File Nos.333-47011
811-08673
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. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5 [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) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
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.
----
Dreyfus Investment Portfolios
European Equity Portfolio
Investing in European companies for long-term capital growth
PROSPECTUS May 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Portfolio
Dreyfus Investment Portfolios
European Equity Portfolio
Contents
The Portfolio
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 2
Management 3
Financial Highlights 4
Account Information
- --------------------------------------------------------------------------------
Account Policies 5
Distributions and Taxes 5
For More Information
- --------------------------------------------------------------------------------
SEE BACK COVER.
Portfolio shares are offered only to separate accounts established by insurance
companies to fund variable annuity contracts ("VA contracts") and variable life
insurance policies ("VLI policies"). Individuals may not purchase shares
directly from, or place sell orders directly with, the portfolio. The VA
contracts and the VLI policies are described in the separate prospectuses issued
by the participating insurance companies, over which the portfolio assumes no
responsibility. Conflicts may arise between the interests of VA contract holders
and VLI policyholders. The board of trustees will monitor events to identify any
material conflicts and, if such conflicts arise, determine what action, if any,
should be taken.
While the portfolio's investment objective and policies may be similar to those
of other funds managed by the investment advisers, the portfolio's investment
results may be higher or lower than, and may not be comparable to, those of the
other funds.
GOAL/APPROACH
The portfolio seeks long-term capital growth. To pursue this goal, the portfolio
generally invests at least 80% of its total assets in stocks included within the
universe of the 300 largest European companies. The portfolio may invest up to
10% of its total assets in the stocks of non-European companies. The portfolio's
stock investments may include common stocks, preferred stocks and convertible
securities.
In choosing stocks, the portfolio managers identify and forecast: key trends in
economic variables, such as gross domestic product, inflation and interest
rates; investment themes, such as the impact of new technologies and the
globalization of industries and brands; relative values of equity securities,
bonds and cash; and long-term trends in currency movements. Within markets and
sectors determined to be relatively attractive, the portfolio managers seek what
they believe to be attractively priced companies that possess a sustainable
competitive advantage in their market or sector. The portfolio managers
generally will sell securities when themes or strategies change or when the
portfolio managers determine that the company's prospects have changed or if the
portfolio managers believe that the company's stock is fully valued by the
market.
Concepts to understand
EUROPEAN COMPANY: a company organized under the laws of a European country or
for which the principal securities trading market is in Europe; or a company,
wherever organized, with a majority of its assets or business in Europe.
PREFERRED STOCK: stock that pays dividends at a specified rate and has
preference over common stock in the payment of dividends and the liquidation of
assets. Preferred stock ordinarily does not carry voting rights.
CONVERTIBLE SECURITIES: corporate securities, usually preferred stock or bonds,
that are exchangeable for a set amount of another form of security, usually
common stock, at a prestated price.
<PAGE>
MAIN RISKS
While stocks have historically been a choice of long-term investors, they do
fluctuate in price. The value of a shareholder's investment in the portfolio
will go up and down, which means that shareholders could lose money.
The portfolio's performance will be influenced by political, social and economic
factors affecting companies in European countries and throughout the world.
These risks include changes in currency exchange rates, a lack of comprehensive
company information, political instability, less liquidity and differing
auditing and legal standards.
The portfolio expects to invest primarily in the stocks of companies located in
developed European countries. However, the portfolio may invest in the stocks of
companies located in certain European countries which are considered to be
emerging markets. These countries generally have economic structures that are
less diverse and mature, and political systems that are less stable, than those
of developed countries. Emerging markets may be more volatile than the markets
of more mature economies, and the securities of companies located in emerging
markets are often subject to rapid and large changes in price; however, these
markets may provide higher rates of return to investors.
Under adverse market conditions, the portfolio could invest some or all of its
assets in money market securities. Although the portfolio would do this to avoid
losses, it could reduce the benefit from any upswing in the market. During such
period, the portfolio may not achieve its investment objective.
Other potential risks
The portfolio, at times, may invest in derivative securities, such as options
and futures, and in foreign currencies. The portfolio may also sell short, which
involves selling a security it does not own in anticipation of a decline in the
market price of the security. These practices, when employed, are used primarily
to hedge its portfolio but also may be used to increase returns; however, such
practices sometimes may reduce returns or increase volatility. In addition,
derivatives can be illiquid and highly sensitive to changes in their underlying
instrument. A small investment in certain derivatives could have a potentially
large impact on the portfolio's performance.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
The Portfolio
<PAGE 1>
PAST PERFORMANCE
As a new portfolio, past performance information is not available for the
portfolio as of the date of this prospectus.
EXPENSES
Investors pay certain fees and expenses in connection with the portfolio, which
are described in the table below. Annual portfolio operating expenses are paid
out of portfolio assets, so their effect is included in the portfolio's share
price. The information in the table does not reflect account fees and charges to
separate accounts or related VA contracts and VLI policies that may be imposed
by participating insurance companies.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 1.00%
Other expenses 0.25%
- --------------------------------------------------------------------------------
TOTAL 1.25%
- --------------------------------------------------------------------------------
Expense example
1 Year 3 Years
- --------------------------------------------------------------------------------
$127 $397
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual return and expenses will be different,
the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment advisers for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: estimated fees to be paid by the portfolio for the current
fiscal year for miscellaneous items such as transfer agency, custody,
professional and registration fees.
<PAGE 2>
MANAGEMENT
The investment adviser for the portfolio is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages one of the
nation's leading mutual fund complexes, with more than $120 billion in over 160
mutual fund portfolios. Dreyfus is the primary mutual fund business of Mellon
Bank Corporation, a broad-based financial services company with a bank at its
core. With more than $389 billion of assets under management and $1.9 trillion
of assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.
Dreyfus has engaged its affiliate, Newton Capital Management Limited, to act as
sub-investment adviser. Newton, located at 71 Queen Victoria Street, London,
EC4V 4DR, England, was formed in 1977 and, as of December 31, 1998, together
with its parent and its parent's subsidiaries, managed approximately $21 billion
in discretionary separate accounts and other investment accounts.
Management philosophy
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, the firm
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
Portfolio managers
The portfolio's primary portfolio managers are Joanna Bowen and Keiran
Gallagher. Ms. Bowen joined Newton in 1993 as a European fund manager. In 1997,
she was appointed an Associate Director of Newton. In 1999, she was appointed a
Director of Newton. Mr. Gallagher joined Newton in 1993 and in 1994 was
appointed Head of European Equities. In 1997, he was appointed a Director of
Newton.
Concepts to understand
YEAR 2000 ISSUES: the portfolio could be adversely affected if the computer
systems used by Dreyfus and the portfolio's other service providers do not
properly process and calculate date-related information from and after January
1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the portfolio invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the portfolio's investments and its share price.
The Portfolio
<PAGE 3>
FINANCIAL HIGHLIGHTS
As a new portfolio, financial highlights information is not available for the
portfolio as of the date of this prospectus.
<PAGE 4>
Account Information
ACCOUNT POLICIES
Buying/Selling shares
Portfolio shares may be purchased or sold (redeemed) by separate accounts of
participating insurance companies. VA contract holders and VLI policyholders
should consult the prospectus of the separate account of the participating
insurance company for more information about buying or selling portfolio shares
The price for portfolio shares is the portfolio's NAV, which is generally
calculated as of the close of trading on the New York Stock Exchange (usually 4:
00 p.m. Eastern time) every day the exchange is open. Purchase and sale orders
from separate accounts received in proper form by the participating insurance
company on a given business day are priced at the NAV calculated on such day,
provided that the orders are received by the portfolio in proper form on the
next business day. The participating insurance company is responsible for
properly transmitting purchase and sale orders.
Wire purchase payments may be made if the bank account of the participating
insurance company is in a commercial bank that is a member of the Federal
Reserve System or any other bank having a correspondent bank in New York City.
Immediately available funds may be transmitted by wire to The Bank of New York
(DDA#8900375108/Dreyfus Investment Portfolios: European Equity Portfolio), for
purchase of portfolio shares. The wire must include the portfolio account number
(for new accounts, a taxpayer identification number should be included instead),
account registration and dealer number, if applicable, of the participating
insurance company.
The portfolio's investments are generally valued based on market value or, where
market quotations are not readily available, based on fair value as determined
in good faith by the board of trustees. Foreign securities held by the portfolio
may trade on days when the portfolio does not calculate its NAV and thus affect
the portfolio's NAV on days when investors have no access to the portfolio.
DISTRIBUTIONS AND TAXES
The portfolio generally pays dividends from its net investment income and
distributes any net capital gains it has realized once a year.
Distributions will be reinvested in the portfolio unless it is instructed
otherwise by a participating insurance company.
Since the portfolio's shareholders are the participating insurance companies and
their separate accounts, the tax treatment of dividends and distributions will
depend on the tax status of the participating insurance company. Accordingly, no
discussion is included as to the federal income tax consequences to VA contract
holders or VLI policyholders. For this information, VA contract holders and VLI
policyholders should consult the prospectus of the separate account of the
participating insurance company or their tax advisers.
Participating insurance companies should consult their tax advisers about
federal, state and local tax consequences.
Who the shareholders are
The participating insurance companies and their separate accounts are the
shareholders of the portfolio. From time to time, a shareholder may own a
substantial number of portfolio shares. The sale of a large number of shares
could hurt the portfolio's net asset value per share (NAV).
Account Information
<PAGE 5>
For More Information
Dreyfus Investment Portfolios European Equity Portfolio
- ----------------------------------------
SEC file number: 811-08673
More information on the portfolio is available free upon request, including the
following:
Statement of Additional Information (SAI)
Provides more details about the portfolio and its policies. A current SAI is on
file with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-554-4611 or 516-338-3300
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144 Attn: Institutional Servicing
ON THE INTERNET Text-only versions of portfolio documents can be viewed online
or downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999 Dreyfus Service Corporation 181P0599
<PAGE>
Dreyfus Investment Portfolios
Bond Market Index Portfolio
Investing in bonds to match the total return of the Lehman Brothers Aggregate
Bond Index
PROSPECTUS May 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Portfolio
Dreyfus Investment Portfolios
Bond Market Index Portfolio
Contents
The Portfolio
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 2
Management 3
Financial Highlights 4
Account Information
- --------------------------------------------------------------------------------
Account Policies 5
Distributions and Taxes 5
For More Information
- --------------------------------------------------------------------------------
SEE BACK COVER.
Portfolio shares are offered only to separate accounts established by insurance
companies to fund variable annuity contracts ("VA contracts") and variable life
insurance policies ("VLI policies"). Individuals may not purchase shares
directly from, or place sell orders directly with, the portfolio. The VA
contracts and the VLI policies are described in the separate prospectuses issued
by the participating insurance companies, over which the portfolio assumes no
responsibility. Conflicts may arise between the interests of VA contract holders
and VLI policyholders. The board of trustees will monitor events to identify any
material conflicts and, if such conflicts arise, determine what action, if any,
should be taken.
While the portfolio's investment objective and policies may be similar to those
of other funds managed by the investment adviser, the portfolio's investment
results may be higher or lower than, and may not be comparable to, those of the
other funds.
GOAL/APPROACH
The portfolio seeks to match the total return of the Lehman Brothers Aggregate
Bond Index. Total return includes price movements as well as interest income. To
pursue its goal, the portfolio invests primarily in securities that are included
in the index. To maintain liquidity, the portfolio may invest some assets in
various short-term, fixed-income securities and money market instruments.
As the portfolio grows, it will attempt to have a correlation between its
performance and that of the index of at least .95 before expenses. A correlation
of 1.00 would mean that the portfolio and the index were perfectly correlated.
The Lehman Brothers Aggregate Bond Index is a broad-based, unmanaged index that
covers the U.S. investment grade fixed-rate bond market and is comprised of U.S.
government, corporate, mortgage-backed and asset-backed securities. Most of the
bonds in the index are issued by the U.S. Treasury and other U.S. government and
agency issuers. Lehman Brothers is not affiliated with the portfolio, and it
does not sell or endorse the portfolio, nor does it guarantee the performance of
the portfolio or the index.
Concepts to understand
INDEX FUNDS: mutual funds that are designed to match the performance of an
underlying benchmark index. To replicate index performance, the manager uses a
passive management approach and purchases a representative sample of the bonds
comprising the benchmark index. Because the portfolio has expenses, performance
will tend to be slightly lower than that of the target benchmark.
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. Bonds rated BBB or Baa and above are considered investment
grade.
<PAGE>
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the portfolio to invest for higher yields, the most
immediate effect is usually a drop in bond prices, and therefore in the
portfolio's share price as well. As a result, the value of a shareholder's
investment in the portfolio could go up and down, which means that shareholders
could lose money.
The portfolio uses an indexing strategy. It does not attempt to manage market
volatility, use defensive strategies or reduce the effects of any long-term
periods of poor performance among bonds.
The correlation between portfolio and index performance may be affected by the
portfolio's expenses and use of sampling techniques, changes in securities
markets, changes in the composition of the index, the size of the portfolio and
the timing of purchases and redemptions of portfolio shares.
Other risk factors that could have an effect on the portfolio's performance
include:
* a decline in the credit quality of a bond, or the perception of a
decline, could cause the bond's value to fall, potentially lowering the
portfolio's share price
* if the loans underlying the portfolio's mortgage-and asset-related
securities are paid off earlier or later than expected, which could occur
because of movements in market interest rates, the portfolio's share price or
yield could be hurt
* general downturns in the economy could cause the value of asset-backed
securities to fall, and the risk that any recovery on repossessed collateral
might be inadequate is greater than for mortgage-backed securities
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
Other potential risks
While some of the portfolio's securities may carry guarantees of the U.S.
government or its agencies or instrumentalities, these guarantees do not apply
to shares of the portfolio itself.
To the extent that the portfolio invests in securities not included in the index
to maintain liquidity, it will not achieve its goal of matching the total return
of the index.
The Portfolio
<PAGE 1>
PAST PERFORMANCE
As a new portfolio, past performance information is not available for the
portfolio as of the date of this prospectus.
EXPENSES
Investors pay certain fees and expenses in connection with the portfolio, which
are described in the table below. Annual portfolio operating expenses are paid
out of portfolio assets, so their effect is included in the portfolio's share
price. The information in the table does not reflect account fees and charges to
separate accounts or related VA contracts and VLI policies that may be imposed
by participating insurance companies.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.30%
Other expenses 0.25%
- --------------------------------------------------------------------------------
TOTAL 0.55%
- --------------------------------------------------------------------------------
Expense example
1 Year 3 Years
- --------------------------------------------------------------------------------
$56 $176
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual return and expenses will be different,
the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: estimated fees to be paid by the portfolio for the current
fiscal year for miscellaneous items such as transfer agency, custody,
professional and registration fees.
<PAGE 2>
MANAGEMENT
The investment adviser for the portfolio is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages one of the
nation's leading mutual fund complexes, with more than $120 billion in over 160
mutual fund portfolios. Dreyfus is the primary mutual fund business of Mellon
Bank Corporation, a broad-based financial services company with a bank at its
core. With more than $389 billion of assets under management and $1.9 trillion
of assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.
Management philosophy
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
Dreyfus manages the portfolio by making investment decisions based on the
portfolio's investment objective, policies and restrictions in seeking to match
the total return of the Lehman Brothers Aggregate Bond Index.
Concepts to understand
YEAR 2000 ISSUES: the portfolio could be adversely affected if the computer
systems used by Dreyfus and the portfolio's other service providers do not
properly process and calculate date-related information from and after January
1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the portfolio invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the portfolio's investments and its share price.
The Portfolio
<PAGE 3>
FINANCIAL HIGHLIGHTS
As a new portfolio, financial highlights information is not available for the
portfolio as of the date of this prospectus.
<PAGE 4>
Account Information
ACCOUNT POLICIES
Buying/Selling shares
Portfolio shares may be purchased or sold (redeemed) by separate accounts of
participating insurance companies. VA contract holders and VLI policyholders
should consult the prospectus of the separate account of the participating
insurance company for more information about buying or selling portfolio shares
The price for portfolio shares is the portfolio's NAV, which is generally
calculated as of the close of trading on the New York Stock Exchange (usually 4:
00 p.m. Eastern time) every day the exchange is open. Purchase and sale orders
from separate accounts received in proper form by the participating insurance
company on a given business day are priced at the NAV calculated on such day,
provided that the orders are received by the portfolio in proper form on the
next business day. The participating insurance company is responsible for
properly transmitting purchase and sale orders.
Wire purchase payments may be made if the bank account of the participating
insurance company is in a commercial bank that is a member of the Federal
Reserve System or any other bank having a correspondent bank in New York City.
Immediately available funds may be transmitted by wire to The Bank of New York
(DDA#8900375108/Dreyfus Investment Portfolios: Bond Market Index Portfolio), for
purchase of portfolio shares. The wire must include the portfolio account number
(for new accounts, a taxpayer identification number should be included instead),
account registration and dealer number, if applicable, of the participating
insurance company.
The portfolio's investments are generally valued based on market value or, where
market quotations are not readily available, based on fair value as determined
in good faith by the board of trustees or by one or more pricing services
approved by the board.
DISTRIBUTIONS AND TAXES
The portfolio generally declares and pays dividends from its net investment
income monthly, and distributes any net capital gains it has realized once a
year.
Distributions will be reinvested in the portfolio unless it is instructed
otherwise by a participating insurance company.
Since the portfolio's shareholders are the participating insurance companies and
their separate accounts, the tax treatment of dividends and distributions will
depend on the tax status of the participating insurance company. Accordingly, no
discussion is included as to the federal income tax consequences to VA contract
holders or VLI policyholders. For this information, VA contract holders and VLI
policyholders should consult the prospectus of the separate account of the
participating insurance company or their tax advisers.
Participating insurance companies should consult their tax advisers about
federal, state and local tax consequences.
Who the shareholders are
The participating insurance companies and their separate accounts are the
shareholders of the portfolio. From time to time, a shareholder may own a
substantial number of portfolio shares. The sale of a large number of shares
could hurt the portfolio's net asset value per share (NAV).
Account Information
<PAGE 5>
For More Information
Dreyfus Investment Portfolios Bond Market Index Portfolio
- ----------------------------------------
SEC file number: 811-08673
More information on the portfolio is available free upon request, including the
following:
Statement of Additional Information (SAI)
Provides more details about the portfolio and its policies. A current SAI is on
file with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-554-4611 or 516-338-3300
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144 Attn: Institutional Servicing
ON THE INTERNET Text-only versions of portfolio documents can be viewed online
or downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999 Dreyfus Service Corporation 171P0599
<PAGE>
DREYFUS INVESTMENT PORTFOLIOS
BOND MARKET INDEX PORTFOLIO
EUROPEAN EQUITY PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Bond Market Index and European Equity Portfolios (collectively, the
"Portfolios"), each dated May 1, 1999, each a separate series of Dreyfus
Investment Portfolios (the "Fund"), as each Prospectus may be revised from time
to time. To obtain a copy of the relevant Portfolio's Prospectus, please write
to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call 1-800-554-4611 or 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").
TABLE OF CONTENTS
Page
Description of the Fund and Portfolios B-2
Management of the Fund B-21
Management Arrangements B-25
How to Buy Shares B-28
How to Redeem Shares B-29
Determination of Net Asset Value B-30
Dividends, Distributions and Taxes B-32
Portfolio Transactions B-33
Performance Information B-34
Information About the Fund and Portfolios B-35
Counsel and Independent Auditors B-37
Appendix B-38
DESCRIPTION OF THE FUND AND PORTFOLIOS
The Fund is a Massachusetts business trust that commenced operations on May
1, 1998. Each Portfolio is a separate series of the Fund, an open-end
management investment company, known as a mutual fund. Each Portfolio is a
diversified fund, which means that, with respect to 75% of the Portfolio's total
assets, the Portfolio will not invest more than 5% of its assets in
the securities of any single issuer.
The Dreyfus Corporation (the "Manager") serves as each Portfolio's
investment adviser. The Manager has engaged Newton Capital Management Limited
("Newton") to serve as the European Equity Portfolio's sub-investment adviser.
Newton provides day-to-day management of the European Equity Portfolio's
investments, subject to the supervision of the Manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor
of the Portfolios' shares.
Certain Portfolio Securities
The following information supplements and should be read in conjunction
with the relevant Portfolio's Prospectus.
Depositary Receipts. (European Equity Portfolio only) The European Equity
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") and other forms of depositary receipts. 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.
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.
Foreign Government Obligations; Securities of Supranational Entities.
(European Equity Portfolio only) Each Portfolio may invest in obligations issued
or guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities that are determined by the Manager
(or Newton with respect to the European Equity Portfolio) to be of comparable
quality to the other obligations in which the Portfolio may invest. Such
securities also include debt obligations of supranational entities.
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.
Investment Companies. (All Portfolios) Each Portfolio may invest in
securities issued by investment companies. Under the Investment Company Act of
1940, as amended (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.
Mortgage-Related Securities. (Bond Market Index Portfolio only) Mortgage-
related securities are a form of derivative collateralized by pools of
commercial or residential mortgages. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related and
private organizations. These securities may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed securities,
mortgage pass-through securities or other kinds of mortgage-backed securities,
including those with fixed, floating and variable interest rates, those with
interest rates based on multiples of changes in a specified index of interest
rates and those with interest rates that change inversely to changes in interest
rates, as well as those that do not bear interest. See "Investment
Considerations and Risks" below.
Residential Mortgage-Related Securities--The Bond Market Index Portfolio may
invest in mortgage-related securities representing participation interests
in pools of one- to four-family residential mortgage loans issued or guaranteed
by governmental agencies or instrumentalities, such as the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"), or issued by
private entities. Similar to commercial mortgage-related securities,
residential mortgage-related securities have been issued using a variety of
structures, including multi-class structures featuring senior and subordinated
classes.
Mortgage-related securities issued by GNMA include GNMA Mortgage Pass-
Through Certificates (also know as "Ginnie Maes") which are guaranteed as to the
timely payment of principal and interest by GNMA and such guarantee is backed by
the full faith and credit of the United States. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of FNMA and are not backed by or
entitled to the full faith and credit of the United States. Fannie Maes are
guaranteed as to timely payment of principal and interest by FNMA. Mortgage-
related securities issued by FHLMC include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCs"). Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Bank and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the amount due
on account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable.
Commercial Mortgage-Related Securities--Commercial mortgage-related securities
generally are multi-class debt or pass-through certificates secured by mortgage
loans on commercial properties. These mortgage-related securities generally are
constructed to provide protection to the senior classes investors against
potential losses on the underlying mortgage loans. This protection generally is
provided by having the holders of subordinated classes of securities
("Subordinated Securities") take the first loss if there are defaults on the
underlying commercial mortgage loans. Other protection, which may benefit all
of the classes or particular classes, may include issuer guarantees, reserve
funds, additional Subordinated Securities, cross-collateralization and over-
collateralization.
Subordinated Securities--The Bond Market Index Portfolio may invest in
Subordinated Securities issued or sponsored by commercial banks, savings and
loan institutions, mortgage bankers, private mortgage insurance companies
and other non-governmental issuers. Subordinated Securities have no
governmental guarantee, and are subordinated in some manner as to the
payment of principal and/or interest to the holders of more senior mortgage-
related securities arising out of the same pool of mortgages. The holders of
Subordinated Securities typically are compensated with a higher stated yield
than are the holders of more senior mortgage-related securities. On the other
hand, Subordinated Securities typically subject the holder to greater risk than
senior mortgage-related securities and tend to be rated in a lower rating
category, and frequently a substantially lower rating category, than the senior
mortgage-related securities issued in respect of the same pool of mortgage.
Subordinated Securities generally are likely to be more sensitive to changes in
prepayment and interest rates and the market for such securities may be less
liquid than is the case for traditional fixed-income securities and senior
mortgage-related securities.
Collateralized Mortgage Obligations ("CMOs") and Multi-Class Pass-Through-
Securities--A CMO is a multiclass bond backed by a pool of mortgage pass-through
certificates or mortgage loans. CMOs may be collateralized by (a) Ginnie Mae,
Fannie Mae, or Freddie Mac pass-through certificates, (b) unsecuritized mortgage
loans insured by the Federal Housing Administration or guaranteed by the
Department of Veterans' Affairs, (c) unsecuritized conventional mortgages, (d)
other mortgage-related securities, or (e) any combination thereof.
Each class of CMOs, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
The principal and interest on the underlying mortgages may be allocated among
the several classes of a series of a CMO in many ways. One or more tranches of
a CMO may have coupon rates which reset periodically at a specified increment
over an index, such as the London Interbank Offered Rate ("LIBOR") (or sometimes
more than one index). These floating rate CMOs typically are issued with
lifetime caps on the coupon rate thereon. The Portfolio also may invest in
inverse floating rate CMOs. Inverse floating rate CMOs constitute a tranche of
a CMO with a coupon rate that moves in the reverse direction to an applicable
index such a LIBOR. Accordingly, the coupon rate thereon will increase as
interest rates decrease. Inverse floating rate CMOs are typically more volatile
than fixed or floating rate tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying inversely
to a multiple of an applicable index creates a leverage factor. Inverse
floaters 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 loss of principal. The markets for inverse
floating rate CMOs with highly leveraged characteristics at times may be very
thin. The Portfolio's ability to dispose of its positions in such securities
will depend on the degree of liquidity in the markets for such securities. It
is impossible to predict the amount of trading interest that may exist in such
securities, and therefore the future degree of liquidity.
Stripped Mortgage-Backed Securities--The Portfolio also may invest in stripped
mortgage-backed securities which are created by segregating the cash flows from
underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage securities may be partially stripped
so that each investor class receives some interest and some principal. When
securities are completely stripped, however, all of the interest is distributed
to holders of one type of security, known as an interest-only security, or IO,
and all of the principal is distributed to holders of another type of security
known as a principal-only security, or PO. Strips can be created in a pass-
through structure or as tranches of a CMO. The yields to maturity on IOs and
POs are very sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage assets. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, the Portfolio may
not fully recoup its initial investment in IOs. Conversely, if the underlying
mortgage assets experience less than anticipated prepayments of principal, the
yield on POs could be materially and adversely affected.
Private Entity Securities--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other nongovernmental issuers. Timely payment
of principal and interest on mortgage-related securities backed by pools created
by non-governmental issuers often is supported partially by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance. The insurance and guarantees are issued by government entities,
private insurers and the mortgage poolers. There can be no assurance that the
private insurers or mortgage poolers can meet their obligations under the
policies, so that if the issuers default on their obligations the holders of the
security could sustain a loss. No insurance or guarantee covers the Portfolio
or the price of the Portfolio's shares. Mortgage-related securities issued by
non-governmental issuers generally offer a higher rate of interest than
government-agency and government-related securities because there are no direct
or indirect government guarantees of payment.
Other Mortgage-Related Securities--Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals. Other mortgage-related securities
may be equity or debt securities issued by agencies or instrumentalities of the
U.S. Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.
Asset-Backed Securities. (Bond Market Index Portfolio only) Asset-backed
securities are a form of derivative. The securitization techniques used for
asset-backed securities are similar to those used for mortgage-related
securities. These securities include debt securities and securities with debt-
like characteristics. The collateral for these securities has included home
equity loans, automobile and credit card receivables, boat loans, computer
leases, airplane leases, mobile home loans, recreational vehicle loans and
hospital account receivables. The Portfolio may invest in these and other types
of asset-backed securities that may be developed in the future.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may provide the
Portfolio with a less effective security interest in the related collateral than
do mortgage-backed securities. Therefore, there is the possibility
that recoveries on the underlying collateral may not, in some cases, be
available to support payments on these securities.
Variable and Floating Rate Securities. (Bond Market Index Portfolio only)
Variable and floating rate securities provide for a periodic adjustment in the
interest rate paid on the obligations. The terms of such obligations must
provide that interest rates are adjusted periodically based upon an interest
rate adjustment index as provided in the respective obligations. The adjustment
intervals may be regular, and range from daily up to annually, or may be event
based, such as based on a change in the prime rate.
The Portfolio may invest in floating rate debt instruments ("floaters").
The interest rate on a floater is a variable rate which is tied to another
interest rate, such as a money-market index or Treasury bill rate. The interest
rate on a floater resets periodically, typically every six months. Because of
the interest rate reset feature, floaters provide the Portfolio with a certain
degree of protection against rises in interest rates, although the Portfolio
will participate in any declines in interest rates as well.
The Portfolio also may invest in inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater resets in the
opposite direction from the market rate of interest to which the inverse floater
is indexed or inversely to a multiple of the applicable index. An inverse
floating rate security may exhibit greater price volatility than a fixed rate
obligation of similar credit quality.
Convertible Securities. (European Equity Portfolio only) Convertible
securities 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.
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.
Warrants. (European Equity Portfolio only) 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. The 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.
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. These 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.
Money Market Instruments. (All Portfolios) When the Manager (or
Newton with respect to the European Equity Portfolio) determines that
adverse market conditions exist, the Portfolio may adopt a temporary defensive
position and invest some or all of its assets in money market instruments,
including the securities described below ("Money Market Instruments"). Each
Portfolio also may purchase Money Market Instruments when it has cash reserves
or in anticipation of taking a market position.
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 from 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 for such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not obligated by
law. A security backed by the U.S. Treasury or the full faith and credit of the
United States is guaranteed only as to timely payment of interest and principal
when held to maturity. Neither the market value of such securities nor the
Portfolio's share price is guaranteed.
Repurchase Agreements--Each Portfolio may enter into 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. The Portfolio's custodian or sub-custodian
will have custody of, and will hold in a segregated account, securities acquired
by the Portfolio under a repurchase agreement. Repurchase agreements are
considered by the staff of the Securities and Exchange Commission to be loans by
the Portfolio that enters into them. 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 resale
price. 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.
Bank Obligations--Each Portfolio may purchase certificates of deposit ("CDs"),
time deposits ("TDs"), 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.
CDs are negotiable certificates evidencing the obligation of a bank to
repay funds deposited with it for a specified period of time.
TDs 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 a bank and the drawer to pay the face amount of the
instruments upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
Commercial Paper and Other Short-Term Corporate Obligations--Each Portfolio may
purchase commercial paper consisting of short-term, unsecured promissory notes
issued to finance short-term credit needs. The commercial paper purchased by
the Portfolio will consist only of direct obligations which, at the time of
their purchase, are rated at least Prime-1 by Moody's Investors Service, Inc.
("Moody's"), A-1 by Standard & Poor's Ratings Group ("S&P"), F-1 by Fitch IBCA,
Inc. ("Fitch") or Duff-1 by Duff & Phelps Credit Rating Co. ("Duff"), or issued
by companies having an outstanding unsecured debt issue currently rated at least
A by Moody's S&P, Fitch or Duff, or, if unrated, determined by the Manager (or
Newton with respect to the European Equity Portfolio) to be of comparable
quality to those rated obligations which may be purchased by the Portfolio.
These instruments also include variable amount master demand notes, which
are obligations that permit the 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 the Portfolio may invest in them only if at the time
of an investment the borrower meets the criteria set forth above for other
commercial paper issuers.
Investment Techniques
The following information supplements and should be read in conjunction
with the relevant Portfolio's Prospectus.
General. (Bond Market Index Portfolio only) The Bond Market Index
Portfolio seeks to match the total return of the Lehman Brothers Aggregate Bond
Index (the "Aggregate Bond Index"). The Aggregate Bond Index covers
the U.S. investment grade fixed-rate bond market, including government and
corporate securities, agency mortgage pass-through securities, and asset-backed
securities. The Aggregate Bond Index covers those securities in the Lehman
Brothers Government/Corporate Bond Index, ("Government/Corporate Bond Index")
plus those covered by the Lehman Mortgage-Backed Securities Index ("MBS Index")
and the Lehman Asset-Backed Securities Index ("ABS Index"). The
Government/Corporate Bond Index is composed of (i) all public obligations of the
U.S. Government, its agencies and instrumentalities (excluding "flower" bonds
and pass-through issues such as GNMA Certificates) and (ii) all publicly issued,
fixed-rate, non-convertible, investment grade, dollar-denominated, Securities
and Exchange Commission-registered obligations of domestic corporations, foreign
governments and supranational organizations. The MBS Index covers all fixed-
rate securities backed by mortgage pools of GNMA, FHLMC and FNMA. The ABS Index
covers three subsectors--credit and charge cards, auto, and home equity loans,
and includes pass-through, bullet, and controlled amortization structures. As
of December 31, 1998, over 7,257 issues were included in the Aggregate Bond
Index, representing $5.5 trillion in market value, distributed as follows: 46%
governments; 22% corporates; and 31% mortgage-backed securities.
Foreign Currency Transactions. (European Equity Portfolio only) The
European Equity Portfolio may enter into foreign currency transactions 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 Portfolio contracted to receive in the exchange.
The Portfolio's success in these transactions will depend principally on
Newton's 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.
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. The Bond
Market Index Portfolio currently intends to borrow money only for temporary or
emergency (not leveraging) purposes. Money borrowed will be subject to interest
costs. While borrowings exceed 5% of the Portfolio's total assets, the
Portfolio will not make any additional investments.
Leverage. (European Equity Portfolio only) Leveraging (that is, buying
securities using borrowed money) exaggerates the effect on net asset value
of any increase or decrease in the market value of the Portfolio's investments.
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. For
borrowings for investment purposes, 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.
Reverse Repurchase Agreements. (All Portfolios) Each Portfolio 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. To the extent a
Portfolio enters into a reverse repurchase agreement, the Portfolio will
segregate 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. Except for these transactions,
borrowings by the European Equity Portfolio generally will be unsecured.
Reverse repurchase agreements may be preferable to a regular sale and later
repurchase of the securities because it avoids certain market risks and
transaction costs. Such transactions, however, may increase the risk of
potential fluctuations in the market value of the Portfolio's assets. In
addition, interest costs on the cash received may exceed the return on the
securities purchased.
Short-Selling. (European Equity Portfolio only) In these transactions,
the Portfolio sells a security it does not own in anticipation of a decline in
the market value of the security. To complete the transaction, the Portfolio
must borrow the security to make delivery to the buyer. The Portfolio is
obligated to replace the security borrowed by purchasing it subsequently at the
market price at the time of replacement. The price at such time may be more or
less than the price at which the security was sold by the Portfolio, which would
result in a loss or gain, respectively.
Securities will not be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Portfolio's net assets.
The Portfolio also may make short sales "against the box," in which the
Portfolio enters into a short sale of a security it owns. At no time will more
than 15% of the value of the Portfolio's net assets be in deposits on short
sales against the box.
Until the Portfolio closes its short position or replaces the borrowed
security, the Portfolio will: (a) maintain a segregated account, containing
permissible liquid assets, at such a level that the amount deposited in the
account plus the amount deposited with the broker as collateral always
equals the current value of the security sold short; or (b) otherwise cover its
short position.
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. The
Portfolio continues to be entitled to payments in amounts equal to the interest,
dividends or other distributions payable on the loaned securities, which affords
the Portfolio an opportunity to earn interest on the amount of the loan and 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. 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.
Derivatives. (All Portfolios) Each Portfolio may invest in, or enter
into, derivatives 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 the 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 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 the 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 entered into by the European Equity Portfolio, such as
options and futures, subject the Portfolio to the rules of the Commodity Futures
Trading Commission which limit the extent to which the Portfolio can invest in
such derivatives. The European Equity Portfolio may invest in futures contracts
and options with respect thereto for hedging purposes without limit. However,
the Portfolio may not 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.
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 Newton with respect to the European Equity
Portfolio) 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 the 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. (European Equity Portfolio only) The
European Equity 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 on exchanges located outside the
United States, such as the London International Financial Futures Exchange, the
Deutsche Termine Borse 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 the 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 the Portfolio which
could adversely affect the value of the Portfolio's net assets. Although the
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 the Portfolio also is subject to Newton's
ability 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 the 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. The 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, the Portfolio may be required to set aside permissible
liquid assets in a segregated account to cover its obligations relating to its
transactions in 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.
In addition, the segregation of such assets will have the effect of limiting the
Portfolio's ability otherwise to invest those assets.
Specific Futures Transactions. (European Equity Portfolio only) The
European Equity 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 Portfolio 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.
The 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.
Successful use by the Portfolio of futures contracts will be subject to the
Newton's ability 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, the Portfolio may incur losses.
Options--In General. (European Equity Portfolio only) The European Equity
Portfolio may invest up to 5% of its assets, represented by the premium
paid, in the purchase of call and put options. The Portfolio may write (i.e.,
sell) covered call and put option contracts to the extent of 20% of the value of
its net assets at the time such option contracts are written. 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 the 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 the 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. The 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. (European Equity Portfolio only) The 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.
The 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.
The Portfolio may purchase cash-settlement options on interest rate swaps,
interest rate swaps denominated in foreign currency and equity index swaps in
pursuit of its investment objective. Interest rate swaps involve the exchange
by the Portfolio with another party of their respective commitments to pay or
receive interest (for example, an exchange of floating-rate payments for fixed-
rate payments) denominated in U.S. dollars or foreign currency. 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 the Portfolio of options will be subject to the Newton's
ability 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, the 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 the Portfolio, the Fund will provide appropriate disclosure in the
Portfolio's Prospectus or Statement of Additional Information.
Forward Commitments. (All Portfolios) Each Portfolio may purchase
securities on a forward commitment, when-issued or delayed delivery basis, which
means that delivery and payment take place a number of days after the date of
the commitment to purchase or sell the securities at a predetermined price
and/or yield. Typically, no interest accrues to the purchaser until the
security is delivered. When purchasing a security on a forward commitment
basis, the Portfolio assumes the rights and risks of ownership of the security,
including the risk of price and yield fluctuations, and takes such fluctuations
into account when determining its net asset value. Because the Portfolio is not
required to pay for these securities until the delivery date, these risks are in
addition to the risks associated with the Portfolio's other investments. The
Portfolio will set aside in a segregated account permissible liquid assets at
least equal at all times to the amount of the Portfolio's purchase commitments.
The Bond Market Index Portfolio intends to engage in forward
commitments to increase its portfolio's financial exposure to changes in
interest rates and will increase the volatility of its returns. If the
Portfolio is fully or almost fully invested when forward commitment
purchases are outstanding, such purchases may result in a form of leverage. At
no time will the Portfolio have more than 33-1/3% of its assets committed to
purchase securities on a forward commitment basis. The European Equity
Portfolio will commit to purchase securities on a forward commitment or when-
issued basis 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.
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 and 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
Fixed Income Securities. (All Portfolios) 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 the 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 securities
that may be purchased by the 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 Portfolio will consider all
circumstances deemed relevant in determining whether to continue to hold the
security.
Equity Securities. (European Equity Portfolio only) - Equity securities,
including common stock, preferred stock, convertible securities and warrants,
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 the Portfolio's investments will result in changes in the value of its
shares and thus the Portfolio's total return to investors.
Foreign Securities. (European Equity Portfolio only) Foreign securities
markets generally are not as developed or efficient as those in the United
States. Securities of some foreign issuers, including depository receipts,
foreign government obligations and securities of supranational entities, 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 such securities usually are held outside
the United States, the Portfolio 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 the 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 Portfolio 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.
The percentage of the Portfolio's assets which may be invested in foreign
securities as noted above is not a fundamental policy and may be changed at any
time without shareholder approval.
Mortgage-Related Securities. (Bond Market Index Portfolio only) Mortgage-
related securities are complex derivative instruments, subject to both credit
and prepayment risk, and may be more volatile and less liquid than more
traditional debt securities. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value of
the security, which may fluctuate, is not secured. If a mortgage-related
security is purchased at a premium, all or part of the premium may be lost if
there is a decline in the market value of the security, whether resulting from
changes in interest rates or prepayments on the underlying mortgage collateral.
Mortgage-related securities are subject to credit risks associated with the
performance of the underlying mortgage properties. Adverse changes in economic
conditions and circumstances are more likely to have an adverse impact on
mortgage-related securities secured by loans on certain types of commercial
properties than on those secured by loans on residential properties. In
addition, these securities are subject to prepayment risk, although commercial
mortgages typically have shorter maturities than residential mortgages and
prepayment protection features. Some mortgage-related securities have
structures that make their reactions to interest rate changes and other factors
difficult to predict, making their value highly volatile.
State Insurance Regulation. (All Portfolios) 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 future contracts and short sales of
securities, among other techniques. If applied to a Portfolio, the 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 Investments. (All Portfolios) Investment decisions for each
Portfolio are made independently from those of the other Portfolio and
investment companies managed by the Manager (and, where applicable, Newton).
If, however, such other Portfolio 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.
Investment Restrictions
Each Portfolio's investment objective is a fundamental policy, which cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Portfolio's outstanding voting shares. In addition, each Portfolio
has adopted investment restrictions numbered 1 through 10 as fundamental
policies. Investment restrictions numbered 11 through 13 are not fundamental
policies and may be changed, as to a Portfolio, by a vote of a majority of the
Fund's Board members at any time. Neither 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 the 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 the 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. Lend any securities or make any other loans if, as a result, more
than 33-1/3% of its total assets would be lent to others, except that this
limitation does not apply to the purchase of debt obligations and the entry into
repurchase agreements. 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 the 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 and 12 may be deemed to give rise to a senior
security.
10. Purchase securities on margin, but the 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. 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.
* * *
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will not
constitute a violation of such restriction.
In addition, each Portfolio has adopted the following policies as non-
fundamental policies. Each Portfolio intends (i) to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) to comply
in all material respects with insurance laws and regulations that the Fund has
been advised are applicable to investments of separate accounts of Participating
Insurance Companies. As non-fundamental policies, these policies may be changed
by vote of a majority of the Board members at any time.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of each
Portfolio. The Board approves all significant agreements with those companies
that furnish services to the Fund. These companies are as
follows:
The Dreyfus Corporation Investment Adviser
Newton Capital Management Limited Sub-Investment Adviser to the
European Equity Portfolio
Premier Mutual Fund Services, Inc. Distributor
Dreyfus Transfer, Inc. Transfer Agent
The Bank of New York Custodian for the European
Equity Portfolio
Mellon Bank, N.A. Custodian for the Bond Market
Index Portfolio
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 is also
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 sizes 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, Equitable Resources, Inc., a producer and
distributor of natural gas and crude petroleum, MCI Communications
Corporation, Mutual of America Life Insurance Company and TLC Beatrice
International Holdings, Inc. He is 65 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
Communications Satellite 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. From 1980 to 1994, Mrs. Benson was a director of The
Grumman Corporation and of the General RE Corporation from 1990 to 1998.
Mrs. Benson served as a consultant to the U.S. Department of State and to
SRI International from 1980 to 1981. From 1977 to 1980, she was Under
Secretary of State for Security Assistance, Science and Technology. She is
71 years old and her address is 46 Sunset Avenue, Amherst, Massachusetts
01002.
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 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 ended December 31, 1998, is as follows:
Total Compensation
From Fund and Fund
Aggregate Complex Paid
Name of Board Member Compensation From Fund** to Board Member
Joseph S. DiMartino $2,500 $619,660 (187)
Clifford L. Alexander, Jr. $2,000 $80,918 (38)
Lucy Wilson Benson $2,000 $77,168 (24)
___________________
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Fund, for which the Board member
serves.
**Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $211 for all board members as a group.
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 has been employed by Funds Distributor,
Inc., for more than the past five years. She is 42 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
39 years old.
STEPHANIE D. PIERCE, Vice President, Assistant Secretary and Assistant
Treasurer. Vice President and Client Development Manager of Funds
Distributor, Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, N.A. From August
1995 to April 1997, she was an Assistant Vice President with Hudson Valley
Bank, and from September 1990 to August 1995, she was Second
Vice President with Chase Manhattan Bank. She is 30 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of the
Distributor and Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. From September 1989 to
July 1994, she was an Assistant Vice President and Client Manager for The
Boston Company, Inc. She is 35 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. He is 44 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 36
years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for Investors
Bank & Trust Company. He is 30 years old.
CHRISTOPHER J. KELLEY, Vice President and Assistant Secretary. Vice President
and Senior Associate General Counsel of 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. He is 34 years old.
KATHLEEN K. MORRISEY, Vice President and Assistant Secretary. Manager of
Treasury Services Administration 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 27 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 37 years old.
The address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166.
As of April 20, 1999, none of the Fund's Board members or officers
owned shares of any Portfolio.
MANAGEMENT ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). 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.
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") with the Fund dated April 16, 1998, as amended April
16, 1999. 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. The Agreement was last approved by the Fund's Board, including a
majority of the Board members who are not "interested persons" of any party to
the Agreement, at a meeting held on April 15, 1999. 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:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment Officer
and a director; Thomas F. Eggers, Vice Chairman-Institutional and a director;
Lawrence S. Kash, Vice Chairman and a director; J. David Officer, Vice Chairman
and a director; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr.,
Executive Vice President; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Diane P. Durnin, Vice President-Product Development; Patrice M.
Kozlowski, Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Andrew S. Wasser, Vice President-Information Systems;
Theodore A. Schachar, Vice President; Wendy Strutt, Vice President; Richard
Terres, Vice President; William H. Maresca, Controller; James Bitetto, Assistant
Secretary; Steven F. Newman, Assistant Secretary; and Mandell L. Berman, Burton
C. Borgelt, Steven G. Elliott, Martin C. McGuinn, Richard W. Sabo, and Richard
F. Syron, directors.
The Manager has a personal securities trading policy (the "Policy") which
restricts the personal securities transactions of its employees. Its primary
purpose is to ensure that personal trading by the Manager's
employees does not disadvantage any fund managed by the Manager. Under the
Policy, the Manager's employees must preclear personal transactions in
securities not exempt under the Policy. In addition, the Manager's
employees must report their personal securities transactions and holdings, which
are reviewed for compliance with Policy. In that regard, the
Manager's portfolio managers and other investment personnel also are subject to
the oversight of Mellon's Investment Ethics Committee. The Manager's portfolio
managers and other investment personnel who comply with the Policy's
preclearance and disclosure procedures, and the requirements of the Committee,
may be permitted to purchase, sell or hold securities which also may be or are
held in fund(s) they manage or for which they otherwise provide investment
advice.
Sub-Investment Advisory Agreement. With respect to the European Equity
Portfolio, the Manager has entered into a Sub-Investment Advisory Agreement (the
"Newton Sub-Advisory Agreement") with Newton dated April 16, 1999. As to such
Portfolio, the Newton 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 Newton, by vote
cast in person at a meeting called for the purpose of voting on such approval.
The Newton 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 Newton. The Newton Sub-
Advisory Agreement will terminate automatically in the event of its assignment
(as defined in the 1940 Act).
The following persons are officers and/or directors of Newton: Colin
Harris, Director; Jonathan Powell, Director; Guy Hudson, Director; Shreekant
Panday, Director; Joanna Bowen, Officer; Keiran Gallagher, Officer; Philip
Collins, Officer; Guy Christie, Officer; Helena Morrisey, Officer; April
Larusse, Officer; Alexander Stanic, Officer; Richard Harris, Officer; Susan
Duffy, Officer; Julian Campbell, Compliance Officer; and Mary-Ann O'Hara, Chief
Financial Officer.
The Manager manages the investments of each Portfolio in accordance
with the stated policies of such Portfolio, subject to the approval of the
Fund's Board. Newton, with respect to the European Equity Portfolio, provides
day-to-day management of the Portfolio's investments, subject to
the supervision of the Manager and the Fund's Board. Each Portfolio's adviser
is responsible for investment decisions and provides the Portfolio with
portfolio managers who are authorized by the Fund's Board to execute purchases
and sales of securities. The portfolio managers of the European Equity
Portfolio are Joanna Bowen and Keiran Gallagher. The Bond Market Index
Portfolio is not managed according to traditional methods of "active" investment
management, which involve the buying and selling of securities based upon
economic, financial and market analysis and investment judgment. Instead, the
Bond Market Index Portfolio utilizes a "passive" investment approach, attempting
to duplicate the investment performance of the Aggregate Bond Index through the
use of statistical procedures.
The Manager and Newton 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 Newton.
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,
Newton). 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 Newton 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 Fund's 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, from time to time, may make payments
from its own assets to Participating Insurance Companies in connection with the
provision of certain administrative services to one or more Portfolios and/or to
purchasers of VA contracts or VLI policies. The Manager also may make such
advertising and promotional expenditures, using its own resources, as it from
time to time deems appropriate.
As compensation for its services, the Fund has agreed to pay the
Manager a monthly fee at the annual rate of .30% of the Bond Market Index
Portfolio's average daily net assets and 1.00% of the European Equity
Portfolio's average daily net assets. All fees and expenses are accrued daily
and deducted before declaration of distributions to shareholders.
As compensation for Newton's services, the Manager has agreed to pay Newton
a monthly sub-advisory fee at the annual rate set forth below as a percentage of
the European Equity Portfolio's average daily net assets:
Annual Fee as a Percentage of the
Average Daily Net Assets Portfolio's Average Daily Net Assets
0 to $100 million .35%
$100 million to $1 billion .30%
$1 billion to $1.5 billion .26%
$1.5 billion or more .20%
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Portfolio's assets increases.
Distributor. The Distributor, located at 60 State Street, Boston,
Massachusetts 02109, serves as the Fund's distributor on a best efforts
basis pursuant to an agreement which is renewable annually.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus
Transfer, Inc. (the "Transfer Agent"), 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 Bond Market Index Portfolio. Under a custody agreement with the Fund,
Mellon Bank, N.A. holds the 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 the 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 European Equity
Portfolio. The Bank of New York has no part in determining the investment
policies of the Portfolio or which securities are to be purchased or sold by the
Portfolio.
HOW TO BUY SHARES
Portfolio shares currently are offered only to separate accounts of
Participating Insurance Companies. Individuals may not place purchase
orders directly with the Fund.
Separate accounts of the Participating Insurance Companies place orders
based on, among other things, the amount of premium payments to be invested
pursuant to VA contracts and VLI policies. See the prospectus of the separate
account of the Participating Insurance Company for more information on the
purchase of Portfolio shares and with respect to the availability for investment
in specific portfolios of the Fund. The Fund does not issue
share certificates.
Purchase orders from separate accounts based on premiums and
transaction requests received by the Participating Insurance Company on a given
business day in accordance with procedures established by the Participating
Insurance Company will be effected at the net asset value of the applicable
Portfolio determined on such business day if the orders are received by the Fund
in proper form and in accordance with applicable requirements on the next
business day and Federal Funds (monies of member banks within the Federal
Reserve System which are held on deposit at a Federal Reserve Bank) in the net
amount of such orders are received by the Fund on the next business day in
accordance with applicable requirements. It is each Participating Insurance
Company's responsibility to properly transmit purchase orders and Federal Funds
in accordance with applicable requirements. VA contract holders and VLI policy
holders should refer to the prospectus for their contracts or policies in this
regard.
Portfolio 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 methods employed in valuing each Portfolio's investments,
see "Determination of Net Asset Value."
HOW TO REDEEM SHARES
Portfolio shares may be redeemed at any time by the separate accounts
of the Participating Insurance Companies. Individuals may not place redemption
orders directly with the Portfolio. Redemption requests received by the
Participating Insurance Company from separate accounts on a given business day
in accordance with procedures established by the Participating Insurance Company
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 responsibility to properly transmit redemption
requests in accordance with applicable requirements. VA contract holders and
VLI policy holders should consult their Participating Insurance Company in this
regard. 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. No
charges are imposed by the Fund when shares are redeemed.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission.
Should any conflict between VA contract holders and VLI policy holders
arise which would require that a substantial amount of net assets be withdrawn,
orderly portfolio management could be disrupted to the potential detriment of
such contract holders and policy holders.
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 and is a
fundamental policy, as to a Portfolio, which may not be changed without
shareholder approval of such Portfolio. 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 sells 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
Substantially all of the Bond Market Index Portfolio's investments
(excluding short-term investments) are valued each business day by an
independent pricing service (the "Service") approved by the Fund's Board.
Securities valued by the Service for which quoted bid prices in the judgment of
the Service are readily available and are representative of the bid side of the
market are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by the
Service based upon its evaluation of the market for such securities). Other
debt securities valued by the Service are carried at fair value as determined by
the Service, based on methods which include consideration of: yields or prices
of securities of comparable quality, coupon, maturity and type; indications as
to values from dealers; and general market conditions. Debt securities that are
not valued by the Service are valued at the average of the most recent bid and
asked prices in the market in which such investments are primarily traded, or at
the last sales price for securities traded primarily on an exchange. In the
absence of reported sales of investments traded primarily on an exchange, the
average of the most recent bid and asked prices is used. Bid price is used when
no asked price is available.
With respect to the European Equity Portfolio, portfolio securities,
including covered call options written by the Portfolio, are valued at the last
sale price on the securities exchange or national securities market on which
such securities primarily are 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. Any assets or
liabilities initially expressed in terms of foreign currency will be translated
into U.S. dollars at the midpoint of the New York interbank market spot exchange
rate as quoted on the day of such translation by the Federal Reserve Bank of New
York or if no such rate is quoted on such date, at the exchange rate previously
quoted by the Federal Reserve Bank of New York, or at such other quoted market
exchange rate as may be determined to be appropriate by the Manager. Forward
currency contracts will be valued at the current cost of offsetting the
contract. 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 does
not take place contemporaneously with the determination of prices of certain of
the European Equity Portfolio's investments. Short-term investments are carried
at amortized cost, which approximates value.
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.
Expenses and fees, including the management fee, are accrued daily and
taken into account for the purpose of determining the net asset value of the
relevant Portfolio's shares.
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
Each Portfolio intends to qualify as a regulated investment company under
the Code if such qualification is in the best interests of its shareholders. As
a regulated investment company, each Portfolio will pay no Federal income tax on
net investment income and net realized securities gains to the extent that such
income and gains are distributed to shareholders in accordance with applicable
provisions of the Code. To qualify as a regulated investment company, the
Portfolio must meet several requirements. These requirements include the
following: (1) at least 90% of the Portfolio's gross income must be derived from
dividends, interest, payments with respect to securities loans, gains from the
sale or disposition of stock, securities or foreign currencies or other income
(including gain from options, futures or forward contracts) derived in
connection with the Portfolio's investment business, (2) at the close of
each quarter of the Portfolio's taxable year, (a) at least 50% of the value of
the Portfolio's assets must consist of cash, United States Government
securities, securities of other regulated investment companies and other
securities (limited generally with respect to any one issuer to not more
than 5% of the total assets of the Portfolio and not more than 10% of the
outstanding voting securities of such issuer) and (b) not more than 25% of the
value of the Portfolio's assets may be invested in the securities of any one
issuer (other than United States Government securities or securities of other
regulated investment companies) or of two or more issuers which the Portfolio
controls and which are determined to be engaged in similar or related trades or
businesses and (3) at least 90% of the Portfolio's net income (consisting of net
investment income and net short-term capital gain) must be distributed to its
shareholders. The Portfolios may be subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amount of investment income and
capital gains. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any government
agency.
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. In addition, 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.
Shareholders of the Portfolios will be variable annuity and variable life
insurance separate accounts established by insurance companies to fund Policies.
Section 817(h) of the Code and the regulations thereunder set standards for
diversification of the investments underlying Policies in order for the Policies
to be treated as life insurance. These requirements, which are in addition to
diversification requirements applicable to the Portfolios under Subchapter M of
the Code, may affect the composition of a Portfolio's investments.
The Secretary of the Treasury may in the future issue additional
regulations or revenue rulings that will prescribe the circumstances in
which a Policy owner's control of the investments of a separate account may
cause the Policy owner, rather than the insurance company, to be treated as the
owner of assets of the separate account. Failure to comply with Section 817(h)
of the Code or any regulation thereunder, or with any regulations or revenue
rulings on Policy owner control, if promulgated, would cause earnings regarding
a Policy owner's interest in the separate account to be includable in the Policy
owner's gross income in the year earned.
If a Portfolio fails to qualify as a regulated investment company, the
Portfolio will be subject to federal, and possibly state, corporate taxes on its
taxable income and gains, distributions to its shareholders will be taxed as
ordinary dividend income to the extent of such Portfolio's available earnings
and profits, and Policy owners could be subject to current tax on distributions
received with respect to Portfolio shares.
For more information concerning the Federal income tax consequences, Policy
owners should refer to the prospectus for their contracts or policies.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities on a securities exchange
are effected by the Manager (or Newton with respect to the European Equity
Portfolio) 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 Newton to
supplement their own research and analysis with the views and information of
other securities firms and may be selected based upon their sales of shares of
funds advised by the Manager or its affiliates. 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 Newton in advising other
funds or accounts and, conversely, research services furnished to the Manager
and Newton 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 based on their sales of shares of other funds
advised by the Manager or its affiliates, as well as 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 its affiliates. 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 its affiliates are reasonable and fair.
PERFORMANCE INFORMATION
Performance figures for the Portfolios will not reflect the separate
charges applicable to the 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.
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. The effective yield and total
return for a Portfolio should be distinguished from the rate of return of a
corresponding sub-account or investment division of a separate account of a
Participating Insurance Company, which rate will reflect the deduction of
additional charges, including mortality and expense risk charges, and will
therefore be lower. Policy owners should consult the prospectus for their
Policy.
Calculations of the Portfolios' performance information may reflect
absorbed expenses pursuant to any undertaking that may be in effect.
Comparative performance information may be used from time to time in advertising
a Portfolio's shares, including data from Lipper Analytical Services, Inc., the
Aggregate Bond Index, Government/Corporate Bond Index, CDA Technologies Indexes,
Consumer Price Index, Standard & Poor's 500 Composite Stock Price Index, Morgan
Stanley Capital International (MSCI) Europe Index, MSCI World Index, the Dow
Jones Industrial Average, Morningstar, Inc., Money Magazine and other industry
publications.
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, and 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 AND PORTFOLIOS
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.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a
result, shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least
10% of the shares outstanding and entitled to vote may require the Fund to hold
a special meeting of shareholders for purposes of removing a Board member from
office. Shareholders may remove a Board member by the affirmative vote of two-
thirds of the Fund's outstanding voting shares. In addition, the Board will
call a meeting of shareholders for the purpose of electing Board members if, at
any time, less than a majority of the Board members then holding office have
been elected by shareholders.
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 seven 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
series without shareholder approval.
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.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-
4982, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares being
sold pursuant to the Fund's Prospectuses.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the
Fund. The auditors examine the Fund's financial statements and provide
other audit, tax and related services.
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.
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.
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.
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 consider to have below average protection factors but
still considered sufficient for prudent investment. Considerable variability in
risk exist during economic cycles.
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.
DREYFUS INVESTMENT PORTFOLIOS
PART C. OTHER INFORMATION
_________________________
Item 23. Exhibits
_______ ________
(a) Registrant's Agreement and Declaration of Trust is incorporated by
reference to the Registration Statement on Form N-1A, filed on
February 28, 1998.
(b) Registrant's By-Laws are incorporated by reference to the
Registration Statement on Form N-1A, filed on February 28, 1998.
(d)(1) Management Agreement is incorporated by reference to Exhibit
(5)(a) of Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A, filed on September 15, 1998.
(d)(2) Sub-Investment Advisory Agreement with Founders Asset Management
LLC is incorporated by reference to Post-Effective Amendment
No. 1 to the Registration Statement on Form N-1A, filed on
July 17, 1998.
(d)(3) Sub-Investment Advisory Agreement with Newton Capital Management
Limited.
(e) Distribution Agreement is incorporated by reference to Exhibit (6)
of Post-Effective Amendment No. 2 to the Registration Statement on
Form N-1A, filed on September 15, 1998.
(g) Custody Agreement is incorporated by reference to Exhibit (8) of
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on April 24, 1998.
(i) Opinion and consent of Registrant's counsel is incorporated
by reference to Exhibit (10) of Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A, filed on April 24, 1998.
(j) Consent of Independent Auditors.
Other Exhibits
______________
(a) Certificate of Assistant Secretary is incorporated by
reference to Other Exhibits (a) of Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A, filed on
April 24, 1998.
(b) Rule 18f-1 Election Assistant is incorporated by reference
to Other Exhibits (b) of Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A, filed on April 24,
1998.
Item 24. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 25. Indemnification
_______ _______________
The Statement as to the general effect of any contract,
arrangements or statute under which a director, officer,
underwriter or affiliated person of the Registrant is insured or
indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any
director, officer, affiliated person or underwriter for their own
protection, is incorporated by reference to Item 27 of Part C of
Pre-Effective Amendment No. 2 to the Registration Statement on Form
N-1A, filed on September 15, 1998.
Reference is also made to the Distribution Agreement filed as
Exhibit (6) of Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A, filed on September 15, 1998.
Item 26. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
(a) Manager - The Dreyfus Corporation
________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary
companies comprise a financial service organization whose
business consists primarily of providing investment management
services as the investment adviser, manager and distributor
for sponsored 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.
<TABLE>
<CAPTION>
ITEM 26. Business and Other Connections of Investment Adviser (continued)
Officers and Directors of Investment Adviser
<S> <C> <C> <C>
Name and Position
With Dreyfus Other Businesses Position Held Dates
Christopher M. Condron Franklin Portfolio Associates, LLC* Director 1/97 - Present
Chairman of the Board and
Chief Executive Officer
TBCAM Holdings, Inc.* Director 10/97 - Present
President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Director 1/98 - Present
Asset Management, LLC* Chairman 1/98 - 6/98
President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Pareto Partners Partner Representative 11/95 - 5/97
271 Regent Street
London, England W1R 8PP
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Certus Asset Advisors Corp.** Director 6/95 -Present
Mellon Capital Management Director 5/95 -Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 -1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc.* Director 5/95 - Present
President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - 3/98
Mellon Bank Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Christopher M. Condron The Boston Company, Inc.* Vice Chairman 1/94 - Present
Chairman and Chief Director 5/93 - Present
Executive Officer
(Continued) Laurel Capital Advisors, LLP+ Exec. Committee 1/98 - 8/98
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Director 5/93 -Present
Company*
The Boston Company Financial President 6/89 - Present
Strategies, Inc. * Director 6/89 - Present
Mandell L. Berman Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
Burton C. Borgelt DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Bank Corporation+ Director 6/91 - Present
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Inc. Director 2/81 - Present
570 West College Avenue
York, PA
Quill Corporation Director 3/93 - Present
Lincolnshire, IL
Stephen E. Canter Dreyfus Investment Chairman of the Board 1/97 - Present
President, Chief Operating Advisors, Inc.++ Director 5/95 - Present
Officer, Chief Investment President 5/95 - Present
Officer, and Director
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - Present
Member
Mellon Equity Associates, LLP+ Executive Committee 1/99 - Present
Member
Franklin Portfolio Associates, LLC* Director 2/99 - Present
Franklin Portfolio Holdings, Inc.* Director 2/99 - Present
The Boston Company Asset Director 2/99 - Present
Management, LLC*
TBCAM Holdings, Inc.* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Stephen E. Canter Founders Asset Management, LLC Member, Board of 12/97 - Present
President, Chief Operating 2930 East Third Ave. Managers
Officer, Chief Investment Denver, CO 80206 Acting Chief Executive 7/98 - 12/98
Officer, and Director Officer
(Continued)
The Dreyfus Trust Company+++ Director 6/ 95 - Present
Thomas F. Eggers Dreyfus Service Corporation++ Executive Vice President 4/96 - Present
Vice Chairman - Institutional Director 9/96 - Present
and Director
Founders Asset Management, LLC Member, Board of 2/99 - Present
2930 East Third Avenue Managers
Denver, CO 80206
Steven G. Elliott Mellon Bank Corporation+ Senior Vice Chairman 1/99 - Present
Director Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
Treasurer 1/90 - 5/98
Mellon Bank, N.A.+ Senior Vice Chairman 3/98 - Present
Vice Chairman 6/92 - 3/98
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Corporation Controller 10/90 - 2/99
500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Financial Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+ Chairman 7/89 - 11/97
President 4/88 - 11/97
Chief Executive Officer 4/88 - 11/97
Mellon International Investment Director 9/89 - 8/97
Corporation+
Steven G. Elliott Mellon Financial Services Treasurer 12/87 - Present
Director (Continued) Corporation # 5+
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
Lawrence S. Kash Dreyfus Investment Director 4/97 - Present
Vice Chairman Advisors, Inc.++
And Director
Dreyfus Brokerage Services, Inc. Chairman 11/97 - Present
401 North Maple Ave. Chief Executive Officer 11/97 - Present
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - 2/99
President 9/96 - 3/99
Dreyfus Precious Metals, Inc.++ + Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - Present
Organization, Inc.++ President 1/97 - Present
Seven Six Seven Agency, Inc. ++ Director 1/97 - Present
Dreyfus Insurance Agency of Chairman 5/97 - Present
Massachusetts, Inc.++++ President 5/97 - Present
Director 5/97 - Present
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - Present
Corporation++ President 5/97 - Present
Director 12/94 - Present
Founders Asset Management, LLC Member, Board of 12/97 - Present
2930 East Third Avenue Managers
Denver, CO. 80206
The Boston Company Advisors, Chairman 12/95 - Present
Inc. Chief Executive Officer 12/95 - Present
Wilmington, DE President 12/95 - Present
The Boston Company, Inc.* Director 5/93 - Present
President 5/93 - Present
Mellon Bank, N.A.+ Executive Vice President 6/92 - Present
Laurel Capital Advisors, LLP+ Chairman 1/98 - 8/98
Executive Committee 1/98 - 8/98
Member
Chief Executive Officer 1/98 - 8/98
President 1/98 - 8/98
Lawrence S. Kash Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Vice Chairman Chairman 9/93 - 1/98
And Director (Continued) President and CEO 12/91 - 1/98
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Martin G. McGuinn Mellon Bank Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 3/98
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
Mellon Financial Vice President 9/86 - 10/97
Corporation (MD)
Rockville, Maryland
J. David Officer Dreyfus Service Corporation++ Executive Vice President 5/98 - Present
Vice Chairman Director 3/99 - Present
And Director
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
North Miami Beach, FL 33180
Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - Present
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - Present
Services, Inc.* Director 8/96 - Present
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
J. David Officer Mellon Trust of New York Director 6/96 - Present
Vice Chairman and 1301 Avenue of the Americas
Director (Continued) New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon Bank, N.A.+ Executive Vice President 2/94 - Present
Mellon United National Bank Director 3/98 - Present
1399 SW 1st Ave., Suite 400
Miami, Florida
Boston Group Holdings, Inc.* Director 12/97 - Present
Dreyfus Financial Services Corp. + Director 9/96 - Present
Dreyfus Investment Services Director 4/96 - Present
Corporation+
Richard W. Sabo Founders Asset Management LLC President 12/98 - Present
Director 2930 East Third Avenue Chief Executive Officer 12/98 - Present
Denver, CO. 80206
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
Richard F. Syron American Stock Exchange Chairman 4/94 - Present
Director 86 Trinity Place Chief Executive Officer 4/94 - Present
New York, NY 10006
Ronald P. O'Hanley Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Vice Chairman
TBCAM Holdings, Inc.* Chairman 6/98 - Present
Director 10/97 - Present
The Boston Company Asset Chairman 6/98 - Present
Management, LLC* Director 1/98 - 6/98
The Boston Company Asset Director 2/97 - 12/97
Management, Inc. *
Boston Safe Advisors, Inc.* Chairman 6/97 - Present
Director 2/97 - Present
Pareto Partners Partner Representative 5/97 - Present
271 Regent Street
London, England W1R 8PP
Mellon Capital Management Director 5/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon Equity Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon-France Corporation+ Director 3/97 - Present
Ronald P. O'Hanley Laurel Capital Advisors+ Trustee 3/97 - Present
Vice Chairman (Continued)
Mark N. Jacobs Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - Present
Organization, Inc.++
William H. Maresca The Dreyfus Trust Company+++ Director 3/97 - Present
Controller
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Dreyfus Consumer Credit Corp. ++ Treasurer 10/98 -Present
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, DE 19808
The TruePenny Corporation++ Vice President 10/98 - Present
Dreyfus Precious Metals, Inc. +++ Treasurer 10/98 - 12/98
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Corporation++ Vice President 10/98 - Present
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Assistant Treasurer 3/93 - Present
Organization, Inc.++
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
William T. Sandalls, Jr. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - Present
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97-12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
William T. Sandalls, Jr. Dreyfus-Lincoln, Inc. Director 12/96 - Present
Executive Vice President 4500 New Linden Hill Road President 1/97 - Present
(Continued) Wilmington, DE 19808
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
Dreyfus Partnership President 1/97 - 6/97
Management, Inc.++ Director 1/96 - 6/97
Dreyfus Service Organization, Director 1/96 - 6/97
Inc.++ Executive Vice President 1/96 - 6/97
Treasurer 10/96- Present
Dreyfus Insurance Agency of Director 5/97 - Present
Massachusetts, Inc.++++ Treasurer 5/97- Present
Executive Vice President 5/97 - Present
Diane P. Durnin Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and Advertising
Development Division
Patrice M. Kozlowski None
Vice President - Corporate
Communications
Mary Beth Leibig None
Vice President -
Human Resources
Theodore A. Schachar Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
Dreyfus Investment Advisors, Inc.++ Vice President - Tax 10/96 - Present
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Inc.++ Vice President - Tax 10/96 - Present
Wendy Strutt None
Vice President
Richard Terres None
Vice President
Andrew S. Wasser Mellon Bank Corporation+ Vice President 1/95 - Present
Vice-President -
Information Systems
James Bitetto The TruePenny Corporation++ Secretary 9/98 - Present
Assistant Secretary
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
Steven F. Newman Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
_______________________________
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ 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 53 State Street, Boston, Massachusetts 02109.
</TABLE>
Item 27. 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 Debt and Equity 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) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds, Inc.
38) The Dreyfus/Laurel Funds Trust
39) The Dreyfus/Laurel Tax-Free Municipal Funds
40) Dreyfus LifeTime Portfolios, Inc.
41) Dreyfus Liquid Assets, Inc.
42) Dreyfus Massachusetts Intermediate Municipal Bond Fund
43) Dreyfus Massachusetts Municipal Money Market Fund
44) Dreyfus Massachusetts Tax Exempt Bond Fund
45) Dreyfus MidCap Index Fund
46) Dreyfus Money Market Instruments, Inc.
47) Dreyfus Municipal Bond Fund, Inc.
48) Dreyfus Municipal Cash Management Plus
49) Dreyfus Municipal Money Market Fund, Inc.
50) Dreyfus New Jersey Intermediate Municipal Bond Fund
51) Dreyfus New Jersey Municipal Bond Fund, Inc.
52) Dreyfus New Jersey Municipal Money Market Fund, Inc.
53) Dreyfus New Leaders Fund, Inc.
54) Dreyfus New York Insured Tax Exempt Bond Fund
55) Dreyfus New York Municipal Cash Management
56) Dreyfus New York Tax Exempt Bond Fund, Inc.
57) Dreyfus New York Tax Exempt Intermediate Bond Fund
58) Dreyfus New York Tax Exempt Money Market Fund
59) Dreyfus U.S. Treasury Intermediate Term Fund
60) Dreyfus U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Premier California Municipal Bond Fund
66) Dreyfus Premier Equity Funds, Inc.
67) Dreyfus Premier International Funds, Inc.
68) Dreyfus Premier GNMA Fund
69) Dreyfus Premier Worldwide Growth Fund, Inc.
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) Founders Funds, Inc.
85) General California Municipal Bond Fund, Inc.
86) General California Municipal Money Market Fund
87) General Government Securities Money Market Fund, Inc.
88) General Money Market Fund, Inc.
89) General Municipal Bond Fund, Inc.
90) General Municipal Money Market Funds, Inc.
91) General New York Municipal Bond Fund, Inc.
92) General New York Municipal Money Market Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Chief Treasurer
Compliance Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Jean M. O'Leary+ Assistant Vice President, None
Assistant Secretary and
Assistant Clerk
William J. Nutt+ Chairman of the Board None
Stephanie D. Pierce++ Vice President Vice President,
Assistant Secretary
and Assistant
Treasurer
Patrick W. McKeon+ Vice President None
Joseph A. Vignone+ Vice President None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 28. 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 02940-9671
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 29. Management Services
_______ ___________________
Not Applicable
Item 30. Undertakings
_______ ____________
None
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the 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 27th day of April, 1999.
DREYFUS INVESTMENT PORTFOLIOS
BY:/s/Marie E. Connolly*
____________________________
MARIE E. CONNOLLY, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons
in the capacities and on the date indicated.
Signatures Title Date
__________________________ ______________________________ __________
/s/Marie E. Connolly* President and Treasurer 4/27/99
______________________________ (Principal Executive, Financial
Marie E. Connolly and Accounting Officer)
/s/Clifford L. Alexander, Jr.* Director 4/27/99
_____________________________
Clifford L. Alexander, Jr.
/s/Lucy Wilson Benson* Director 4/27/99
______________________________
Lucy Wilson Benson
/s/Joseph S. DiMartino* Chairman of the Board of Directors 4/27/99
_____________________________
Joseph S. DiMartino
*BY: /s/Stephanie Pierce
__________________________
Stephanie Pierce,
Attorney-in-Fact
INDEX OF EXHIBITS
(d)(3) Sub-Investment Advisory Agreement with Newton Capital Management
Limited.
(j) Consent of Independent Auditors.
SUB-INVESTMENT ADVISORY AGREEMENT
THE DREYFUS CORPORATION
200 Park Avenue
New York, New York 10166
April 16, 1999
Newton Capital Management Limited
71 Queen Victoria Street
London, ECV 4DR
Dear Sirs:
As you are aware, Dreyfus Investment Portfolios (the "Fund")
desires to employ the capital of its European Equity Portfolio (the
"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 the Series' 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 intends to employ 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 the 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 the Series' portfolio in accordance with
the Series' investment objectives and policies as stated in its Prospectus
and Statement of Additional Information as from time to time in effect. In
connection therewith, you will supervise the Series' investments and conduct
a continuous program of investment, evaluation and, if appropriate, sale and
reinvestment of the Series' assets. You will furnish to the Adviser or the
Fund such statistical information, with respect to the investments which the
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 the 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 the 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 the 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
calculated daily and paid monthly based on the Series' average daily net
assets, for the preceding month as follows:
Annual Fee as a Percentage of
Average Daily Net Assets Average Daily Net Assets
0 to $100 million .35 of 1%
$100 million to $1 billion .30 of 1%
$1 billion to $1.5 billion .26 of 1%
$1.5 billion or more .20 of 1%
Net asset value shall be computed on such days and at such time
or times as described in the Series' then-current Prospectus and Statement
of Additional Information. The fee for the period from the date following
the commencement of sales of the 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
the Series' net assets shall be computed in the manner specified in the
Fund's charter documents for the computation of the value of the 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
Commission fees and state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees,
certain insurance premiums, industry association fees, outside auditing and
legal expenses, costs of independent pricing services, costs of maintaining
the Fund's existence, costs attributable to investor services (including,
without limitation, telephone and personnel expenses), costs of preparing
and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing stockholders, costs of
stockholders' reports and meetings, and any extraordinary expenses.
The Adviser understands that you now act, and that from time to
time hereafter you may act, as 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 the Series or the size of the position obtainable for or
disposed of by the 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 the 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.
This Agreement shall continue until April 16, 2001, and
thereafter shall continue automatically for successive annual periods ending
on April 16th of each year, 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
the 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. 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 the 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 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:
NEWTON CAPITAL MANAGEMENT LIMITED
By:______________________________
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Counsel and
Independent Auditors" in this Registration Statement (Form N-1A 333-47011) of
Dreyfus Investment Portfolios, Bond Market Index Portfolio and European Equity
Portfolio.
ERNST & YOUNG LLP
New York, New York
April 26, 1999
