-current prospectus.
3. Term
This agreement shall continue until the date (the "Reapproval Date") set
forth on Exhibit A hereto (and, if the Fund has Series, a separate Reapproval
Date shall be specified on Exhibit A for each Series), and thereafter shall
continue automatically for successive annual periods ending on the day (the
"Reapproval Day") of each year set forth on Exhibit A hereto, provided such
continuance is specifically approved at least annually by (i) the Fund's Board
or (ii) vote of a majority (as defined in the Investment Company Act of 1940) of
the Shares of the Fund or the relevant Series, as the case may be, provided that
in either event its continuance also is approved by a majority of the Board
members who are not "interested persons" (as defined in said Act) of any party
to this agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This agreement is terminable without penalty, on 60
days' notice, by vote of holders of a majority of the Fund's or, as to any
relevant Series, such Series' outstanding voting securities or by the Fund's
Board as to the Fund or the relevant Series, as the case may be. This agreement
is terminable by you, upon 270 days' notice, effective on or after the fifth
anniversary of the date hereof. This agreement also will terminate
automatically, as to the Fund or relevant Series, as the case may be, in the
event of its assignment (as defined in said Act).
4. Exclusivity
So long as you act as the distributor of Shares, you shall not perform any
services for any entity other than investment companies advised or administered
by The Dreyfus Corporation. The Fund acknowledges that the persons employed by
you to assist in the performance of your duties under this agreement may not
devote their full time to such service and nothing contained in this agreement
shall be deemed to limit or restrict your or any of your affiliates right to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
5. Miscellaneous
This agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The obligations
of this agreement shall only be binding upon the assets and property of the Fund
and shall not be binding upon any Board member, officer or shareholder of the
Fund individually.
Please confirm that the foregoing is in accordance with your understanding
and indicate your acceptance hereof by signing below, whereupon it shall become
a binding agreement between us.
Very truly yours,
DREYFUS INVESTMENT PORTFOLIOS
By:__________________________
Accepted:
PREMIER MUTUAL FUND SERVICES, INC.
By:_______________________________
<PAGE>
EXHIBIT A
NAME OF SERIES REAPPROVAL DATE REAPPROVAL DAY
Core Value Portfolio April 16, 2000 April 16th
MidCap Stock Portfolio April 16, 2000 April 16th
Founders Growth Portfolio April 16, 2000 April 16th
Founders International Equity April 16, 2000 April 16th
Portfolio
Founders Passport Portfolio April 16, 2000 April 16th
Revised: July 16, 1998
EXHIBIT (11)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Transfer and Dividend
Disbursing Agent, Custodian, Counsel and Independent Auditors" and to the use of
our report on the Core Value Portfolio and MidCap Stock Portfolio dated April
22, 1998, which is included in this Registration Statement (Form N-1A No.
333-47011) of Dreyfus Investment Portfolios.
ERNST & YOUNG
New York, New York
September 15, 1998
