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. 13 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 13 [X]
(Check appropriate box or boxes.)
DREYFUS INVESTMENT PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
on (date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
----
X on December 31, 2000 pursuant to paragraph (a)(1)
----
75 days after filing pursuant to paragraph (a)(2)
----
on (date) pursuant to paragraph (a)(2) 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
Core Bond Portfolio
Core Value Portfolio
Emerging Leaders Portfolio
Emerging Markets Portfolio
European Equity Portfolio
Founders Discovery Portfolio
Founders Growth Portfolio
Founders International Equity Portfolio
Founders Passport Portfolio
Japan Portfolio
MidCap Stock Portfolio
Technology Growth Portfolio
PROSPECTUS December __, 2000
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.
Contents
The Portfolios
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Core Bond Portfolio 2
Core Value Portfolio 6
Emerging Leaders Portfolio 10
Emerging Markets Portfolio 14
European Equity Portfolio 18
Founders Discovery Portfolio 22
Founders Growth Portfolio 26
Founders International
Equity Portfolio 30
Founders Passport Portfolio 34
Japan Portfolio 38
MidCap Stock Portfolio 42
Technology Growth Portfolio 46
Management 50
Financial Highlights 58
Account Information
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Account Policies 64
Distributions and Taxes 65
Exchange Privilege 65
For More Information
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INFORMATION ON THE PORTFOLIOS' RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN
THE CURRENT ANNUAL/SEMIANNUAL REPORT. 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 portfolios. The VA
contracts and the VLI policies are described in the separate prospectuses issued
by the participating insurance companies, as to which the portfolios assume 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.
Each portfolio currently offers two classes of shares: Initial shares and
Service shares. VA contract holders and VLI policyholders should consult the
applicable prospectus of the separate account of the participating insurance
company to determine which class of portfolio shares may be purchased by the
separate account.
Each portfolio has its own investment strategy and risk/return profile. The
differences in strategy among the portfolios determine the types of securities
in which each portfolio invests and can be expected to affect the degree of risk
each portfolio is subject to and its performance.
While the portfolios' investment objectives and policies may be similar to those
of other funds managed by the investment advisers, the portfolios' investment
results may be higher or lower than, and may not be comparable to, those of the
other funds.
<PAGE> 1
Core Bond Portfolio
GOAL/APPROACH
The portfolio seeks to maximize total return through capital appreciation and
current income. To pursue this goal, the portfolio invests at least 65% of its
assets in fixed-income securities, such as: U.S. government bonds and notes,
corporate bonds, convertible securities, preferred stocks, asset-backed
securities, mortgage-related securities, and foreign bonds. The portfolio also
may own warrants and common stock acquired in "units" with bonds.
Generally, the portfolio seeks to maintain an investment grade (BBB/Baa) average
credit quality. However, the portfolio may invest up to 35% of its assets in
lower-rated securities ("high yield" or "junk" bonds). The portfolio has the
flexibility to shift its investment focus among different fixed-income
securities, based on market conditions and other factors. In choosing market
sectors and securities for investment, the issuer's financial strength, and the
current state and long-term outlook of the industry or sector are reviewed.
Current and forecasted interest rate and liquidity conditions also are important
factors in this regard.
Typically, the portfolio can be expected to have an average effective maturity
of between 5 and 10 years and an average effective duration between 3.5 and 6
years. While the portfolio's duration and maturity usually will stay within
these ranges, if the maturity or duration of the portfolio's benchmark index
moves outside these ranges, so may the portfolio's.
Concepts to understand
AVERAGE EFFECTIVE MATURITY: an average of the stated maturity of bonds, adjusted
to reflect provisions that may cause a bond's principal to be repaid earlier
than at maturity.
DURATION: an indication of an investment's "interest rate risk," or how
sensitive a bond or mutual fund portfolio may be to changes in interest rates.
Generally speaking, the longer a portfolio's duration, the more it is likely to
react to interest rate fluctuations and the greater its long-term risk/return
potential.
<PAGE> 2
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. A rise in
rates usually causes a drop in bond prices and therefore in the portfolio's
share price as well.
The longer the portfolio's maturity and duration, the more its share price is
likely to react to interest rate movements. The value of a shareholder's
investment in the portfolio could go up and down, which means that shareholders
could lose money.
Mortgage-related securities may react differently to interest rate changes than
other bonds, because of prepayments and other factors. When rates fall, mortgage
pass-through securities may be paid off earlier than expected, and the portfolio
may reinvest those assets at lower rates. This lessens price-appreciation
potential from rate declines. When rates rise, prices may decline less, given
their generally higher coupon, and it may effectively lengthen a mortgage
security's expected maturity and cause its value to fluctuate more widely as
rates change.
High yield bonds involve greater credit risk than investment grade bonds, and
are considered speculative. The prices of high yield bonds can fall in response
to bad news about the issuer or its industry, or the economy in general, or if
an issuer fails to make timely interest or principal payments.
Other risk factors that could have an effect on the portfolio's performance:
*the prices of foreign bonds can be affected by political and economic
instability or changes in currency exchange rates
*if the portfolio holds securities that are traded in a market that becomes
"illiquid," typically when there are many more sellers than buyers for the
securities, the value of such securities, and the portfolio's share price, may
fall dramatically
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
periods, the portfolio may not achieve its investment objective.
Other potential risks
Most mortgage and asset-backed securities are a form of derivative. The
portfolio, at times, may also invest in other derivative securities, such as
options and futures. Futures and options are used primarily to hedge the
portfolio, but may be used to increase returns; however, such practices may
lower returns or increase volatility. Derivatives can be illiquid, and a small
investment in certain derivatives could have a potentially large impact on the
portfolio's performance.
The portfolio may buy securities on a forward-commitment basis, and enter into
reverse repurchase agreements, which are forms of borrowing that can increase
the portfolio's overall price volatility.
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs.
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.
Core Bond Portfolio
<PAGE> 3
CORE BOND PORTFOLIO (CONTINUED)
PAST PERFORMANCE
Since Initial shares were not in existence as of December 31, 1999, annual total
return information for that class is not included in this section of the
prospectus. As a new class, past performance information is not available for
Service shares as of the date of this prospectus.
<PAGE> 4
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.
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Fee table
Initial Service
shares shares
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ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60% 0.60%
Rule 12b-1 fee none 0.25%
Other expenses 0.68% 0.68%
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TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 1.28% 1.53%
Fee waiver and/or expense
reimbursement (0.48%) (0.73%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 0.80% 0.80%
* THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 0.80%.
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Expense example
1 Year 3 Years
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INITIAL SHARES $82 $358
SERVICE SHARES $82 $412
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. The one-year number is based on the net
operating expenses. The three-year number is based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
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.
Core Bond Portfolio
<PAGE> 5
Core Value Portfolio
GOAL/APPROACH
The portfolio seeks long-term growth of capital, with current income as a
secondary objective. To pursue these goals, the portfolio invests primarily in
stocks of large-cap value companies (market capitalizations of $1 billion and
above). The portfolio typically invests mainly in the stocks of U.S. issuers,
and will limit its foreign stock holdings to 20% of the value of its total
assets. The portfolio's stock investments may include common stocks, preferred
stocks, convertible securities and depositary receipts.
In choosing stocks, the portfolio manager focuses on individual stock selection
(a "bottom-up" approach) rather than forecasting stock market trends (a "
top-down" approach), and looks for value companies. A three-step value
screening process is used to select stocks:
* VALUE: quantitative screens track traditional measures such as
price-to-earnings, price-to-book and price-to-sales; these ratios are analyzed
and compared against the market
* SOUND BUSINESS FUNDAMENTALS: a company's balance sheet and income data are
examined to determine the company's financial history
* POSITIVE BUSINESS MOMENTUM: a company's earnings and forecast changes are
analyzed and sales and earnings trends are reviewed to determine the company's
financial condition
The portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the portfolio
manager's expectations.
Concepts to understand
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.
LARGE-CAP COMPANIES: established companies that are considered "known
quantities." Large-cap companies often have the resources to weather economic
shifts, though they can be slower to innovate than small companies.
<PAGE> 6
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, which means that shareholders could lose money.
Value stocks involve the risk that they may never reach what the portfolio
manager believes is their full market value, either because the market fails to
recognize the stock's intrinsic worth or the portfolio manager misgauged that
worth. They also may decline in price, even though in theory they are already
underpriced. Because different types of stocks tend to shift in and out of favor
depending on market and economic conditions, the portfolio's performance may
sometimes be lower or higher than that of other types of funds (such as those
emphasizing growth stocks).
Any foreign securities purchased by the portfolio include 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
periods, the portfolio may not achieve its primary 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.
Other potential risks
The portfolio, at times, may invest some assets in derivative securities, such
as options and futures, and in foreign currencies. 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. Derivatives can be illiquid, and 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.
Core Value Portfolio
<PAGE> 7
CORE VALUE PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the performance of the portfolio's Initial shares
for the portfolio's first full calendar year of operations. The table compares
the average annual total return of the Initial shares to that of the Standard &
Poor's 500/BARRA Value Index (S&P 500 BARRA Value), which has been selected as
the portfolio's primary index based on the portfolio's and the index's value
orientation, and the Standard & Poor's 500((reg.tm)) Composite Stock Price Index
(S& P 500 Composite), each a broad measure of stock performance. Performance for
the S& P 500 Composite will not be shown in the future. All performance figures
reflect the reinvestment of dividends and distributions. Of course, past
performance is no guarantee of future results. As a new class, past performance
information is not available for Service shares as of the date of this
prospectus.
--------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
INITIAL SHARES
[Exhibit A]
BEST QUARTER: Q4 '99 +13.16%
WORST QUARTER: Q3 '99 -10.40%
--------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year (5/1/98)
--------------------------------------------------------------------------------
INITIAL SHARES 19.73% 7.61%
S&P 500 BARRA VALUE 12.72% 8.46%*
S&P 500 COMPOSITE 21.03% 19.80%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF EACH INDEX ON 4/30/98 IS USED AS THE
BEGINNING VALUE ON 5/1/98.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
<PAGE> 8
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. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies.
--------------------------------------------------------------------------------
Fee table
Initial Service
shares shares
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ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75% 0.75%
Rule 12b-1 fee none 0.25%
Other expenses 0.75% 0.75%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 1.50% 1.75%
Fee waiver and/or expense
reimbursement (0.50%) (0.75%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 1.00% 1.00%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 1.00%.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
INITIAL SHARES $102 $425 $771 $1,748
SERVICE SHARES $102 $478 $879 $2,000
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. The one-year number is based on the net
operating expenses. The longer-term numbers are based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees. Other expenses for
Service shares are based on other expenses for Initial shares for the past
fiscal year.
Core Value Portfolio
<PAGE> 9
Emerging Leaders Portfolio
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.
The portfolio currently intends to close to new investors after it reaches total
assets of approximately $750 million.
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.
<PAGE> 10
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.
The portfolio may purchase securities of companies in initial public offerings
(IPOs). The prices of securities purchased in IPOs can be very volatile. The
effect of IPOs on the portfolio's performance depends on a variety of factors,
including the number of IPOs the portfolio invests in, whether and to what
extent a security purchased in an IPO appreciates in value, and the asset base
of the portfolio. As a portfolio's asset base increases, IPOs often have a
diminished effect on such portfolio's performance.
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
periods, 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.
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.
Emerging Leaders Portfolio
<PAGE> 11
EMERGING LEADERS PORTFOLIO (CONTINUED)
PAST PERFORMANCE
Since Initial shares had less than one calendar year of performance as of
December 31, 1999, annual total return information for that class is not
included in this section of the prospectus. As a new class, past performance
information is not available for Service shares as of the date of this
prospectus.
<PAGE> 12
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
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.90% 0.90%
Rule 12b-1 fee none 0.25%
Other expenses 0.94% 0.94%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 1.84% 2.09%
Fee waiver and/or expense
reimbursement (0.34%) (0.59%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 1.50% 1.50%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 1.50%.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years
--------------------------------------------------------------------------------
INITIAL SHARES $153 $546
SERVICE SHARES $153 $598
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. The one-year number is based on the net
operating expenses. The three-year number is based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
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.
Emerging Leaders Portfolio
<PAGE> 13
Emerging Markets Portfolio
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,
Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, Sri Lanka, South
Africa, Taiwan, Thailand, Turkey and Venezuela, or any other country Dreyfus
believes has an emerging economy or market.
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.
<PAGE> 14
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.
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
periods, the portfolio may not achieve its investment objective.
Other potential risks
The portfolio, at times, may invest in derivative securities, such as options
and futures, and in foreign currencies. The portfolio may also sell short, which
involves selling a security it does not own in anticipation of a decline in the
market price of the security. These practices, when employed, are used primarily
to hedge its portfolio but also 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.
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.
Emerging Markets Portfolio
<PAGE> 15
EMERGING MARKETS PORTFOLIO (CONTINUED)
PAST PERFORMANCE
Since Initial shares had less than one calendar year of performance as of
December 31, 1999, annual total return information for that class is not
included in this section of the prospectus. As a new class, past performance
information is not available for Service shares as of the date of this
prospectus.
<PAGE> 16
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
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 1.25% 1.25%
Rule 12b-1 fee none 0.25%
Other expenses 1.51% 1.51%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 2.76% 3.01%
Fee waiver and/or expense
reimbursement (0.76%) (1.01%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 2.00% 2.00%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 2.00%.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years
--------------------------------------------------------------------------------
INITIAL SHARES $203 $784
SERVICE SHARES $203 $835
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. The one-year number is based on the net
operating expenses. The three-year number is based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
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.
Emerging Markets Portfolio
<PAGE> 17
European Equity Portfolio
GOAL/APPROACH
The portfolio seeks long-term capital growth. To pursue this goal, the portfolio
generally invests at least 80% of its total assets in stocks included within the
universe of the 300 largest European companies. The portfolio may invest up to
10% of its total assets in the stocks of non-European companies. The portfolio's
stock investments may include common stocks, preferred stocks and convertible
securities.
In choosing stocks, the portfolio 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; 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 the company's prospects have changed or that
its stock is fully valued by the market.
Concepts to understand
EUROPEAN COMPANY: a company organized under the laws of a European country or
for which the principal securities trading market is in Europe; or a company,
wherever organized, with a majority of its assets or business in Europe.
PREFERRED STOCK: stock that pays dividends at a specified rate and has
preference over common stock in the payment of dividends and the liquidation of
assets. Preferred stock ordinarily does not carry voting rights.
CONVERTIBLE SECURITIES: corporate securities, usually preferred stock or bonds,
that are exchangeable for a set amount of another form of security, usually
common stock, at a prestated price.
<PAGE> 18
MAIN RISKS
While stocks have historically been a choice of long-term investors, they do
fluctuate in price. The value of a shareholder's investment in the portfolio
will go up and down, which means that shareholders could lose money.
The portfolio's performance will be influenced by political, social and economic
factors affecting companies in European countries and throughout the world.
These risks include changes in currency exchange rates, a lack of comprehensive
company information, political instability, less liquidity and differing
auditing and legal standards.
The portfolio expects to invest primarily in the stocks of companies located in
developed European countries. However, the portfolio may invest in the stocks of
companies located in certain European countries which are considered to be
emerging markets. These countries generally have economic structures that are
less diverse and mature, and political systems that are less stable, than those
of developed countries. Emerging markets may be more volatile than the markets
of more mature economies, and the securities of companies located in emerging
markets are often subject to rapid and large changes in price; however, these
markets may provide higher rates of return to investors.
The portfolio may purchase securities of companies in initial public offerings
(IPOs). The prices of securities purchased in IPOs can be very volatile. The
effect of IPOs on the portfolio's performance depends on a variety of factors,
including the number of IPOs the portfolio invests in, whether and to what
extent a security purchased in an IPO appreciates in value, and the asset base
of the portfolio. As a portfolio's asset base increases, IPOs often have a
diminished effect on such portfolio's performance.
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
periods, 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.
Other potential risks
The portfolio, at times, may invest in derivative securities, such as options
and futures, and in foreign currencies. The portfolio may also sell short, which
involves selling a security it does not own in anticipation of a decline in the
market price of the security. These practices, when employed, are used primarily
to hedge its portfolio but also may be used to increase returns; however, such
practices sometimes may reduce returns or increase volatility. In addition,
derivatives can be illiquid and highly sensitive to changes in their underlying
instrument. A small investment in certain derivatives could have a potentially
large impact on the portfolio's performance.
European Equity Portfolio
<PAGE> 19
EUROPEAN EQUITY PORTFOLIO (CONTINUED)
PAST PERFORMANCE
Since Initial shares had less than one calendar year of performance as of
December 31, 1999, annual total return information for that class is not
included in this section of the prospectus. As a new class, past performance
information is not available for Service shares as of the date of this
prospectus.
<PAGE> 20
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
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 1.00% 1.00%
Rule 12b-1 fee none 0.25%
Other expenses 4.03% 4.03%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 5.03% 5.28%
Fee waiver and/or expense
reimbursement (3.53%) (3.78%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 1.50% 1.50%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 1.50%.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
INITIAL SHARES $153 $1,194 $2,234 $4,832
SERVICE SHARES $153 $1,243 $2,326 $5,009
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. The one-year number is based on net
operating expenses. The longer-term numbers are based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees. Other expenses for
Service shares are based on other expenses for Initial shares for the past
fiscal year.
European Equity Portfolio
<PAGE> 21
Founders Discovery Portfolio
GOAL/APPROACH
The portfolio seeks capital appreciation. To pursue this goal, the portfolio
invests primarily in equity securities of small, U.S.-based companies 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: generally, those companies with market capitalizations of less
than $2.2 billion. This range may fluctuate depending on changes in the value of
the stock market as a whole. 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 may 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.
<PAGE> 22
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.
Because the portfolio may allocate relatively more assets to certain industry
sectors than others, the portfolio's performance may be more susceptible to any
developments which affect those sectors emphasized by the portfolio.
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.
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.
The portfolio may purchase securities of companies in initial public offerings
(IPOs). The prices of securities purchased in IPOs can be very volatile. The
effect of IPOs on the portfolio's performance depends on a variety of factors,
including the number of IPOs the portfolio invests in, whether and to what
extent a security purchased in an IPO appreciates in value, and the asset base
of the portfolio. As a portfolio's asset base increases, IPOs often have a
diminished effect on such portfolio's performance.
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
periods, 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.
Other potential risks
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs.
Founders Discovery Portfolio
<PAGE> 23
FOUNDERS DISCOVERY PORTFOLIO (CONTINUED)
PAST PERFORMANCE
Since Initial shares had less than one calendar year of performance as of
December 31, 1999, annual total return information for that class is not
included in this section of the prospectus. As a new class, past performance
information is not available for Service shares as of the date of this
prospectus.
<PAGE> 24
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
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.90% 0.90%
Rule 12b-1 fee none 0.25%
Other expenses 0.63% 0.63%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 1.53% 1.78%
Fee waiver and/or expense
reimbursement (0.03%) (0.28%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 1.50% 1.50%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 1.50%.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years
--------------------------------------------------------------------------------
INITIAL SHARES $153 $480
SERVICE SHARES $153 $533
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. The one-year number is based on the net
operating expenses. The three-year number is based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
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.
Founders Discovery Portfolio
<PAGE> 25
Founders Growth Portfolio
GOAL/APPROACH
The portfolio seeks long-term growth of capital. To pursue this goal, the
portfolio invests primarily in equity securities of well-established, high
quality "growth" companies. These companies tend to have strong performance
records, solid market positions and reasonable financial strength, and have
continuous operating records of three years or more.
The portfolio will seek investment opportunities, generally, in companies which
the portfolio managers believe have fundamental strengths that indicate the
potential for growth in earnings per share. The portfolio managers focus 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, and up
to 25% of its assets in any one foreign country. The portfolio also may invest
in investment grade debt securities of domestic or foreign issuers that the
portfolio managers believe -- based on market conditions, the financial
condition of the issuer, general economic conditions, and other relevant factors
-- offer opportunities for capital growth.
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.
EQUITY SECURITIES: common stocks, preferred stocks and convertible securities.
The portfolio will invest in preferred stocks and convertible securities that
are 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.
<PAGE> 26
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, which means that shareholders could lose money.
While the portfolio's investments in stocks of well-established companies may
limit the overall downside risk of the portfolio over time, the portfolio may
produce more modest gains than riskier stock funds as a trade-off for this
potentially lower risk.
Because the portfolio may allocate relatively more assets to certain industry
sectors than others, the portfolio's performance may be more susceptible to any
developments which affect those sectors emphasized by the portfolio.
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.
Any foreign securities purchased by the portfolio include 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
periods, 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.
Other potential risks
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs.
Founders Growth Portfolio
<PAGE> 27
FOUNDERS GROWTH PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the performance of the portfolio's Initial shares
for the portfolio's first full calendar year of operations. The table compares
the average annual total return of the Initial shares to that of the Standard &
Poor's 500/BARRA Growth Index (S&P 500 BARRA Growth), which has been selected as
the portfolio's primary index based on the portfolio's and the index's growth
orientation, and the Standard & Poor's 500 Composite Stock Price Index (S&P 500
Composite), each a broad measure of stock performance. Performance for the S&P
500 Composite will not be shown in the future. All performance figures reflect
the reinvestment of dividends and distributions. Of course, past performance is
no guarantee of future results. As a new class, past performance information is
not available for Service shares as of the date of this prospectus.
--------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit B]
INITIAL SHARES
BEST QUARTER: Q4 '99 +30.13%
WORST QUARTER: Q3 '99 -4.29%
--------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year (9/30/98)
--------------------------------------------------------------------------------
INITIAL SHARES 39.01% 57.77%
S&P 500 BARRA GROWTH 28.25% 45.19%
S&P 500 COMPOSITE 21.03% 35.94%
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
<PAGE> 28
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. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies.
--------------------------------------------------------------------------------
Fee table
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75% 0.75%
Rule 12b-1 fee none 0.25%
Other expenses 1.58% 1.58%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 2.33% 2.58%
Fee waiver and/or expense
reimbursement (1.33%) (1.58%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 1.00% 1.00%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 1.00%.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
INITIAL SHARES $102 $600 $1,124 $2,563
SERVICE SHARES $102 $652 $1,228 $2,797
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. The one-year number is based on net
operating expenses. The longer-term numbers are based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees. Other expenses for
Service shares are based on other expenses for Initial shares for the past
fiscal year.
Founders Growth Portfolio
<PAGE> 29
Founders International Equity Portfolio
GOAL/APPROACH
The portfolio seeks long-term growth of capital. To pursue this goal, the
portfolio invests primarily in equity securities of foreign issuers which are
characterized as "growth" companies. The portfolio may purchase securities of
companies in initial public offerings or shortly thereafter.
The portfolio will seek investment opportunities, generally, in companies which
the portfolio manager believes have 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 will invest primarily in foreign issuers from at least three
foreign countries with established or emerging economies, but will not invest
more than 50% of its assets in issuers in any one foreign country. Although the
portfolio intends to invest substantially all of its assets in issuers located
outside the United States, it may at times invest in U.S.-based companies. The
portfolio also may invest in investment grade debt securities of 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 growth.
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.
EQUITY SECURITIES: common stocks, preferred stocks and convertible securities.
The portfolio will invest in preferred stocks and convertible securities that
are 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.
<PAGE> 30
MAIN RISKS
The portfolio's performance will be influenced by political, social and economic
factors affecting companies in foreign countries. Like the stocks of U.S.
companies, the securities of foreign issuers fluctuate in price, often based on
factors unrelated to the issuers' value, and such fluctuations can be
pronounced. The prices of securities purchased in initial public offerings or
shortly thereafter may be very volatile. Unlike investing in U.S. companies,
foreign securities include special risks such as exposure to currency
fluctuations, a lack of comprehensive company information, political
instability, and differing auditing and legal standards. The value of a
shareholder's investment in the portfolio will go up and down, which means that
shareholders could lose money.
Because the portfolio may allocate relatively more assets to certain industry
sectors than others, the portfolio's performance may be more susceptible to any
developments which affect those sectors emphasized by the portfolio.
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.
The portfolio may invest in the stocks of companies located in developed
countries and in emerging markets. Emerging market countries generally have
economic structures that are less diverse and mature, and political systems that
are less stable, than those of developed countries. Emerging markets may be more
volatile than the markets of more mature economies, and the securities of
companies located in emerging markets are often subject to rapid and large
changes in price; however, these markets also may provide higher long-term rates
of return.
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
periods, 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.
Other potential risks
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs.
Founders International Equity Portfolio
<PAGE> 31
FOUNDERS INTERNATIONAL EQUITY PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the performance of the portfolio's Initial shares
for the portfolio's first full calendar year of operations. The table compares
the average annual total return of the Initial shares to that of the Morgan
Stanley Capital International (MSCI) World (ex. US) Index, a broad measure of
international stock performance. All performance figures reflect the
reinvestment of dividends and distributions. Of course, past performance is no
guarantee of future results. As a new class, past performance information is not
available for Service shares as of the date of this prospectus.
--------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
INITIAL SHARES
[Exhibit C]
BEST QUARTER: Q4 '99 +40.36%
WORST QUARTER: Q1 '99 +2.44%
--------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year (9/30/98)
--------------------------------------------------------------------------------
INITIAL SHARES 60.69% 63.30%
MSCI WORLD
(EX. US) INDEX 27.93% 41.33%
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
<PAGE> 32
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. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies.
--------------------------------------------------------------------------------
Fee table
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 1.00% 1.00%
Rule 12b-1 fee none 0.25%
Other expenses 2.77% 2.77%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 3.77% 4.02%
Fee waiver and/or expense
reimbursement (2.27%) (2.52%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 1.50% 1.50%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 1.50%.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
INITIAL SHARES $153 $943 $1,752 $3,865
SERVICE SHARES $153 $993 $1,850 $4,067
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. The one-year number is based on net
operating expenses. The longer-term numbers are based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as the principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees. Other expenses for
Service shares are based on other expenses for Initial shares for the past
fiscal year.
Founders International Equity Portfolio
<PAGE> 33
Founders Passport Portfolio
GOAL/APPROACH
The portfolio seeks capital appreciation. To pursue this goal, the portfolio
invests primarily in equity securities of foreign small-cap companies that are
characterized as "growth" companies. The portfolio may purchase securities of
companies in initial public offerings or shortly thereafter.
The portfolio seeks investment opportunities, generally, in companies which the
portfolio manager believes have 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 will invest primarily in foreign issuers from at least three
foreign countries with established or emerging economies. The portfolio may
invest in securities of larger foreign issuers or in U.S. 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
FOREIGN SMALL-CAP COMPANIES: generally those foreign companies with market
capitalizations of less than $1.5 billion. This range may fluctuate depending on
changes in the value of the stock market as a whole.
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.
EQUITY SECURITIES: common stocks, preferred stocks and convertible securities.
The portfolio will invest in preferred stocks and convertible securities that
are 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.
<PAGE> 34
MAIN RISKS
The portfolio's performance will be influenced by political, social and economic
factors affecting companies in foreign countries. Like the stocks of U.S.
companies, the securities of foreign issuers fluctuate in price, often based on
factors unrelated to the issuers' value, and such fluctuations can be
pronounced. Unlike investing in U.S. companies, foreign securities include
special risks such as exposure to currency fluctuations, a lack of comprehensive
company information, political instability, and differing auditing and legal
standards. The value of a shareholder's investment in the portfolio will go up
and down, which means that shareholders could lose money.
Because the portfolio may allocate relatively more assets to certain industry
sectors than others, the portfolio's performance may be more susceptible to any
developments which affect those sectors emphasized by the portfolio.
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.
The portfolio may invest in the stocks of companies located in developed
countries and in emerging markets. Emerging market countries generally have
economic structures that are less diverse and mature, and political systems that
are less stable, than those of developed countries. Emerging markets may be more
volatile than the markets of more mature economies, and the securities of
companies located in emerging markets are often subject to rapid and large
changes in price; however, these markets also may provide higher long-term rates
of return.
The portfolio invests primarily in securities issued by companies with
relatively small market capitalizations. Smaller companies typically 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. The prices of securities purchased in initial public
offerings or shortly thereafter may be very volatile.
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
periods, 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.
Other potential risks
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs.
Founders Passport Portfolio
<PAGE> 35
FOUNDERS PASSPORT PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the performance of the portfolio's Initial shares
for the portfolio's first full calendar year of operations. The table compares
the average annual total return of the Initial shares to that of the Morgan
Stanley Capital International (MSCI) World (ex. US) Index, a broad measure of
international stock performance. All performance figures reflect the
reinvestment of dividends and distributions. Of course, past performance is no
guarantee of future results. As a new class, past performance information is not
available for Service shares as of the date of this prospectus.
--------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
INITIAL SHARES
[Exhibit D]
BEST QUARTER: Q4 '99 +53.13%
WORST QUARTER: Q1 '99 +3.55%
--------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year (9/30/98)
--------------------------------------------------------------------------------
INITIAL SHARES 76.05% 76.79%
MSCI WORLD (EX. US)
INDEX 27.93% 41.33%
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
<PAGE> 36
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. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies.
--------------------------------------------------------------------------------
Fee table
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 1.00% 1.00%
Rule 12b-1 fee none 0.25%
Other expenses 2.64% 2.64%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 3.64% 3.89%
Fee waiver and/or expense
reimbursement (2.14%) (2.39%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 1.50% 1.50%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 1.50%.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
INITIAL SHARES $153 $916 $1,701 $3,758
SERVICE SHARES $153 $967 $1,799 $3,962
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. The one-year number is based on net
operating expenses. The longer-term numbers are based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees. Other expenses for
Service shares are based on other expenses for Initial shares for the past
fiscal year.
Founders Passport Portfolio
<PAGE> 37
Japan Portfolio
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.
<PAGE> 38
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.
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.
The portfolio may purchase securities of companies in initial public offerings
(IPOs). The prices of securities purchased in IPOs can be very volatile. The
effect of IPOs on the portfolio's performance depends on a variety of factors,
including the number of IPOs the portfolio invests in, whether and to what
extent a security purchased in an IPO appreciates in value, and the asset base
of the portfolio. As a portfolio's asset base increases, IPOs often have a
diminished effect on such portfolio's performance.
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
periods, the portfolio may not achieve its investment objective.
Other potential risks
The portfolio, at times, may invest in derivative securities, such as options
and futures, and in foreign currencies. The portfolio may also sell short, which
involves selling a security it does not own in anticipation of a decline in the
market price of the security. 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.
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.
Japan Portfolio
<PAGE> 39
JAPAN PORTFOLIO (CONTINUED)
PAST PERFORMANCE
Since Initial shares had less than one calendar year of performance as of
December 31, 1999, annual total return information for that class is not
included in this section of the prospectus. As a new class, past performance
information is not available for Service shares as of the date of this
prospectus.
<PAGE> 40
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
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 1.00% 1.00%
Rule 12b-1 fee none 0.25%
Other expenses 1.79% 1.79%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 2.79% 3.04%
Fee waiver and/or expense
reimbursement (1.29%) (1.54%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 1.50% 1.50%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 1.50%.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years
--------------------------------------------------------------------------------
INITIAL SHARES $153 $743
SERVICE SHARES $153 $794
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. The one-year number is based on the net
operating expenses. The three-year number is based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
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.
Japan Portfolio
<PAGE> 41
MidCap Stock Portfolio
GOAL/APPROACH
The portfolio seeks investment results that are greater than the total return
performance of publicly traded common stocks of medium-size domestic companies
in the aggregate, as represented by the Standard & Poor's MidCap 400((reg.tm))
Index ("S&P 400"). To pursue this goal, the portfolio invests primarily in a
blended portfolio of growth and value stocks of medium-size companies, those
whose market values generally range between $200 million and $10 billion. Stocks
are chosen through a disciplined process combining computer modeling techniques,
fundamental analysis and risk management. Consistency of returns and stability
of the portfolio's share price compared to the S&P 400 are primary goals of the
process. The portfolio's stock investments may include common stocks, preferred
stocks, convertible securities and depositary receipts.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities.
Dreyfus then manages risk by diversifying across companies and industries,
limiting the potential adverse impact from any one stock or industry. The
portfolio is structured so that its sector weightings and risk characteristics,
such as growth, size, quality and yield, are similar to those of the S&P 400.
Concepts to understand
MIDCAP COMPANIES: established companies that may not be well known. Midcap
companies have the potential to grow faster than large-cap companies, but may
lack the resources to weather economic shifts, and are more volatile than large
companies.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 2,000 stocks. Dreyfus reviews each of the screens on a regular basis.
Dreyfus also maintains the flexibility to adapt the screening criteria to
changes in market conditions.
<PAGE> 42
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, which means that shareholders could lose money.
Medium-size 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. Some of the portfolio's
investments will rise and fall based on investor perception rather than
economics.
Although the portfolio seeks to manage risk by broadly diversifying among
industries and by maintaining a risk profile very similar to the S&P 400, the
portfolio is expected to hold fewer securities than the index. Owning fewer
securities and the ability to purchase stocks of companies not listed in the S&P
400 can cause the portfolio to underperform the index.
By investing in a mix of growth and value companies, the portfolio assumes the
risks of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
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
periods, 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.
Other potential risks
The portfolio, at times, may invest some assets in derivative securities, such
as options and futures. These practices, when employed, are used to hedge the
portfolio and increase returns; however, such practices sometimes may reduce
returns or increase volatility. Derivatives can be illiquid, and 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 have the effect of magnifying the portfolio's gains or losses.
MidCap Stock Portfolio
<PAGE> 43
MIDCAP STOCK PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the performance of the portfolio's Initial shares
for the portfolio's first full calendar year of operations. The table compares
the average annual total return of the Initial shares to that of the S&P 400, a
broad measure of midcap stock performance. All performance figures reflect the
reinvestment of dividends and distributions. Of course, past performance is no
guarantee of future results. As a new class, past performance information is not
available for Service shares as of the date of this prospectus.
--------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
INITIAL SHARES
[Exhibit E]
BEST QUARTER: Q4 '99 +14.67%
WORST QUARTER: Q3 '99 -7.11%
--------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year (5/1/98)
--------------------------------------------------------------------------------
INITIAL SHARES 10.82% 4.72%
S&P 400 14.72% 12.02%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 4/30/98 IS USED AS THE
BEGINNING VALUE ON 5/1/98.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
<PAGE> 44
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. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies.
--------------------------------------------------------------------------------
Fee table
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75% 0.75%
Rule 12b-1 fee none 0.25%
Other expenses 0.71% 0.71%
--------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO
OPERATING EXPENSES 1.46% 1.71%
Fee waiver and/or expense
reimbursement (0.46%) (0.71%)
--------------------------------------------------------------------------------
NET OPERATING EXPENSES* 1.00% 1.00%
*THE DREYFUS CORPORATION HAS AGREED, UNTIL DECEMBER 31, 2001, TO WAIVE RECEIPT
OF ITS FEES AND/OR ASSUME THE EXPENSES OF THE PORTFOLIO SO THAT EXPENSES
(EXCLUDING TAXES, BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, INTEREST
EXPENSES AND COMMITMENT FEES ON BORROWINGS) DO NOT EXCEED 1.00%. FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1999, DREYFUS FURTHER REIMBURSED THE PORTFOLIO FOR OTHER
EXPENSES SO THAT TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES FOR INITIAL SHARES
WERE 0.97% INSTEAD OF 1.00%. (SERVICE SHARES WERE NOT IN EXISTENCE DURING THE
FISCAL YEAR ENDED DECEMBER 31, 1999.) THIS ADDITIONAL EXPENSE REIMBURSEMENT WAS
VOLUNTARY.
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
INITIAL SHARES $102 $417 $754 $1,707
SERVICE SHARES $102 $469 $862 $1,960
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. The one-year number is based on the net
operating expenses. The longer-term numbers are based on total annual portfolio
operating expenses.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees. Other expenses for
Service shares are based on other expenses for Initial shares for the past
fiscal year.
MidCap Stock Portfolio
<PAGE> 45
Technology Growth Portfolio
GOAL/APPROACH
The portfolio seeks capital appreciation. To pursue this goal, the portfolio
invests primarily in the stocks of growth companies of any size that Dreyfus
believes to be leading producers or beneficiaries of technological innovation.
Up to 25% of the portfolio's assets may be invested in foreign securities. The
portfolio's stock investments may include common stocks, preferred stocks and
convertible securities.
In choosing stocks, the portfolio looks for sectors in technology that are
expected to outperform on a relative scale. The more attractive sectors are
overweighted; those sectors with less appealing prospects are underweighted.
Among the sectors evaluated are those that develop, produce or distribute
products or services in the computer, semi-conductor, electronics,
communications, healthcare, biotechnology, computer software and hardware,
electronic components and systems, network and cable broadcasting,
telecommunications, defense and aerospace, and environmental sectors.
Although the portfolio looks for companies with the potential for strong
earnings growth rates, some of the portfolio's investments may currently be
experiencing losses. Moreover, the portfolio may invest in small-, mid- and
large-cap securities in all available trading markets, including initial public
offerings and the aftermarket.
Concepts to understand
SMALL AND MIDSIZE COMPANIES: new and often entrepreneurial companies. These
companies tend to grow faster than large-cap companies and typically use any
profits for expansion rather than for paying dividends. They are also more
volatile than larger companies and fail more often.
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.
<PAGE> 46
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. In fact, the technology sector has been among the
most volatile sectors of the stock market. The value of a shareholder's
investment in the portfolio will go up and down, sometimes dramatically, which
means that shareholders could lose money.
Technology companies, especially small-cap technology companies, involve greater
risk because their earnings tend to be 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 in
technology companies will rise and fall based on investor perception rather than
economics. Other portfolio investments are made in anticipation of future
products and services which, if delayed or cancelled, could cause the stock
price to drop dramatically.
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.
Any foreign securities purchased by the portfolio include 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
periods, 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.
Other potential risks
The portfolio, at times, may invest in derivative securities, such as options
and futures, and in foreign currencies. The portfolio may also sell short, which
involves selling a security it does not own in anticipation of a decline in the
market price of the security. These practices, when employed, are used primarily
to hedge its portfolio but also may be used to increase returns; however, such
practices sometimes may reduce returns or increase volatility. In addition,
derivatives can be illiquid and highly sensitive to changes in their underlying
instrument. A small investment in certain derivatives could have a potentially
large impact on the portfolio's performance.
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.
Technology Growth Portfolio
<PAGE> 47
TECHNOLOGY GROWTH PORTFOLIO (CONTINUED)
PAST PERFORMANCE
Since Initial shares had less than one calendar year of performance as of
December 31, 1999, annual total return information for that class is not
included in this section of the prospectus. As a new class, past performance
information is not available for Service shares as of the date of this
prospectus.
<PAGE> 48
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
Initial Service
shares shares
--------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75% 0.75%
Rule 12b-1 fee none 0.25%
Other expenses 0.04% 0.04%
--------------------------------------------------------------------------------
TOTAL 0.79% 1.04%
--------------------------------------------------------------------------------
Expense example
1 Year 3 Years
--------------------------------------------------------------------------------
INITIAL SHARES $81 $252
SERVICE SHARES $106 $331
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual return and expenses will be different,
the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
RULE 12B-1 FEE: the fee paid to the portfolio's distributor for distributing
Service shares, for advertising and marketing related to Service shares, and for
providing account service and maintenance for holders of Service shares. The
distributor may pay all or part of this fee to participating insurance
companies, and the broker-dealer acting as principal underwriter for their
variable insurance products. Because this fee is paid on an ongoing basis out of
portfolio assets attributable to Service shares, over time it will increase the
cost of an investment in Service shares which could be more than that payable
with respect to other types of sales charges.
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.
Technology Growth Portfolio
<PAGE> 49
MANAGEMENT
The investment adviser for the portfolios is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages more than
$138 billion in over 160 mutual fund portfolios. Dreyfus is the primary mutual
fund business of Mellon Financial Corporation, a global financial services
company with approximately $2.8 trillion of assets under management,
administration or custody, including approximately $521 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.
CORE BOND PORTFOLIO -- The portfolio has agreed to pay Dreyfus an annual
management fee of 0.60% of the portfolio's average daily net assets.
CORE VALUE PORTFOLIO -- For the fiscal year ended December 31, 1999, the
portfolio paid Dreyfus a management fee at the annual rate of 0.25% of the
portfolio's average daily net assets.
EMERGING LEADERS PORTFOLIO -- The portfolio has agreed to pay Dreyfus a
management fee at the annual rate of 0.90% of the portfolio's average daily net
assets. For the fiscal period December 15, 1999 (commencement of operations)
through December 31, 1999, the portfolio did not pay Dreyfus a management fee as
a result of a fee waiver/expense reimbursement in effect.
EMERGING MARKETS PORTFOLIO -- The portfolio has agreed to pay Dreyfus a
management fee at the annual rate of 1.25% of the portfolio's average daily net
assets. For the fiscal period December 15, 1999 (commencement of operations)
through December 31, 1999, the portfolio did not pay Dreyfus a management fee as
a result of a fee waiver/expense reimbursement in effect.
EUROPEAN EQUITY PORTFOLIO -- The portfolio has agreed to pay Dreyfus a
management fee at the annual rate of 1.00% of the portfolio's average daily net
assets. For the fiscal period April 30, 1999 (commencement of operations)
through December 31, 1999, the portfolio did not pay Dreyfus a management fee as
a result of a fee waiver/expense reimbursement in effect.
FOUNDERS DISCOVERY PORTFOLIO -- The portfolio has agreed to pay Dreyfus a
management fee at the annual rate of 0.90% of the portfolio's average daily net
assets. For the fiscal period December 15, 1999 (commencement of operations)
through December 31, 1999, the portfolio did not pay Dreyfus a management fee as
a result of a fee waiver/expense reimbursement in effect.
FOUNDERS GROWTH PORTFOLIO -- For the fiscal year ended December 31, 1999, the
portfolio did not pay Dreyfus a management fee as a result of a fee
waiver/expense reimbursement in effect.
FOUNDERS INTERNATIONAL EQUITY PORTFOLIO -- For the fiscal year ended December
31, 1999, the portfolio did not pay Dreyfus a management fee as a result of a
fee waiver/expense reimbursement in effect.
FOUNDERS PASSPORT PORTFOLIO -- For the fiscal year ended December 31, 1999, the
portfolio did not pay Dreyfus a management fee as a result of a fee
waiver/expense reimbursement in effect.
JAPAN PORTFOLIO -- The portfolio has agreed to pay Dreyfus a management fee at
the annual rate of 1.00% of the portfolio's average daily net assets. For the
fiscal period December 15, 1999 (commencement of operations) through December
31, 1999, the portfolio did not pay Dreyfus a management fee as a result of a
fee waiver/expense reimbursement in effect.
MIDCAP STOCK PORTFOLIO -- For the fiscal year ended December 31, 1999, the
portfolio paid Dreyfus a management fee at the annual rate of 0.29% of the
portfolio's average daily net assets.
<PAGE> 50
TECHNOLOGY GROWTH PORTFOLIO -- The portfolio has agreed to pay Dreyfus a
management fee at the annual rate of 0.75% of the portfolio's average daily net
assets. For the fiscal period August 31, 1999 (commencement of operations)
through December 31, 1999, Dreyfus waived or reimbursed a portion of its
management fee so that the net fee paid by the portfolio was 0.49%.
Dreyfus has engaged its growth specialist affiliate, Founders Asset Management
LLC, to serve as the sub-investment adviser for the Founders Discovery
Portfolio, Founders Growth Portfolio, Founders International Equity Portfolio
and Founders Passport Portfolio. 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, 2000, Founders managed mutual funds and other client
accounts having aggregate assets of approximately $___ billion.
Dreyfus has engaged its affiliate, Newton Capital Management Limited, to serve
as sub-investment adviser for the European Equity Portfolio and the Japan
Portfolio. Newton, located at 71 Queen Victoria Street, London, EC4V 4DR,
England, was formed in 1977 and, as of September 30, 2000, together with its
parent and its parent's subsidiaries, managed approximately $___ billion in
discretionary separate accounts and other investment accounts.
Portfolio managers
The primary portfolio managers of the portfolios are as follows:
CORE BOND PORTFOLIO -- The Dreyfus Taxable Fixed Income team makes investment
decisions for the portfolio. No individual team member is primarily responsible
for making these investment decisions. The portfolio managers comprising the
team are identified in the Statement of Additional Information.
CORE VALUE PORTFOLIO -- The portfolio's primary portfolio manager is Valerie J.
Sill. She has been a portfolio manager of the portfolio since its inception. Ms.
Sill is a portfolio manager of Dreyfus and senior vice president of The Boston
Company Asset Management, Inc. ("TBCAM"), an affiliate of Dreyfus. She is also a
member of the Equity Policy Group of TBCAM. She previously served as director of
equity research and as an equity research analyst for TBCAM.
EMERGING LEADERS PORTFOLIO -- 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.
EMERGING MARKETS PORTFOLIO -- 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.
EUROPEAN EQUITY PORTFOLIO -- The portfolio's primary portfolio manager is Joanna
Bowen. Ms. Bowen has been a primary portfolio manager for the portfolio since
its inception. She joined Newton in 1993 as a European fund manager, was
appointed an associate director of Newton in 1997, and was appointed a director
of Newton in 1999.
FOUNDERS DISCOVERY PORTFOLIO -- 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.
Management
<PAGE> 51
MANAGEMENT (CONTINUED)
FOUNDERS GROWTH PORTFOLIO -- The portfolio's primary portfolio managers are
Scott A. Chapman, C.F.A. and Thomas M. Arrington, C.F.A. Mr. Chapman and Mr.
Arrington have been the portfolio's primary portfolio managers, and have been
employed by Founders, since December 1998. Mr. Chapman is a vice president of
investments and director of research at Founders. Mr. Arrington is a vice
president of investments at Founders. Prior to joining Founders, Mr. Chapman was
employed for seven years at HighMark Capital Management, Inc., a subsidiary of
Union BanCal Corporation, most recently as a vice president and director of
growth strategy. Prior to joining Founders, Mr. Arrington was employed for eight
years at HighMark Capital where he held various positions, including vice
president and director of income and growth strategy, securities research
analyst and, most recently, vice president and director of income equity
strategy.
FOUNDERS INTERNATIONAL EQUITY PORTFOLIO -- The portfolio's primary portfolio
manager is Douglas A. Loeffler, C.F.A. He has been the portfolio's primary
portfolio manager since the portfolio's inception and has been employed by
Founders since 1995. He is a vice president of investments at Founders. Prior to
joining Founders, Mr. Loeffler was employed for seven years at Scudder, Stevens
& Clark as an international equities and quantitative analyst.
FOUNDERS PASSPORT PORTFOLIO -- The portfolio's primary portfolio manager is
Tracy P. Stouffer. She has been the portfolio's primary portfolio manager, and
has been employed by Founders, since July 1999. Prior to joining Founders, Ms.
Stouffer was a vice president and portfolio manager with Federated Global
Incorporated from 1995 to July 1999, and a vice president and portfolio manager
with Clariden Asset Management, Inc. from 1988 to 1995.
JAPAN PORTFOLIO -- 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.
MIDCAP STOCK PORTFOLIO -- John O'Toole is the portfolio's primary portfolio
manager, a position he has held since the portfolio's inception. He has been
employed by Dreyfus since October 1994. Mr. O'Toole also is a senior vice
president and a portfolio manager for Mellon Equity Associates, an affiliate of
Dreyfus, and has been employed by Mellon Bank, N.A. since 1979.
TECHNOLOGY GROWTH PORTFOLIO -- The portfolio's primary portfolio manager is Mark
Herskovitz. Mr. Herskovitz has been the primary portfolio manager of the
portfolio since its inception and has been employed by Dreyfus since 1996. From
1992 to 1996, he served as a senior technology analyst at National City Bank
The portfolios, Dreyfus, Founders, Newton and Dreyfus Service Corporation (the
portfolios' distributor) each has adopted a code of ethics that permits its
personnel, subject to such code, to invest in securities, including securities
that may be purchased or held by a portfolio. The Dreyfus and Founders codes of
ethics restrict the personal securities transactions of their employees, and
require portfolio managers and other investment personnel to comply with the
code's preclearance and disclosure procedures. Each code's primary purpose is to
ensure that personal trading by Dreyfus or Founders employees does not
disadvantage any Dreyfus- or Founders-managed fund.
<PAGE> 52
CORE BOND, EMERGING LEADERS, EMERGING MARKETS AND FOUNDERS DISCOVERY PORTFOLIOS
-- PERFORMANCE INFORMATION FOR RELATED PUBLIC FUNDS
Although the Core Bond Portfolio is newly organized and does not yet have its
own full year of performance, 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 Core Bond Fund -- Class A shares (the "Premier Core Bond
Fund"). The portfolio currently has the same investment team as the Premier Core
Bond Fund. The table below shows average annual total return information for the
Premier Core Bond Fund and for the Merrill Lynch Domestic Master Index, the
benchmark index of the portfolio and the Premier Core Bond Fund. No performance
information is shown for the Core Bond Portfolio, which did not have its own
full year of performance as of September 30, 2000.
Historical performance information for Class A shares of the Premier Core Bond
Fund and the Merrill Lynch Domestic Master Index for various periods ended
September 30, 2000, as calculated pursuant to SEC guidelines, is as follows:
--------------------------------------------------------------------------------
Average annual total return AS OF 9/30/00
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
DREYFUS PREMIER
CORE BOND FUND
CLASS A (NAV) 7.83% 7.50% 9.41%
CLASS A
(WITH SALES LOAD) 1.63% 6.23% 8.76%
MERRILL LYNCH
DOMESTIC
MASTER INDEX(1) 6.92% 6.47% 8.10%
(1)THE MERRILL LYNCH DOMESTIC MASTER INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK
FOR U.S. GOVERNMENT SECURITIES AND INVESTMENT GRADE CORPORATE SECURITIES WITH
MATURITIES GREATER THAN OR EQUAL TO ONE YEAR. ALL PERFORMANCE FIGURES REFLECT
THE REINVESTMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS.
The Emerging Leaders 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, 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 Dreyfus Emerging
Leaders Fund and the Insurance Fund. The table below shows average annual total
return information for the Dreyfus Emerging Leaders Fund, the Insurance Fund and
the Russell 2000 Index, the benchmark index of the portfolio, the Dreyfus
Emerging Leaders Fund and the Insurance Fund. No performance information is
shown for the Emerging Leaders Portfolio, which did not have its own full year
of performance as of September 30, 2000
Historical performance information for the Dreyfus Emerging Leaders Fund, the
Insurance Fund and the Russell 2000 Index for various periods ended September
30, 2000, as calculated pursuant to SEC guidelines, is as follows:
--------------------------------------------------------------------------------
Average annual total return AS OF 9/30/00
Since
1 Year 5 Years 10 Years inception(2)
-------------------------------------------------------------------------------
DREYFUS
EMERGING
LEADERS
FUND 30.42% 29.64% -- 29.57%
DREYFUS
SMALL CAP
PORTFOLIO 41.49% 13.93% 35.04% --
RUSSELL 2000
INDEX(3) 23.39% 12.38% 16.93% 12.38%(4)
(2) THE INCEPTION DATE OF THE DREYFUS EMERGING LEADERS FUND WAS 9/29/95.
(3) 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.
(4) FOR COMPARATIVE PURPOSES FOR THE DREYFUS EMERGING LEADERS FUND, THE VALUE OF
THE INDEX ON 9/30/95 IS USED AS THE BEGINNING VALUE ON 9/29/95.
Management
<PAGE> 53
MANAGEMENT (CONTINUED)
The Emerging Markets 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 "Premier Emerging Markets
Fund"). The portfolio has the same primary portfolio manager as the Premier
Emerging Markets Fund. The table below shows average annual total return
information for the Premier Emerging Markets Fund and for the Morgan Stanley
Capital International (MSCI) Emerging Markets (Free) Index, the benchmark index
of the portfolio and the Premier Emerging Markets Fund. No performance
information is shown for the Emerging Markets Portfolio, which did not have its
own full year of performance as of September 30, 2000.
[The one-year performance of the Premier Emerging Markets 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 Premier Emerging
Markets Fund and for the MSCI Emerging Markets (Free) Index for various periods
ended September 30, 2000, as calculated pursuant to SEC guidelines, is as
follows:
--------------------------------------------------------------------------------
Average annual total return AS OF 9/30/00
Since inception
1 Year (3/31/98)
--------------------------------------------------------------------------------
DREYFUS PREMIER EMERGING MARKETS FUND
CLASS A (NAV) 7.91% .92%
CLASS A (WITH SALES LOAD) 1.68% -1.42%
MSCI EMERGING MARKETS
(FREE) INDEX(5) .41% -2.59%
(5) THE MSCI EMERGING MARKETS (FREE) INDEX IS A MARKET-CAPITALIZATION-WEIGHTED
INDEX COMPOSED OF COMPANIES REPRESENTATIVE OF THE MARKET STRUCTURE OF 25
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.
The Founders Discovery 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 -- Dreyfus
Founders Discovery Fund (the "Founders Discovery Fund"). The portfolio currently
has the same primary portfolio manager as the Founders Discovery Fund. The table
below shows average annual total return information for the Founders Discovery
Fund and for the Russell 2000 Index, the benchmark index of the portfolio and
the Founders Discovery Fund. No performance information is shown for the
Founders Discovery Portfolio, which did not have its own full year of
performance as of September 30, 2000.
[The one-year performance of the Founders Discovery Fund was due in part to the
allocation to the Founders Discovery Fund of securities sold in initial public
offerings ("IPOs"). There is no guarantee that the Founders Discovery 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 Founders Discovery Fund and for the
Russell 2000 Index for various periods ended September 30, 2000, as calculated
pursuant to SEC guidelines, is as follows:
--------------------------------------------------------------------------------
Average annual total return AS OF 9/30/00
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
FOUNDERS DISCOVERY
FUND XX.XX% XX.XX% XX.XX%
RUSSELL 2000
INDEX(6) XX.XX% XX.XX% XX.XX%
(6) 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.
<PAGE> 54
Investors should not consider this performance data as an indication of the
future performance of the portfolios. The performance figures for the Premier
Core Bond Fund, Dreyfus Emerging Leaders Fund, Insurance Fund, Premier Emerging
Markets Fund and Founders Discovery Fund reflect the deduction of the historical
fees and expenses paid by the funds, and not those to be paid by the respective
portfolios. The Premier Core Bond Fund's total annual operating expenses for the
fiscal year ended October 31, 2000 were ___% of its average daily net assets.
The total annual operating expenses, after fee waiver and expense reimbursement,
if any, for the fiscal year ended August 31, 2000 for the Dreyfus Emerging
Leaders Fund were ___% and for the fiscal year ended December 31, 1999 for the
Insurance Fund were 0.78% of the respective fund's average daily net assets. The
Premier Emerging Markets Fund's total annual operating expenses, after fee
waiver and expense reimbursement, for the year ended September 30, 2000 were
___% of its average daily net assets. The Founders Discovery Fund's total annual
operating expenses, after fee waiver and expense reimbursement, for the year
ended December 31, 1999 were 1.46% of its 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 each portfolio and its corresponding 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.
Performance information for Public Funds and Founders Growth, Founders
International Equity and Founders Passport portfolios
Each of the Founders Growth, Founders International Equity and Founders Passport
portfolios has the same investment objective and follows substantially the same
investment policies and strategies as a corresponding series of another open-end
investment company advised by Founders, the Dreyfus Founders Growth Fund, the
Dreyfus Founders International Equity Fund and the Dreyfus Founders Passport
Fund, respectively (the "Public Funds"). Each portfolio currently has the same
primary portfolio managers as its corresponding Public Fund. The first three
tables on page ___ show average annual total return information for the Public
Funds and for the appropriate securities index. The fourth table shows average
annual total return information for Initial shares of each portfolio and for the
appropriate securities index.
Investors should not consider this performance data as an indication of the
future performance of the portfolios. The performance figures for the Public
Funds reflect the deduction of the historical fees and expenses paid by the
Public Funds, and not those to be paid by the respective portfolio. The Public
Funds' total annual operating expenses, after fee waiver and expense
reimbursement, for the year ended December 31, 1999 were 1.09% of Dreyfus
Founders Growth Fund's average daily net assets, 1.80% of Dreyfus Founders
International Equity Fund's average daily net assets and 1.64% of Dreyfus
Founders Passport Fund's average daily net assets.
The performance figures for the Public Funds and the portfolios 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 each
portfolio and its corresponding Public Fund will hold similar securities, their
investment results are expected to differ. In particular, differences in asset
size and in cash flow resulting from purchases and redemptions of portfolio
shares may result in different security selections, differences in the relative
weightings of securities or differences in the price paid for particular
portfolio holdings. Performance information for the Public Funds and portfolios
reflect the reinvestment of dividends and other distributions.
<PAGE> 55
[The one-year performance of the Dreyfus Founders International Equity Fund and
the Dreyfus Founders Passport Fund was due in part to the allocation to those
funds of securities sold in initial public offerings ("IPOs"). There is no
guarantee that the Dreyfus Founders International Equity Fund's and the Dreyfus
Founders Passport 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.]
PUBLIC FUNDS
Historical performance information for the corresponding Public Funds and for
the securities indexes for various periods ended September 30, 2000, as
calculated pursuant to SEC guidelines, is as follows:
--------------------------------------------------------------------------------
Average annual total return AS OF 9/30/00
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
DREYFUS FOUNDERS
GROWTH FUND -- CLASS F(1) XX.XX% XX.XX% XX.XX%
S&P 500 BARRA
GROWTH INDEX(2) XX.XX% XX.XX% XX.XX%
S&P 500 COMPOSITE
INDEX(3) XX.XX% XX.XX% XX.XX%
--------------------------------------------------------------------------------
Average annual total return AS OF 9/30/00
Since
inception
1 Year (12/29/95)
--------------------------------------------------------------------------------
DREYFUS FOUNDERS INTERNATIONAL
EQUITY FUND -- CLASS F(1) XX.XX% XX.XX%
MSCI WORLD
(EX. US) INDEX(4) XX.XX% XX.XX%(5)
Average annual total return AS OF 9/30/00
Since
inception
1 Year 5 Years (11/16/93)
--------------------------------------------------------------------------------
DREYFUS FOUNDERS
PASSPORT FUND -- CLASS F(1) XX.XX% XX.XX% XX.XX%
MSCI WORLD
(EX US) INDEX(4) XX.XX% XX.XX% XX.XX%(6)
FOUNDERS GROWTH, FOUNDERS INTERNATIONAL EQUITY AND FOUNDERS PASSPORT PORTFOLIOS
Average annual total return for Initial shares of each portfolio and for the
securities index for various periods ended September 30, 2000, as calculated
pursuant to SEC guidelines, is as follows:
--------------------------------------------------------------------------------
Average annual total return AS OF 9/30/00
Since
inception
1 Year (9/30/98)
--------------------------------------------------------------------------------
FOUNDERS GROWTH
PORTFOLIO -- INITIAL SHARES XX.XX% XX.XX%
S&P 500 BARRA
GROWTH INDEX(2) XX.XX% XX.XX%
S&P 500 COMPOSITE INDEX(3) XX.XX% XX.XX%
FOUNDERS INTERNATIONAL EQUITY
PORTFOLIO -- INITIAL SHARES XX.XX% XX.XX%
MSCI WORLD (EX US) INDEX(4) XX.XX% XX.XX%
FOUNDERS PASSPORT
PORTFOLIO -- INITIAL SHARES XX.XX% XX.XX%
MSCI WORLD (EX US) INDEX(4) XX.XX% XX.XX%
--------------------------------------------------------------------------------
(1) CLASS F SHARES ARE GENERALLY CLOSED TO NEW INVESTORS.
(2) THE S&P BARRA GROWTH INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE
STOCKS IN THE S&P 500 COMPOSITE INDEX THAT HAVE HIGH PRICE-TO-BOOK RATIOS. ALL
PERFORMANCE FIGURES REFLECT THE REINVESTMENT OF DIVIDENDS AND OTHER
DISTRIBUTIONS.
(3) THE S&P 500 COMPOSITE INDEX IS A WIDELY RECOGNIZED, UNMANAGED INDEX OF
STOCK PERFORMANCE. ALL PERFORMANCE FIGURES REFLECT THE REINVESTMENT OF DIVIDENDS
AND OTHER DISTRIBUTIONS.
(4) THE MSCI WORLD (EX. US) INDEX IS AN ARITHMETICAL AVERAGE OF THE PERFORMANCE
OF OVER 1,000 SECURITIES LISTED ON THE STOCK EXCHANGES OF EUROPE, CANADA,
AUSTRALIA, NEW ZEALAND AND THE FAR EAST. TOTAL RETURN FIGURES FOR THE INDEX
ASSUME CHANGE IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AFTER DEDUCTION OF
LOCAL TAXES, BUT DO NOT DEDUCT ANY FEES OR EXPENSES WHICH ARE CHARGED TO THE
RESPECTIVE PUBLIC FUNDS AND THE PORTFOLIO.
(5) FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 12/31/95 IS USED AS THE
BEGINNING VALUE ON 12/29/95.
(6) FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/93 IS USED AS THE
BEGINNING VALUE ON 11/16/93.
<PAGE> 56
Japan Portfolio -- Performance Information for Related Investment Accounts
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. No performance information is shown for the portfolio, which did not
have its own full year of performance as of September 30, 2000.
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 annual management fee 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, 2000 is as follows:
--------------------------------------------------------------------------------
Average annual total return AS OF 9/30/00
Since
1 Year 5 Years 11/22/94(1)
--------------------------------------------------------------------------------
NEWTON JAPAN FUND XX.XX% XX.XX% XX.XX%
NEWTON UGF JAPANESE
EQUITY FUND XX.XX% XX.XX% XX.XX%
MSCI JAPAN INDEX(2) XX.XX% XX.XX% XX.XX%
(1) 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.
(2) 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
Management
<PAGE> 57
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each portfolio's Initial shares
for the fiscal periods indicated. Certain information reflects financial results
for a single portfolio share. "Total return" shows how much an investment in the
portfolio would have increased (or decreased) during each period, assuming the
investor had reinvested all dividends and distributions. These figures (other
than those for the six-month period ended June 30, 2000) have been independently
audited by Ernst & Young LLP, whose report, along with the portfolios' financial
statements, is included in the annual report, which is available upon request.
Keep in mind that fees and charges imposed by participating insurance companies,
which are not reflected in the tables, would reduce the investment returns that
are shown. Since Service shares are new, financial highlights information is not
available for that class as of the date of this prospectus.
<TABLE>
<CAPTION>
(UNAUDITED)
PERIOD ENDED JUNE 30,
CORE BOND PORTFOLIO -- INITIAL SHARES 2000(1)
---------------------------------------------------------------------------------------------------------------------
<S> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.50
Investment operations: Investment income -- net .12
Net realized and unrealized gain (loss) on investments .09
Total from investment operations .21
Distributions: Dividends from investment income -- net (.06)
Net asset value, end of period 12.65
Total return (%) 10.05(2)
---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .80(2)
Ratio of net investment income to average net assets (%) 5.86(2)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) 1.13(2)
Portfolio turnover rate (%) 162.16(3)
---------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 5,291
(1) FROM MAY 1, 2000 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 2000.
(2) ANNUALIZED.
(3 )NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
CORE VALUE PORTFOLIO -- INITIAL SHARES 2000 1999 1998(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C>
Net asset value, beginning of period 13.97 11.72 12.50
Investment operations: Investment income -- net .06(2) .07(2) .07
Net realized and unrealized gain (loss) on investments (.11) 2.24 (.77)
Total from investment operations (.05) 2.31 (.70)
Distributions: Dividends from investment - net (.06) (.08)
Dividends from net realized gain on investments (.06) -- --
Total distributions (.06) (.06) (.08)
Net asset value, end of period 13.86 13.97 11.72
Total return (%) (.39)(3) 19.73 (5.59)(3)
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .50(3) 1.00 .67(3)
Ratio of net investment income to average net assets (%) .40(3) .56 .62(3)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) .08(3) .50 .74(3)
Portfolio turnover rate (%) 50.17(3) 97.14 47.37(3)
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 18,519 15,343 5,959
(1) FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31
EMERGING LEADERS PORTFOLIO -- INITIAL SHARES 2000 1999(1)
-------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C>
Net asset value, beginning of period 13.44 12.50
Investment operations: Investment income (loss) -- net (.04)(2) .01
Net realized and unrealized gain (loss) on investments 2.19 .93
Total from investment operations 2.15 .94
Distributions: Dividends from investment income -- net (.01) --
Net asset value, end of period 15.58 13.44
Total return (%) 15.97(3) 7.52(3)
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .75(3) .07(3)
Ratio of net investment income (loss) to average net assets (%) (.28)(3) .04(3)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) .63(3) 1.25(3)
Portfolio turnover rate (%) 87.56(3) 1.79(3)
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 2,825 2,150
(1) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31
EMERGING MARKETS PORTFOLIO -- INITIAL SHARES 2000 1999(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C>
Net asset value, beginning of period 13.63 12.50
Investment operations: Investment income -- net .10(2) .02
Net realized and unrealized gain (loss) on investments (1.12) 1.11
Total from investment operations (1.02) 1.13
Distributions: Dividends from investment income -- net (.02) --
Dividends from net realized gain on investments (.01) --
Total distributions (.03) --
Net asset value, end of period 12.58 13.63
Total return (%) (7.54)(3) 9.04(3)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .99(3) .09(3)
Ratio of net investment income to average net assets (%) .75(3) .18(3)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) 1.01(3) 1.51(3)
Portfolio turnover rate (%) 66.30(3) .43(3)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 2,087 2,181
(1) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
Financial Highlights
<PAGE> 59
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31
EUROPEAN EQUITY PORTFOLIO -- INITIAL SHARES 2000 1999(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C>
Net asset value, beginning of period 15.96 12.50
Investment operations: Investment income -- net .11(2) .04(2)
Net realized and unrealized gain (loss) on investments .33 3.61
Total from investment operations .44 3.65
Distributions: Dividends from investment income -- net -- (.03)
Dividends from net realized gain on investments (.51) (.16)
Total distributions (.51) (.19)
Net asset value, end of period 15.89 15.96
Total return (%) 2.45(3) 29.20(3)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .65(3) 1.01(3)
Ratio of net investment income to average net assets (%) .63(3) .32(3)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) .28(3) 2.38(3)
Portfolio turnover rate (%) 99.81(3) 99.89(3)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 19,900 6,592
(1) FROM APRIL 30, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31
FOUNDERS DISCOVERY PORTFOLIO -- INITIAL SHARES 2000 1999(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C>
Net asset value, beginning of period 13.89 12.50
Investment operations: Investment income (loss) -- net (.05)(2) .01
Net realized and unrealized gain (loss) on investments 2.60 1.38
Total from investment operations 2.55 1.39
Distributions: Dividends from investment income -- net (.01) --
Dividends from net realized gain on investments (.05) --
Total distributions (.06) --
Net asset value, end of period 16.38 13.89
Total return (%) 18.33(3) 11.12(3)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .75(3) .07(3)
Ratio of net investment income (loss) to average net assets (%) (.35)(3) .06(3)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) 1.10(3) 1.45(3)
Portfolio turnover rate (%) 63.12(3) 7.49(3)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 6,564 2,223
(1) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
FOUNDERS GROWTH PORTFOLIO -- INITIAL SHARES 2000 1999 1998(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C>
Net asset value, beginning of period 19.87 15.90 12.50
Investment operations: Investment income (loss) -- net .00(2,3) (.02)(2) .01
Net realized and unrealized gain (loss) on investments (.75) 5.79 3.39
Total from investment operations (.75) 5.77 3.40
Distributions: Dividends from investment income -- net -- (.01) --
Dividends from net realized gain on investments (.13) (1.79) --
Total distributions (.13) (1.80) --
Net asset value, end of period 18.99 19.87 15.90
Total return (%) (3.72)(4) 39.01 27.20(4)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .50(4) 1.00 .25(4)
Ratio of net investment income (loss) to average net assets (%) .00(4,5) (.11) .05(4)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) .14(4) 1.33 .31(4)
Portfolio turnover rate (%) 101.25(4) 115.08 75.65(4)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 17,894 7,485 2,544
(1) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(4) NOT ANNUALIZED.
(5) AMOUNT REPRESENTS LESS THAN .01%.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
FOUNDERS INTERNATIONAL EQUITY PORTFOLIO -- INITIAL SHARES 2000 1999 1998(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C>
Net asset value, beginning of period 21.65 14.36 12.50
Investment operations: Investment income (loss) -- net .04(2) (.02)(2) (.01)
Net realized and unrealized gain (loss) on investments (.59) 8.73 1.87
Total from investment operations (.55) 8.71 1.86
Distributions: Dividends from net realized gain on investments (1.10) (1.42) --
Net asset value, end of period 20.00 21.65 14.36
Total return (%) (2.83)(3) 60.69 14.88(3)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .75(3) 1.50 .38(3)
Ratio of investment income (loss) to average net assets (%) .18(3) (.11) (.08)(3)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) .59(3) 2.27 .81(3)
Portfolio turnover rate (%) 108.14(3) 190.80 29.25(3)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 9,616 4,608 2,297
(1) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
<PAGE> 61
Financial Highlights
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
FOUNDERS PASSPORT PORTFOLIO -- INITIAL SHARES 2000 1999 1998(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C>
Net asset value, beginning of period 23.82 14.46 12.50
Investment operations: Investment income (loss) -- net (.05)(2) (.10)(2) .00(3)
Net realized and unrealized gain (loss) on investments (.99) 11.04 1.97
Total from investment operations (1.04) 10.94 1.97
Distributions: Dividends from investment income -- net -- -- (.00)(3)
Dividends from net realized gain on investments (1.11) (1.58) (.01)
Total distributions (1.11) (1.58) (.01)
Net asset value, end of period 21.67 23.82 14.46
Total return (%) (5.26)(4) 76.05 15.79(4)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .75(4) 1.50 .38(4)
Ratio of net investment income (loss) to average net assets (%) (.20)(4) (.60) .02(4)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) 1.01(4) 2.14 .30(4)
Portfolio turnover rate (%) 256.37(4) 319.31 3.98(4)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 26,427 14,836 5,788
(1) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(4) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
JAPAN PORTFOLIO -- INITIAL SHARES 2000 1999(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C>
Net asset value, beginning of period 12.84 12.50
Investment operations: Investment income (loss) -- net (.06)(2) .00(2,3)
Net realized and unrealized gain (loss) on investments 2.21 .34
Total from investment operations 2.15 .34
Distributions: Dividends from investment income -- net (.05) --
Net asset value, end of period 14.94 12.84
Total return (%) 16.84(4) 2.64(4)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .75(4) .07(4)
Ratio of net investment income (loss) to average net assets (%) (.41)(4) .03(4)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) 1.11(4) 1.35(4)
Portfolio turnover rate (%) 222.29(4) --
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 2,486 2,054
(1) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(4) NOT ANNUALIZED.
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
MIDCAP STOCK PORTFOLIO -- INITIAL SHARES 2000 1999 1998(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C>
Net asset value, beginning of period 13.44 12.16 12.50
Investment operations: Investment income -- net .03(2) .03(2) .02
Net realized and unrealized gain (loss) on investments .86 1.28 (.34)
Total from investment operations .89 1.31 (.32)
Distributions: Dividends from investment income -- net .00(3) (.03) (.02)
Net asset value, end of period 14.33 13.44 12.16
Total return (%) 6.63(4) 10.82 (2.53)(4)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .50(4) .97 .67(4)
Ratio of net investment income to average net assets (%) .20(4) .26 .18(4)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) .07(4) .49 .60(4)
Portfolio turnover rate (%) 52.16(4) 77.73 75.74(4)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 32,187 15,563 10,506
(1) FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(4) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
TECHNOLOGY GROWTH PORTFOLIO -- INITIAL SHARES 2000 1999(1)
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C>
Net asset value, beginning of period 19.45 12.50
Investment operations: Investment (loss) -- net (.04)(2) (.02)(2)
Net realized and unrealized gain (loss) on investments 2.59 6.97
Total from investment operations 2.55 6.95
Distributions: Dividends from net realized gain on investments (.02) --
Net asset value, end of period 21.98 19.45
Total return (%) 13.10(3) 55.60(3)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .43(3) .36(3)
Ratio of net investment income (loss) to average net assets (%) (.19)(3) (.14)
(3)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) -- .09(3)
Portfolio turnover rate (%) 65.98(3) 20.01(3)
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 168,673 65,707
(1) FROM AUGUST 31, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
<PAGE> 63
Financial Highlights
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 NAV of each class, 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: name of portfolio/share class),
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.
CORE BOND PORTFOLIO -- generally values investments by using available market
quotations or at fair value, which may be determined by one or more pricing
services approved by the fund's board.
EACH PORTFOLIO OTHER THAN CORE BOND PORTFOLIO -- Each 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 each of the Emerging Markets, European
Equity, Founders International Equity, Founders Passport and Japan portfolios
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.
<PAGE> 64
DISTRIBUTIONS AND TAXES
CORE BOND PORTFOLIO -- usually pays dividends from its net investment income
once a month, and distributes any net capital gains it has realized once a year.
EACH PORTFOLIO OTHER THAN CORE BOND PORTFOLIO -- usually pays dividends from its
net investment income and distributes any net capital gains it has realized once
a year.
Each share class will generate a different dividend because each has different
expenses. Distributions will be reinvested in the relevant portfolio unless the
participating insurance company instructs otherwise.
Since each 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 applicable 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 portfolios. 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).
EXCHANGE PRIVILEGE
SHAREHOLDERS CAN EXCHANGE SHARES of a class of a portfolio for shares of the
same class of any other portfolio or fund managed by Dreyfus that is offered
only to separate accounts established by insurance companies to fund VA
contracts and VLI policies, or into shares of any such portfolio or fund offered
without a separate class designation, or which makes available only one class,
subject to the terms and conditions relating to exchanges of the applicable
insurance company prospectus. Owners of VA contracts or VLI policies should
refer to the applicable insurance company prospectus for more information on
exchanging portfolio shares.
Account Information
<PAGE> 65
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Investment Portfolios
-----------------------------
SEC file number: 811-08673
More information on the portfolios is available free upon request, including the
following:
Annual/Semiannual Report
Describes each portfolio's performance, lists portfolio holdings and contains a
letter from the portfolio manager(s) discussing recent market conditions,
economic trends and portfolio strategies that significantly affected the
portfolio's performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the portfolios and their 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 certain fund 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 (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by E-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation
<PAGE>
-------------------------------------------------------------------------------
DREYFUS INVESTMENT PORTFOLIOS
CORE BOND 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 __, 2000
(FOR INITIAL SHARES AND SERVICE SHARES)
-------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the relevant current
Prospectus of the Core Bond, Core Value, Emerging Leaders, Emerging Markets,
European Equity, Japan, MidCap Stock, Technology Growth, Founders Growth,
Founders International Equity, Founders Passport and Founders Discovery
Portfolios, each dated December __, 2000 (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.
Portfolio shares are offered only to variable annuity and variable life
insurance separate accounts established by insurance companies ("Participating
Insurance Companies") to fund variable annuity contracts ("VA contracts") and
variable life insurance policies ("VLI policies"). VA contracts and VLI policies
are referred to collectively herein as the "Policies". Individuals may not
purchase shares of any Portfolio directly from the Fund. The Policies are
described in the separate prospectuses issued by the Participating Insurance
Companies.
Each Portfolio currently offers two classes of shares: Initial shares and
Service shares. VA contract holders and VLI policy holders should consult the
applicable prospectus of the separate account of the Participating Insurance
Company to determine which class of Portfolio shares may be purchased by the
separate account.
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.
<PAGE>
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE FUND AND PORTFOLIOS...................................3
Management of the Fund...................................................33
Management Arrangements..................................................36
How to Buy Shares........................................................43
Distribution Plan (Service Shares Only)..................................43
How to Redeem Shares.....................................................44
Exchange Privilege.......................................................45
Determination of Net Asset Value.........................................46
Dividends, Distributions and Taxes.......................................47
Portfolio Transactions...................................................49
Performance Information..................................................51
Information About the Fund and Portfolios................................54
Counsel and Independent Auditors.........................................55
Appendix.................................................................56
<PAGE>
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 nor hold more than 10% of the
outstanding voting 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.
Dreyfus Service Corporation (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 Core Bond 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. (Core
Bond Portfolio, 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 Core Bond and Emerging Markets Portfolios) 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. (Core Bond 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, interests in real estate mortgage investment
conduits ("REMICs"), adjustable rate mortgages, real estate investment trusts
("REITs"), 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 Core Bond 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 Core Bond 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 Core Bond 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.
REAL ESTATE INVESTMENT TRUSTS--A REIT is a corporation, or a business trust that
would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The
Code permits a qualifying REIT to deduct dividends paid, thereby effectively
eliminating corporate level Federal income tax and making the REIT a
pass-through vehicle for Federal income tax purposes. To meet the definitional
requirements of the Code, a REIT must, among other things, invest substantially
all of its assets in interests in real estate (including mortgages and other
REITs) or cash and government securities, derive most of its income from rents
from real property or interest on loans secured by mortgages on real property,
and distribute to shareholders annually a substantial portion of its otherwise
taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid REITs.
Equity REITs, which may include operating or finance companies, own real estate
directly and the value of, and income earned by, the REITs depends upon the
income of the underlying properties and the rental income they earn. Equity
REITs also can realize capital gains (or losses) by selling properties that have
appreciated (or depreciated) in value. Mortgage REITs can make construction,
development or long-term mortgage loans and are sensitive to the credit quality
of the borrower. Mortgage REITs derive their income from interest payments on
such loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also are
subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation and the possibility of failing to qualify for tax-free status
under the Code or to maintain exemption from the 1940 Act.
ADJUSTABLE-RATE MORTGAGE LOANS ("ARMS")--ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest rate
for a specified period of time, generally for either the first three, six,
twelve, thirteen, thirty-six, or sixty scheduled monthly payments. Thereafter,
the interest rates are subject to periodic adjustment based on changes in an
index. ARMs typically have minimum and maximum rates beyond which the mortgage
interest rate may not vary over the lifetime of the loans. Certain ARMs provide
for additional limitations on the maximum amount by which the mortgage interest
rate may adjust for any single adjustment period. Negatively amortizing ARMs may
provide limitations on changes in the required monthly payment. Limitations on
monthly payments can result in monthly payments that are greater or less than
the amount necessary to amortize a negatively amortizing ARM by its maturity at
the interest rate in effect during any particular month.
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. (Core Bond 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. (Core Bond 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) 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) 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.
PARTICIPATION INTERESTS. (Core Bond Portfolio only) The Core Bond Portfolio
may invest in short-term corporate obligations denominated in U.S. and foreign
currencies that are originated, negotiated and structured by a syndicate of
lenders ("Co-Lenders"), consisting of commercial banks, thrift institutions,
insurance companies, financial companies or other financial institutions one or
more of which administers the security on behalf of the syndicate (the "Agent
Bank"). Co-Lenders may sell such securities to third parties called
"Participants." The Portfolio may invest in such securities either by
participating as a Co-Lender at origination or by acquiring an interest in the
security from a Co-Lender or a Participant (collectively, "participation
interests"). Co-Lenders and Participants interposed between the Portfolio and
the corporate borrower (the "Borrower"), together with Agent Banks, are referred
herein as "Intermediate Participants."
The Portfolio also may purchase a participation interest in a portion of
the rights of an Intermediate Participant, which would not establish any direct
relationship between the Portfolio and the Borrower. A participation interest
gives the Portfolio an undivided interest in the security in the proportion that
the Portfolio's participation interest bears to the total principal amount of
the security. These instruments may have fixed, floating or variable rates of
interest. The Portfolio would be required to rely on the Intermediate
Participant that sold the participation interest not only for the enforcement of
the Portfolio's rights against the Borrower but also for the receipt and
processing of payments due to the Portfolio under the security. Because it may
be necessary to assert through an Intermediate Participant such rights as may
exist against the Borrower, in the event the Borrower fails to pay principal and
interest when due, the Portfolio may be subject to delays, expenses and risks
that are greater than those that would be involved if the Portfolio would
enforce its rights directly against the Borrower. Moreover, under the terms of a
participation interest, the Portfolio may be regarded as a creditor of the
Intermediate Participant (rather than of the Borrower), so that the Portfolio
may also be subject to the risk that the Intermediate Participant may become
insolvent. Similar risks may arise with respect to the Agent Bank if, for
example, assets held by the Agent Bank for the benefit of the Portfolio were
determined by the appropriate regulatory authority or court to be subject to the
claims of the Agent Bank's creditors. In such case, the Portfolio might incur
certain costs and delays in realizing payment in connection with the
participation interest or suffer a loss of principal and/or interest. Further,
in the event of the bankruptcy or insolvency of the Borrower, the obligation of
the Borrower to repay the loan may be subject to certain defenses that can be
asserted by such Borrower as a result of improper conduct by the Agent Bank or
Intermediate Participant.
MUNICIPAL OBLIGATIONS. (Core Bond Portfolio) Municipal obligations are debt
obligations issued by states, territories and possessions of the United States
and the District of Columbia and their political subdivisions, agencies and
instrumentalities, or multistate agencies or authorities, the interest from
which, in the opinion of bond counsel to the issuer, is exempt from Federal
income tax. Municipal obligations generally include debt obligations issued to
obtain funds for various public purposes as well as certain industrial
development bonds issued by or on behalf of public authorities. Municipal
obligations are classified as general obligation bonds, revenue bonds and notes.
General obligation bonds are secured by the issuer's pledge of its faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Industrial
development bonds, in most cases, are revenue bonds that do not carry the pledge
of the credit of the issuing municipality, but generally are guaranteed by the
corporate entity on whose behalf they are issued. Notes are short-term
instruments which are obligations of the issuing municipalities or agencies and
are sold in anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal obligations include municipal lease/purchase agreements
which are similar to installment purchase contracts for property or equipment
issued by municipalities. Municipal obligations bear fixed, floating or variable
rates of interest, which are determined in some instances by formulas under
which the municipal obligation's interest rate will change directly or inversely
to changes in interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum. Certain municipal obligations are subject to
redemption at a date earlier than their stated maturity pursuant to call
options, which may be separated from the related municipal obligation and
purchased and sold separately. The Core Bond Portfolio also may acquire call
options on specific municipal obligations. The Portfolio generally would
purchase these call options to protect the Portfolio from the issuer of the
related municipal obligation redeeming, or other holder of the call option from
calling away, the municipal obligation before maturity.
While, in general, municipal obligations are tax exempt securities having
relatively low yields as compared to taxable, non-municipal obligations of
similar quality, certain municipal obligations are taxable obligations, offering
yields comparable to, and in some cases greater than, the yields available on
other permissible Portfolio investments. Dividends received by shareholders on
Portfolio shares which are attributable to interest income received by the
Portfolio from municipal obligations generally will be subject to Federal income
tax. The Portfolio may invest in municipal obligations, the ratings of which
correspond with the ratings of other permissible Fund investments. The Portfolio
currently intends to invest no more than 25% of its assets in municipal
obligations. However, this percentage may be varied from time to time without
shareholder approval.
ZERO COUPON SECURITIES. (Core Bond Portfolio only) The Core Bond Portfolio
may invest in zero coupon U.S. Treasury securities, which are Treasury Notes and
Bonds that have been stripped of their unmatured interest coupons, the coupons
themselves and receipts or certificates representing interests in such stripped
debt obligations and coupons. Zero coupon securities also are issued by
corporations and financial institutions which constitute a proportionate
ownership of the issuer's pool of underlying U.S. Treasury securities. A zero
coupon security pays no interest to its holders during its life and is sold at a
discount to its face value at maturity. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having similar
maturities and credit qualities.
Zero coupon securities issued by private entities include bonds, notes, and
debentures that do not pay current interest and are issued at substantial
discounts from par value or, in some cases, that pay no current interest until a
stated date one or more years in the future, after which the issuer is obligated
to pay interest until maturity (in which case the interest rate is usually
higher than if interest were payable from the issuance date). Zero coupon
securities, including those issued by private entities, are subject to the risk
of the issuer's failure to pay interest and repay the principal value of the
security, which risk is enhanced in the case of below investment grade rated (or
of comparable quality, if unrated) zero coupon securities. Private entities also
may issue zero coupon securities which constitute a proportionate interest of
the issuer's pool of underlying U.S. Treasury securities. Zero coupon securities
issued directly by the U.S. Treasury include notes and bonds which have been
stripped of their interest coupons and receipts. While U.S. Treasury-related
zero coupon securities are not subject to the same credit risk as a security
issued directly by a private entity, they are subject to interest rate risk to
the same extent.
The Portfolio is required to accrue taxable income on zero coupon
securities and is required to distribute it to shareholders. Such distributions
may require the Portfolio to sell other securities and incur a gain or loss at a
time it may otherwise not want to in order to obtain the cash needed for these
distributions.
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.
DURATION. (Core Bond Portfolio only) As a measure of a fixed-income
security's cash flow, duration is an alternative to the concept of "term to
maturity" in assessing the price volatility associated with changes in interest
rates. Generally, the longer the duration, the more volatility an investor
should expect. For example, the market price of a bond with a duration of three
years would be expected to decline 3% if interest rates rose 1%. Conversely, the
market price of the same bond would be expected to increase 3% if interest rates
fell 1%. The market price of a bond with a duration of six years would be
expected to increase or decline twice as much as the market price of a bond with
a three-year duration. Duration is a way of measuring a security's maturity in
terms of the average time required to receive the present value of all interest
and principal payments as opposed to its term to maturity. The maturity of a
security measures only the time until final payment is due; it does not take
account of the pattern of a security's cash flows over time, which would include
how cash flow is affected by prepayments and by changes in interest rates.
Incorporating a security's yield, coupon interest payments, final maturity and
option features into one measure, duration is computed by determining the
weighted average maturity of a bond's cash flows, where the present values of
the cash flows serve as weights. In computing the duration of the Core Bond
Portfolio, the Manager will estimate the duration of obligations that are
subject to features such as prepayment or redemption by the issuer, put options
retained by the investor or other imbedded options, taking into account the
influence of interest rates on prepayments and coupon flows.
PORTFOLIO MATURITY. (Core Bond Portfolio only) The Core Bond Portfolio
typically will maintain an average effective maturity ranging between five and
ten years. However, to the extent the maturity of the Portfolio's benchmark
index is outside this range at a particular time (generally, this may occur
during other than usual market conditions), the Portfolio's average effective
maturity also may fall outside such range. For purposes of calculating average
effective portfolio maturity, a security that is subject to redemption at the
option of the issuer on a particular date (the "call date") which is prior to
the security's stated maturity may be deemed to mature on the call date rather
than on its stated maturity date. The call date of a security will be used to
calculate average effective portfolio maturity when the Manager reasonably
anticipates, based upon information available to it, that the issuer will
exercise its right to redeem the security. The Manager may base its conclusion
on such factors as the interest-rate paid on the security compared to prevailing
market rates, the amount of cash available to the issuer of the security, events
affecting the issuer of the security, and other factors that may compel or make
it advantageous for the issuer to redeem a security prior to its stated
maturity.
FOREIGN CURRENCY TRANSACTIONS. (All Portfolios, except the MidCap Stock
Portfolio) 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. A short position 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.
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 currently intends to borrow money only for temporary or
emergency (not leveraging) purposes. While such borrowings exceed 5% of the
Portfolio's total assets, the Portfolio will not make any additional
investments. Money borrowed will be subject to interest costs. The Core Bond,
Core Value, Emerging Leaders, Emerging Markets, European Equity, Japan, MidCap
Stock and Technology Growth Portfolios may borrow money for investment purposes
as described below under "Leverage."
LEVERAGE. (Core Bond, 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 (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 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. (Core Bond, 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. Each Portfolio 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 position being hedged and the price movements of the
futures contract. For example, if a Portfolio uses futures to hedge against the
possibility of a decline in the market value of securities held in its portfolio
and the prices of such securities instead increase, the Portfolio will lose part
or all of the benefit of the increased value of securities which it has hedged
because it will have offsetting losses in its futures positions. Furthermore, if
in such circumstances the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. A Portfolio may have to
sell such securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, a Portfolio may be required to segregate permissible liquid
assets 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. Each Portfolio may purchase and sell stock index
futures contracts. A stock index future obligates the Portfolio to pay or
receive an amount of cash equal to a fixed dollar amount specified in the
futures contract multiplied by the difference between the settlement price of
the contract on the contract's last trading day and the value of the index based
on the stock prices of the securities that comprise it at the opening of trading
in such securities on the next business day.
Each Portfolio, except the MidCap Stock Portfolio, may purchase and sell
currency futures. A foreign currency future obligates the Portfolio to purchase
or sell an amount of a specific currency at a future date at a specific price.
Each Portfolio, except the Emerging Markets Portfolio, may purchase and
sell interest rate futures contracts. An interest rate future obligates the
Portfolio to purchase or sell an amount of a specific debt security at a future
date at a specific price.
Successful use by the Portfolio of futures contracts will be subject to the
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. Each Portfolio 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, the Portfolio segregates
permissible liquid assets having a value equal to or greater than the exercise
price of the option to fulfill the obligation undertaken. The principal reason
for writing covered call and put options is to realize, through the receipt of
premiums, a greater return than would be realized on the underlying securities
alone. A Portfolio receives a premium from writing covered call or put options
which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Portfolio is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
SPECIFIC OPTIONS TRANSACTIONS. Each Portfolio, except the Core Bond Portfolio,
may purchase and sell call and put options in respect of specific securities (or
groups or "baskets" of specific securities) or stock indices listed on national
securities exchanges or traded in the over-the-counter market. An option on a
stock index is similar to an option in respect of specific securities, except
that settlement does not occur by delivery of the securities comprising the
index. Instead, the option holder receives an amount of cash if the closing
level of the stock index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
option. Thus, the effectiveness of purchasing or writing stock index options
will depend upon price movements in the level of the index rather than the price
of a particular stock.
Each Portfolio, except the MidCap Stock Portfolio, may purchase and sell
call and put options on foreign currency. These options convey the right to buy
or sell the underlying currency at a price which is expected to be lower or
higher than the spot price of the currency at the time the option is exercised
or expires.
Each Portfolio, except the Core Bond Portfolio, may purchase cash-settled
options on equity index swaps in pursuit of its investment objective. Equity
index swaps involve the exchange by the Portfolio with another party of cash
flows based upon the performance of an index or a portion of an index of
securities which usually includes dividends. 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 or sell
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 or sell the securities. 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 purchaser 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 Core Bond 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.
FORWARD ROLL TRANSACTIONS. (Core Bond Portfolio only) To enhance current
income, the Portfolio may enter into forward roll transactions with respect to
mortgage-related securities. In a forward roll transaction, the Portfolio sells
a mortgage-related security to a financial institution, such as a bank or
broker-dealer, and simultaneously agrees to purchase a similar security from the
institution at a later date at an agreed upon price. The securities that are
purchased will bear the same interest rate as those sold, but generally will be
collateralized by different pools of mortgages with different pre-payment
histories than those sold. During the period between the sale and purchase, the
Portfolio will not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale typically will be invested in short-term
instruments, particularly repurchase agreements, and the income from these
investments, together with any additional fee income received on the sale will
be expected to generate income for the Portfolio exceeding the yield on the
securities sold. Forward roll transactions involve the risk that the market
value of the securities sold by the Portfolio may decline below the purchase
price of those securities. The Portfolio will segregate permissible liquid
assets at least equal to the amount of the repurchase price (including accrued
interest).
INVESTMENT CONSIDERATIONS AND RISKS
EQUITY SECURITIES. (All Portfolios) 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) 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 Bond Portfolio, 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 Bond, 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.
Bond prices are inversely related to interest rate changes; however, bond
price volatility also is inversely related to coupon. Accordingly, below
investment grade securities may be relatively less sensitive to interest rate
changes than higher quality securities of comparable maturity, because of their
higher coupon. This higher coupon is what the investor receives in return for
bearing greater credit risk. The higher credit risk associated with below
investment grade securities potentially can have a greater effect on the value
of such securities than may be the case with higher quality issues of comparable
maturity, and will be a substantial factor in the Portfolio's relative share
price volatility. Although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk of
these securities. The Portfolio will rely on the judgment, analysis and
experience of the Manager (or Founders with respect to the Founders Portfolios)
in evaluating the creditworthiness of an issuer.
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 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) 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. Moreover, foreign
securities held by a Portfolio may trade on days when the Portfolio does not
calculate its net asset value and thus affect the Portfolio's net asset value on
days when investors have no access to the Portfolio.
With respect to the securities purchased by the Emerging Markets Portfolio and
certain securities that may be purchased by the Founders Portfolios and the Core
Bond, 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. (Core Bond Portfolio only) Mortgage-related
securities are complex derivative instruments, subject to both credit and
prepayment risk, and may be more volatile and less liquid, and more difficult to
price accurately, 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. These securities may be
particularly susceptible to economic downturns. It is likely that an economic
recession could disrupt severely the market for such securities and may have an
adverse impact on the value of such securities. Mortgage-related securities
generally are subject to credit risks associated with the performance of the
underlying mortgage properties and to prepayment risk. In certain instances, the
credit risk associated with mortgage-related securities can be reduced by third
party guarantees or other forms of credit support. Improved credit risk does not
reduce prepayment risk which is unrelated to the rating assigned to the
mortgage-related security. Prepayment risk can lead to fluctuations in value of
the mortgage-related security which may be pronounced. 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.
Certain mortgage-related securities that may be purchased by the Portfolio, such
as inverse floating rate collateralized mortgage obligations, have coupons that
move inversely to a multiple of a specific index which may result in a form of
leverage. As with other interest-bearing securities, the prices of certain
mortgage-related securities are inversely affected by changes in interest rates.
However, although the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in periods of
declining interest rates the mortgages underlying the security are more likely
to be prepaid. For this and other reasons, a mortgage-related security's stated
maturity may be shortened by unscheduled prepayments on the underlying
mortgages, and, therefore, it is not possible to predict accurately the
security's return to the Portfolio. Moreover, with respect to certain stripped
mortgage-backed securities, if the underlying mortgage securities experience
greater than anticipated prepayments of principal, the Portfolio may fail to
fully recoup its initial investment even if the securities are rated in the
highest rating category by a nationally recognized statistical rating
organization. During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity which generally would cause the value of such security to fluctuate
more widely in response to changes in interest rates. Were the prepayments on
the Portfolio's mortgage-related securities to decrease broadly, the Portfolio's
effective duration, and thus sensitivity to interest rate fluctuations, would
increase. Commercial real property loans, however, often contain provisions that
reduce the likelihood that such securities will be prepaid. The provisions
generally impose significant prepayment penalties on loans and in some cases
there may be prohibitions on principal prepayments for several years following
origination.
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
has adopted certain investment restrictions as fundamental policies and certain
other investment restrictions as non-fundamental policies, as described below.
CORE VALUE PORTFOLIO, MIDCAP STOCK PORTFOLIO, TECHNOLOGY GROWTH PORTFOLIO,
FOUNDERS DISCOVERY PORTFOLIO, FOUNDERS GROWTH PORTFOLIO, FOUNDERS INTERNATIONAL
EQUITY PORTFOLIO AND FOUNDERS PASSPORT PORTFOLIO ONLY. Each of these Portfolios
has adopted investment restrictions numbered 1 through 10 as fundamental
policies which cannot be changed, as to a Portfolio, without approval by the
holders of a majority (as defined in the 1940 Act) of the Portfolio's
outstanding voting shares. 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 Securities and Exchange Commission and the Fund's
Board.
8. Act as an underwriter of securities of other issuers, except to the
extent a Portfolio may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.
9. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent the activities permitted in Investment
Restriction Nos. 4, 6, 12 and 13 may be deemed to give rise to a senior
security.
10. Purchase securities on margin, but a Portfolio may make margin deposits
in connection with transactions in options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
11. Invest in the securities of a company for the purpose of exercising
management or control, but the Portfolio will vote the securities it owns as a
shareholder in accordance with its views.
12. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
13. Purchase, sell or write puts, calls or combinations thereof, except as
described in the Prospectus and Statement of Additional Information.
14. Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 15% of the value of its net assets would be so invested.
15. Purchase securities of other investment companies, except to the extent
permitted under the 1940 Act.
* * *
CORE BOND PORTFOLIO, EMERGING LEADERS PORTFOLIO, EUROPEAN EQUITY PORTFOLIO
AND JAPAN PORTFOLIO. Each of these Portfolios has adopted investment
restrictions numbered 1 through 10 as fundamental policies which cannot be
changed, as to a Portfolio, without approval by the holders of a majority (as
defined in the 1940 Act) of the Portfolio's outstanding voting shares.
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 instrumentalities may be purchased, without regard to any such
limitations.
3. Purchase the securities of any issuer if such purchase would cause the
Portfolio to hold more than 10% of the voting securities of such issuer. This
restriction applies only with respect to 75% of the Portfolio's total assets.
4. Invest in commodities, except that the Portfolio may purchase and sell
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
5. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Portfolio may purchase
and sell securities that are secured by real estate or issued by companies that
invest or deal in real estate or real estate investment trusts.
6. Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the
Portfolio's total assets). For purposes of this Investment Restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
7. Lend any securities or make any other loans if, as a result, more than
33-1/3% of its total assets would be lent to others, except that this limitation
does not apply to the purchase of debt obligations and the entry into repurchase
agreements. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the Fund's
Board.
8. Act as an underwriter of securities of other issuers, except to the
extent the Portfolio may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.
9. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent the activities permitted in Investment
Restriction Nos. 4, 6 and 12 may be deemed to give rise to a senior security.
10. Purchase securities on margin, but the Portfolio may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
11. Invest in the securities of a company for the purpose of exercising
management or control, but the Portfolio will vote the securities it owns as a
shareholder in accordance with its views.
12. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
13. Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 15% of the value of its net assets would be so invested.
* * *
EMERGING MARKETS PORTFOLIO ONLY. The Portfolio has adopted investment
restrictions numbered 1 through 8 as fundamental policies 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. 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 Emerging Markets
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 Securities and Exchange Commission 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.
<PAGE>
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
Dreyfus Service Corporation.......... 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 Core Bond, 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, Century Business Services, Inc. (formerly, International
Alliance Services, Inc.), a provider of various outsourcing functions for
small and medium sized companies, The Newark Group, a privately held
company providing a national network of paper recovery facilities,
paperboard mills and paperboard converting plants and QuikCAT.com, Inc., a
private company engaged in the development of high speed movement, routing,
storage and encryption of data across cable, wireless and all other modes
of data transport. 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 the Distributor.
From August 1994 until December 31, 1994, he was a director of Mellon
Financial Corporation. He is 57 years old and his address is 200 Park
Avenue, New York, New York 10166.
CLIFFORD L. ALEXANDER, JR., BOARD MEMBER. Chairman of the Board and Chief
Executive Officer of The Dun and Bradstreet Corporation and 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, MCI WorldCom and Mutual of America Life Insurance Company. He
is 67 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 The
International Executive Service Corps. She is also 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. Mrs. Benson is also
a member of the Town Meeting, Town of Amherst, Massachusetts. From 1987 to
2000, Ms. Benson was a director of COMSAT Corporation and was a Trustee of
the Alfred P. Sloan Foundation from 1975 to 1977 and from 1981 to 2000. She
was also a member of the Board of Trustees of Lafayette College from 1985
to 2000 for which she served as Vice Chairman of the Board of Trustees from
1990 to 2000. From 1980 to 1994, Mrs. Benson was a director of The Grumman
Corporation, from 1990 to 1998, she was a director of the General RE
Corporation, and from 1987 to 1999, she was a director of Logistics
Management Institute. 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 73 years old and her address is 46 Sunset Avenue,
Amherst, Massachusetts 01002.
The Fund has a standing nominating committee comprised of its Board members
who are not "interested persons" of the Fund, as defined in the 1940 Act. The
function of the nominating committee is to select and nominate all candidates
who are not "interested persons" of the Fund for election to the Fund's Board.
Currently, the Fund typically pays its Board members its allocated portion
of an annual retainer of $25,000 and a fee of $4,000 per meeting ($500 per
telephone meeting) attended for the Fund and four other funds in the Dreyfus
Family of Funds, and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board members,
if any, 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, 1999, pursuant to the
compensation schedule then in effect, is as follows:
<TABLE>
<CAPTION>
TOTAL COMPENSATION FROM
AGGREGATE FUND AND FUND COMPLEX
NAME OF BOARD MEMBER COMPENSATION FROM FUND** PAID TO BOARD MEMBER
-------------------- ---------------------- --------------------
<S> <C> <C> <C>
Joseph S. DiMartino $2,500 $642,177 (189)
Clifford L. Alexander, Jr. $2,000 $85,378 (43)
Lucy Wilson Benson $2,000 $76,500 (29)
-------------------
* 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 $1,151 for all Board members as a group.
</TABLE>
OFFICERS OF THE FUND
STEPHEN E. CANTER, PRESIDENT. President, Chief Operating Officer, Chief
Investment Officer and a director of the Manager, and an officer of other
investment companies advised and administered by the Manager. Mr. Canter
also is a Director and Executive Committee Member of the other investment
management subsidiaries of Mellon Financial Corporation, each of which is
an affiliate of the Manager. He is 55 years old.
MARK N. JACOBS, VICE PRESIDENT. Vice President, Secretary, and General Counsel
of the Manager, and an officer of other investment companies advised and
administered by the Manager. He is 54 years old.
JOSEPH CONNOLLY, VICE PRESIDENT AND TREASURER. Director - Mutual Fund Accounting
of the Manager, and an officer of other investment companies advised and
administered by the Manager. He is 43 years old.
STEVEN F. NEWMAN, SECRETARY. Assistant Secretary and Associate General Counsel
of the Manager, and an officer of other investment companies advised and
administered by the Manager. He is 51 years old.
JEFF PRUSNOFSKY, ASSISTANT SECRETARY. Associate General Counsel of the Manager,
and an officer of other investment companies advised and administered by
the Manager. He is 35 years old.
MICHAEL A. ROSENBERG, ASSISTANT SECRETARY. Associate General Counsel of the
Manager, and an officer of other investment companies advised and
administered by the Manager. He is 40 years old.
WILLIAM MCDOWELL, ASSISTANT TREASURER. Senior Accounting Manager - Taxable Fixed
Income of the Manager, and an officer of other investment companies advised
and administered by the Manager. He is 42 years old.
JAMES WINDELS, ASSISTANT TREASURER. Senior Treasury Manager of the Manager, and
an officer of other investment companies advised and administered by the
Manager. He is 42 years old.
The address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166.
The Fund's Board members and officers, as a group, owned less than 1% of
each Portfolio's shares outstanding on December __, 2000.
The following shareholders are known by the Fund to own of record 5% or
more of the indicated Portfolio's shares outstanding on December __, 2000:
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 global multibank financial 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 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; J. David Officer, Vice Chairman and a director;
Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr., Executive Vice
President; Stephen R. Byers, Senior Vice President; Patrice M. Kozlowski, Senior
Vice President-Corporate Communications; Mark N. Jacobs, Vice President, General
Counsel and Secretary; Diane P. Durnin, Vice President-Product Development; Mary
Beth Leibig, Vice President-Human Resources; Ray Van Cott, Vice
President-Information Systems; Theodore A. Schachar, Vice President-Tax; Wendy
Strutt, 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 G. McGuinn, Richard W. Sabo and Richard F.
Syron, directors.
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; Julie D.
DiIorio, Vice President; Francis P. Gaffney, Senior Vice President; Laurine
Garrity, Senior Vice President; Robert T. Kelly, Vice President; Douglas A.
Loeffler, Vice President; Andra C. Ozols, Vice President; David L. Ray, Senior
Vice President and Treasurer; Richard A. Sampson, Senior Vice President; Kevin
S. Sonnett, Vice President; Tracy P. Stouffer, Vice President; and Lisa G.
Warshafsky, 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; Joanna Bowen,
Officer; Keiran Gallagher, Officer; Philip Collins, Officer; Guy Christie,
Officer; Helena Morrisey, Officer; April Larusse, Officer; Alexander Stanic,
Officer; Paul Butler, Officer; Susan Ritchie, Officer; Julian Campbell,
Compliance Officer; and Mary-Ann O'Hara, Chief Financial Officer.
PORTFOLIO MANAGEMENT. 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,
provide 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 Bond
Portfolio are Michael Hoeh, Roger King, John Koerber, Gerald E. Thunelius and
William Howarth. 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 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.
Mellon Bank, N.A., the Manager's parent, and its affiliates may have
deposit, loan and commercial banking or other relationships with the issuers of
securities purchased by a Portfolio. The Manager has informed the Fund that in
making its investment decisions it does not obtain or use material inside
information that Mellon Bank, N.A. or its affiliates may possess with respect to
such issuers.
The Fund, the Manager, Founders, Newton and the Distributor each have
adopted a code of ethics that permits its personnel, subject to such respective
code, to invest in securities, including securities that may be purchased or
held by a Portfolio. The Manager's code of ethics (the "Code") subjects its
employees' personal securities transactions to various restrictions to ensure
that such trading does not disadvantage any fund advised by the Manager. In that
regard, the Manager's portfolio managers and other investment personnel must
preclear and report their personal securities transactions and holdings, which
are reviewed for compliance with the Code and are also subject to the oversight
of Mellon's Investment Ethics Committee. Portfolio managers and other investment
personnel who comply with the Code'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.
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.
EXPENSES. 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. In addition, each Portfolio's Service shares are subject
to an annual distribution fee. See "Distribution Plan (Service Shares Only)."
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.
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
----------------- ---------------
Core Bond Portfolio .60%
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 periods from its commencement of operations through
December 31, 1998 and/or 1999, were as follows:
<PAGE>
MANAGEMENT FEE PAYABLE
----------------------
1998* 1999
----- ----
Core Value Portfolio $26,068(1) $80,234
Midcap Stock Portfolio $40,453(1) $92,701
Founders Growth Portfolio $4,286(2) $30,158
Founders International Equity Portfolio $5,388(2) $27,223
Founders Passport Portfolio $13,578(2) $73,558
European Equity Portfolio N/A $17,955(3)
Emerging Leaders Portfolio N/A $871(4)
Emerging Markets Portfolio N/A $1,216(4)
Founders Discovery Portfolio N/A $886(4)
Japan Portfolio N/A $925(4)
Technology Growth Portfolio N/A $57,840(5)
REDUCTION IN FEE
----------------
1998 1999
---- ----
Core Value Portfolio $26,068 $53,959
Midcap Stock Portfolio $40,453 $59,994
Founders Growth Portfolio $4,286 $30,158
Founders International Equity Portfolio $5,388 $27,223
Founders Passport Portfolio $13,578 $73,558
European Equity Portfolio N/A $17,955
Emerging Leaders Portfolio N/A $871
Emerging Markets Portfolio N/A $1,216
Founders Discovery Portfolio N/A $886
Japan Portfolio N/A $925
Technology Growth Portfolio N/A $19,780
NET FEE PAID
-----------
1998 1999
---- ----
Core Value Portfolio $0 $26,275
Midcap Stock Portfolio $0 $32,707
Founders Growth Portfolio $0 $0
Founders International Equity Portfolio $0 $0
Founders Passport Portfolio $0 $0
European Equity Portfolio N/A $0
Emerging Leaders Portfolio N/A $0
Emerging Markets Portfolio N/A $0
Founders Discovery Portfolio N/A $0
Japan Portfolio N/A $0
Technology Growth Portfolio N/A $38,060
-----------------
* 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.
(3) From May 1, 1999 (commencement of operations) through December 31, 1999.
(4) From December 15, 1999 (commencement of operations) through December 31,
1999.
(5) From August 31, 1999 (commencement of operations) through December 31, 1999.
The Core Bond Portfolio has not completed its 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 September 30, 1998 (commencement of operations) through December 31, 1998
were waived in their entirety by Founders pursuant to an undertaking. For the
fiscal year ended December 31, 1999 with respect to Founders Growth, Founders
International Equity and Founders Passport Portfolios, and for the period
December 15, 1999 (commencement of operations) through December 31, 1999 with
respect to Founders Discovery Portfolio, the Manager paid Founders $0, $0, $0
and $0, respectively, in sub-advisory fees.
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%
For the period May 1, 1999 (commencement of operations) through December
31, 1999 with respect to the European Equity Portfolio and for the period
December 15, 1999 (commencement of operations) through December 31, 1999 with
respect to the Japan Portfolio, the Manager paid Newton $0 and $0, respectively,
in sub-advisory fees.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Portfolio's assets increases.
DISTRIBUTOR. Dreyfus Service Corporation, a wholly-owned subsidiary of the
Manager, located at 200 Park Avenue, New York, New York 10166, serves as the
Fund's distributor on a best efforts basis pursuant to an agreement with the
Fund 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 Core Bond, 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
Each Portfolio offers two classes of shares--Initial shares and Service
shares. The classes are identical, except as to the expenses borne by each class
which may affect performance. See "Distribution Plan (Service Shares Only)."
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 classes of the Portfolios
and 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 of each Class of shares is computed by
dividing the value of a Portfolio's net assets represented by such class (i.e.,
the value of its assets less liabilities) by the total number of shares of such
class outstanding. For information regarding methods employed in valuing each
Portfolio's investments, see "Determination of Net Asset Value."
DISTRIBUTION PLAN
(SERVICE SHARES ONLY)
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
1940 Act (the "Rule") for its Service shares. The Rule provides, among other
things, that an investment company may bear expenses of distributing its shares
only pursuant to a plan adopted in accordance with the Rule. The Board has
adopted a separate plan (the "Distribution Plan") with respect to each
Portfolio's Service shares pursuant to which the Portfolio pays the Distributor
at an annual rate of .25% of the value of the average daily net assets of the
portfolio's Service shares for distributing Service shares, for advertising and
marketing related to Service shares and for servicing and/or maintaining
accounts of Service class shareholders. Under the Distribution Plan, with
respect to Service shares, the Distributor may make payments to insurance
companies, brokers and dealers in respect to these services. The fees payable
under the Distribution Plan are payable without regard to actual expenses
incurred. The Board believes that there is a reasonable likelihood that the
Fund's Distribution Plan will benefit each Portfolio and the holders of its
Service shares.
A quarterly report of the amounts expended under the Distribution Plan, and
the purposes for which such expenditures were incurred, must be made to the
Fund's Board for its review. In addition, the Distribution Plan provides that it
may not be amended to increase materially the costs which holders of Service
shares may bear pursuant to the Distribution Plan without the approval of the
holders of such Class of shares and that other material amendments of the
Distribution Plan must be approved by the Board, and by the Board members who
are not "interested persons" (as defined in the 1940 Act) of the Fund and have
no direct or indirect financial interest in the operation of the Distribution
Plan or in any agreements entered into in connection with the Distribution Plan,
by vote cast in person at a meeting called for the purpose of considering such
amendments. The Distribution Plan is subject to annual approval by such vote of
its Board members cast in person at a meeting called for the purpose of voting
on the Distribution Plan. The Distribution Plan may be terminated at any time as
to the Service Class of shares by vote of a majority of the Board members who
are not "interested persons" and have no direct or indirect financial interest
in the operation of the Distribution Plan or in any agreements entered into in
connection with the Distribution Plan or by vote of the holders of a majority of
such Class of shares.
No payments were made pursuant to the Distribution Plan for the fiscal year
ended December 31, 1999 for any Portfolio since neither Service shares nor the
Distribution Plan were in existence during that time period.
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 prospectus in this
regard. The value of the shares redeemed may be more or less than their original
cost, depending on the Portfolio's then-current net asset value. No charges are
imposed by the Fund when shares are redeemed.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission.
Should any conflict between VA contract holders and VLI policy holders
arise which would require that a substantial amount of net assets be withdrawn,
orderly portfolio management could be disrupted to the potential detriment of
such contract holders and policy holders.
REDEMPTION COMMITMENT. The Fund has committed to pay in cash all redemption
requests by any shareholder of record, limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the value of a Portfolio's net assets
at the beginning of such period. Such commitment is irrevocable without the
prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amount, the Fund's Board reserves the
right to make payments in whole or part in securities or other assets of the
Portfolio in case of an emergency or any time a cash distribution would impair
the liquidity of the Portfolio to the detriment of the existing shareholders. In
such event, the securities would be valued in the same manner as the Portfolio's
investments are valued. If the recipient sells such securities, brokerage
charges 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 Securities and Exchange Commission so that disposal of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the Securities and Exchange
Commission by order may permit to protect the Fund's shareholders.
EXCHANGE PRIVILEGE
Shareholders can exchange shares of a class for shares of the same class of
any other portfolio or fund managed by the Manager that is offered only to
separate accounts established by Participating Insurance Companies to fund VA
contracts and VLI policies, into shares of any such portfolio or fund offered
without a separate class designation, or into shares of a different class of any
such portfolio or fund but only if that other class is the only class offered by
the portfolio or fund, subject to the terms and conditions relating to exchanges
of the applicable Participating Insurance Company prospectus. Owners of VA
contracts or VLI policies should refer to the applicable Participating Insurance
Company prospectus for more information on exchanging Portfolio shares. The Fund
reserves the right to modify or discontinue its exchange program at any time
upon 60 days' notice to the Participating Insurance Companies.
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 foreign investment securities of the Core Bond
Portfolio, Core Value Portfolio, Emerging Leaders Portfolio, Emerging Markets
Portfolio, European Equity Portfolio, Japan Portfolio or any Founders Portfolio.
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 any fee waiver or expense reimbursement arrangement),
and fees pursuant to the Distribution Plan, with respect to each Portfolio's
Service shares, are accrued daily and taken into account for the purpose of
determining the net asset value of the relevant Portfolio's shares.
Substantially all of the Core Bond 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 Core Bond Portfolio
which had not commenced operations) has qualified as a regulated investment
company under the Code for the period ended December 31, 1999. It is expected
that the Core Bond Portfolio will qualify as a regulated investment company
under the Code. Each Portfolio intends to continue to so qualify as long as such
qualification is in the best interests of its shareholders. As a regulated
investment company, each Portfolio will pay no Federal income tax on net
investment income and net realized securities gains to the extent that such
income and gains are distributed to shareholders in accordance with applicable
provisions of the Code. To qualify as a regulated investment company, the
Portfolio must meet several requirements. These requirements include the
following: (1) at least 90% of the Portfolio's gross income must be derived from
dividends, interest, payments with respect to securities loans, gains from the
sale or disposition of stock, securities or foreign currencies or other income
(including gain from options, futures or forward contracts) derived in
connection with the Portfolio's investment business, (2) at the close of each
quarter of the Portfolio's taxable year, (a) at least 50% of the value of the
Portfolio's assets must consist of cash, United States Government securities,
securities of other regulated investment companies and other securities (limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Portfolio and not more than 10% of the outstanding voting securities of
such issuer) and (b) not more than 25% of the value of the Portfolio's assets
may be invested in the securities of any one issuer (other than United States
Government securities or securities of other regulated investment companies) or
of two or more issuers which the Portfolio controls and which are determined to
be engaged in similar or related trades or businesses and (3) at least 90% of
the Portfolio's net income (consisting of net investment income and net
short-term capital gain) must be distributed to its shareholders. The 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.
In connection with its portfolio securities transactions for the fiscal
periods ended December 31, 1998 and 1999, 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:
<TABLE>
<CAPTION>
CONCESSIONS ON PRINCIPAL
NAME OF PORTFOLIO BROKERAGE COMMISSIONS PAID TRANSACTIONS
----------------- -------------------------- ---------------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Core Value $9,350(1) $24,894 $0 $23,159
MidCap Stock $20,261(1) $21,859 $0 $0
Founders Growth $4,258(2) $6,510 $0 $1,488
Founders International Equity $7,518(2) $23,532 $0 $0
Founders Passport $11,415(2) $134,550 $0 $0
European Equity N/A $12,362(3) N/A $0
Emerging Leaders N/A $2,569(4) N/A $0
Emerging Markets N/A $5,818(4) N/A $0
Founders Discovery N/A $664(4) N/A $0
Japan N/A $3,445(4) N/A $0
Technology Growth N/A $10,889(5) N/A $7,978
------------------
(1) From May 1, 1998 (commencement of operations) through December 31, 1998.
(2) From September 30, 1998 (commencement of operations) through December 31,
1998.
(3) From May 1, 1999 (commencement of operations) through December 31, 1999.
(4) From December 15, 1999 (commencement of operations) through December 31,
1999.
(5) From August 31, 1999 (commencement of operations) through December 31,
1999.
</TABLE>
The aggregate amount of transactions during the fiscal period ended
December 31, 1999 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:
<TABLE>
<CAPTION>
NAME OF PORTFOLIO TRANSACTION AMOUNT COMMISSIONS AND CONCESSIONS
----------------- ------------------ ----------------------------
<S> <C> <C>
Core Value $0 $0
MidCap Stock $0 $0
Founders Growth $0 $0
Founders International Equity $0 $0
Founders Passport $0 $0
European Equity(1) $0 $0
Emerging Leaders(2) $45,438 $120
Emerging Markets(2) $16,000 $50
Founders Discovery(2) $0 $0
Japan(2) $0 $0
Technology Growth(3) $878,081 $550
------------------
(1) From May 1, 1999 (commencement of operations) through December 31, 1999.
(2) From December 15, 1999 (commencement of operations) through December 31,
1999.
(3) From August 31, 1999 (commencement of operations) through December 31,
1999.
</TABLE>
The Core Bond Portfolio has not completed its first fiscal year.
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, including Dreyfus Investment
Services Corporation and Dreyfus Brokerage Services, Inc. ("DBS"). 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, Newton or
their affiliates are reasonable and fair.
For the period August 31, 1999 (commencement of operations) through
December 31, 1999, Technology Growth Portfolio paid to DBS brokerage commissions
of $3,025. During this period, this amounted to approximately 28% of the
aggregate brokerage commissions paid by Technology Growth Portfolio for
transactions involving approximately 30% of the aggregate dollar amount of
transactions for which the Technology Growth Portfolio paid brokerage
commissions.
PERFORMANCE INFORMATION
Performance figures for the Portfolios will not reflect the separate
charges applicable to the Policies offered by Participating Insurance Companies.
The current yield for the 30-day period ended June 30, 2000 for Core Bond
Portfolio was 6.01%.
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.
The average annual total return for the periods indicated ended June 30,
2000, for Initial shares of the indicated Portfolios was as follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL
TOTAL RETURN TOTAL RETURN
NAME OF PORTFOLIO/CLASS ONE YEAR SINCE INCEPTION
----------------------- -------------- ---------------
<S> <C> <C>
Core Value - Initial shares 1.00% 5.62% (1)
MidCap Stock - Initial shares 13.57% 6.72% (1)
Founders Growth - Initial shares 19.91% 35.53% (2)
Founders International Equity - Initial shares 43.54% 39.64% (2)
Founders Passport - Initial shares 52.50% 45.66% (2)
European Equity - Initial shares 35.41% 27.09% (3)
--------------------
(1) From May 1, 1998 (commencement of operations) through June 30, 2000.
(2) From September 30, 1998 (commencement of operations) through June 30, 2000.
(3) From April 30, 1999 (commencement of operations) through June 30, 2000.
</TABLE>
No average annual total return figures are provided for the Core Bond, Emerging
Leaders, Emerging Markets, Founders Discovery, Japan and Technology Growth
Portfolios since they had not completed a full year of operations as of the date
of the performance figures provided for the other Portfolios.
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 the periods indicated ended June 30,
2000, for Initial shares of the indicated Portfolios was as follows:
TOTAL RETURN
NAME OF PORTFOLIO/CLASS (NOT ANNUALIZED)
----------------------- -----------------
Core Value - Initial shares (1) 12.60%
Midcap Stock - Initial shares (1) 15.17%
Founders Growth - Initial shares (2) 70.24%
Founders International Equity - Initial shares (2) 79.37%
Founders Passport - Initial shares (2) 93.12%
European Equity - Initial shares (3) 32.37%
Emerging Leaders - Initial shares (4) 24.69%
Emerging Markets - Initial shares (4) 0.82%
Founders Discovery - Initial shares (4) 31.49%
Japan - Initial shares (4) 19.93%
Technology Growth - Initial shares (5) 75.99%
Core Bond - Initial Shares(6) 2.25%
-------------------
(1) From May 1, 1998 (commencement of operations) through June 30, 2000.
(2) From September 30, 1998 (commencement of operations) through June 30, 2000.
(3) From May 1, 1999 (commencement of operations) through June 30, 2000.
(1) From December 15, 1999 (commencement of operations) through June 30, 2000.
(2) From August 31, 1999 (commencement of operations) through June 30, 2000.
(3) From May 1, 2000 (commencement of operations) through June 30, 2000.
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.
No performance data has been provided for Service shares of the Portfolios
since they were not offered as of June 30, 2000.
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 a Portfolio may refer to or
discuss then-current or past economic or financial conditions, developments
and/or events. From time to time, advertising materials for a Portfolio also may
refer to Morningstar ratings and related analyses supporting the rating, and may
refer to, or include, commentary by the Portfolio'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's shares are classified into two classes. Each Portfolio
share has one vote and shareholders will vote in the aggregate and not by class,
except as otherwise required by law or with respect to any matter which affects
only one class. Each Portfolio share, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Portfolio
shares 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.
<PAGE>
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, as amended, are incorporated by reference
to Exhibit (b) of Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A, filed on February 14, 2000.
(d)(1) Revised Management Agreement is incorporated by reference to
Exhibit (d)(1) of Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A, filed on February 14, 2000.
(d)(2) Sub-Investment Advisory Agreements are incorporated by reference
to Exhibit (d)(2) of Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A, filed on December 15, 1999.
(e) Form of Distribution Agreement is incorporated by reference to
Exhibit (e) of Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A, filed on February 14, 2000.
(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.*
(m) Distribution (12b-1) Plan.
(o) Rule 18f-3 Plan.
(p)(1) Code of Ethics adopted by the Registrant is incorporated by
reference to Exhibit (p) of Post-Effective Amendment No. 12 to
the Registration Statement on Form N-1A, filed on February
14, 2000.
(p)(2) Codes of Ethics adopted by the Sub-Investment Advisers to the
Registrant is incorporated by reference to Exhibit (p) of
Post-Effective Amendment No. 12 to the Registration Statement on
Form N-1A, filed on February 14, 2000.
__________________
* To be filed by Amendment.
OTHER EXHIBITS
(a) Powers of Attorney are incorporated by reference
to Other Exhibits of Post-Effective Amendment
No. 12 to the Registration Statement on Form N-1A,
filed on February 14, 2000.
(b) Certificate of Assistant Secretary is incorporated
by reference to Other Exhibits of Post-Effective
Amendment No. 12 to the Registration Statement on
Form N-1A, filed on February 14, 2000.
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 Board member, 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
Board member, 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 From N-1A, filed on September 15, 1998.
Reference is also made to the Distribution Agreement filed as
Exhibit (e).
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
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 and manager 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 and distributor of other
investment companies advised and administered by Dreyfus. Dreyfus
Investment Advisors, Inc., another wholly-owned subsidiary,
provides investment management services to various pension plans,
institutions and individuals.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER (CONTINUED)
OFFICERS AND DIRECTORS OF INVESTMENT ADVISER
<TABLE>
<CAPTION>
NAME AND POSITION
WITH DREYFUS OTHER BUSINESSES POSITION HELD DATES
------------------ ---------------- ------------- -----
<S> <C> <C> <C>
CHRISTOPHER M. CONDRON Franklin Portfolio Associates, Director 1/97 - Present
Chairman of the Board and LLC*
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
Director 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 Financial Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Founders Asset Management, Chairman 12/97 - Present
LLC**** Director 12/97 - Present
The Boston Company, Inc.* Vice Chairman 1/94 - Present
Director 5/93 - Present
Laurel Capital Advisors, LLP+ Executive 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 - 1/97
Strategies, Inc. * Director 6/89 - 1/97
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 Financial 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 R. BYERS Dreyfus Service Corporation++ Senior Vice President 3/00 - Present
Director of Investments
Gruntal & Co., LLC Executive Vice President 5/97 - 11/99
New York, NY Partner 5/97 - 11/99
Executive Committee 5/97 - 11/99
Member
Board of Directors 5/97 - 11/99
Member
Treasurer 5/97 - 11/99
Chief Financial Officer 5/97 - 6/99
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, Director 2/99 - Present
LLC*
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***
Founders Asset Management, Member, Board of 12/97 - Present
LLC**** Managers
Acting Chief Executive 7/98 - 12/98
Officer
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++ Chief Executive Officer 3/00 - Present
Vice Chairman - Institutional and Chairman of the
And Director Board
Executive Vice President 4/96 - 3/00
Director 9/96 - Present
Founders Asset Management, Member, Board of 2/99 - Present
LLC**** Managers
Dreyfus Investment Advisors, Inc. Director 1/00 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
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 Financial Corporation+ Senior Vice Chairman 1/99 - Present
Director Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
Treasurer 1/90 - 5/98
Mellon Bank, N.A.+ Senior Vice Chairman 3/98 - Present
Vice Chairman 6/92 - 3/98
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Corporation Controller 10/90 - 2/99
500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Executive Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+
Mellon Financial Services Treasurer 12/87 - Present
Corporation # 5+
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
LAWRENCE S. KASH Dreyfus Investment Director 4/97 - 12/99
Vice Chairman Advisors, Inc.++
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, Member, Board of 12/97 - 12/99
LLC**** Managers
The Boston Company Advisors, Chairman 12/95 - 1/99
Inc. Chief Executive Officer 12/95 - 1/99
Wilmington, DE President 12/95 - 1/99
The Boston Company, Inc.* Director 5/93 - 1/99
President 5/93 - 1/99
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
Boston Safe Deposit & Trust Co.+ Director 6/93 - 1/99
Executive Vice President 6/93 - 4/98
MARTIN G. MCGUINN Mellon Financial 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
J. DAVID OFFICER Dreyfus Service Corporation++ President 3/00 - Present
Vice Chairman Executive Vice President 5/98 - 3/00
And Director Director 3/99 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
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
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
North Miami Beach, FL 33180
Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - 1/99
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - 6/99
Services, Inc.* Director 8/96 - 6/99
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 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 President 12/98 - Present
Director LLC**** Chief Executive Officer 12/98 - Present
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY 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
Franklin Portfolio Associates, Director 3/97 - Present
LLC*
Boston Safe Deposit and Trust Executive Committee 1/99 - Present
Company* Member
Director 1/99 - Present
The Boston Company, Inc.* Executive Committee 1/99 - Present
Member 1/99 - Present
Director
Buck Consultants, Inc.++ Director 7/97 - Present
Newton Asset Management LTD Executive Committee 10/98 - Present
(UK) Member
London, England Director 10/98 - Present
Mellon Asset Management Non-Resident Director 11/98 - Present
(Japan) Co., LTD
Tokyo, Japan
TBCAM Holdings, Inc.* Director 10/97 - Present
The Boston Company Asset Director 1/98 - Present
Management, LLC*
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 2/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates; LLP+ Trustee 1/98 - Present
Chairman 1/98 - Present
Mellon Equity Associates; LLP+ Trustee 1/98 - Present
Chairman 1/98 - 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
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Treasurer 3/99 - Present
Organization, Inc.++ Assistant Treasurer 3/93 - 3/99
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
WILLIAM T. SANDALLS, JR. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - Present
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97 - 12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
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 Advertising
Development Division
PATRICE M. KOZLOWSKI NONE
Vice President - Corporate
Communications
MARY BETH LEIBIG NONE
Vice President -
Human Resources
THEODORE A. SCHACHAR Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
The Dreyfus Consumer Credit Chairman 6/99 - Present
Corporation ++ President 6/99 - Present
Dreyfus Investment Advisors, Vice President - Tax 10/96 - Present
Inc.++
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Vice President - Tax 10/96 - Present
Inc.++
WENDY STRUTT None
Vice President
RICHARD TERRES None
Vice President
RAYMOND J. VAN COTT Mellon Financial Corporation+ Vice President 7/98 - Present
Vice-President -
Information Systems
Computer Sciences Corporation Vice President 1/96 - 7/98
El Segundo, CA
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.
</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) Dreyfus A Bonds Plus, Inc.
2) Dreyfus Appreciation Fund, Inc.
3) Dreyfus Balanced Fund, Inc.
4) Dreyfus BASIC GNMA Fund
5) Dreyfus BASIC Money Market Fund, Inc.
6) Dreyfus BASIC Municipal Fund, Inc.
7) Dreyfus BASIC U.S. Government Money Market Fund
8) Dreyfus California Intermediate Municipal Bond Fund
9) Dreyfus California Tax Exempt Bond Fund, Inc.
10) Dreyfus California Tax Exempt Money Market Fund
11) Dreyfus Cash Management
12) Dreyfus Cash Management Plus, Inc.
13) Dreyfus Connecticut Intermediate Municipal Bond Fund
14) Dreyfus Connecticut Municipal Money Market Fund, Inc.
15) Dreyfus Florida Intermediate Municipal Bond Fund
16) Dreyfus Florida Municipal Money Market Fund
17) Dreyfus Founders Funds, Inc.
18) The Dreyfus Fund Incorporated
19) Dreyfus Global Bond Fund, Inc.
20) Dreyfus Global Growth Fund
21) Dreyfus GNMA Fund, Inc.
22) Dreyfus Government Cash Management Funds
23) Dreyfus Growth and Income Fund, Inc.
24) Dreyfus Growth and Value Funds, Inc.
25) Dreyfus Growth Opportunity Fund, Inc.
26) Dreyfus Debt and Equity Funds
27) Dreyfus Index Funds, Inc.
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Preferred Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Funds, Inc.
34) Dreyfus Investment Grade Bond Funds, Inc.
35) Dreyfus Investment Portfolios
36) The Dreyfus/Laurel Funds, Inc.
37) The Dreyfus/Laurel Funds Trust
38) The Dreyfus/Laurel Tax-Free Municipal Funds
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus MidCap Index Fund
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Municipal Cash Management
54) Dreyfus New York Tax Exempt Bond Fund, Inc.
55) Dreyfus New York Tax Exempt Intermediate Bond Fund
56) Dreyfus New York Tax Exempt Money Market Fund
57) Dreyfus U.S. Treasury Intermediate Term Fund
58) Dreyfus U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus U.S. Treasury Short Term Fund
61) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
62) Dreyfus Pennsylvania Municipal Money Market Fund
63) Dreyfus Premier California Municipal Bond Fund
64) Dreyfus Premier Equity Funds, Inc.
65) Dreyfus Premier International Funds, Inc.
66) Dreyfus Premier GNMA Fund
67) Dreyfus Premier Worldwide Growth Fund, Inc.
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Equity Funds
72) Dreyfus Short-Intermediate Government Fund
73) Dreyfus Short-Intermediate Municipal Bond Fund
74) The Dreyfus Socially Responsible Growth Fund, Inc.
75) Dreyfus Stock Index Fund
76) Dreyfus Tax Exempt Cash Management
77) The Dreyfus Premier Third Century Fund, Inc.
78) Dreyfus Treasury Cash Management
79) Dreyfus Treasury Prime Cash Management
80) Dreyfus Variable Investment Fund
81) Dreyfus Worldwide Dollar Money Market Fund, Inc.
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
84) General Government Securities Money Market Funds, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Funds, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
(b)
<TABLE>
<CAPTION>
POSITIONS AND
NAME AND PRINCIPAL OFFICES WITH
BUSINESS ADDRESS POSITIONS AND OFFICES WITH THE DISTRIBUTOR REGISTRANT
---------------- ------------------------------------------ -------------
<S> <C> <C>
Thomas F. Eggers* Chief Executive Officer and Chairman of the Board None
J. David Officer* President and Director None
Stephen Burke* Executive Vice President None
Charles Cardona* Executive Vice President None
Anthony DeVivio** Executive Vice President None
David K. Mossman** Executive Vice President None
Jeffrey N. Nachman*** Executive Vice President and Chief Operations Officer None
William T. Sandalls, Jr.* Executive Vice President and Director None
Wilson Santos** Executive Vice President and Director of Client Services None
William H. Maresca* Chief Financial Officer None
Ken Bradle** Senior Vice President None
Stephen R. Byers* Senior Vice President None
Frank J. Coates* Senior Vice President None
Joseph Connolly* Senior Vice President Vice President
and Treasurer
William Glenn* Senior Vice President None
Michael Millard** Senior Vice President None
Mary Jean Mulligan** Senior Vice President None
Bradley Skapyak* Senior Vice President None
Jane Knight* Chief Legal Officer and Secretary None
Stephen Storen* Chief Compliance Officer None
Jeffrey Cannizzaro* Vice President - Compliance None
Maria Georgopoulos* Vice President - Facilities Management None
William Germenis Vice President - Compliance None
Walter T. Harris* Vice President None
Janice Hayles* Vice President None
Hal Marshall* Vice President - Compliance None
Paul Molloy* Vice President None
Theodore A. Schachar* Vice President - Tax None
James Windels* Vice President Assistant Treasurer
James Bitetto* Assistant Secretary None
</TABLE>
* Principal business address is 200 Park Avenue, New York, NY 10166. **
Principal business address is 144 Glenn Curtiss Blvd., Uniondale, NY 11556-0144.
*** Principal business address is 401 North Maple Avenue, Beverly Hills, CA
90210.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant 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 30th day of October, 2000.
DREYFUS INVESTMENT PORTFOLIOS
BY: /S/STEPHEN E. CANTER*
---------------------
STEPHEN E. CANTER, 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/ STEPHEN E. CANTER* President (Principal 10/30/00
--------------------------------- Executive Officer)
Stephen E. Canter
/S/ JOSEPH CONNOLLY* Treasurer (Principal Financial 10/30/00
--------------------------------- and Accounting Officer)
Joseph Connolly
/S/ JOSEPH S. DIMARTINO* Chairman of the Board 10/30/00
--------------------------------
Joseph S. DiMartino
/S/ CLIFFORD L. ALEXANDER, JR.* Trustee 10/30/00
-------------------------------
Clifford L. Alexander, Jr.
/S/ LUCY WILSON BENSON* Trustee 10/30/00
-------------------------------
Lucy Wilson Benson
*BY: /S/ JEFF PRUSNOFSKY
--------------------
Jeff Prusnofsky
Attorney-in-Fact
INDEX OF EXHIBITS
(m) Distribution Plan.
(o) Rule 18f-3 Plan.
