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. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [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)
X 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)
----
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
Emerging Leaders Portfolio
Investing in small companies for capital growth
PROSPECTUS December 15, 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
Emerging Leaders Portfolio
Contents
The Portfolio
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 2
Management 3
Financial Highlights 5
Account Information
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 6
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, as to 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 capital growth. To pursue this goal, the portfolio invests
in companies Dreyfus believes to be emerging leaders: small companies
characterized by new or innovative products, services or processes having the
potential to enhance earnings growth. The portfolio invests at least 65% of its
total assets in companies with total market values of less than $1.5 billion at
the time of purchase. The portfolio's investments may include common stocks,
preferred stocks and convertible securities.
In choosing stocks, the portfolio uses a blended approach, investing in a
combination of growth and value stocks. Using fundamental research and direct
management contact, the portfolio managers seek stocks with dominant positions
in major product lines, sustained achievement records and strong financial
condition. They also seek special situations, such as corporate restructurings
or management changes, that could increase the stock price.
The portfolio managers use a sector management approach, supervising a team of
sector managers who assist in making buy and sell decisions within their
respective areas of expertise. The portfolio's sector weightings typically
approximate those of the Russell 2000 Index.
The portfolio typically sells a stock when the reasons for buying it no longer
apply, when the company begins to show deteriorating fundamentals or poor
relative performance, or when a stock is fully valued by the market.
Concepts to understand
SMALL COMPANIES: new, often entrepreneurial companies. Small companies tend to
grow faster than large-cap companies, but frequently are more volatile, are more
vulnerable to major setbacks, and have a higher failure rate than larger
companies.
GROWTH COMPANIES: companies of any capitalization whose earnings are expected to
grow faster than the overall market. Often, growth stocks have relatively high
price-to-earnings and price-to-book ratios, and tend to be more volatile than
value stocks.
VALUE COMPANIES: companies that appear underpriced according to certain
financial measurements of their intrinsic worth or business prospects (such as
price-to-earnings or price-to-book ratios). Because a stock can remain
undervalued for years, value investors often look for factors that could trigger
a rise in price.
MAIN RISKS
While stocks have historically been a leading 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, sometimes dramatically, which means that
shareholders could lose money.
Small companies carry additional risks because their operating histories tend to
be more limited, their earnings less predictable, their share prices more
volatile and their securities less liquid than larger, more established
companies. Some of the portfolio's investments will rise and fall based on
investor perceptions rather than economics. In addition, some of the portfolio's
investments will be made in anticipation of future products and services that,
if delayed, could cause the stock price to drop.
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 the portfolio but 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.
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs.
The portfolio can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying the portfolio's gains or losses.
Growth companies are expected to increase their earnings at a certain rate. If
these expectations are not met, investors can punish the stocks inordinately,
even if earnings do increase. In addition, growth stocks typically lack the
dividend yield that can cushion stock prices in market downturns.
Value stocks are subject to the risk that their intrinsic values may never be
realized by the market, or their prices may go down. Further, while the
portfolio's investments in value stocks may limit the overall downside risk of
the portfolio over time, the portfolio may produce more modest gains than
riskier small-company stock funds as a trade-off for this potentially lower
risk.
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.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives shareholders 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 using this portfolio to fund a VA contract or a VLI policy will 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.
These figures do not reflect any fees or charges imposed by participating
insurance companies under their VA contracts or VLI policies. Owners of VA
contracts or VLI policies should refer to the applicable insurance company
prospectus for information on those fees or charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.90%
Other expenses 0.25%
- --------------------------------------------------------------------------------
TOTAL 1.15%
- --------------------------------------------------------------------------------
Expense example
1 Year 3 Years
- --------------------------------------------------------------------------------
$117 $365
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 Dreyfus 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 more than
$120 billion in over 160 mutual fund portfolios. The portfolio has agreed to pay
Dreyfus an annual management fee of 0.90% of the portfolio's average daily net
assets. Dreyfus is the primary mutual fund business of Mellon Financial
Corporation, a global financial services company with approximately $2.5
trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The portfolio's primary portfolio managers are Paul Kandel and Hilary Woods. Mr.
Kandel and Ms. Woods have been the portfolio's primary portfolio managers since
its inception. Mr. Kandel joined Dreyfus in 1994 as senior sector manager for
the technology and telecommunications industries. Ms. Woods joined Dreyfus in
1987 as senior sector manager for the capital goods industry.
Dreyfus 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 Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
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>
MANAGEMENT (CONTINUED)
Performance Information for Related Funds
Although the portfolio is newly organized and does not yet have its own
performance record, the portfolio has substantially the same investment
objective and follows substantially the same investment policies and strategies
as two corresponding series of separate open-end investment companies advised by
Dreyfus -- Dreyfus Emerging Leaders Fund (the "Public Fund"), which is offered
to the public, and Dreyfus Small Cap Portfolio (the "Insurance Fund"), which,
like the portfolio, serves as a funding vehicle for variable insurance products.
The portfolio currently has the same primary portfolio managers as the Public
Fund and the Insurance Fund. The table at the right shows average annual total
return information for the Public Fund, the Insurance Fund and the Russell 2000
Index, the benchmark index of the portfolio, the Public Fund and the Insurance
Fund.
Investors should not consider this performance data as an indication of the
future performance of the portfolio. The performance figures for the Public Fund
and the Insurance Fund reflect the deduction of the historical fees and expenses
paid by such funds, and not those to be paid by the portfolio. The total annual
operating expenses, after fee waiver and expense reimbursement, if any, for the
fiscal year ended August 31, 1999 for the Public Fund were 1.38% and for the
fiscal year ended December 31, 1998 for the Insurance Fund were 0.77% of the
respective fund's average daily net assets. The performance figures also do not
reflect the deduction of charges or expenses attributable to VA contracts or VLI
policies, which would lower the performance quoted. Policy owners should refer
to the applicable insurance company prospectus for information on any such
charges and expenses. Additionally, although it is anticipated that the
portfolio, the Public Fund and the Insurance Fund will hold similar securities,
their investment results are expected to differ. In particular, differences in
asset size and in cash flow resulting from purchases and redemptions of
portfolio shares may result in different security selections, differences in the
relative weightings of securities or differences in the price paid for
particular portfolio holdings.
Historical performance information for the Public Fund, the Insurance Fund and
the Russell 2000 Index for various periods ended September 30, 1999, as
calculated pursuant to SEC guidelines, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average annual total return AS OF 9/30/99
Since
1 Year 5 Years inception(1)
- ------------------------------------------------------------------------------------------------------------------------------------
DREYFUS EMERGING
LEADERS FUND 40.12% -- 29.37%
DREYFUS SMALL CAP
PORTFOLIO 21.76% 11.51% 34.07%
RUSSELL 2000 INDEX(2) 19.07% 12.39% 9.79%(3)
14.91%(4)
(1) THE INCEPTION DATES OF THE PUBLIC FUND AND INSURANCE FUND WERE 9/29/95 AND
8/31/90, RESPECTIVELY.
(2) THE RUSSELL 2000 INDEX IS A WIDELY RECOGNIZED, UNMANAGED SMALL-CAP INDEX
COMPRISED OF THE COMMON STOCKS OF THE 2,000 U.S. PUBLIC COMPANIES NEXT IN
SIZE AFTER THE LARGEST 1,000 PUBLICLY TRADED U.S. COMPANIES. ALL
PERFORMANCE FIGURES REFLECT THE REINVESTMENT OF DIVIDENDS AND OTHER
DISTRIBUTIONS.
(3) FOR COMPARATIVE PURPOSES FOR THE PUBLIC FUND, THE VALUE OF THE INDEX ON
9/30/95 IS USED AS THE BEGINNING VALUE ON 9/29/95.
(4) FOR COMPARATIVE PURPOSES FOR THE INSURANCE FUND, THE VALUE OF THE INDEX ON
8/31/90 IS USED AS THE BEGINNING VALUE.
</TABLE>
<PAGE 4>
FINANCIAL HIGHLIGHTS
As a new portfolio, financial highlights information is not available for the
portfolio as of the date of this prospectus.
The Portfolio
<PAGE 5>
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 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: Emerging Leaders 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)
and 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.
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).
<PAGE 6>
NOTES
NOTES
NOTES
<PAGE>
For More Information
Dreyfus Investment Portfolios
Emerging Leaders 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
192P1299
Dreyfus Investment Portfolios
Emerging Markets Portfolio
Investing in emerging markets for long-term capital growth
PROSPECTUS December 15, 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
Emerging Markets Portfolio
Contents
The Portfolio
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 2
Management 3
Financial Highlights 5
Account Information
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 6
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, as to 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 long-term capital growth. To pursue this goal, the portfolio
invests primarily in the stocks of companies organized, or with a majority of
its assets or business, in emerging market countries. Normally, the portfolio
will not invest more than 25% of its total assets in the securities of companies
in any one emerging market country. The portfolio may invest up to 35% of its
net assets in the high yield debt securities of such companies as Dreyfus deems
appropriate in light of market conditions.
In choosing stocks, the portfolio emphasizes growth-oriented stocks and employs
a top-down country allocation approach which involves identifying and
forecasting: key trends in global 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 countries and sectors determined to be relatively attractive, the
portfolio seeks what the portfolio manager believes to be attractively priced
companies that possess a sustainable competitive advantage in their country or
sector. The portfolio typically will sell a security when themes or strategies
change, or when the portfolio manager determines that the company's prospects
have changed or that its stock is fully valued by the market.
Concepts to understand
EMERGING MARKET COUNTRIES: consist of all countries represented by the Morgan
Stanley Capital International (MSCI) Emerging Markets (Free) Index, which
currently includes Argentina, Brazil, Chile, China, Colombia, the Czech
Republic, Egypt, Greece, Hungary, India, Indonesia, Israel, Jordan, Korea,
Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, Sri
Lanka, South Africa, Taiwan, Thailand, Turkey and Venezuela, as well as those
not represented by the index, but considered by the portfolio to be emerging
market countries, such as Hong Kong and Singapore.
GROWTH COMPANIES: companies of any capitalization whose earnings are expected to
grow faster than the overall market. Often, growth stocks have relatively high
price-to-earnings and price-to-book ratios, and tend to be more volatile than
value stocks.
MAIN RISKS
The stock markets of emerging market countries can be extremely volatile. The
value of a shareholder's investment in the portfolio will go up and down,
sometimes dramatically, which means that shareholders could lose money rapidly.
The portfolio's performance will be influenced by political, social and economic
factors affecting investments in companies in emerging market countries. 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. Special risks include exposure to currency
fluctuations, less liquidity, less developed or efficient trading markets, a
lack of comprehensive company information, political instability, and differing
auditing and legal standards. Such risks could result in more volatility for the
portfolio.
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 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.
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs.
The portfolio can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying the portfolio's gains or losses.
Because the stock prices of growth companies are based in part on future
expectations, these stocks may fall sharply if investors believe the prospects
for a stock, industry or the economy in general are weak. In addition, growth
stocks typically lack the dividend yield that could cushion stock prices in
market downturns.
The fund may invest in companies of any size. Investments in smaller companies
carry additional risks because their earnings tend to be less predictable, their
share prices more volatile and their securities less liquid than larger, more
established companies.
High yield ("junk") bonds involve greater credit risk, including the risk of
default, than investment grade bonds. They tend to be more volatile in price and
less liquid and are considered speculative.
The portfolio is non-diversified and may invest a greater percentage of its
assets in a particular company compared with other funds. Accordingly, the
portfolio may be more sensitive to changes in the market value of a single
company or industry.
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.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives shareholders 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 using this portfolio to fund a VA contract or a VLI policy will 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.
These figures do not reflect any fees or charges imposed by participating
insurance companies under their VA contracts or VLI policies. Owners of VA
contracts or VLI policies should refer to the applicable insurance company
prospectus for information on those fees or charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 1.25%
Other expenses 0.25%
- --------------------------------------------------------------------------------
TOTAL 1.50%
- --------------------------------------------------------------------------------
Expense example
1 Year 3 Years
- --------------------------------------------------------------------------------
$153 $474
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 Dreyfus 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 more than
$120 billion in over 160 mutual fund portfolios. The portfolio has agreed to pay
Dreyfus an annual management fee of 1.25% of the portfolio's average daily net
assets. Dreyfus is the primary mutual fund business of Mellon Financial
Corporation, a global financial services company with approximately $2.5
trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The portfolio's primary portfolio manager is Daniel Beneat. Mr. Beneat has been
the primary portfolio manager of the portfolio since its inception and has been
employed by Dreyfus since May 1996. For the three previous years, he was a vice
president and portfolio manager at UBS Asset Management (NY), Inc.
Dreyfus 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 Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
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>
MANAGEMENT (CONTINUED)
Performance Information for Related Public Fund
Although the portfolio is newly organized and does not yet have its own
performance record, the portfolio has the same investment objective and follows
substantially the same investment policies and strategies as a corresponding
series of another open-end investment company advised by Dreyfus -- Dreyfus
Premier Emerging Markets Fund Class A shares (the "Public Fund"). The portfolio
has the same primary portfolio manager as the Public Fund. The table at the
right shows average annual total return information for the Public Fund and for
the Morgan Stanley Capital International (MSCI) Emerging Markets (Free) Index,
the benchmark index of the portfolio and the Public Fund.
Investors should not consider this performance data as an indication of the
future performance of the portfolio. The performance figures for the Public Fund
reflect the deduction of the historical fees and expenses paid by the Public
Fund, and not those to be paid by the portfolio. The Public Fund's total annual
operating expenses, after fee waiver and expense reimbursement, for the year
ended September 30, 1999 were 2.25% of its average daily net assets. The
performance figures for the Public Fund also do not reflect the deduction of
charges or expenses attributable to VA contracts or VLI policies, which would
lower the performance quoted. Policy owners should refer to the applicable
insurance company prospectus for information on any such charges and expenses.
Additionally, although it is anticipated that the portfolio and the Public Fund
will hold similar securities, their investment results are expected to differ.
In particular, differences in asset size and in cash flow resulting from
purchases and redemptions of portfolio shares may result in different security
selections, differences in the relative weightings of securities or differences
in the price paid for particular portfolio holdings.
The one-year performance of the Public Fund and the index was due in large part
to an economic recovery in emerging markets and a recovery of liquidity in the
asset class. Such returns should not be expected over the long term.
Historical performance information for Class A shares of the Public Fund and for
the MSCI Emerging Markets (Free) Index for various periods ended September 30,
1999, as calculated pursuant to SEC guidelines, is as follows:
- --------------------------------------------------------------------------------
Average annual total return AS OF 9/30/99
Since inception
1 Year (3/31/98)
- --------------------------------------------------------------------------------
DREYFUS PREMIER EMERGING MARKETS FUND
CLASS A (NAV) 63.71% -3.48%
CLASS A (WITH SALES LOAD) 54.33% -7.21%
MSCI EMERGING MARKETS
(FREE) INDEX* 56.52% -4.54%
* THE MSCI EMERGING MARKETS (FREE) INDEX IS A MARKET-CAPITALIZATION-WEIGHTED
INDEX COMPOSED OF COMPANIES REPRESENTATIVE OF THE MARKET STRUCTURE OF 28
EMERGING MARKET COUNTRIES IN EUROPE, LATIN AMERICA AND THE PACIFIC BASIN AND
INCLUDES GROSS DIVIDENDS REINVESTED. THE INDEX EXCLUDES CLOSED MARKETS AND THOSE
SHARES IN OTHERWISE FREE MARKETS WHICH ARE NOT PURCHASABLE BY FOREIGNERS.
<PAGE 4>
FINANCIAL HIGHLIGHTS
As a new portfolio, financial highlights information is not available for the
portfolio as of the date of this prospectus.
The Portfolio
<PAGE 5>
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 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: Emerging Markets 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)
and 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).
<PAGE 6>
NOTES
NOTES
NOTES
For More Information
Dreyfus Investment Portfolios
Emerging Markets 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
191P1299
Dreyfus Investment Portfolios
Founders Discovery Portfolio
Investing in stocks of smaller-cap growth companies for capital appreciation
PROSPECTUS December 15, 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
Founders Discovery Portfolio
Contents
The Portfolio
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 2
Management 3
Financial Highlights 5
Account Information
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 6
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 VLI policies are described in the separate prospectuses issued by
the participating insurance companies, as to 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 capital appreciation. To pursue this goal, the portfolio
invests primarily in equity securities of small, U.S.-based companies with
market capitalizations or annual revenues between $10 million and $1.5 billion
and which are characterized as "growth" companies. These companies typically are
not listed on a national securities exchange, but trade on the over-the-counter
market. The portfolio may purchase securities of companies in initial public
offerings or shortly thereafter.
The portfolio manager seeks investment opportunities for the portfolio in
companies with fundamental strengths that indicate the potential for growth in
earnings per share. The portfolio manager focuses on individual stock selection
(a "bottom-up" approach) rather than on forecasting stock market trends (a
"top-down" approach).
The portfolio may invest up to 30% of its assets in foreign securities. The
portfolio may invest in securities of larger issuers if the portfolio manager
believes these securities offer attractive opportunities for capital
appreciation. The portfolio also may invest in investment grade debt securities
of domestic or foreign issuers that the portfolio manager believes -- based on
market conditions, the financial condition of the issuer, general economic
conditions, and other relevant factors -- offer opportunities for capital
appreciation.
Concepts to understand
GROWTH COMPANIES: companies whose earnings are expected to grow faster than the
overall market. Often, growth stocks have relatively high price-to-earnings and
price-to-book ratios, and tend to be more volatile than value stocks.
SMALL COMPANIES: new, often entrepreneurial companies. Small companies tend to
grow faster than large-cap companies, but frequently are more volatile, are more
vulnerable to major setbacks, and have a higher failure rate than large
companies.
EQUITY SECURITIES: common stocks, preferred stocks and convertible securities.
The portfolio will invest in preferred stocks and convertible securities rated
at the time of purchase at least B by a credit rating agency or the unrated
equivalent as determined by the portfolio's sub-adviser.
MAIN RISKS
While stocks have historically been a leading 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, sometimes dramatically, which means that
shareholders could lose money.
Small companies carry additional risks because their operating histories tend to
be more limited, their earnings less predictable, their share prices more
volatile and their securities less liquid than larger, more established
companies. The prices of securities purchased in initial public offerings or
shortly thereafter may be very volatile. Some of the portfolio's investments
will rise and fall based on investor perceptions rather than economics.
Growth companies are expected to increase their earnings at a certain rate. If
these expectations are not met, investors can punish the stocks inordinately,
even if earnings do increase. In addition, growth stocks typically lack the
dividend yield that can cushion stock prices in market downturns.
Other potential risks
The portfolio, at times, may invest in derivative securities, such as options
and futures, and in foreign currencies. These practices, when employed, are used
to hedge its portfolio; 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.
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs.
Any foreign securities purchased by the portfolio are subject to special risks,
such as exposure to currency fluctuations, changing political climate, lack of
comprehensive company information and potentially less liquidity.
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.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives shareholders 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 using this portfolio to fund a VA contract or a VLI policy will 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.
These figures do not reflect any fees or charges imposed by participating
insurance companies under their VA contracts or VLI policies. Owners of VA
contracts or VLI policies should refer to the applicable insurance company
prospectus for information on those fees or charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.90%
Other expenses 0.25%
- --------------------------------------------------------------------------------
TOTAL 1.15%
- --------------------------------------------------------------------------------
Expense example
1 Year 3 Years
- --------------------------------------------------------------------------------
$117 $365
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 returns and expenses will be different,
the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus 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. The portfolio has agreed to pay Dreyfus an annual
management fee of 0.90% of the portfolio's average daily net assets. Dreyfus is
the primary mutual fund business of Mellon Financial Corporation, a global
financial services company with approximately $2.5 trillion of assets under
management, administration or custody, including approximately $450 billion
under management. Mellon provides wealth management, global investment services
and a comprehensive array of banking services for individuals, businesses and
institutions. Mellon is headquartered in Pittsburgh, Pennsylvania.
Dreyfus has engaged its affiliate, Founders Asset Management LLC, to serve as
the portfolio's sub-investment adviser. Founders, located at Founders Financial
Center, 2930 East Third Avenue, Denver, Colorado 80206, and its predecessor
companies have been offering tools to help investors pursue their financial
goals since 1938. As of September 30, 1999, Founders managed mutual funds and
other client accounts having aggregate assets of approximately $6.78 billion.
The portfolio's primary portfolio manager is Robert T. Ammann, C.F.A. He has
been the portfolio's primary portfolio manager since the portfolio's inception
and has been employed by Founders since 1993. He is a vice president of
investments at Founders.
Dreyfus and Founders each have a personal securities trading policy (each, a
"Policy") which restricts the personal securities transactions of its employees.
The Policy's primary purpose is to ensure that personal trading by Dreyfus or
Founders employees does not disadvantage any Dreyfus-managed or Founders-managed
fund. Portfolio managers and other investment personnel of Dreyfus and Founders
who comply with their respective Policy's preclearance and disclosure procedures
may be permitted to purchase, sell or hold certain types of securities which
also may be or are held in the fund(s) they advise.
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>
MANAGEMENT (CONTINUED)
Performance Information for Related Public Fund
Although the portfolio is newly organized and does not yet have its own
performance record, the portfolio has the same investment objective and follows
substantially the same investment policies and strategies as a corresponding
series of another open-end investment company advised by Founders -- Founders
Discovery Fund (the "Public Fund"). The portfolio currently has the same primary
portfolio manager as the Public Fund. The table at the right shows average
annual total return information for the Public Fund and for the Russell 2000
Index, the benchmark index of the portfolio and the Public Fund.
Investors should not consider this performance data as an indication of the
future performance of the portfolio. The performance figures for the Public Fund
reflect the deduction of the historical fees and expenses paid by the Public
Fund, and not those to be paid by the portfolio. The Public Fund's total annual
operating expenses, after fee waiver and expense reimbursement, for the year
ended December 31, 1998 were 1.55% of its average daily net assets. The
performance figures for the Public Fund also do not reflect the deduction of
charges or expenses attributable to VA contracts or VLI policies, which would
lower the performance quoted. Policy owners should refer to the applicable
insurance company prospectus for information on any such charges and expenses.
Additionally, although it is anticipated that the portfolio and the Public Fund
will hold similar securities, their investment results are expected to differ.
In particular, differences in asset size and in cash flow resulting from
purchases and redemptions of portfolio shares may result in different security
selections, differences in the relative weightings of securities or differences
in the price paid for particular portfolio holdings.
The one-year performance of the Public Fund was due in part to the allocation to
the Public Fund of securities sold in initial public offerings ("IPOs"). There
is no guarantee that the Public Fund's investments in IPOs will continue to have
a similar impact on performance, and such returns should not be expected over
the long term.
Historical performance information for the Public Fund and for the Russell 2000
Index for various periods ended September 30, 1999, as calculated pursuant to
SEC guidelines, is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average annual total return AS OF 9/30/99
Since
inception
1 Year 5 Years (12/31/89)
- ------------------------------------------------------------------------------------------------------------------------------------
FOUNDERS DISCOVERY
FUND 87.32% 23.09% 20.26%
RUSSELL 2000
INDEX* 19.07% 12.39% 11.81%
* THE RUSSELL 2000 INDEX IS A WIDELY RECOGNIZED, UNMANAGED SMALL-CAP INDEX
COMPRISED OF THE COMMON STOCKS OF THE 2,000 U.S. PUBLIC COMPANIES NEXT IN SIZE
AFTER THE LARGEST 1,000 PUBLICLY TRADED U.S. COMPANIES. ALL PERFORMANCE FIGURES
REFLECT THE REINVESTMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS.
</TABLE>
<PAGE 4>
FINANCIAL HIGHLIGHTS
As a new portfolio, financial highlights information is not available for the
portfolio as of the date of this prospectus.
The Portfolio
<PAGE 5>
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 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: Founders Discovery 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) and 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.
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).
<PAGE 6>
NOTES
NOTES
NOTES
For More Information
Dreyfus Investment Portfolios
Founders Discovery 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
193P1299
Dreyfus Investment Portfolios
Japan Portfolio
Investing in stocks of Japanese companies for long-term capital growth
PROSPECTUS December 15, 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
Japan Portfolio
Contents
The Portfolio
- --------------------------------------------------------------------------------
Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 2
Expenses 2
Management 3
Financial Highlights 5
Account Information
- --------------------------------------------------------------------------------
Account Policies 6
Distributions and Taxes 6
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, as to 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
invests primarily in stocks of Japanese companies. Generally, the portfolio
invests at least 60% of its assets in Japanese companies with market caps of at
least $1.5 billion at the time of investment. The portfolio's investments may
include common stocks, preferred stocks and convertible securities.
In choosing stocks, the portfolio manager identifies and forecasts: 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; company fundamentals and long-term trends in currency movements
Within markets and sectors determined to be relatively attractive, the portfolio
manager seeks what are believed to be attractively priced companies that possess
a sustainable competitive advantage in their market or sector. The portfolio
manager generally sells securities when themes or strategies change or when the
portfolio manager determines that a company's prospects have changed or that its
stock is fully valued by the market.
Many of the securities in which the portfolio invests are denominated in yen. To
protect the portfolio against potential depreciation of the yen versus the U.S.
dollar, the portfolio manager may engage in currency hedging.
Concepts to understand
JAPANESE COMPANY: a company organized under the laws of Japan or for which the
principal securities trading market is Japan; or a company, wherever organized,
with a majority of its assets or business in Japan.
CURRENCY HEDGING: the value of the yen can fluctuate significantly relative to
the U.S. dollar and potentially result in losses for investors. To help offset
such losses, the portfolio manager may employ certain techniques designed to
reduce the portfolio's foreign currency exposure. Generally, this involves
buying options, futures, or forward contracts for the foreign currency.
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 investments in Japanese companies. These risks include changes
in currency exchange rates, a lack of comprehensive company information,
political instability, less liquidity and differing auditing and legal
standards. Each of those risks could result in more volatility for the
portfolio. While investments in all foreign countries are subject to those
risks, the portfolio's concentration in Japanese securities could cause the
portfolio's performance to be more volatile than that of more geographically
diversified funds.
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. When employed, these practices are used primarily
to hedge the portfolio but may also 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.
The portfolio can buy securities with borrowed money (a form of leverage), which
could magnify the portfolio's gains or losses.
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.
Small companies carry additional risks because their operating histories tend to
be more limited, their earnings less predictable, their share prices more
volatile and their securities less liquid than larger, more established
companies. Some of the portfolio's investments will rise and fall based on
investor perceptions rather than economics.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives shareholders 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 using this portfolio to fund a VA contract or a VLI policy will 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.
These figures do not reflect any fees or charges imposed by participating
insurance companies under their VA contracts or VLI policies. Owners of VA
contracts or VLI policies should refer to the applicable insurance company
prospectus for information on those fees or charges.
- --------------------------------------------------------------------------------
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 Dreyfus 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 more than
$120 billion in over 160 mutual fund portfolios. The portfolio has agreed to pay
Dreyfus an annual management fee of 1.00% of the portfolio's average daily net
assets. Dreyfus is the primary mutual fund business of Mellon Financial
Corporation, a global financial services company with approximately $2.5
trillion of assets under management, administration or custody, including
approximately $450 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in
Pittsburgh, Pennsylvania.
Dreyfus has engaged its affiliate, Newton Capital Management Limited, to serve
as the portfolio's sub-investment adviser. Newton, located at 71 Queen Victoria
Street, London, EC4V 4DR, England, was formed in 1977 and, as of September 30,
1999, together with its parent and its parent's subsidiaries, managed
approximately $25 billion in discretionary separate accounts and other
investment accounts.
The portfolio's primary portfolio manager is Miki Sugimoto. She has been the
portfolio's primary portfolio manager since the portfolio's inception and has
been employed by Newton since 1995. Prior to joining Newton, Ms. Sugimoto was
employed for five years at S.G. Warburg where she worked primarily in the
corporate finance department.
Dreyfus 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 Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
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>
MANAGEMENT (CONTINUED)
Performance Information for Related Investment Accounts
Although the portfolio is newly organized and does not yet have its own
performance record, the portfolio has a substantially similar investment
objective and follows substantially similar investment policies and strategies
as two investment accounts advised by Newton -- Newton Japan Fund and Newton
Universal Growth Funds Japanese Equity Fund (collectively, the "Investment
Accounts"). The portfolio currently has the same portfolio managers as the
Investment Accounts. The table at the right shows composite average annual total
return information for the Investment Accounts and for the Morgan Stanley
Capital International (MSCI) Japan Index, the benchmark index of the portfolio
and the Investment Accounts.
Investors should not consider this performance data as an indication of the
future performance of the portfolio. The performance figures for the Investment
Accounts were calculated by Micropal on a "bid-bid" basis (i.e., the price at
which an investor can sell its shares) with the accounts' gross income
reinvested in U.S. dollars. The performance figures were then adjusted to
reflect the deduction of the historical fees and expenses paid by the Investment
Accounts (1.50% of each Investment Account's net assets), and not those to be
paid by the portfolio. The performance figures for the Investment Accounts do
not reflect the deduction of charges or expenses attributable to VA contracts or
VLI policies, which would lower the performance quoted. Policy owners should
refer to the applicable insurance company prospectus for information on any such
charges and expenses. Moreover, the performance of the Investment Accounts could
have been adversely affected by the imposition of certain regulatory
requirements, restrictions and limitations if the accounts had been regulated as
investment companies under the U.S. federal securities and tax laws.
Additionally, although it is anticipated that the portfolio and the Investment
Accounts will hold similar securities, their investment results are expected to
differ. In particular, differences in asset size and in cash flow resulting from
purchases and redemptions of portfolio shares may result in different security
selections, differences in the relative weightings of securities or differences
in the price paid for particular portfolio holdings.
The one-year performance of the Investment Accounts was due in large part to a
period of extremely strong stock market performance in Japan, which should not
be expected over the long term.
Historical performance information for the Investment Accounts and for the MSCI
Japan Index for various periods ended September 30, 1999 is as follows:
- --------------------------------------------------------------------------------
Average annual total return AS OF 9/30/99
Since
1 Year 11/22/94**
- --------------------------------------------------------------------------------
NEWTON JAPAN FUND 101.45% 9.15%
NEWTON UGF JAPANESE
EQUITY FUND 96.34% 7.36%
MSCI JAPAN INDEX* 76.24% -1.38%
* THE MSCI JAPAN INDEX IS A CAPITALIZATION WEIGHTED INDEX (ADJUSTED IN U.S.
DOLLARS) OF COMPANIES IN JAPAN INTENDED TO REPLICATE THE INDUSTRY COMPOSITION OF
THE LOCAL MARKET. THE CHOSEN LIST OF STOCKS INCLUDES A REPRESENTATIVE SAMPLING
OF LARGE, MEDIUM AND SMALL CAPITALIZATION WEIGHTED STOCKS, TAKING EACH STOCK'S
LIQUIDITY INTO ACCOUNT. THE RETURNS OF THE INDEX ASSUME REINVESTMENT NET OF
WITHHOLDING TAX AND, UNLIKE FUND RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES.
**NEWTON BEGAN MANAGING THE INVESTMENT ACCOUNTS ON NOVEMBER 22, 1994. PRIOR
THERETO, THE INVESTMENT ACCOUNTS WERE MANAGED BY CAPITAL HOUSE, LLC, A
SUBSIDIARY OF THE ROYAL BANK OF SCOTLAND. PERFORMANCE FOR THE MSCI JAPAN INDEX
IS CALCULATED FROM OCTOBER 31, 1994.
<PAGE 4>
FINANCIAL HIGHLIGHTS
As a new portfolio, financial highlights information is not available for the
portfolio as of the date of this prospectus.
The Portfolio
<PAGE 5>
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 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 with 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: Japan 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) and
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).
<PAGE 6>
NOTES
NOTES
NOTES
For More Information
Dreyfus Investment Portfolios
Japan 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
189P1299
<PAGE>
- --------------------------------------------------------------------------------
DREYFUS INVESTMENT PORTFOLIOS
BOND MARKET INDEX PORTFOLIO
CORE VALUE PORTFOLIO
EMERGING LEADERS PORTFOLIO
EMERGING MARKETS PORTFOLIO
EUROPEAN EQUITY PORTFOLIO
JAPAN PORTFOLIO
MIDCAP STOCK PORTFOLIO
TECHNOLOGY GROWTH PORTFOLIO
FOUNDERS DISCOVERY PORTFOLIO
FOUNDERS GROWTH PORTFOLIO
FOUNDERS INTERNATIONAL EQUITY PORTFOLIO
FOUNDERS PASSPORT PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 15, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the relevant current
Prospectus of the Bond Market Index, Core Value, European Equity, MidCap Stock,
Founders Growth, Founders International Equity and Founders Passport Portfolios,
each dated May 1, 1999, the Technology Growth Portfolio, dated August 31, 1999,
or the Emerging Leaders, Emerging Markets, Japan and Founders Discovery
Portfolios, each dated December 15, 1999 (collectively, the "Portfolios"), each
a separate series of Dreyfus Investment Portfolios (the "Fund"), as each
Prospectus may be revised from time to time. To obtain a copy of the relevant
Portfolio's Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call 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").
The most recent Annual Report and Semi-Annual Report to Shareholders for
each Portfolio are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
Page
Description of the Fund and Portfolios B-3
Management of the Fund B-28
Management Arrangements B-33
How to Buy Shares B-39
How to Redeem Shares B-40
Determination of Net Asset Value B-41
Dividends, Distributions and Taxes B-42
Portfolio Transactions B-44
Performance Information B-46
Information About the Fund and Portfolios B-48
Counsel and Independent Auditors B-49
Appendix B-51
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, except
the Emerging Markets 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 Emerging
Markets Portfolio is a non-diversified fund, which means that the proportion of
the Portfolio's assets that may be invested in the securities of a single issuer
is not limited by the Investment Company Act of 1940, as amended (the "1940
Act").
The Dreyfus Corporation (the "Manager") serves as each Portfolio's
investment adviser. The Manager has engaged Founders Asset Management LLC
("Founders") to serve as sub-investment adviser to each of the Founders
Discovery, Founders Growth, Founders International Equity and Founders Passport
Portfolios (collectively, the "Founders Portfolios") and to provide day-to-day
management of the Founders Portfolios' investments, subject to the supervision
of the Manager. The Manager has engaged Newton Capital Management Limited
("Newton") to serve as sub-investment adviser to each of the European Equity and
Japan Portfolios and to provide day-to-day management of the European Equity and
Japan Portfolios' 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. (All Portfolios, except the Bond Market Index and
Emerging Leaders Portfolios) Each of these Portfolios 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. 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.
(Founders Portfolios, Emerging Markets Portfolio, European Equity Portfolio and
Japan Portfolio only) Each of these Portfolios may invest in obligations issued
or guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities that are determined by Founders (in
the case of the Founders Portfolios), the Manager (in the case of the Emerging
Markets Portfolio) or Newton (in the case of the European Equity and Japan
Portfolios) 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.
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.
Investment Companies. (All Portfolios) Each Portfolio may invest in
securities issued by investment companies. The Emerging Markets Portfolio may
invest in securities issued by closed-end investment companies which principally
invest in securities in which it invests. Under the 1940 Act, a 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.
Convertible Securities. (All Portfolios, except the Bond Market Index
Portfolio) 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, 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 provide for a stable stream of income with
generally higher yields than common stocks, but 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 generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
Warrants. (All Portfolios, except the Bond Market Index Portfolio) A
warrant is an instrument issued by a corporation which gives the holder the
right to subscribe to a specified amount of the corporation's capital stock at a
set price for a specified period of time. Each Portfolio may invest up to 5% of
its net assets in warrants, except that this limitation does not apply to
warrants purchased by the Portfolio that are sold in units with, or attached to,
other securities.
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 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 Founders
with respect to the Founders Portfolios or Newton with respect to the European
Equity and Japan Portfolios) 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" and,
together with Moody's, S&P and Fitch, the "Rating Agencies"), 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
Founders with respect to the Founders Portfolios or Newton with respect to the
European Equity and Japan Portfolios) 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. (All Portfolios, except the Bond Market
Index and MidCap Stock Portfolios) Each of these Portfolios 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 the
ability of the Manager (or Founders with respect to the Founders Portfolios or
Newton with respect to the European Equity and Japan Portfolios) 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. Each
Founders Portfolio and 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 such borrowings exceed 5% of
the Portfolio's total assets, the Portfolio will not make any additional
investments. The Core Value, Emerging Leaders, Emerging Markets, European
Equity, Japan, MidCap Stock and Technology Growth Portfolios may borrow money
for investment purposes as described below.
Leverage. (Core Value, Emerging Leaders, Emerging Markets, European
Equity, Japan, MidCap Stock and Technology Growth Portfolios 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 a 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, except the Founders
Portfolios) Each of these Portfolios may enter into reverse repurchase
agreements with banks, brokers or dealers. This form of borrowing involves the
transfer by the Portfolio of an underlying debt instrument in return for cash
proceeds based on a percentage of the value of the security. The Portfolio
retains the right to receive interest and principal payments on the security. At
an agreed upon future date, the Portfolio repurchases the security at principal
plus accrued interest. 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 Core Value, Emerging
Leaders, Emerging Markets, European Equity, Japan, MidCap Stock and Technology
Growth Portfolios 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.
Lending Portfolio Securities. (All Portfolios, except Emerging Leaders
Portfolio) Each of these Portfolios 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.
Short-Selling. (Emerging Leaders, Emerging Markets, European Equity, Japan
and Technology Growth Portfolios only) In these transactions, a 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) segregate permissible liquid assets in an
amount that, together with 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.
Derivatives. (All Portfolios) Each Portfolio may invest in, or enter into,
derivatives, such as options and futures, for a variety of reasons, including to
hedge certain market risks, to provide a substitute for purchasing or selling
particular securities or to increase potential income gain. Derivatives may
provide a cheaper, quicker or more specifically focused way for the Portfolio to
invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit a Portfolio to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Portfolio can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities. However, 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 a Portfolio's
performance.
If a Portfolio invests in derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Portfolio's return
or result in a loss. A Portfolio also could experience losses if its derivatives
were poorly correlated with its other investments, or if the Portfolio were
unable to liquidate its position because of an illiquid secondary market. The
market for many derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for derivatives.
Although neither the Fund nor any Portfolio will be a commodity pool,
certain derivatives subject the Portfolios to the rules of the Commodity Futures
Trading Commission which limit the extent to which a Portfolio can invest in
such derivatives. A Portfolio may invest in futures contracts and options with
respect thereto for hedging purposes without limit. However, no Portfolio may
invest in such contracts and options for other purposes if the sum of the amount
of initial margin deposits and premiums paid for unexpired options with respect
to such contracts, other than for bona fide hedging purposes, exceeds 5% of the
liquidation value of the Portfolio's assets, after taking into account
unrealized profits and unrealized losses on such contracts and options;
provided, however, that in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
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 variation margin system 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. In contrast, no clearing agency guarantees
over-the-counter derivatives. Therefore, each party to an over-the-counter
derivative bears the risk that the counterparty will default. Accordingly, the
Manager (or Founders with respect to the Founders Portfolios or Newton with
respect to the European Equity and Japan Portfolios) will consider the
creditworthiness of counterparties to over-the-counter derivatives in the same
manner as it would review the credit quality of a security to be purchased by a
Portfolio. Over-the-counter derivatives are less liquid than exchange-traded
derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the derivative to be interested in bidding for
it.
Futures Transactions--In General. (All Portfolios, except the Bond Market Index
Portfolio) Each of these Portfolios may enter into futures contracts in U.S.
domestic markets, or, except for the MidCap Stock Portfolio, on exchanges
located outside the United States. 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 a Portfolio might realize
in trading could be eliminated by adverse changes in the exchange rate, or the
Portfolio could incur losses as a result of those changes. Transactions on
foreign exchanges may include both commodities which are traded on domestic
exchanges and those which are not. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to a Portfolio which
could adversely affect the value of the Portfolio's net assets. Although each
Portfolio intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid market
will exist for any particular contract at any particular time. Many futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Portfolio to
substantial losses.
Successful use of futures by a Portfolio also is subject to the ability of
the Manager (or Founders with respect to the Founders Portfolios or Newton with
respect to the European Equity and Japan Portfolios) to predict correctly
movements in the direction of the relevant market and, to the extent the
transaction is entered into for hedging purposes, to ascertain the appropriate
correlation between the transaction being hedged and the price movements of the
futures contract. For example, if a Portfolio uses futures to hedge against the
possibility of a decline in the market value of securities held in its portfolio
and the prices of such securities instead increase, the Portfolio will lose part
or all of the benefit of the increased value of securities which it has hedged
because it will have offsetting losses in its futures positions. Furthermore, if
in such circumstances the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. A Portfolio may have to
sell such securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission (the "SEC"), a Portfolio may be required to segregate
permissible liquid assets 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 a Portfolio's
ability otherwise to invest those assets.
Specific Futures Transactions. (All Portfolios, except the Bond Market Index
Portfolio) Each of these Portfolios may purchase and sell stock index futures
contracts. A stock index future obligates the Portfolio to pay or receive an
amount of cash equal to a fixed dollar amount specified in the futures contract
multiplied by the difference between the settlement price of the contract on the
contract's last trading day and the value of the index based on the stock prices
of the securities that comprise it at the opening of trading in such securities
on the next business day.
The Core Value Portfolio, Emerging Leaders Portfolio, Emerging Markets
Portfolio, European Equity Portfolio, Japan Portfolio, Technology Growth
Portfolio and Founders Portfolios may purchase and sell currency futures. A
foreign currency future obligates the Portfolio to purchase or sell an amount of
a specific currency at a future date at a specific price.
The Core Value Portfolio, Emerging Leaders Portfolio, European Equity
Portfolio, Japan Portfolio, MidCap Stock Portfolio, Technology Growth Portfolio
and Founders Portfolios 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 ability of the Manager (or Founders with respect to the Founders Portfolios
or Newton with respect to the European Equity and Japan Portfolios) to predict
correctly movements in the prices of individual stocks, the stock market
generally, foreign currencies or interest rates. To the extent such predictions
are incorrect, the Portfolio may incur losses.
Options--In General. (All Portfolios, except the Bond Market Index Portfolio)
Each of these Portfolios may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. A 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 a Portfolio is a call option with respect
to which the Portfolio owns the underlying security or otherwise covers the
transaction by segregating permissible liquid assets. A put option written by a
Portfolio is covered when, among other things, permissible liquid assets having
a value equal to or greater than the exercise price of the option are segregated
to fulfill the obligation undertaken. The principal reason for writing covered
call and put options is to realize, through the receipt of premiums, a greater
return than would be realized on the underlying securities alone. A Portfolio
receives a premium from writing covered call or put options which it retains
whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Portfolio is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Specific Options Transactions. (All Portfolios, except the Bond Market Index
Portfolio) Each of these Portfolios 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 Core Value Portfolio, Emerging Leaders Portfolio, Emerging Markets
Portfolio, European Equity Portfolio, Japan Portfolio, Technology Growth
Portfolio and Founders Portfolios may purchase and sell call and put options on
foreign currency. These options convey the right to buy or sell the underlying
currency at a price which is expected to be lower or higher than the spot price
of the currency at the time the option is exercised or expires.
Each of these Portfolios may purchase cash-settled options on equity index
swaps in pursuit of its investment objective. Equity index swaps involve the
exchange by the Portfolio with another party of cash flows based upon the
performance of an index or a portion of an index of securities which usually
includes dividends. The European Equity and Japan Portfolios also may purchase
cash-settled options on interest rate swaps and interest rate swaps denominated
in foreign currency. 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. A cash-settled option on a swap
gives the purchaser the right, but not the obligation, in return for the premium
paid, to receive an amount of cash equal to the value of the underlying swap as
of the exercise date. These options typically are purchased in privately
negotiated transactions from financial institutions, including securities
brokerage firms.
Successful use by a Portfolio of options will be subject to the ability of
the Manager (or Founders with respect to the Founders Portfolios or Newton with
respect to the European Equity and Japan Portfolios) to predict correctly
movements in the prices of individual stocks, the stock market generally,
foreign currencies or interest rates. To the extent such predictions are
incorrect, a Portfolio may incur losses.
Future Developments. (All Portfolios) A Portfolio may take advantage of
opportunities in the area of options and futures contracts and options on
futures contracts and any other derivatives which are not presently contemplated
for use by the Portfolio or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the
Portfolio's investment objective and legally permissible for the Portfolio.
Before entering into such transactions or making any such investment on behalf
of a Portfolio, the Fund will provide appropriate disclosure in its Prospectus
or Statement of Additional Information.
Forward Commitments. (All Portfolios) Each Portfolio may purchase
securities on a forward commitment or when-issued basis, which means that
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate receivable
on a forward commitment or when-issued security are fixed when the Portfolio
enters into the commitment, but the Portfolio does not make a payment until it
receives delivery from the counter party. The Portfolio will commit to purchase
such securities only with the intention of actually acquiring the securities,
but the Portfolio may sell these securities before the settlement date if it is
deemed advisable. The Portfolio will segregate 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.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose a Portfolio to
risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when-issued basis when a
Portfolio is fully or almost fully invested may result in greater potential
fluctuation in the value of the Portfolio's net assets and its net asset value
per share.
Investment Considerations and Risks
Equity Securities. (All Portfolios, except the Bond Market Index
Portfolio) 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.
Fixed-Income Securities. (All Portfolios, except the Technology Growth
Portfolio) The Core Value Portfolio may invest up to 5% of its total net assets
in fixed-income securities, including those of companies that are close to
entering, or already in, reorganization proceedings which are rated below
investment grade by the Rating Agencies. The MidCap Stock Portfolio also may
invest in corporate obligations rated at least Baa by Moody's or BBB by S&P,
Fitch or Duff, or, if unrated, of comparable quality as determined by the
Manager. Each Founders Portfolio may invest in debt securities of foreign
issuers that management believes, based on market conditions, the financial
condition of the issuer, general economic conditions and other relevant factors,
offer opportunities for capital growth. The bonds, debentures and corporate
obligations (other than convertible securities and preferred stock) in which
each Founders Portfolio may invest must be rated not lower than Baa by Moody's
or BBB by S&P, Fitch and Duff, or, if unrated, deemed to be of comparable
quality by Founders. 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 a 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 each Portfolio, such as those rated Baa or lower by Moody's
and BBB or lower by S&P, Fitch and Duff, may be subject to such risk with
respect to the issuing entity and to greater market fluctuations than certain
lower yielding, higher rated fixed-income securities. Once the rating of a
portfolio security has been changed, the Fund will consider all circumstances
deemed relevant in determining whether to continue to hold the security.
Technology Sector. (Technology Growth Portfolio only) The technology
sector has been among the most volatile sectors of the stock market. You should
recognize that returns are likely to be highly volatile and that, depending upon
when you purchase and sell your Portfolio shares, you may make or lose money.
The Portfolio may purchase securities of companies in initial public
offerings or shortly thereafter. The prices of these companies' securities may
be very volatile, rising and falling rapidly based, among other reasons, solely
on investor perceptions rather than economic reasons. The Portfolio may purchase
securities of companies which have no earnings or have experienced losses. The
Portfolio generally will make these investments based on a belief that actual
anticipated products or services will produce future earnings. If the
anticipated event is delayed or does not occur, or if investor perception about
the company change, the company's stock price may decline sharply and its
securities may become less liquid. The Portfolio may purchase securities of
smaller capitalization companies, the prices of which may be subject to more
abrupt or erratic market movements than larger, more established companies,
because these securities typically are traded in lower volume and the issuers
typically are more subject to changes in earnings and prospects. The Portfolio
is not limited in the amount it may invest in these securities or companies. The
Portfolio, together with other investment companies advised by the Manager and
its affiliates, may own significant positions in portfolio companies which,
depending on market conditions, may affect adversely the Portfolio's ability to
dispose of some or all of its position should it desire to do so.
Lower Rated Securities. (Core Value Portfolio, Emerging Markets Portfolio
and Founders Portfolios only) Each of these Portfolios may invest a portion of
its assets in higher yielding (and, therefore, higher risk) debt securities
(convertible securities and preferred stocks with respect to the Founders
Portfolios) such as those rated Ba by Moody's or BB by S&P, Fitch or Duff, or as
low as those rated B by a Rating Agency in the case of the Founders Portfolios,
or as low as the lowest rating assigned by a Rating Agency in the case of the
Core Value and Emerging Markets Portfolios. They may be subject to certain risks
with respect to the issuing entity and to greater market fluctuations than
certain lower yielding, higher rated fixed-income securities. The retail
secondary market for these securities may be less liquid than that of higher
rated securities; adverse conditions could make it difficult at times for the
Portfolio to sell certain securities or could result in lower prices than those
used in calculating the Portfolio's net asset value.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities and
will fluctuate over time. For example, during an economic downturn or a
sustained period of rising interest rates, highly leveraged issuers of these
securities may experience financial stress. During such periods, such issuers
may not have sufficient revenues to meet their interest payment obligations. The
issuer's ability to service its debt obligations also may be affected adversely
by specific corporate developments, or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing. The
risk of loss because of default by the issuer is significantly greater for the
holders of these securities because such securities generally are unsecured and
often are subordinated to other creditors of the issuer.
Because there is no established retail secondary market for many of these
securities, the Fund anticipates that such securities could be sold only to a
limited number of dealers or institutional investors. To the extent a secondary
trading market for these securities does exist, it generally is not as liquid as
the secondary market for higher rated securities. The lack of a liquid secondary
market may have an adverse impact on market price and yield and the Portfolio's
ability to dispose of particular issues when necessary to meet such Portfolio's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
security market for certain securities also may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes of valuing its
portfolio and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.
These securities may be particularly susceptible to economic downturns. It
is likely that any economic recession could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default for such securities.
Each of these Portfolios may acquire these securities during an initial
offering. Such securities may involve special risks because they are new issues.
The Fund has no arrangement with any persons concerning the acquisition of such
securities, and the Manager (or Founders with respect to the Founders
Portfolios) will review carefully the credit and other characteristics pertinent
to such new issues.
The ratings of the Ratings Agencies represent their opinions as to the
quality of the obligations which they undertake to rate. Ratings are relative
and subjective and, although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk of
such obligations. Although these ratings may be an initial criterion for
selection of portfolio investments, the Manager (or Founders with respect to the
Founders Portfolios) also will evaluate these securities and the ability of the
issuers of such securities to pay interest and principal.
Foreign Securities. (All Portfolios, except the Bond Market Index
Portfolio) Foreign securities markets generally are not as developed or
efficient as those in the United States. Securities of some foreign issuers,
including depositary 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.
With respect to the securities purchased by the Emerging Markets Portfolio
and certain securities that may be purchased by the Founders Portfolios and the
European Equity and Japan Portfolios only, 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.
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 (such as a U.S. Government agency or instrumentality
with respect to government-related mortgage-backed securities) 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 Portfolios and
investment companies managed by the Manager (and, where applicable, Founders or
Newton). If, however, such other Portfolios or investment companies desire to
invest in, or dispose of, the same securities as the Portfolio, available
investments or opportunities for sales will be allocated equitably to each. In
some cases, this procedure may adversely affect the size of the position
obtained for or disposed of by a Portfolio or the price paid or received by a
Portfolio.
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, except the Bond Market Index, Emerging Leaders, Emerging Markets,
European Equity and Japan Portfolios, has adopted investment restrictions
numbered 1 through 10 as fundamental policies. Investment restrictions numbered
11 through 15 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. None
of these Portfolios 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. For purposes of this Investment
Restriction with respect to the Technology Growth Portfolio, the technology
sector in general is not considered an industry.
2. Invest more than 5% of its assets in the obligations of any one
issuer, except that up to 25% of the value of the Portfolio's total assets may
be invested, and securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities may be purchased, without regard to any such
limitations.
3. Purchase the securities of any issuer if such purchase would
cause the Portfolio to hold more than 10% of the voting securities of such
issuer. This restriction applies only with respect to 75% of the Portfolio's
total assets.
4. Invest in commodities, except that a Portfolio may purchase and
sell options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
5. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but a Portfolio may purchase and
sell securities that are secured by real estate or issued by companies that
invest or deal in real estate or real estate investment trusts.
6. Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the
Portfolio's total assets). For purposes of this Investment Restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
7. Make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements. However, a Portfolio may lend its
portfolio securities in an amount not to exceed 33-1/3% of the value of its
total assets. Any loans of portfolio securities will be made according to
guidelines established by the SEC and the Fund's Board.
8. Act as an underwriter of securities of other issuers, except to
the extent a Portfolio may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.
9. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent the activities permitted in
Investment Restriction Nos. 4, 6, 12 and 13 may be deemed to give rise to a
senior security.
10. Purchase securities on margin, but a Portfolio may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those relating to indices, and options on futures
contracts or indices.
11. Invest in the securities of a company for the purpose of
exercising management or control, but the Portfolio will vote the securities it
owns as a shareholder in accordance with its views.
12. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
13. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Prospectus and Statement of Additional Information.
14. Enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which are illiquid, if,
in the aggregate, more than 15% of the value of its net assets would be so
invested.
15. Purchase securities of other investment companies, except to
the extent permitted under the 1940 Act.
* * *
Each of the Bond Market Index, Emerging Leaders, European Equity and Japan
Portfolios 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. None of these Portfolios 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 instrumentalitiesmay 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 SEC 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.
* * *
The Emerging Markets Portfolio has adopted investment restrictions
numbered 1 through 8 as fundamental policies. Investment restrictions numbered 9
through 11 are not fundamental policies and may be changed by a vote of a
majority of the Fund's Board members at any time. The Portfolio may not:
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 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.
3. 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.
4. 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.
5. 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 SEC and the Fund's Board.
6. 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.
7. 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. 2, 4 and 10 may be deemed to give rise to a senior
security.
8. 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.
9. 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.
10. 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.
11. 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
Founders Asset Management LLC...... Sub-Investment Adviser to the
Founders Portfolios
Newton Capital Management Limited.. Sub-Investment Adviser to the
European Equity and Japan Portfolios
Premier Mutual Fund Services, Inc.. Distributor
Dreyfus Transfer, Inc.............. Transfer Agent
The Bank of New York............... Custodian for the Emerging Markets,
European Equity, Founders
International Equity, Founders
Passport and Japan Portfolios
Mellon Bank, N.A................... Custodian for the Bond Market
Index, Core Value, Emerging
Leaders, Founders Discovery,
Founders Growth, MidCap Stock and
Technology Growth Portfolios
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
Board Members of the Fund
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of the
Board of various funds in the Dreyfus Family of Funds. He also is a
director of The Muscular Dystrophy Association, 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, Career Blazers, Inc. (formerly, Staffing Resources, Inc.), a
temporary placement agency, and Century Business Services, Inc. (formerly,
International Alliance Services, Inc.), a provider of various outsourcing
functions for small and medium sized companies. For more than five years
prior to January 1995, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice President
and a director of Dreyfus Service Corporation, a wholly-owned subsidiary
of the Manager. From August 1994 until December 31, 1994, he was a
director of Mellon Financial Corporation. He is 56 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, IMS Health, a service
provider of marketing information and information technology, The Dun &
Bradstreet Corporation, MCI WorldCom and Mutual of America Life Insurance
Company. He is 66 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 of The Atlantic Council of the U.S. 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 and 1981. From 1977
to 1980, she was Under Secretary of State for Security Assistance, Science
and Technology. She is 72 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 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, $2,000 $80,918 (38)
Jr.
Lucy Wilson Benson $2,000 $77,168 (24)
- -------------------
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Portfolios, 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 40 years old.
*FREDERICK C. DEY, Vice President, Assistant Treasurer and Assistant Secretary.
Vice President, New Business Development of Funds Distributor, Inc. since
September 1994, and an officer of other investment companies advised or
administered by the Manager. He is 37 years old.
STEPHANIE D. PIERCE, Vice President, Assistant Secretary 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 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 31 years old.
*JOHN P. COVINO, Vice President and Assistant Treasurer. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of Funds
Distributor, Inc. since December 1998, and an officer of other investment
companies advised or administered by the Manager. From December 1995 to
November 1998, he was employed by Fidelity Investments where he held
multiple positions in their Institutional Brokerage Group. Prior to
joining Fidelity, he was employed by SunGard Brokerage Systems where he
was responsible for the technology and development of the accounting
product group. He is 36 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. 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. He is 37 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.
*KAREN JACOPPO-WOOD, Vice President and Assistant Secretary. Vice President and
Senior Counsel of Funds Distributor, Inc. since February 1997, and an
officer of other investment companies advised or administered by the
Manager. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. She is 32 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 38 years old.
The address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166, except those officers indicated by an (*), whose address is 60 State
Street, Boston, Massachusetts 02109.
The Fund's Board members and officers, as a group, owned less than 1% of
each Portfolio's shares outstanding on December 2, 1999.
The following shareholders are known by the Fund to own of record 5% or
more of the indicated Portfolio's shares outstanding on December 2, 1999:
Shareholder Portfolio Percentage of Shares
MBCIC Core Value 36.91%
c/o Mellon Bank, N.A. European Equity 49.81%
919 North Market Street Founders Growth 47.61%
Wilmington, DE 19801-3023 Founders International Equity 77.33%
Founders Passport 77.80%
MidCap Stock 28.04%
Nationwide Insurance Co. European Equity 30.25%
NWVA9
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
TransAmerica Occidental Core Value 44.47%
Life Insurance Company European Equity 13.72%
Separate Account VA-2L Founders Growth 41.67%
Accounting Department Founders International Equity 21.76%
P.O. Box 33849 Founders Passport 17.44%
Charlotte, NC 28233-3849 MidCap Stock 47.41%
Technology Growth 70.33%
First TransAmerica Life Core Value 18.25%
Insurance Company Founders Growth 10.73%
Separate Account VA-2LNY MidCap Stock 22.49%
Accounting Department Technology Growth 29.66%
P.O. Box 33849
Charlotte, NC 28233-3849
MANAGEMENT ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial 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 a Management
Agreement (the "Agreement") between the Fund and the Manager. As to each
Portfolio, the Agreement is subject to annual approval by (i) the Fund's Board
or (ii) vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of such Portfolio, provided that in either event the
continuance also is approved by a majority of the Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund or the Manager, by
vote cast in person at a meeting called for the purpose of voting on such
approval. As to each Portfolio, the Agreement is terminable without penalty, on
60 days' notice, by the Fund's Board or by vote of the holders of a majority of
the shares of such Portfolio, or, upon not less than 90 days' notice, by the
Manager. The Agreement will terminate automatically, as to the relevant
Portfolio, in the event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
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; Ronald P. O'Hanley III, Vice
Chairman; J. David Officer, Vice Chairman and a director; 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. Portfolio managers and other investment personnel of the Manager 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 Advisers. With respect to the Founders Portfolios, the
Manager has entered into a Sub-Investment Advisory Agreement with Founders (the
"Founders Sub-Advisory Agreement"). As to each Founders Portfolio, the Founders
Sub-Advisory Agreement is subject to annual approval by (i) the Fund's Board or
(ii) vote of a majority (as defined in the 1940 Act) of the Portfolio's
outstanding voting securities, provided that in either event the continuance
also is approved by a majority of the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Fund or Founders, by vote cast in
person at a meeting called for the purpose of voting on such approval. As to
each Founders Portfolio, the Founders Sub-Advisory Agreement is terminable
without penalty, (i) by the Manager on 60 days' notice, (ii) by the Fund's Board
or by vote of the holders of a majority of the Portfolio's outstanding voting
securities on 60 days' notice, or (iii) upon not less than 90 days' notice, by
Founders. The Founders Sub-Advisory Agreement will terminate automatically, as
to the relevant Founders Portfolio, in the event of its assignment (as defined
in the 1940 Act).
The following persons are officers of Founders: Christopher M. Condron,
Chairman; Richard W. Sabo, President and Chief Executive Officer; Robert T.
Ammann, Vice President; Curtis J. Anderson, Vice President; Thomas M. Arrington,
Vice President; Marissa A. Banuelos, Vice President; Angelo Barr, Senior Vice
President and National Sales Manager; Scott A. Chapman, Vice President; Kenneth
R. Christoffersen, Senior Vice President, General Counsel and Secretary; Gregory
P. Contillo, Executive Vice President and Chief Marketing Officer; Francis P.
Gaffney, Senior Vice President; Laurine Garrity, Senior Vice President; Paul A.
LaRocco, Vice President; Douglas A. Loeffler, Vice President; Andra C. Ozols,
Vice President; David L. Ray, Senior Vice President and Treasurer; Linda M.
Ripley, Vice President; and Tracy P. Stouffer, Vice President.
With respect to the European Equity and Japan Portfolios, the Manager has
entered into a Sub-Investment Advisory Agreement with Newton (the "Newton
Sub-Advisory Agreement"). As to each 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. As to each of the European Equity
and Japan Portfolios, 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, 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 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 the Portfolio, subject to the approval of the Fund's
Board. Founders, with respect to each Founders Portfolio, and Newton, with
respect to each of the European Equity and Japan Portfolios, 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 Fund with portfolio managers who are
authorized by the Fund's Board to execute purchases and sales of securities for
the relevant Portfolio. The portfolio managers of Core Value Portfolio are
Francis DeAngelis, William Goldenberg and Valerie Sill. The portfolio managers
of Emerging Leaders Portfolio are Paul Kandel and Hilary Woods. The primary
portfolio manager of Emerging Markets Portfolio is Daniel Beneat. The portfolio
managers of European Equity Portfolio are Joanna Bowen and Keiran Gallagher. The
primary portfolio manager of Founders Discovery Portfolio is Robert T. Ammann.
The primary portfolio managers of Founders Growth Portfolio are Scott A. Chapman
and Thomas M. Arrington. The primary portfolio manager of Founders International
Equity Portfolio is Douglas A. Loeffler. The primary portfolio manager of
Founders Passport Portfolio is Tracy Stouffer. The portfolio managers of Japan
Portfolio are Miki Sugimoto and Martin Batty. The portfolio managers of MidCap
Stock Portfolio are John O'Toole, Ronald Gala, Steven Falci, Robert Wilke, Mark
Sickorski, Harry Grosse and Jocelyn Reed. The primary portfolio manager of
Technology Growth Portfolio is Mark Herskovitz. 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, Founders 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, Founders
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, the
Portfolio's sub-investment adviser). The expenses borne by the Fund include:
organizational costs, taxes, interest, loan commitment fees, dividends and
interest on securities sold short, brokerage fees and commissions, if any, fees
of Board members who are not officers, directors, employees or holders of 5% or
more of the outstanding voting securities of the Manager or Founders or any of
their affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, industry association fees,
outside auditing and legal expenses, costs of maintaining the Fund's existence,
costs of independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and printing prospectuses
and statements of additional information for regulatory purposes and for
distribution to existing shareholders, and any extraordinary expenses. Expenses
attributable to a particular Portfolio are charged against the assets of that
Portfolio; other expenses of the Fund are allocated among the Portfolios on the
basis determined by the Fund's Board, including, but not limited to,
proportionately in relation to the net assets of each Portfolio.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager, 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 set forth below as a percentage of the relevant
Portfolio's average daily net assets.
Name of Portfolio Management Fee
Bond Market Index Portfolio .30%
Core Value Portfolio .75%
Emerging Leaders Portfolio .90%
Emerging Markets Portfolio 1.25%
European Equity Portfolio 1.00%
Japan Portfolio 1.00%
MidCap Stock Portfolio .75%
Technology Growth Portfolio .75%
Founders Discovery Portfolio .90%
Founders Growth Portfolio .75%
Founders International Equity Portfolio 1.00%
Founders Passport Portfolio 1.00%
The fees payable by the Fund to the Manager with respect to each Portfolio
indicated below for the period from its commencement of operations through
December 31, 1998, were as follows:
Name of Portfolio Management Fee Payable*
Core Value Portfolio(1) $26,068
MidCap Stock Portfolio(1) $40,453
Founders Growth Portfolio(2) $ 4,286
Founders International Equity Portfolio(2) $ 5,388
Founders Passport Portfolio(2) $13,578
- -----------------
* The management fees payable by each Portfolio to the Manager for the fiscal
year ended December 31, 1998 were waived pursuant to undertakings by the
Manager, resulting in no management fees being paid by the Portfolios for
the fiscal year ended December 31, 1998.
(1) From May 1, 1998 (commencement of operations) through December 31, 1998.
(2) From September 30, 1998 (commencement of operations) through December 31,
1998.
The Bond Market Index, Emerging Leaders, Emerging Markets, European
Equity, Founders Discovery, Japan and Technology Growth Portfolios have not
completed their first fiscal year.
As compensation for Founders' services, the Manager has agreed to pay
Founders a monthly sub-advisory fee at the annual rate set forth below as a
percentage of the relevant Founders Portfolio's average daily net assets:
Sub-Investment
Name of Portfolio Advisory Fee
Founders Discovery Portfolio and Founders Growth
Portfolio
0 to $100 million of average daily net assets .25%
$100 million to $1 billion of average daily net assets .20%
$1 billion to $1.5 billion of average daily net assets .16%
$1.5 billion or more of average daily net assets .10%
Founders International Equity Portfolio and Founders
Passport Portfolio
0 to $100 million of average daily net assets .35%
$100 million to $1 billion of average daily net assets .30%
$1 billion to $1.5 billion of average daily net assets .26%
$1.5 billion or more of average daily net assets .20%
The fees payable by the Manager to Founders with respect to the Founders
Growth, Founders International Equity and Founders Passport Portfolios for the
period from September 30, 1998 (commencement of operations) through December 31,
1998 were waived in their entirety by Founders pursuant to an undertaking.
Founders Discovery Portfolio has not completed its first fiscal year.
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 each of the European Equity and Japan 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 European Equity and Japan Portfolios have not completed their first
fiscal year.
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, Core Value, Emerging Leaders, Founders Discovery,
Founders Growth, MidCap Stock and Technology Growth Portfolios. Under a custody
agreement with the Fund, Mellon Bank, N.A. holds each such Portfolio's
securities and keeps all necessary accounts and records. For its custody
services, Mellon Bank, N.A. receives a monthly fee based on the market value of
each such Portfolio's assets held in custody and receives certain securities
transaction charges.
The Bank of New York, 100 Church Street, New York, New York 10286, serves
as the Fund's custodian with respect to the Emerging Markets, European Equity,
Founders International Equity, Founders Passport and Japan Portfolios. The Bank
of New York has no part in determining the investment policies of the Portfolios
or which securities are to be purchased or sold by the Portfolios.
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 applicable 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 ("NYSE") (currently 4:00 p.m., New York time), on each day that the
NYSE 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 NYSE. 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. For 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 Fund. 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 SEC.
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 SEC. In the case of requests for redemption in excess
of such amount, the Fund's Board reserves the right to make payments in whole or
part in securities or other assets of the Portfolio in case of an emergency or
any time a cash distribution would impair the liquidity of the Portfolio to the
detriment of the existing shareholders. In such event, the securities would be
valued in the same manner as the Portfolio's investments are valued. If the
recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE 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 SEC 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 SEC by order may permit to protect the Fund's
shareholders.
DETERMINATION OF NET ASSET VALUE
Each Portfolio's investment securities are valued at the last sale price
on the securities exchange or national securities market on which such
securities are primarily traded. Securities not listed on an exchange or
national securities market, or securities in which there were no transactions,
are valued at the average of the most recent bid and asked prices, except in the
case of open short positions where the asked price is used for valuation
purposes. Bid price is used when no asked price is available. Market quotations
for foreign securities denominated in foreign currencies are translated into
U.S. dollars at the prevailing rates of exchange. Because of the need to obtain
prices as of the close of trading on various exchanges throughout the world, the
calculation of net asset value may not take place contemporaneously with the
determination of prices of certain of the Core Value Portfolio's, Emerging
Leaders Portfolio's, Emerging Markets Portfolio's, European Equity Portfolio's,
Japan Portfolio's or any Founders Portfolio's foreign investment securities. If
events materially affecting the value of such securities occur between the time
when their price is determined and the time when the Portfolio's net asset value
is calculated, such securities may be valued at fair value as determined in good
faith by the Board. Short-term investments are carried at amortized cost, which
approximates value. Any securities or other assets for which recent market
quotations are not readily available are valued at fair value as determined in
good faith by the Fund's Board. Expenses and fees, including the management fee
(reduced by the expense limitation, if any), are accrued daily and taken into
account for the purpose of determining the net asset value of shares.
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.
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.
NYSE Closings. The holidays (as observed) on which the NYSE 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
Management believes that each Portfolio (except the Bond Market Index,
Emerging Leaders, Emerging Markets, European Equity, Founders Discovery, Japan
and Technology Growth Portfolios) has qualified as a regulated investment
company under the Code for the period ended December 31, 1998. It is expected
that each of the Bond Market Index, Emerging Leaders, Emerging Markets, European
Equity, Founders Discovery, Japan and Technology Growth Portfolios will qualify
as a regulated investment company under the Code. Each Portfolio intends to
continue to so qualify as long as such qualification is in the best interests of
its shareholders. As a regulated investment company, each Portfolio will pay no
Federal income tax on net investment income and net realized securities gains to
the extent that such income and gains are distributed to shareholders in
accordance with applicable provisions of the Code. To qualify as a regulated
investment company, the Portfolio must meet several requirements. These
requirements include the following: (1) at least 90% of the Portfolio's gross
income must be derived from dividends, interest, payments with respect to
securities loans, gains from the sale or disposition of stock, securities or
foreign currencies or other income (including gain from options, futures or
forward contracts) derived in connection with the Portfolio's investment
business, (2) at the close of each quarter of the Portfolio's taxable year, (a)
at least 50% of the value of the Portfolio's assets must consist of cash, United
States Government securities, securities of other regulated investment companies
and other securities (limited generally with respect to any one issuer to not
more than 5% of the total assets of the Portfolio and not more than 10% of the
outstanding voting securities of such issuer) and (b) not more than 25% of the
value of the Portfolio's assets may be invested in the securities of any one
issuer (other than United States Government securities or securities of other
regulated investment companies) or of two or more issuers which the Portfolio
controls and which are determined to be engaged in similar or related trades or
businesses and (3) at least 90% of the Portfolio's net income (consisting of net
investment income and net short-term capital gain) must be distributed to its
shareholders. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any government
agency.
Each Portfolio intends to comply with the diversification requirements
imposed by section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements
mentioned above, place certain limitations on the proportion of each Portfolio's
assets that may be represented by any single investment (which includes all
securities of the same issuer). For purposes of section 817(h), all securities
of the same issuer, all interests in the same real property project, and all
interest in the same commodity are treated as a single investment. In addition,
each U.S. Government agency or instrumentality is treated as a separate issuer,
while the securities of a particular foreign government and its agencies,
instrumentalities and political subdivisions all will be considered securities
issued by the same issuer.
Generally, a regulated investment company must distribute substantially
all of its ordinary income and capital gains in accordance with a calendar year
distribution requirement in order to avoid a nondeductible 4% excise tax.
However, the excise tax does not apply to a fund whose only shareholders are
certain tax exempt trusts or segregated asset accounts of life insurance
companies held in connection with variable contracts. In order to avoid this
excise tax, each Portfolio intends to qualify for this exemption or to make its
distributions in accordance with the calendar year.
In order to maintain its qualifications as a regulated investment company,
a Portfolio's ability to invest in certain types of financial instruments (for
example, securities issued or acquired at a discount) may be restricted and a
Portfolio may be required to maintain or dispose of its investments in certain
types of financial instruments beyond the time when it might otherwise be
advantageous to do so.
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 lose the benefit of tax deferral on
distributions made to the separate accounts of Participating Insurance
Companies. Similarly, if a Portfolio failed to comply with the diversification
requirements of section 817(h) of the Code and the regulations thereunder,
Policy owners could be subject to current tax on distributions made to the
separate accounts of Participating Insurance Companies.
Portfolios investing in foreign securities or currencies may be required
to pay withholding, income or other taxes to foreign governments or U.S.
possessions. Foreign tax withholding from dividends and interest, if any, is
generally at a rate between 10% and 35%. The investment yield of any Portfolio
that invests in foreign securities or currencies is reduced by these foreign
taxes. Policy owners investing in such Portfolios bear the cost of any foreign
taxes but will not be able to claim a foreign tax credit or deduction for these
foreign taxes. Tax conventions between certain countries and the United States
may reduce or eliminate these foreign taxes, however, and foreign countries
generally do not impose taxes on capital gains in respect of investments by
foreign investors.
Certain Portfolios may invest in securities of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. A Portfolio investing in securities of PFICs may
be subject to U.S. Federal income taxes and interest charges, which would reduce
the investment yield of a Portfolio making such investments. Policy owners
investing in such Portfolios would bear the cost of these taxes and interest
charges. In certain cases, a Portfolio may be eligible to make certain elections
with respect to securities of PFICs which could reduce taxes and interest
charges payable by the Portfolio. However, a Portfolio's intention to qualify
annually as a regulated investment company may limit a Portfolio's elections
with respect to PFIC securities and no assurance can be given that such
elections can or will be made.
The foregoing is only a general summary of some of the important Federal
income tax considerations generally affecting the Portfolios and their
shareholders. No attempt is made to present a complete explanation of the
Federal tax treatment of the Portfolios' activities or to discuss state and
local tax matters affecting the Portfolios. Policy owners are urged to consult
their own tax advisers for more detailed information concerning tax implications
of investments in the Portfolios.
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, if applicable, the Portfolio's sub-investment
adviser) 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, if
applicable, the Portfolio's sub-investment adviser) to supplement its 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, if applicable, the
Portfolio's sub-investment adviser) in advising other funds or accounts and,
conversely, research services furnished to the Manager (and, if applicable, the
Portfolio's sub-investment adviser) 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, Founders or Newton or their 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, Founders or Newton or their
affiliates are reasonable and fair.
In connection with its portfolio securities transactions for the period
ended December 31, 1998, each Portfolio indicated below paid brokerage
commissions and, where determinable, concessions on principal transactions, none
of which was paid to the Distributor, in the following amounts:
Concessions on
Name of Portfolio Brokerage Commissions Paid Principal
Transactions
Core Value(1) $ 9,350 $0
MidCap Stock(1) $20,261 $0
Founders Growth(2) $ 4,258 $0
Founders International $ 7,518 $0
Equity(2)
Founders Passport(2) $11,415 $0
- ------------------
(1) From May 1, 1998 (commencement of operations) through December 31, 1998.
(2) From September 30, 1998 (commencement of operations) through December 31,
1998.
The aggregate amount of transactions during the period ended December 31,
1998 in securities effected on an agency basis through a broker for, among other
things, research services, and the commissions and concessions related to such
transactions were as follows:
Name of Portfolio Transaction Amount Commissions and
Concessions
Core Value(1) $631,983 $480
MidCap Stock(1) $134,821 $406
Founders Growth(2) $768,658 $811
Founders International $273,807 $265
Equity(2)
Founders Passport(2) $ 0 $ 0
- ------------------
(1) From May 1, 1998 (commencement of operations) through December 31, 1998.
(2) From September 30, 1998 (commencement of operations) through December 31,
1998.
The Bond Market Index, Emerging Leaders, Emerging Markets, European
Equity, Founders Discovery, Japan and Technology Growth Portfolios have not
completed their first fiscal year.
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 (not annualized) for each of the following Portfolios for the
period indicated was:
Period Ended December 31, 1998
Portfolio
Core Value(1) -5.59%
MidCap Stock(1) -2.53%
Founders Growth(2) 27.20%
Founders International Equity(2) 14.88%
Founders Passport(2) 15.79%
- ------------------
(1) From May 1, 1998 (commencement of operations) through December 31, 1998. (2)
From September 30, 1998 (commencement of operations) through December 31, 1998.
The Bond Market Index, Emerging Leaders, Emerging Markets, European
Equity, Founders Discovery, Japan and Technology Growth Portfolios have not
completed their first fiscal year and, therefore, no performance data have been
provided for such Portfolios.
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, IBC's Money Fund Report(TM), International Finance
Corporation Index, Money Magazine, Bank Rate Monitor(TM), Standard & Poor's 500
Composite Stock Price Index, Standard & Poor's MidCap 400 Index, Russell 2000(R)
Index, Russell 2500(R) Index, Morgan Stanley Capital International (MSCI)
Emerging Markets (Free) Index, MSCI Europe Index, MSCI World (ex US) Index, MSCI
Japan Index, the Dow Jones Industrial Average, Morningstar, Inc., Value Line
Mutual Fund Survey 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 12 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.
<PAGE>
APPENDIX
Description of certain ratings:
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned to a debt obligation.
Capacity to pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB
Bonds rated BB have less near-term vulnerability to default than other
speculative grade bonds. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B
Bonds rated B have a greater vulnerability to default but presently have
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Bonds rated CCC have a current identifiable vulnerability to default, and
are dependent upon favorable business, financial and economic conditions to meet
timely payments of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.
CC
Bonds rated CC typically are subordinated to senior debt which is assigned
an actual or implied CCC rating.
C
Bonds rated C typically are subordinated to senior debt which is assigned
an actual or implied CCC- rating.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or a minus
sign, which is used to show relative standing within the major ratings
categories, except in the AAA (Prime Grade) category.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.
Issues assigned an A rating are regarded as having the greatest capacity for
timely payment. Issues in this category are delineated with the numbers 1, 2 and
3 to indicate the relative degree of safety.
A-1
This designation indicates the degree of safety regarding timely payment
is either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted with a plus sign (+)
designation.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Moody's
Bond Ratings
Aaa
Bonds 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 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 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 rated Baa are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba
Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B
Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa
Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca
Bonds rated Ca present obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C
Bonds rated C are the lowest rated class of bonds, and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a rating for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions.
Ample alternate liquidity is maintained.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual default of interest and/or
principal payments. Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or reorganization of
the obligor. DDD represents the highest potential for recovery on these bonds
and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
Duff
Bond Ratings
AAA
Bonds rated AAA are considered highest credit quality. The risk factors
are negligible, being only slightly more than for risk-free U.S. Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
A
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
BBB
Bonds rated BBB are considered to have below average protection factors
but still considered sufficient for prudent investment. Considerable variability
in risk exists during economic cycles.
BB
Bonds rated BB are below investment grade but are deemed by Duff as likely
to meet obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company fortunes. Overall
quality may move up or down frequently within the category.
B
Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating within
this category or into a higher or lower quality rating grade.
CCC
Bonds rated CCC are well below investment grade securities. Such bonds may
be in default or have considerable uncertainty as to timely payment of interest,
preferred dividends and/or principal. Protection factors are narrow and risk can
be substantial with unfavorable economic or industry conditions and/or with
unfavorable company developments.
DD
Defaulted debt obligations. Issuer has failed to meet scheduled principal
and/or interest payments.
Plus (+) and minus (-) signs are used with a rating symbol (except AAA) to
indicate the relative position of a credit within the rating category.
Commercial Paper Rating
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor.
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) Revised Management Agreement.
(d)(2) Revised Sub-Investment Advisory Agreements.
(e) Revised Distribution Agreement.
(g) Amended and Restated 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) Power of Attorney is incorporated by reference to Other
Exhibits of Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A, filed on August 31,
1999.
(b) Certificate of Assistant Secretary is incorporated by
reference to Other Exhibits of Post-Effective Amendment
No. 8 to the Registration Statement on
Form N-1A, filed on August 31, 1999.
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 Post-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>
ITEM 26 Business and Other Connections of Investment Adviser (continued)
Officers and Directors of Investment Adviser
Name and Position
With Dreyfus Other Businesses Position Held Dates
<S> <C> <C> <C>
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
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 Executive Director 5/93 - Present
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 Managers
Officer, Chief Investment Acting Chief Executive 7/98 - 12/98
Officer, and Director Officer
(Continued)
The Dreyfus Trust Company+++ Director 6/95 - Present
Chairman 1/99 - Present
President 1/99 - Present
Chief Executive Officer 1/99 - 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 Managers 2/99 - Present
Dreyfus Service Organization++ Director 3/99 - Present
Dreyfus Insurance Agency of Director 3/99 - Present
Massachusetts, Inc. +++
Dreyfus Brokerage Services, Inc. Director 11/97 - 6/98
401 North Maple Avenue
Beverly Hills, CA.
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
Steven G. Elliott Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Director (Continued) Chief Financial Officer 8/87 - Present
Mellon Overseas Investments Director 8/87 - Present
Corporation+ President 8/87 - Present
Director 4/88 - Present
Chairman 7/89 - 11/97
Mellon International Investment President 4/88 - 11/97
Corporation+ Chief Executive Officer 4/88 - 11/97
Director 9/89 - 8/97
Mellon Financial Services Treasurer 12/87 - Present
Corporation +
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 - 2/99
401 North Maple Ave. Chief Executive Officer 11/97 - 2/98
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 - 3/99
Organization, Inc.++ President 1/97 - 3/99
Seven Six Seven Agency, Inc. ++ Director 1/97 - 4/99
Dreyfus Insurance Agency of Chairman 5/97 - 3/99
Massachusetts, Inc.++++ President 5/97 - 3/99
Director 5/97 - 3/99
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 - 6/99
Corporation++ President 5/97 - 6/99
Director 12/94 - 6/99
Founders Asset Management, LLC**** Member, Board of Managers 12/97 - Present
Lawrence S. Kash The Boston Company Advisors, Chairman 12/95 - Present
Vice Chairman Inc. Chief Executive Officer 12/95 - Present
And Director (Continued) 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
Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Chairman 9/93 - 1/98
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 Service Organization++ Director 3/99 - Present
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Dreyfus Brokerage Services, Inc. Chairman 3/99 - Present
401 North Maple Avenue
Beverly Hills, CA
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
J. David Officer Mellon Trust of Florida, N.A. Director 8/97 - Present
Vice Chairman and 2875 Northeast 191st Street
Director (Continued) 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
Mellon Trust of New York Director 6/96 - Present
1301 Avenue of the Americas
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 Chief Executive Officer 12/98 - Present
Prudential Securities
New York, NY Senior Vice President 07/91 - 11/98
Regional Director 07/91 - 11/98
Richard F. Syron Thermo Electron President 6/99 - Present
Director 81 Wyman Street Chief Executive Officer 6/99 - Present
Waltham, MA 02454-9046
American Stock Exchange Chairman 4/94 -6/99
86 Trinity Place Chief Executive Officer 4/94 - 6/99
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
Ronald P. O'Hanley The Boston Company Asset Chairman 6/98 - Present
Vice Chairman Management, LLC* Director 1/98 - 6/98
(Continued)
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
Laurel Capital Advisors+ Trustee 3/97 - Present
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 - 3/99
Organization, Inc.++
William H. Maresca The Dreyfus Trust Company+++ Chief Financial Officer 3/99 - Present
Controller Treasurer 9/98 - Present
Director 3/97 - Present
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
William H. Maresca Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Controller (Continued)
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Treasurer 3/99 - Present
Organization, Inc.++ Assistant Treasurer 3/93 - 3/99
Dreyfus Insurance Agency of
Massachusetts, Inc.++++ Assistant Treasurer 5/98 - Present
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
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
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
The Dreyfus Trust Company +++ Director 1/96 - Present
Dreyfus Service Organization, Treasurer 10/96- 3/99
Inc.++
Dreyfus Insurance Agency of Director 5/97 - 3/99
Massachusetts, Inc.++++ Treasurer 5/97- 3/99
Executive Vice President 5/97 - 3/99
Diane P. Durnin Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and
Development Advertising 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
The Dreyfus Consumer Credit Chairman 6/99 - Present
Corporation ++ President 6/99 - Present
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 2930 East Third Avenue,Denver, Colorado 80206.
+ 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
**** The address of the business so indicated is 2930 East Third Avenue,Denver, Colorado 80206.
</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 Equity Funds
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. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
2. The Bank of New York
100 Church Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
5. Founders Asset Management
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 15th day of December, 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 12/15/99
______________________________ (Principal Executive, Financial
Marie E. Connolly and Accounting Officer)
/s/Clifford L. Alexander, Jr.* Director 12/15/99
- -----------------------------
Clifford L. Alexander, Jr.
/s/Lucy Wilson Benson* Director 12/15/99
- ------------------------------
Lucy Wilson Benson
/s/Joseph S. DiMartino* Chairman of the Board of Directors 12/15/99
- -----------------------------
Joseph S. DiMartino
*BY: /s/Stephanie Piece
--------------------------
Stephanie Pierce,
Attorney-in-Fact
EXHIBIT INDEX
Exhibits
(d) (1) Revised Management Agreement
(d) (2) Revised Sub-Investment Advisory Agreements
(e) Revised Distribution Agreement
(j) Consent of Independent Auditors
MANAGEMENT AGREEMENT
DREYFUS INVESTMENT PORTFOLIOS
200 Park Avenue
New York, New York 10166
April 16, 1998
As Amended, July 16, 1998
The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Ladies and Gentlemen:
The above-named investment company (the "Fund") consisting of the
series named on Schedule 1 hereto, as such Schedule may be revised from time to
time (each, a "Series"), herewith confirms its agreement with you as follows:
The Fund desires to employ its capital by investing and reinvesting
the same in investments of the type and in accordance with the limitations
specified in its charter documents and in its Prospectus and Statement of
Additional Information as from time to time in effect, copies of which have been
or will be submitted to you, and in such manner and to such extent as from time
to time may be approved by the Fund's Board. The Fund desires to employ you to
act as the Fund's investment adviser.
In this connection it is understood that from time to time you will
employ or associate with yourself such person or persons as you may believe to
be particularly fitted to assist you in the performance of this Agreement. Such
person or persons may be officers or employees who are employed by both you and
the Fund. The compensation of such person or persons shall be paid by you and no
obligation may be incurred on the Fund's behalf in any such respect. We have
discussed and concur in your employing on this basis for as long as you deem it
appropriate each indicated sub-adviser (each, a "Sub-Investment Adviser") named
on Schedule 1 hereto to act as the Fund's sub-investment adviser with respect to
the Series indicated on Schedule 1 hereto (the "Sub-Advised Series") to provide
day-to-day management of the Sub-Advised Series' investments.
Subject to the supervision and approval of the Fund's Board, you
will provide investment management of each Series' portfolio in accordance with
such Series' investment objectives and policies as stated in the Fund's
Prospectus and Statement of Additional Information as from time to time in
effect. In connection therewith, you will obtain and provide investment research
and will supervise each Series' investments and conduct, or with respect to the
Sub-Advised Series, supervise, a continuous program of investment, evaluation
and, if appropriate, sale and reinvestment of such Series' assets. You will
furnish to the Fund such statistical information, with respect to the
investments which a Series may hold or contemplate purchasing, as the Fund may
reasonably request. The Fund wishes to be informed of important developments
materially affecting any Series' portfolio and shall expect you, on your own
initiative, to furnish to the Fund from time to time such information as you may
believe appropriate for this purpose.
In addition, you will supply office facilities (which may be in your
own offices), data processing services, clerical, accounting and bookkeeping
services, internal auditing and legal services, internal executive and
administrative services, and stationery and office supplies; prepare reports to
each Series' stockholders, tax returns, reports to and filings with the
Securities and Exchange Commission and state Blue Sky authorities; calculate the
net asset value of each Series' shares; and generally assist in all aspects of
the Fund's operations. You shall have the right, at your expense, to engage
other entities to assist you in performing some or all of the obligations set
forth in this paragraph, provided each such entity enters into an agreement with
you in form and substance reasonably satisfactory to the Fund. You agree to be
liable for the acts or omissions of each such entity to the same extent as if
you had acted or failed to act under the circumstances.
You shall exercise your best judgment in rendering the services to
be provided to the Fund hereunder and the Fund agrees as an inducement to your
undertaking the same that neither you nor the Sub-Investment Adviser shall be
liable hereunder for any error of judgment or mistake of law or for any loss
suffered by one or more Series, provided that nothing herein shall be deemed to
protect or purport to protect you or the Sub-Investment Adviser against any
liability to the Fund or a Series or to its security holders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder, or to which the
Sub-Investment Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
under its Sub-Investment Advisory Agreement with you or by reason of its
reckless disregard of its obligations and duties under said Agreement.
In consideration of services rendered pursuant to this Agreement,
the Fund will pay you on the first business day of each month a fee at the rate
set forth opposite each Series' name on Schedule 1 hereto. Net asset value shall
be computed on such days and at such time or times as described in the Fund's
then current Prospectus and Statement of Additional Information. The fee for the
period from the date of the commencement of the public sale of a Series' shares
to the end of the month during which such sale shall have been commenced shall
be pro-rated according to the proportion which such period bears to the full
monthly period, and upon any termination of this Agreement before the end of any
month, the fee for such part of a month shall be pro-rated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to you, the value of
each Series' net assets shall be computed in the manner specified in the Fund's
charter documents for the computation of the value of each Series' net assets.
You will bear all expenses in connection with the performance of
your services under this Agreement and will pay all fees of the Sub-Investment
Adviser in connection with its duties in respect of the Fund. All other expenses
to be incurred in the operation of the Fund (other than those borne by the
Sub-Investment Adviser) will be borne by the Fund, except to the extent
specifically assumed by you. The expenses to be borne by the Fund include,
without limitation, the following: organizational costs, taxes, interest, loan
commitment fees, interest and distributions paid on securities sold short,
brokerage fees and commissions, if any, fees of Board members who are not your
officers, directors or employees or holders of 5% or more of the outstanding
voting securities of you or the Sub-Investment Adviser or any affiliate of you
or the Sub-Investment Adviser, Securities and Exchange Commission fees and state
Blue Sky qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Fund's existence, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
stockholders, costs of stockholders' reports and meetings, and any extraordinary
expenses.
The Fund understands that you and the Sub-Investment Adviser now
act, and that from time to time hereafter you or the Sub-Investment Adviser may
act, as investment adviser to one or more other investment companies and
fiduciary or other managed accounts, and the Fund has no objection to your and
the Sub-Investment Adviser's so acting, provided that when the purchase or sale
of securities of the same issuer is suitable for the investment objectives of
two or more companies or accounts managed by you which have available funds for
investment, the available securities will be allocated in a manner believed by
you to be equitable to each company or account. It is recognized that in some
cases this procedure may adversely affect the price paid or received by one or
more Series or the size of the position obtainable for or disposed of by one or
more Series.
In addition, it is understood that the persons employed by you to
assist in the performance of your duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict your right or the right of any of your affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
Neither you nor the Sub-Investment Adviser shall be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except for a loss
resulting from willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from reckless disregard by you of your
obligations and duties under this Agreement and, in the case of the
Sub-Investment Adviser, for a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under its Sub-Investment
Advisory Agreement. Any person, even though also your officer, director,
partner, employee or agent, who may be or become an officer, Board member,
employee or agent of the Fund, shall be deemed, when rendering services to the
Fund or acting on any business of the Fund, to be rendering such services to or
acting solely for the Fund and not as your officer, director, partner, employee
or agent or one under your control or direction even though paid by you.
As to each Series, this Agreement shall continue until the date set
forth opposite such Series' name on Schedule 1 hereto (the "Reapproval Date")
and thereafter shall continue automatically for successive annual periods ending
on the day of each year set forth opposite the Series' name on Schedule 1 hereto
(the "Reapproval Day"), provided such continuance is specifically approved at
least annually by (i) the Fund's Board or (ii) vote of a majority (as defined in
the Investment Company Act of 1940) of such Series' outstanding voting
securities, provided that in either event its continuance also is approved by a
majority of the Fund's Board members who are not "interested persons" (as
defined in said Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. As to each Series,
this Agreement is terminable without penalty, on 60 days' notice, by the Fund's
Board or by vote of holders of a majority of such Series' shares or, upon not
less than 90 days' notice, by you. This Agreement also will terminate
automatically, as to the relevant Series, in the event of its assignment (as
defined in said Act).
The Fund recognizes that from time to time your directors, officers
and employees may serve as directors, trustees, partners, officers and employees
of other corporations, business trusts, partnerships or other entities
(including other investment companies) and that such other entities may include
the name "Dreyfus" as part of their name, and that your corporation or its
affiliates may enter into investment advisory or other agreements with such
other entities. If you cease to act as the Fund's investment adviser, the Fund
agrees that, at your request, the Fund will take all necessary action to change
the name of the Fund to a name not including "Dreyfus" in any form or
combination of words.
In addition, the Fund recognizes that from time to time the
Sub-Investment Adviser's directors, officers and employees may serve as
directors, trustees, partners, officers and employees of other corporations,
business trusts, partnerships or other entities (including other investment
companies) and that such other entities may include the Sub-Investment Adviser's
primary name as part of their name, and that the Sub-Investment Adviser's
corporation or its affiliates may enter into sub-investment advisory or other
agreements with such other entities. If the Sub-Investment Adviser ceases to act
as the Sub-Advised Series' sub-investment adviser, and none of the
Sub-Investment Adviser's directors, officers or employees act as a portfolio
manager for such Sub-Advised Series, the Fund agrees that, at the Sub-Investment
Adviser's request, the Fund will take all necessary action to change the name of
the Sub-Advised Series to a name not including the Sub-Investment Adviser's
primary name in any form or combination of words.
The Fund is agreeing to the provisions of this Agreement that limit
the Sub-Investment Adviser's liability and other provisions relating to the
Sub-Investment Adviser so as to induce the Sub-Investment Adviser to enter into
its Sub-Investment Advisory Agreement with you and to perform its obligations
thereunder. The Sub-Investment Adviser is expressly made a third party
beneficiary of this Agreement with rights as respects the Sub-Advised Series to
the same extent as if it had been a party hereto.
This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall only be binding upon the assets and property
of the Fund or the affected Series, as the case may be, and shall not be binding
upon any Board member, officer or shareholder of the Fund individually.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
DREYFUS INVESTMENT PORTFOLIOS
By:___________________________
Accepted:
THE DREYFUS CORPORATION
By:_______________________________
SCHEDULE 1
Annual Fee as
a Percentage
of Average
Daily Net
Name of Series Assets Reapproval Date Reapproval
Day
Bond Market Index .30% April 16, 2001 April 16th
Portfolio
Core Value Portfolio .75% April 16, 2000 April 16th
Emerging Leaders Portfolio .90% August 31, 2001 August 31st
Emerging Markets Portfolio 1.25% August 31, 2001 August 31st
European Equity 1.00% April 16, 2001 April 16th
Portfolio1
MidCap Stock .75% April 16, 2000 April 16th
Portfolio
Technology Growth .75% July 29, 2001 July 29th
Portfolio
Founders Discovery .90% August 31, 2001 August 31st
Portfolio2
Founders Growth .75% April 16, 2000 April 16th
Portfolio2
Founders Interna-tional 1.00% April 16, 2000 April 16th
Equity Portfolio2
Founders Passport 1.00% April 16, 2000 April 16th
Portfolio2
Japan Portfolio1 1.00% August 31, 2001 August 31st
Revised as of: October 28, 1999
1 The Dreyfus Corporation has employed Newton Capital Management Limited to
act as sub-investment adviser to this Series.
2 The Dreyfus Corporation has employed Founders Asset Management LLC to act as
sub-investment adviser to this Series.
SUB-INVESTMENT ADVISORY AGREEMENT
THE DREYFUS CORPORATION
200 Park Avenue
New York, New York 10166
July 16, 1998
Founders Asset Management LLC
Founders Financial Center
2930 East Third Avenue
Denver, Colorado 80206
Dear Sirs:
As you are aware, Dreyfus Investment Portfolios (the "Fund"),
currently consisting of twelve series, desires to employ the capital of its
series named on Schedule 1 hereto, as such Schedule may be revised from time to
time (each, a "Series"), by investing and reinvesting the same in investments of
the type and in accordance with the limitations specified in the Fund's charter
documents and in its Prospectus and Statement of Additional Information as from
time to time in effect, copies of which have been or will be submitted to you,
and in such manner and to such extent as from time to time may be approved by
the Fund's Board. The Fund employs The Dreyfus Corporation (the "Adviser") to
act as its investment adviser pursuant to a written agreement (the "Management
Agreement"), a copy of which has been furnished to you. The Adviser desires to
employ you to act as each Series' sub-investment adviser.
In connection with your serving as sub-investment adviser to the
Series, it is understood that from time to time you will employ or associate
with yourself such person or persons as you may believe to be particularly
fitted to assist you in the performance of this Agreement. Such person or
persons may be officers or employees who are employed by both you and the Fund.
The compensation of such person or persons shall be paid by you and no
obligation may be incurred on the Fund's behalf in any such respect.
Subject to the supervision and approval of the Adviser, you will
provide investment management of each Series' portfolio in accordance with the
Series' investment objectives and policies as stated in the Fund's Prospectus
and Statement of Additional Information as from time to time in effect. In
connection therewith, you will supervise each Series' investments and conduct a
continuous program of investment, evaluation and, if appropriate, sale and
reinvestment of such Series' assets. You will furnish to the Adviser or the Fund
such statistical information, with respect to the investments which a Series may
hold or contemplate purchasing, as the Adviser or the Fund may reasonably
request. The Fund and the Adviser wish to be informed of important developments
materially affecting any Series' portfolio and shall expect you, on your own
initiative, to furnish to the Fund or the Adviser from time to time such
information as you may believe appropriate for this purpose.
You shall exercise your best judgment in rendering the services to
be provided hereunder, and the Adviser agrees as an inducement to your
undertaking the same that you shall not be liable hereunder for any error of
judgment or mistake of law or for any loss suffered by one or more Series or the
Adviser, provided that nothing herein shall be deemed to protect or purport to
protect you against any liability to the Adviser, the Fund or a Series' security
holders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties
hereunder, or by reason of your reckless disregard of your obligations and
duties hereunder.
In consideration of services rendered pursuant to this Agreement,
the Adviser will pay you, on the first business day of each month, out of the
management fee it receives and only to the extent thereof, a fee at the annual
rate set forth on Schedule 2 hereto.
Net asset value shall be computed on such days and at such time or
times as described in the Fund's then-current Prospectus and Statement of
Additional Information. The fee for the period from the date following the
commencement of sales of a Series' shares (after any sales are made to the
Fund's sponsor) to the end of the month during which such sales shall have been
commenced shall be pro-rated according to the proportion which such period bears
to the full monthly period, and upon any termination of this Agreement before
the end of any month, the fee for such part of a month shall be pro-rated
according to the proportion which such period bears to the full monthly period
and shall be payable within 10 business days of date of termination of this
Agreement.
For the purpose of determining fees payable to you, the value of
each Series' net assets shall be computed in the manner specified in the Fund's
charter documents for the computation of the value of a 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 or sub-investment adviser to one or
more investment companies and fiduciary or other managed accounts, and the
Adviser has no objection to your so acting, provided that when purchase or sale
of securities of the same issuer is suitable for the investment objectives of
two or more companies or accounts managed by you which have available funds for
investment, the available securities will be allocated in a manner believed by
you to be equitable to each company or account. It is recognized that in some
cases this procedure may adversely affect the price paid or received by one or
more Series or the size of the position obtainable for or disposed of by one or
more Series.
In addition, it is understood that the persons employed by you to
assist in the performance of your duties hereunder will not devote their full
time to such services and nothing contained herein shall be deemed to limit or
restrict your right or the right of any of your affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
You shall not be liable for any error of judgment or mistake of law
or for any loss suffered by a Series or the Adviser in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on your part in the
performance of your duties or from reckless disregard by you of your obligations
and duties under this Agreement. Any person, even though also your officer,
director, partner, employee or agent, who may be or become an officer, Board
member, employee or agent of the Fund, shall be deemed, when rendering services
to the Fund or acting on any business of the Fund, to be rendering such services
to or acting solely for the Fund and not as your officer, director, partner,
employee, or agent or one under your control or direction even though paid by
you.
As to each Series, this Agreement shall continue until the date set
forth opposite such Series' name on Schedule 1 hereto (the "Reapproval Date"),
and thereafter shall continue automatically for successive annual periods ending
on the day of each year set forth opposite the Series' name on Schedule 1 hereto
(the "Reapproval Day"), provided such continuance is specifically approved at
least annually by (i) the Fund's Board or (ii) vote of a majority (as defined in
the Investment Company Act of 1940, as amended) of such Series' outstanding
voting securities, provided that in either event its continuance also is
approved by a majority of the Fund's Board members who are not "interested
persons" (as defined in said Act) of any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting on such approval. As to
each Series, this Agreement is terminable without penalty (i) by the Adviser
upon 60 days' notice to you, (ii) by the Fund's Board or by vote of the holders
of a majority of such Series' shares upon 60 days' notice to you, or (iii) by
you upon not less than 90 days' notice to the Fund and the Adviser. This
Agreement also will terminate automatically, as to the relevant Series, in the
event of its assignment (as defined in said Act). In addition, notwithstanding
anything herein to the contrary, if the Management Agreement terminates for any
reason, this Agreement shall terminate effective upon the date the Management
Agreement terminates.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE DREYFUS CORPORATION
By:_________________________
Accepted:
FOUNDERS ASSET MANAGEMENT LLC
By:__________________________
SCHEDULE 1
Name of Series Reapproval Date Reapproval Day
Founders Discovery August 31, 2001 August 31st
Portfolio
Founders Growth Portfolio April 16, 2000 April 16th
Founders International April 16, 2000 April 16th
Equity Portfolio
Founders Passport April 16, 2000 April 16th
Portfolio
Revised as of: October 28, 1999
SCHEDULE 2
Annual Fee as a
Percentage of Average
Daily
Name of Series Net Assets Net Assets
Founders Discovery 0 to $100 million .25%
Portfolio $100 million to $1 billion .20%
$1 billion to $1.5 billion .16%
more than $1.5 billion .10%
Founders Growth 0 to $100 million .25%
Portfolio $100 million to $1 billion .20%
$1 billion to $1.5 billion .16%
more than $1.5 billion .10%
Founders International 0 to $100 million .35%
Equity Portfolio $100 million to $1 billion .30%
$1 billion to $1.5 billion .26%
more than $1.5 billion .20%
Founders Passport 0 to $100 million .35%
Portfolio $100 million to $1 billion .30%
$1 billion to $1.5 billion .26%
more than $1.5 billion .20%
Revised as of: October 28, 1999
THE DREYFUS CORPORATION
200 Park Avenue
New York, New York 10166
April 16, 1999
As Revised, October 28, 1999
Newton Capital Management Limited
71 Queen Victoria Street
London, ECV 4DR
Dear Sirs:
As you are aware, Dreyfus Investment Portfolios (the "Fund"),
currently consisting of twelve series, desires to employ the capital of its
series named on Schedule 1 hereto, as such Schedule may be revised from time to
time (each, a "Series"), by investing and reinvesting the same in investments of
the type and in accordance with the limitations specified in the Fund's charter
documents and in its Prospectus and Statement of Additional Information as from
time to time in effect, copies of which have been or will be submitted to you,
and in such manner and to such extent as from time to time may be approved by
the Fund's Board. The Fund 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 each Series' sub-investment adviser.
In connection with your serving as sub-investment adviser to the
Series, it is understood that from time to time you will employ or associate
with yourself such person or persons as you may believe to be particularly
fitted to assist you in the performance of this Agreement. Such person or
persons may be officers or employees who are employed by both you and the Fund.
The compensation of such person or persons shall be paid by you and no
obligation may be incurred on the Fund's behalf in any such respect.
Subject to the supervision and approval of the Adviser, you will
provide investment management of each Series' portfolio in accordance with the
Series' investment objectives and policies as stated in the Fund's Prospectus
and Statement of Additional Information as from time to time in effect. In
connection therewith, you will supervise each Series' investments and conduct a
continuous program of investment, evaluation and, if appropriate, sale and
reinvestment of such Series' assets. You will furnish to the Adviser or the Fund
such statistical information, with respect to the investments which a Series may
hold or contemplate purchasing, as the Adviser or the Fund may reasonably
request. The Fund and the Adviser wish to be informed of important developments
materially affecting any Series' portfolio and shall expect you, on your own
initiative, to furnish to the Fund or the Adviser from time to time such
information as you may believe appropriate for this purpose.
You shall exercise your best judgment in rendering the services to
be provided hereunder, and the Adviser agrees as an inducement to your
undertaking the same that you shall not be liable hereunder for any error of
judgment or mistake of law or for any loss suffered by one or more Series or the
Adviser, provided that nothing herein shall be deemed to protect or purport to
protect you against any liability to the Adviser, the Fund or a Series' security
holders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties
hereunder, or by reason of your reckless disregard of your obligations and
duties hereunder.
In consideration of services rendered pursuant to this Agreement,
the Adviser will pay you, on the first business day of each month, out of the
management fee it receives and only to the extent thereof, a fee at the rate set
forth opposite each Series' name on Schedule 1 hereto. Net asset value shall be
computed on such days and at such time or times as described in the Fund's
then-current Prospectus and Statement of Additional Information. The fee for the
period from the date following the commencement of sales of a Series' shares
(after any sales are made to the Fund's sponsor) to the end of the month during
which such sales shall have been commenced shall be pro-rated according to the
proportion which such period bears to the full monthly period, and upon any
termination of this Agreement before the end of any month, the fee for such part
of a month shall be pro-rated according to the proportion which such period
bears to the full monthly period and shall be payable within 10 business days of
date of termination of this Agreement.
For the purpose of determining fees payable to you, the value of
each Series' net assets shall be computed in the manner specified in the Fund's
charter documents for the computation of the value of the a 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 one or more Series
or the size of the position obtainable for or disposed of by one or more Series.
In addition, it is understood that the persons employed by you to
assist in the performance of your duties hereunder will not devote their full
time to such services and nothing contained herein shall be deemed to limit or
restrict your right or the right of any of your affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
You shall not be liable for any error of judgment or mistake of
law or for any loss suffered by a Series or the Adviser in connection with the
matters to which this Agreement relates, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on your part in the
performance of your duties or from reckless disregard by you of your obligations
and duties under this Agreement. Any person, even though also your officer,
director, partner, employee or agent, who may be or become an officer, Board
member, employee or agent of the Fund, shall be deemed, when rendering services
to the Fund or acting on any business of the Fund, to be rendering such services
to or acting solely for the Fund and not as your officer, director, partner,
employee, or agent or one under your control or direction even though paid by
you.
As to each Series, this Agreement shall continue until the date
set forth opposite such Series' name on Schedule 1 hereto (the "Reapproval
Date"), and thereafter shall continue automatically for successive annual
periods ending on the day of each year set forth opposite the Series' name on
Schedule 1 hereto (the "Reapproval Day"), provided such continuance is
specifically approved at least annually by (i) the Fund's Board or (ii) vote of
a majority (as defined in the Investment Company Act of 1940, as amended) of
such Series' outstanding voting securities, provided that in either event its
continuance also is approved by a majority of the Fund's Board members who are
not "interested persons" (as defined in said Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. As to each Series, this Agreement is terminable without
penalty (i) by the Adviser upon 60 days' notice to you, (ii) by the Fund's Board
or by vote of the holders of a majority of such Series' shares upon 60 days'
notice to you, or (iii) by you upon not less than 90 days' notice to the Fund
and the Adviser. This Agreement also will terminate automatically, as to the
relevant Series, in the event of its assignment (as defined in said Act). In
addition, notwithstanding anything herein to the contrary, if the Management
Agreement terminates for any reason, this Agreement shall terminate effective
upon the date the Management Agreement terminates.
If the foregoing is in accordance with your understanding, will
you kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE DREYFUS CORPORATION
By:_________________________
Accepted:
NEWTON CAPITAL MANAGEMENT LIMITED
By:__________________________
<PAGE>
SCHEDULE 1
Annual Fee as
a Percentage
of Average
Name of Series Daily Net Assets Reapproval Date Reapproval Day
European Equity * April 16, 2001 April 16th
Portfolio
Japan Portfolio * August 31, 2001 August 31st
- -------------------------
* 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%
$100 million to $1 billion .30%
$1 billion to $1.5 billion .26%
$1.5 billion or more .20%
DISTRIBUTION AGREEMENT
DREYFUS INVESTMENT PORTFOLIOS
200 Park Avenue
New York, New York 10166
April 16, 1998
As Amended October 28, 1999
Premier Mutual Fund Services, Inc.
60 State Street
Boston, Massachusetts 02109
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the "Fund") has
agreed that you shall be, for the period of this agreement, the distributor of
(a) shares of each Series of the Fund set forth on Exhibit A hereto, as such
Exhibit may be revised from time to time (each, a "Series") or (b) if no Series
are set forth on such Exhibit, shares of the Fund. For purposes of this
agreement the term "Shares" shall mean the authorized shares of the relevant
Series, if any, and otherwise shall mean the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered by,
and in accordance with, the registration statement and prospectus then in effect
under the Securities Act of 1933, as amended, and will transmit promptly any
orders received by you for purchase or redemption of Shares to the Transfer and
Dividend Disbursing Agent for the Fund of which the Fund has notified you in
writing.
1.2 You agree to use your best efforts to solicit orders for the
sale of Shares. It is contemplated that you will enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitation, all rules
and regulations made or adopted pursuant to the Investment Company Act of 1940,
as amended, by the Securities and Exchange Commission or any securities
association registered under the Securities Exchange Act of 1934, as amended.
1.4 Whenever in their judgment such action is warranted by market,
economic or political conditions, or by abnormal circumstances of any kind, the
Fund's officers may decline to accept any orders for, or make any sales of, any
Shares until such time as they deem it advisable to accept such orders and to
make such sales and the Fund shall advise you promptly of such determination.
1.5 The Fund agrees to pay all costs and expenses in connection with
the registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided, however,
that nothing contained herein shall be deemed to require the Fund to pay any of
the costs of advertising the sale of Shares.
1.6 The Fund agrees to execute any and all documents and to furnish
any and all information and otherwise to take all actions which may be
reasonably necessary in the discretion of the Fund's officers in connection with
the qualification of Shares for sale in such states as you may designate to the
Fund and the Fund may approve, and the Fund agrees to pay all expenses which may
be incurred in connection with such qualification. You shall pay all expenses
connected with your own qualification as a dealer under state or Federal laws
and, except as otherwise specifically provided in this agreement, all other
expenses incurred by you in connection with the sale of Shares as contemplated
in this agreement.
1.7 The Fund shall furnish you from time to time, for use in
connection with the sale of Shares, such information with respect to the Fund or
any relevant Series and the Shares as you may reasonably request, all of which
shall be signed by one or more of the Fund's duly authorized officers; and the
Fund warrants that the statements contained in any such information, when so
signed by the Fund's officers, shall be true and correct. The Fund also shall
furnish you upon request with: (a) semi-annual reports and annual audited
reports of the Fund's books and accounts made by independent public accountants
regularly retained by the Fund, (b) quarterly earnings statements prepared by
the Fund, (c) a monthly itemized list of the securities in the Fund's or, if
applicable, each Series' portfolio, (d) monthly balance sheets as soon as
practicable after the end of each month, and (e) from time to time such
additional information regarding the Fund's financial condition as you may
reasonably request.
1.8 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the Shares have been carefully prepared in
conformity with the requirements of said Acts and rules and regulations of the
Securities and Exchange Commission thereunder. As used in this agreement the
terms "registration statement" and "prospectus" shall mean any registration
statement and prospectus, including the statement of additional information
incorporated by reference therein, filed with the Securities and Exchange
Commission and any amendments and supplements thereto which at any time shall
have been filed with said Commission. The Fund represents and warrants to you
that any registration statement and prospectus, when such registration statement
becomes effective, will contain all statements required to be stated therein in
conformity with said Acts and the rules and regulations of said Commission; that
all statements of fact contained in any such registration statement and
prospectus will be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any prospectus when
such registration statement becomes effective will include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Fund may
but shall not be obligated to propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus as, in the light of future developments, may, in the opinion of
the Fund's counsel, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request from you to do so, you may,
at your option, terminate this agreement or decline to make offers of the Fund's
securities until such amendments are made. The Fund shall not file any amendment
to any registration statement or supplement to any prospectus without giving you
reasonable notice thereof in advance; provided, however, that nothing contained
in this agreement shall in any way limit the Fund's right to file at any time
such amendments to any registration statement and/or supplements to
any prospectus, of whatever character, as the Fund may deem advisable, such
right being in all respects absolute and unconditional.
1.9 The Fund authorizes you to use any prospectus in the form
furnished to you from time to time, in connection with the sale of Shares. The
Fund agrees to indemnify, defend and hold you, your several officers and
directors, and any person who controls you within the meaning of Section 15 of
the Securities Act of 1933, as amended, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which you, your officers and directors,
or any such controlling person, may incur under the Securities Act of 1933, as
amended, or under common law or otherwise, arising out of or based upon any
untrue statement, or alleged untrue statement, of a material fact contained in
any registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Fund's
agreement to indemnify you, your officers or directors, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of any untrue statement or alleged untrue statement or omission or
alleged omission made in any registration statement or prospectus in reliance
upon and in conformity with written information furnished to the Fund by you
specifically for use in the preparation thereof. The Fund's agreement to
indemnify you, your officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Fund's being notified of any action
brought against you, your officers or directors, or any such controlling person,
such notification to be given by letter or by telegram addressed to the Fund at
its address set forth above within ten days after the summons or other first
legal process shall have been served. The failure so to notify the Fund of any
such action shall not relieve the Fund from any liability which the Fund may
have to the person against whom such action is brought by reason of any such
untrue, or alleged untrue, statement or omission, or alleged omission, otherwise
than on account of the Fund's indemnity agreement contained in this paragraph
1.9. The Fund will be entitled to assume the defense of any suit brought to
enforce any such claim, demand or liability, but, in such case, such defense
shall be conducted by counsel of good standing chosen by the Fund and approved
by you. In the event the Fund elects to assume the defense of any such suit and
retain counsel of good standing approved by you, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Fund does not elect to assume the defense of any
such suit, or in case you do not approve of counsel chosen by the Fund, the Fund
will reimburse you, your officers and directors, or the controlling person or
persons named as defendant or defendants in such suit, for the fees and expenses
of any counsel retained by you or them. The Fund's indemnification agreement
contained in this paragraph 1.9 and the Fund's representations and warranties in
this agreement shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of you, your officers and directors, or
any controlling person, and shall survive the delivery of any Shares. This
agreement of indemnity will inure exclusively to your benefit, to the benefit of
your several officers and directors, and their respective estates, and to the
benefit of any controlling persons and their successors. The Fund agrees
promptly to notify you of the commencement of any litigation or proceedings
against the Fund or any of its officers or Board members in connection with the
issue and sale of Shares.
1.10 You agree to indemnify, defend and hold the Fund, its several
officers and Board members, and any person who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Fund, its officers or Board members, or any such controlling person, may incur
under the Securities Act of 1933, as amended, or under common law or otherwise,
but only to the extent that such liability or expense incurred by the Fund, its
officers or Board members, or such controlling person resulting from such claims
or demands, shall arise out of or be based upon any untrue, or alleged untrue,
statement of a material fact contained in information furnished in writing by
you to the Fund specifically for use in the Fund's registration statement and
used in the answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by you to the Fund and
required to be stated in such answers or necessary to make such information not
misleading. Your agreement to indemnify the Fund, its officers and Board
members, and any such controlling person, as aforesaid, is expressly conditioned
upon your being notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification to be given by
letter or telegram addressed to you at your address set forth above within ten
days after the summons or other first legal process shall have been served. You
shall have the right to control the defense of such action, with counsel of your
own choosing, satisfactory to the Fund, if such action is based solely upon such
alleged misstatement or omission on your part, and in any other event the Fund,
its officers or Board members, or such controlling person shall each have the
right to participate in the defense or preparation of the defense of any such
action. The failure so to notify you of any such action shall not relieve you
from any liability which you may have to the Fund, its officers or Board
members, or to such controlling person by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission, otherwise than on account of
your indemnity agreement contained in this paragraph 1.10. This agreement of
indemnity will inure exclusively to the Fund's benefit, to the benefit of the
Fund's officers and Board members, and their respective estates, and to the
benefit of any controlling persons and their successors.
You agree promptly to notify the Fund of the commencement of any litigation or
proceedings against you or any of your officers or directors in connection with
the issue and sale of Shares.
1.11 No Shares shall be offered by either you or the Fund under any
of the provisions of this agreement and no orders for the purchase or sale of
such Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission; provided, however, that nothing contained in
this paragraph 1.11 shall in any way restrict or have an application to or
bearing upon the Fund's obligation to repurchase any Shares from any shareholder
in accordance with the provisions of the Fund's prospectus or charter documents.
1.12 The Fund agrees to advise you immediately in writing:
(a) of any request by the Securities and Exchange
Commission for amendments to the registration statement or
prospectus then in effect or for additional information;
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the effectiveness
of the registration statement or prospectus then in effect or the
initiation of any proceeding for that purpose;
(c) of the happening of any event which makes untrue any
statement of a material fact made in the registration statement or
prospectus then in effect or which requires the making of a change
in such registration statement or prospectus in order to make the
statements therein not misleading; and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to any registration
statement or prospectus which may from time to time be filed with
the Securities and Exchange Commission.
2. Offering Price
Shares of any class of the Fund offered for sale by you shall be
offered for sale at a price per share (the "offering price") approximately equal
to (a) their net asset value (determined in the manner set forth in the Fund's
charter documents) plus (b) a sales charge, if any and except to those persons
set forth in the then-current prospectus, which shall be the percentage of the
offering price of such Shares as set forth in the Fund's then-current
prospectus. The offering price, if not an exact multiple of one cent, shall be
adjusted to the nearest cent. In addition, Shares of any class of the Fund
offered for sale by you may be subject to a contingent deferred sales charge as
set forth in the Fund's then-current prospectus. You shall be entitled to
receive any sales charge or contingent deferred sales charge in respect of the
Shares. Any payments to dealers shall be governed by a separate agreement
between you and such dealer and the Fund's then-current prospectus.
3. Term
This agreement shall continue until the date (the "Reapproval Date")
set forth on Exhibit A hereto (and, if the Fund has Series, a separate
Reapproval Date shall be specified on Exhibit A for each Series), and thereafter
shall continue automatically for successive annual periods ending on the day
(the "Reapproval Day") of each year set forth on Exhibit A hereto, provided such
continuance is specifically approved at least annually by (i) the Fund's Board
or (ii) vote of a majority (as defined in the Investment Company Act of 1940) of
the Shares of the Fund or the relevant Series, as the case may be, provided that
in either event its continuance also is approved by a majority of the Board
members who are not "interested persons" (as defined in said Act) of any party
to this agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This agreement is terminable without penalty, on 60
days' notice, by vote of holders of a majority of the Fund's or, as to any
relevant Series, such Series' outstanding voting securities or by the Fund's
Board as to the Fund or the relevant Series, as the case may be. This agreement
is terminable by you, upon 270 days' notice, effective on or after the fifth
anniversary of the date hereof. This agreement also will terminate
automatically, as to the Fund or relevant Series, as the case may be, in the
event of its assignment (as defined in said Act).
4. Exclusivity
So long as you act as the distributor of Shares, you shall not
perform any services for any entity other than a "Mellon Entity," such term
being defined as any entity that is advised or administered by a direct or
indirect subsidiary of the Mellon Bank Corporation. The Fund acknowledges that
the persons employed by you to assist in the performance of your duties under
this agreement may not devote their full time to such service and, subject to
the preceding sentence, nothing contained in this agreement shall be deemed to
limit or restrict your or any of your affiliates right to engage in and devote
time and attention to other businesses or to render services of whatever kind or
nature.
5. Miscellaneous
This agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this agreement shall only be binding upon the assets and property
of the Fund and shall not be binding upon any Board member, officer or
shareholder of the Fund individually.
Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding agreement between us.
Very truly yours,
DREYFUS INVESTMENT PORTFOLIOS
By:
Accepted:
PREMIER MUTUAL FUND SERVICES, INC.
By:_______________________________
EXHIBIT A
Name of Series Reapproval Date Reapproval Day
Bond Market Index Portfolio April 16, 2001 April 16th
Core Value Portfolio April 16, 2000 April 16th
Emerging Leaders Portfolio August 31, 2001 August 31st
Emerging Markets Portfolio August 31, 2001 August 31st
European Equity Portfolio April 16, 2001 April 16th
MidCap Stock Portfolio April 16, 2000 April 16th
Technology Growth Portfolio July 29, 2001 July 29th
Founders Discovery August 31, 2001 August 31st
Portfolio
Founders Growth Portfolio April 16, 2000 April 16th
Founders International April 16, 2000 April 16th
Equity Portfolio
Founders Passport Portfolio April 16, 2000 April 16th
Japan Portfolio August 31, 2001 August 31st
Revised as of: October 28, 1999
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Counsel and
Independent Auditors" and to the use of our reports dated February 4,
1999 for Core Value Portfolio, Founders Growth Portfolio, Founders
International Equity Portfolio, Founders Passport Portfolio, and MidCap
Stock Portfolio, each a Portfolio of Dreyfus Investment Portfolios,
which are incorporated by reference in this Registration Statement (Form
N-1A 333-47011) of Dreyfus Investment Portfolios.
ERNST & YOUNG LLP
New York, New York
December 14, 1999
