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. 1 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 1 /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 _____________, 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. The Fund permits investors to invest
in five 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.
-----------------
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 __________, 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.
--------------------
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 CORE VALUE PORTFOLIO'S primary investment objective is to provide
long-term growth of capital; current income is a secondary investment objective.
This Portfolio invests primarily in equity securities, such as common stocks and
securities convertible into common stocks.
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 Asset Management LLC ("Founders"), the
Portfolio's sub-investment adviser.
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, the Portfolio's sub-investment
adviser.
o The FOUNDERS PASSPORT PORTFOLIO'S investment objective is to provide
capital appreciation. This Portfolio invests primarily in 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.
o The MIDCAP STOCK PORTFOLIO'S investment objective is to provide
investment results that are greater than the total return performance of
publicly-traded common stocks of medium-size domestic companies in the
aggregate, as represented by the Standard & Poor's MidCap 400 Index. This
Portfolio invests primarily in a portfolio of equity securities of medium-size
domestic issuers, while attempting to maintain volatility and diversification
similar to that of the Standard & Poor's MidCap 400 Index.
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)
<TABLE>
<CAPTION>
FOUNDERS
CORE FOUNDERS INTERNATIONAL FOUNDERS MIDCAP
VALUE GROWTH EQUITY PASSPORT STOCK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Management Fees.................. .75% .75% 1.00% 1.00% .75%
Other Expenses................... .25% ___% ___% ___% .25%
Total Operating Expenses......... 1.00% ___% ___% ___% 1.00%
</TABLE>
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):
<TABLE>
<CAPTION>
Founders
CORE FOUNDERS International FOUNDERS MIDCAP
VALUE GROWTH Equity PASSPORT STOCK
PORTFOLIO Portfolio Portfolio PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
1 Year........................ $10 $___ $___ $___ $10
3 Years....................... $32 $___ $___ $___ $32
</TABLE>
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 over 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."
CORE VALUE PORTFOLIO
The Core Value Portfolio is a diversified portfolio, the primary investment
objective of which is to provide long-term growth of capital; current income is
a secondary investment objective.
The Portfolio anticipates that at least 65% of the value of its total
assets (except when maintaining a temporary defensive position) will be invested
in equity securities, such as common stocks, preferred stocks and securities
convertible into common stocks, including Depositary Receipts, which would be
characterized as "value" companies according to criteria established by The
Dreyfus Corporation. In general, the Portfolio's investments are broadly
diversified over a number of industries and, as a matter of operating policy,
the Portfolio will not invest more than 25% of its total assets in any one
industry.
The Portfolio's investment approach is value-oriented, research-driven and
risk adverse. To manage the Portfolio, The Dreyfus Corporation classifies
issuers as "value" or "growth" companies. In general, The Dreyfus Corporation
believes that companies with relatively low price to book ratios, low price to
earnings ratios or higher than average dividend payments in relation to price
should be classified as value companies. Alternatively, companies which have
above average earnings or sales growth and retention of earnings and command
higher price to earnings ratios fit the classic growth description. In addition,
The Dreyfus Corporation intends to consider broader measures of value, including
operating return characteristics, overall financial health and positive changes
in business momentum. This value-oriented investment style is both quantitative
and fundamentally based, focusing first on stock selection then enhanced by
industry allocation guidelines.
Up to 20% of the Portfolio's total assets may be invested in foreign
securities, principally in foreign equity securities. The Portfolio may invest
up to 5% of its total net assets in fixed-income securities, including those of
companies that are close to entering, or already in, reorganization proceedings
which are rated below investment grade by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P"), Fitch IBCA, Inc. ("Fitch")
or Duff & Phelps Credit Rating Co. ("Duff"). See "Investment Considerations and
Risks--Fixed-Income Securities" and "--Lower Rated 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 The Dreyfus
Corporation determines that adverse market conditions exist, the Portfolio may
adopt a temporary defensive posture and invest all of its assets in Money Market
Instruments. The Portfolio also may invest in Money Market Instruments in
anticipation of investing cash positions.
The Portfolio's annual portfolio turnover rate is not expected to exceed
150%. A portfolio 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, lending portfolio securities and leveraging. 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 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, 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 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 in which the Portfolio may invest will 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 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 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 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.
MIDCAP STOCK PORTFOLIO
The MidCap Stock Portfolio is a diversified portfolio, the investment
objective of which is to provide investment results that are greater than the
total return performance of publicly-traded common stocks in the aggregate, as
represented by the Standard & Poor's MidCap Index* (the "S&P 400 Index"). The
Portfolio invests primarily in a portfolio of equity securities of medium-size
domestic issuers, while attempting to maintain volatility and diversification
similar to that of the S&P 400 Index. The Portfolio will invest in the
securities of issuers that are considered by The Dreyfus Corporation to offer
above-average growth potential. Medium-size issuers will include those U.S.
companies with market capitalizations (market price per share times the number
of shares outstanding) generally ranging in value from $200 million to $5
billion. The Portfolio also may invest in large and small capitalization
companies, including emerging and cyclical growth companies. Emerging and
cyclical growth companies are firms which, while they may not have a history of
stable long-term growth, are nonetheless expected to represent attractive
investments. The equity securities in which the Portfolio invests consist of
common stocks, preferred stocks and securities convertible into common stocks,
including those in the form of Depositary Receipts. The Portfolio is not an
index fund and its investments are not limited to securities of issuers included
in the S&P 400 Index.
_______________________
* Standard & Poor's MidCap 400 Indexr's MidCap 400 Index" is a trademark of
The McGraw-Hill Companies, Inc. The Portfolio is not sponsored, endorsed,
sold or promoted by S&P or The McGraw-Hill Companies, Inc.
The S&P 400 Index is composed of 400 selected common stocks of medium-size
domestic companies, which may include some Canadian issuers, with market
capitalizations ranging generally between $50 million and $10 billion. The
median market capitalization of the stocks in the S&P 400 Index is approximately
$___ billion. Standard & Poor's chooses the stocks to be included in the S&P 400
Index on the basis of market size, liquidity and industry group representation.
The weightings of stocks in the S&P 400 Index are based on each stock's relative
total market capitalization. Because of this weighting, as of __________,
approximately _____ of the S&P 400 Index was composed of the 50 largest
companies. Of the companies, most are listed on the New York Stock Exchange,
others are quoted on The Nasdaq Stock Market and a few are listed on the
American Stock Exchange.
The Dreyfus Corporation utilizes computer techniques to track, and, if
possible, outperform the S&P 400 Index. To construct the Portfolio's investment
portfolio, The Dreyfus Corporation employs valuation models designed to identify
common stocks of companies that are undervalued and should be purchased and
retained by the Portfolio. Undervalued securities ordinarily are characterized
by a relatively low price to earnings ratio (using normalized earnings), a low
ratio of market price to book value, or underlying asset values that The Dreyfus
Corporation determines are not fully reflected in the current market price. Once
undervalued common stocks are identified, The Dreyfus Corporation's experienced
investment analysts construct an investment portfolio, using the valuation
models, that in the aggregate resembles the S&P 400 Index, but is weighted
toward the most attractive stocks.
The Portfolio also may invest in corporate obligations rated at least Baa
by Moody's or BBB by S&P, Fitch or Duff, or, if unrated, of comparable quality
as determined by The Dreyfus Corporation. Securities rated Baa by Moody's or BBB
by S&P, Fitch or Duff are considered by those rating agencies to be investment
grade obligations which lack outstanding investment characteristics and may have
speculative characteristics as well. 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 The Dreyfus Corporation determines that adverse
market conditions exist, the Portfolio may adopt a temporary defensive posture
and invest all of its assets in Money Market Instruments. The Portfolio also may
invest in Money Market Instruments in anticipation of investing cash positions.
The Portfolio's annual portfolio turnover rate is not expected to exceed
100%. A portfolio turnover rate of 100% is equivalent to the Portfolio buying
and selling all the securities in its portfolio once in the course of the year.
In an effort to increase returns, the Portfolio may engage in various investment
techniques, such as options and futures transactions, lending portfolio
securities and leveraging. 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--The Core Value Portfolio may invest up to 5% of its net
assets in debt securities, and each of Founders Growth Portfolio, Founders
International Equity Portfolio and Founders Passport Portfolio (collectively,
the "Founders Portfolios") 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 with respect to the Founders
Portfolios, or as low as the lowest rating assigned by Moody's, S&P, Fitch or
Duff with respect to the Core Value Portfolio. 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, the 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 June 30, 1998, The Dreyfus Corporation managed or administered
approximately $___ billion in assets for approximately ___ 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 Founders 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
Founders 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:
CORE VALUE PORTFOLIO--Investment decisions for the Core Value Portfolio are made
by a committee of portfolio managers of The Dreyfus Corporation, and no person
is primarily responsible for making recommendations to the committee. Members of
the committee also comprise the Equity Policy Group of The Boston Company Asset
Management, Inc., which is an indirect wholly-owned subsidiary of Mellon and,
thus, an affiliate of The Dreyfus Corporation.
FOUNDERS GROWTH PORTFOLIO--________________. He/she has been the Portfolio's
primary portfolio manager since the Portfolio commenced operations and has been
employed by Founders since ____________. Prior thereto, Mr./Ms. ____________ was
employed by _______________.
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.
MIDCAP STOCK PORTFOLIO--John O'Toole. He has been the MidCap Stock Portfolio's
primary portfolio manager since the Portfolio's inception and has been employed
by The Dreyfus Corporation since October 1994. He also is a Senior Vice
President and a Portfolio Manager for Mellon Equity Associates, a wholly-owned
subsidiary of Mellon and, thus, an affiliate of The Dreyfus Corporation, and has
been employed by Mellon Bank, N.A. since 1979.
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 $328 billion in assets as of March 31,
1998, including approximately $113 billion in proprietary mutual fund assets. As
of March 31, 1998, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for more than $1.6
trillion in assets including approximately $67 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
----------------- --------------
Core Value Portfolio .75%
Founders Growth Portfolio .75%
Founders International Equity Portfolio 1.00%
Founders Passport Portfolio 1.00%
MidCap Stock Portfolio .75%
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 Founders Portfolio's
average daily net assets:
Sub-Investment
Name of Portfolio Advisory Fee
- ----------------- ---------------
Founders Growth Portfolio
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 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 Core Value,
Founders Growth, and MidCap Stock Portfolios. 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
Under the Internal Revenue Code of 1986, as amended (the "Code"), each
Portfolio of the Fund is treated as a separate entity for purposes of
qualification and taxation as a regulated investment company. The Fund declares
and pays dividends from net investment income quarterly with respect to the Core
Value Portfolio and annually with respect to each other Portfolio. 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 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
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 contract or policy.
Although the Fund is newly-organized and the Founders Portfolios do not yet
have their own performance records, each Founders Portfolio has the same
investment objective and follows substantially the same investment policies as a
corresponding series of another open-end investment company advised by
Founders. Set forth below is total return and average annual total return
information for the funds which correspond to the Founders Portfolios offered in
this Prospectus, calculated as described above, and for an appropriate
securities index. Each Founders Portfolio currently has the same primary
portfolio manager as its corresponding fund. Investors should not consider this
performance data as an indication of the future performance of the Founders
Portfolios offered in this Prospectus. The performance figures below reflect the
deduction of the historical fees and expenses paid by the existing funds, and
not those to be paid by the respective Founders Portfolio. The figures also do
not reflect the deduction of charges or expenses attributable to VA contracts or
VLI policies or Plans. 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 these 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 funds and for the
securities indexes for various periods ended June 30, 1998 is set forth below:
<TABLE>
<CAPTION>
Total Return
Name of Public Fund Period Ended Average Annual Total Return
and Index June 30, 1998 Period Ended June 30, 1998
------------------- ------------- ----------------------------
Since One Five Ten
Inception Year Years Years
<S> <C> <C> <C> <C>
Founders Growth Fund................. ______%* ______% ______% ______%*
[INDEX].............................. ______% ______% ______% ______%
Founders International Equity Fund... ______% ** ______% ______% ** N/A
[INDEX].............................. ______% ______% ______% N/A
Founders Passport Fund............... ______% *** ______% ______% *** N/A
[INDEX].............................. ______% ______% ______% N/A
- -------------
* From __________, 1988 (inception) through June 30, 1998.
** From December 29, 1995 (inception) through June 30, 1998.
*** From November 16, 1993 (inception) through June 30, 1998.
</TABLE>
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 400
Index, Russell 2500(R) Index, Morgan Stanley Capital International World Index,
the Dow Jones Industrial Average, Morningstar, Inc., Value Line Mutual Fund
Survey and other industry publications.
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. 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 unaudited semi-annual financial statements
and audited year-end financial statements certified by the Fund's independent
public accountants. Each report will show the investments owned by each
Portfolio and the market values thereof as determined by the Fund's Board 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
Founders 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.
LEVERAGE--(Core Value Portfolio and MidCap Stock Portfolio) Leveraging will
exaggerate the effect on net asset value of any increase or decrease in the
market value of the portfolio. Money borrowed for leveraging will be limited to
33-1/3% of the value of the Portfolio's total assets. These borrowings will be
subject to interest costs which may or may not be recovered by appreciation of
the securities purchased; in certain cases, interest costs may exceed the return
received on the securities purchased.
Each of these Portfolios may enter into reverse repurchase agreements with
banks, brokers or dealers. This form of borrowing involves the transfer by the
Portfolio of an underlying debt instrument in return for cash proceeds based on
a percentage of the value of the security. The Portfolio retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Portfolio repurchases the security at principal plus accrued
interest. Except for these transactions, each of these Portfolios' borrowings
generally will be unsecured.
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, except MidCap Stock Portfolio)
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 The Dreyfus
Corporation's or, where applicable, 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--(Founders
Portfolios) Each Founders 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 The Dreyfus Corporation or,
where applicable, 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 Caa by
Moody's or CCC by S&P, Fitch and Duff are of poor standing and may be in default
or there may be present elements of danger with respect to principal or
interest. Securities rated C by Moody's are regarded as having extremely poor
prospects of ever attaining any real investment standing. Securities rated D by
S&P, Fitch and Duff are in default and the payment of interest and/or repayment
of principal is in arrears. 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, The Dreyfus Corporation or, where
applicable, Founders also will evaluate these securities and the ability of the
issuers of such securities to pay interests and principal. A Portfolio's ability
to achieve its investment objective may be more dependent on The Dreyfus
Corporation's or, where applicable, 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)
_______, 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, Founders Growth Portfolio, Founders International Equity
Portfolio, Founders Passport Portfolio and MidCap Stock Portfolio (collectively,
the "Portfolios"), each a separate series of Dreyfus Investment Portfolios (the
"Fund"), dated ________, 1998, as it may be revised from time to time. To obtain
a copy of the 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 Portfolio's 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-12
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-22
Performance Information............................................B-23
Information About the Fund.........................................B-24
Transfer And Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors................................B-25
Appendix...........................................................B-27
Financial Statement and Report of Independent Auditors.............B-35
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S 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
and 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.
<PAGE>
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 to each Board member by the Fund, and 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 ending December 31, 1998, 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 $600,878 (95)
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. She is
29 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 & Manager of Client Services and Director of Internal
Audit at The Boston Company. 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. From December 1991 to March 1993, he
was employed as a Fund Accountant at The Boston Company, Inc. 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 July 15, 1998, none of the Fund's Board members or officers owned
any shares of any Portfolio.
The following shareholders are known by the Fund to own of record 5% or
more of the indicated Portfolios' shares outstanding on July 15, 1998:
SHAREHOLDER PORTFOLIO PERCENTAGE OF SHARES
- ----------- --------- --------------------
Transamerica Occidental Life Core Value 5.22%
Insurance Company MidCap Stock 21.74%
Separate Account VA-2L
Accounting Department
P.O. Box 33849
Charlotte, NC 28233-3849
First Transamerica Life MidCap Stock 17.10%
Insurance Company
Separate Account VA-2LNY
Accounting Department
P.O. Box 33849
Charlotte, NC 28233-3849
MBCIC Core Value 92.50%
c/o Mellon Bank, N.A. MidCap Stock 61.16%
Attn: Michael Botsford
919 North Market Street
Wilmington, DE 19801-3023
A shareholder that beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed to be a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S 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.,
Senior Vice President and Chief Financial Officer; 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; William V.
Healey, 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; 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 Mezger,
Vice President; Linda M. Ripley, Vice President; and Steven Shapiro, 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
portfolio managers of Founders Growth Portfolio are ____________ and
_____________. 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 FUND'S 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 FUND'S 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 FUND'S 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 will 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 FUND'S 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 distribute at least 90% of its net income (consisting of net
investment income and net short-term capital gain) to its shareholders, and meet
certain asset diversification and other requirements. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency.
Any dividend or distribution paid shortly after an investor's purchase may
have the effect of reducing the aggregate net asset value of the shares below
the cost of the investment. Such a dividend or distribution would be a return of
investment in an economic sense, although taxable as stated in the Prospectus.
In addition, the Code provides that if a shareholder holds shares of the
Portfolio for six months or less and has received a capital gain distribution
with respect to such shares, any loss incurred on the sale of such shares will
be treated as long-term capital loss to the extent of the capital gain
distribution received.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, a portion of the gain or loss
realized from the disposition of foreign currencies (including foreign currency
denominated bank deposits) and non-U.S. dollar denominated securities (including
debt instruments, certain financial futures or forward contracts and options)
may be treated as ordinary income or loss under Section 988 of the Code. In
addition, all or a portion of any gain realized from the sale or other
disposition of certain market discount bonds will be treated as ordinary income
under Section 1276 of the Code. Finally, all or a portion of the gain realized
from engaging in "conversion transactions" may be treated as ordinary income
under Section 1258 of the Code. "Conversion transactions" are defined to include
certain forward, futures, option and straddle transactions, transactions
marketed or sold to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by a Portfolio
from certain financial futures or forward contracts and options transactions
(other than those taxed under Section 988 of the Code) will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. Gain or
loss will arise upon the exercise or lapse of such futures and options as well
as from closing transactions. In addition, any such contract or option remaining
unexercised at the end of the Fund's taxable year will be treated as sold for
their then fair market value, resulting in additional gain or loss to the Fund
characterized in the manner described above.
Offsetting positions held by a Portfolio involving certain futures or
forward contracts or options transactions may be considered, for tax purposes,
to constitute "straddles." Straddles are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of straddles
is governed by Sections 1092 and 1258 of the Code, which, in certain
circumstances, override or modify the provisions of Sections 988 and 1256 of the
Code. As such, all or a portion of any short- or long-term capital gain from
certain straddle transactions may be recharacterized as ordinary income.
If a Portfolio were treated as entering into straddles by reason of its
engaging in certain futures or forward contracts or options transactions, such
straddles could be characterized as "mixed straddles" if the futures or forward
contracts or options transactions comprising such straddles were governed by
Section 1256 of the Code. The Portfolio may make one or more elections with
respect to "mixed straddles." Depending upon which election is made, if any, the
results to the Portfolio may differ. If no election is made, to the extent the
straddle rules apply to positions established by the Portfolio, losses realized
by the Fund will be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle and conversion transaction
rules, short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gain on straddle positions may be
treated as short-term capital gain or ordinary income.
The Taxpayer Relief Act of 1997 included constructive sale provisions that
generally apply if a Fund either (1) holds an appreciated financial position
with respect to stock, certain debt obligations, or partnership interests
("appreciated financial position") and then enters into a short sale, futures or
forward contract or offsetting notional principal contract (collectively, a
"Contract") with respect to the same or substantially identical property or (2)
holds an appreciated financial position that is a Contract and then acquires
property that is the same as, or substantially identical to, the underlying
property. In each instance, with certain exceptions, the Fund generally will be
taxed as if the appreciated financial position were sold at its fair market
value on the date the Fund enters into the financial position or acquires the
property, respectively. Transactions that are identified hedging or straddle
transactions under other provisions of the Code can be subject to the
constructive sale provisions.
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. 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 FUND'S 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 FUND'S 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 Fund or which securities are to be
purchased or sold by the Fund.
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 Prospectus.
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 payment.
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>
<TABLE>
<CAPTION>
FINANCIAL STATEMENT AND REPORT OF INDEPENDENT AUDITORS
STATEMENT OF ASSETS AND LIABILITIES
April 20, 1998
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.
<PAGE>
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 July 15, 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:
Senior Vice President and Chief Dreyfus Partnership Management,
Financial Officer 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
- ------------------------
* 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 Fund, 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 16th day of
July, 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 July 16, 1998
Marie E. Connolly Executive Officer), Treasurer
and Board Member
/S/JOHN F. TOWER, III* Assistant Treasurer July 16, 1998
John F. Tower, III (Principal Financial
and Accounting Officer)
/S/ JOSEPH S. DIMARTINO* Chairman of the Board July 16, 1998
Joseph S. DiMartino
/S/ CLIFFORD L. ALEXANDER, JR.* Board Member July 16, 1998
Clifford L. Alexander, Jr.
/S/ LUCY WILSON BENSON* Board Member July 16, 1998
Lucy Wilson Benson
* By: /s/ Michael S. Petrucelli
Michael S. Petrucelli
<PAGE>
DREYFUS VARIABLE INSURANCE PORTFOLIOS
Post-Effective Amendment No. 1 to
Registration Statement on Form N-1A under
the Securities Act of 1933 and
the Investment Company Act of 1940
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EXHIBITS
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<PAGE>
INDEX TO EXHIBITS
PAGE
(5)(b) Sub-Investment Advisory Agreement..............................
(11) Consent of Independent Auditors................................
EXHIBIT (5)(b)
SUB-INVESTMENT ADVISORY AGREEMENT
THE DREYFUS CORPORATION
200 Park Avenue
New York, New York 10166
July 16, 1998
Founders Asset Management LLC
Founders Financial Center
2930 East Third Avenue
Denver, Colorado 80206
Dear Sirs:
As you are aware, Dreyfus Investment Portfolios (the "Fund"),
currently consisting of five series, desires to employ the capital of its series
named on Schedule 1 hereto, as such Schedule may be revised from time to time
(each, a "Series"), by investing and reinvesting the same in investments of the
type and in accordance with the limitations specified in the Fund's 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 employs The Dreyfus Corporation (the "Adviser") to
act as its investment adviser pursuant to a written agreement (the "Management
Agreement"), a copy of which has been furnished to you. The Adviser desires to
employ you to act as each Series' sub-investment adviser.
In connection with your serving as sub-investment adviser to the
Series, 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.
Subject to the supervision and approval of the Adviser, you will
provide investment management of each Series' portfolio in accordance with the
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 supervise each Series' investments and conduct a
continuous program of investment, evaluation and, if appropriate, sale and
reinvestment of such Series' assets. You will furnish to the Adviser or the Fund
such statistical information, with respect to the investments which a Series may
hold or contemplate purchasing, as the Adviser or the Fund may reasonably
request. The Fund and the Adviser wish to be informed of important developments
materially affecting any Series' portfolio and shall expect you, on your own
initiative, to furnish to the Fund or the Adviser from time to time such
information as you may believe appropriate for this purpose.
You shall exercise your best judgment in rendering the services to be
provided hereunder, and the Adviser agrees as an inducement to your undertaking
the same that you shall not be liable hereunder for any error of judgment or
mistake of law or for any loss suffered by one or more Series or the Adviser,
provided that nothing herein shall be deemed to protect or purport to protect
you against any liability to the Adviser, the Fund or a Series' 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.
In consideration of services rendered pursuant to this Agreement, the
Adviser will pay you, on the first business day of each month, out of the
management fee it receives and only to the extent thereof, a fee at the annual
rate set forth on Schedule 2 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 following the
commencement of sales of a Series' shares (after any sales are made to the
Fund's sponsor) to the end of the month during which such sales 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 within 10 business days of 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 the Series' net assets.
You will bear all expenses in connection with the performance of your
services under this Agreement. All other expenses to be incurred in the
operation of the Series (other than those borne by the 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 officers, directors, employees or holders of 5% or more of
the outstanding voting securities of you or the Adviser or any affiliate of you
or the Adviser, Securities and Exchange Commis sion 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 Adviser understands that you now act, and that from time to time
hereafter you may act, as investment adviser or sub-investment adviser to one
or more investment companies and fiduciary or other managed accounts, and the
Adviser has no objection to your so acting, provided that when 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 services 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.
You shall not be liable for any error of judgment or mistake of law or
for any loss suffered by a Series or the Adviser 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. 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, as amended) 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 (i) by the Adviser
upon 60 days' notice to you, (ii) by the Fund's Board or by vote of the holders
of a majority of such Series' shares upon 60 days' notice to you, or (iii) by
you upon not less than 90 days' notice to the Fund and the Adviser. This
Agreement also will terminate automatically, as to the relevant Series, in the
event of its assignment (as defined in said Act). In addition, notwithstanding
anything herein to the contrary, if the Management Agreement terminates for any
reason, this Agreement shall terminate effective upon the date the Management
Agreement terminates.
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,
THE DREYFUS CORPORATION
By:_________________________
Accepted:
FOUNDERS ASSET MANAGEMENT LLC
By:__________________________
<PAGE>
SCHEDULE 1
Name of Series Reapproval Date Reapproval Day
- -------------- --------------- --------------
Founders Growth Portfolio April 16, 2000 April 16th
Founders International April 16, 2000 April 16th
Equity Portfolio
Founders Passport April 16, 2000 April 16th
Portfolio
<PAGE>
SCHEDULE 2
Annual Fee as a
Percentage of
Average Daily
Name of Series Net Assets Net Assets
- -------------- ---------- ----------------
Founders Growth 0 to $100 million .25%
Portfolio $100 million to $1 billion .20%
$1 billion to $1.5 billion .16%
more than $1.5 billion .10%
Founders 0 to $100 million .35%
International $100 million to $1 billion .30%
Equity Portfolio $1 billion to $1.5 billion .26%
more than $1.5 billion .20%
Founders Passport 0 to $100 million .35%
Portfolio $100 million to $1 billion .30%
$1 billion to $1.5 billion .26%
more than $1.5 billion .20%
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
July 16, 1998
