DREYFUS VARIABLE INVESTMENT FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Variable Investment Fund (the "Fund"), dated May 1, 1995, as it
may be revised from time to time. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call (516) 338-3300.
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objectives and Management Policies . . . . . . . . . . . . B-2
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . .B-15
Investment Advisory Agreements . . . . . . . . . . . . . . . . . . . .B-20
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . .B-27
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . .B-27
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . .B-27
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . .B-29
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . .B-31
Yield and Performance Information. . . . . . . . . . . . . . . . . . .B-33
Information About the Fund . . . . . . . . . . . . . . . . . . . . . .B-35
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . . . . . . . .B-35
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-36
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .B-43
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . .B-76
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Description
of the Fund."
Portfolio Securities
Bank Obligations. (All Series) Domestic commercial banks organized
under Federal law are supervised and examined by the Comptroller of the
Currency and are required to be members of the Federal Reserve System and
to have their deposits insured by the Federal Deposit Insurance Corporation
(the "FDIC"). Domestic banks organized under state law are supervised and
examined by state banking authorities but are members of the Federal
Reserve System only if they elect to join. In addition, state banks whose
certificates of deposit ("CDs") may be purchased by the Series are insured
by the Bank Insurance Fund administered by the FDIC (although such
insurance may not be of material benefit to a Series, depending upon the
principal amount of the CDs of each bank held by such Series) and are
subject to Federal examination and to a substantial body of Federal law and
regulation. As a result of Federal or state laws and regulations, domestic
branches of domestic banks generally are required, among other things, to
maintain specified levels of reserves, are limited in the amounts which
they can loan to a single borrower and are subject to other regulations
designed to promote financial soundness. However, not all of such laws and
regulations apply to the foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches of foreign
banks, such as CDs and time deposits ("TDs"), may be general obligations of
the parent banks in addition to the issuing branch, or may be limited by
the terms of a specific obligation and governmental regulation. Such
obligations are subject to different risks than are those of domestic
banks. These risks include foreign economic and political developments,
foreign governmental restrictions that may adversely affect payment of
principal and interest on the obligations, foreign exchange controls and
foreign withholding and other taxes on interest income. Foreign branches
and subsidiaries are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank or about a
foreign bank than about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent banks in addition to the issuing branch, or may
be limited by the terms of a specific obligation and by Federal or state
regulation as well as governmental action in the country in which the
foreign bank has its head office. In addition, Federal branches licensed
by the Comptroller of the Currency and branches licensed by certain states
("State Branches") may be required to: (1) pledge to the regulator, by
depositing assets with a designated bank within the state, a certain
percentage of their assets as fixed from time to time by the appropriate
regulatory authority; and (2) maintain assets within the state in an amount
equal to a specified percentage of the aggregate amount of liabilities of
the foreign bank payable at or through all of its agencies or branches
within the state. The deposits of Federal branches and State branches must
be insured by the FDIC if such branches take deposits of less than
$100,000.
In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign branches of domestic banks, by foreign
subsidiaries of domestic banks, by foreign branches of foreign banks or by
domestic branches of foreign banks, such investments are carefully
evaluated on a case-by-case basis.
The Fund may purchase CDs issued by banks, savings and loan
associations and similar institutions with less than one billion dollars in
assets, whose deposits are insured by the FDIC, provided a Series purchases
any such CD in a principal amount of not more than $100,000, which amount
would be fully insured by the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the FDIC. Interest payments on
such a CD are not so insured. A Series may not own more than one such CD
per such issuer.
Municipal Lease Obligations. (Quality Bond Portfolio, Growth and
Income Portfolio) Municipal lease obligations or installment purchase
contract obligations (collectively, "lease obligations") have special risks
not ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the
event of foreclosure might prove difficult. The staff of the Securities
and Exchange Commission currently considers certain lease obligations to be
illiquid. Determination as to the liquidity of such securities is made in
accordance with guidelines established by the Fund's Board. Pursuant to
such guidelines, the Board has directed the Manager to monitor carefully
the Series' investment in such securities with particular regard to (1) the
frequency of trades and quotes for the lease obligation; (2) the number of
dealers willing to purchase or sell the lease obligation and the number of
other potential buyers; (3) the willingness of dealers to undertake to make
a market in the lease obligation; (4) the nature of the marketplace trades
including the time needed to dispose of the lease obligation, the method of
soliciting offers and the mechanics of transfer; and (5) such other factors
concerning the trading market for the lease obligation as the Manager may
deem relevant. In addition, in evaluating the liquidity and credit quality
of a lease obligation that is unrated, the Fund's Board has directed the
Manager to consider (a) whether the lease can be cancelled; (b) what
assurance there is that the assets represented by the lease can be sold;
(c) the strength of the lessee's general credit (e.g., its debt,
administrative, economic, and financial characteristics); (d) the
likelihood that the municipality will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to
the operations of the municipality (e.g., the potential for an "event of
nonappropriation"); (e) the legal recourse in the event of failure to
appropriate; and (f) such other factors concerning credit quality as the
Manager may deem relevant. Neither Series will invest more than 15% of the
value of its net assets in lease obligations that are illiquid and in other
illiquid securities.
American, European and Continental Depositary Receipts. (Growth and
Income International Equity and Managed Assets Portfolios) Each of these
Series may invest in American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and Continental Depositary Receipts ("CDRs").
Each of these Series may invest in ADRs, EDRs and CDRs through "sponsored"
or "unsponsored" facilities. A sponsored facility is established jointly
by the issuer of the underlying security and a depositary, whereas a
depositary may establish an unsponsored facility without participation by
the issuer of the deposited security. Holders of unsponsored depositary
receipts generally bear all the costs of such facilities and the depositary
of an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited
security or to pass through voting rights to the holders of such receipts
in respect of the deposited securities.
Mortgage-Related Securities--Government Agency Securities. (Growth
and Income Portfolio) Mortgage-related securities issued by the Government
National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through
Certificates (also known 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 is a
wholly-owned U.S. Government corporation within the department of Housing
and Urban Development. 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--Government Related Securities. (Growth
and Income Portfolio) Mortgage-related securities issued by the Federal
National Mortgage Association ("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. FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "PCs"). FHLMC is a corporate
instrumentality of the United States created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. 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.
Unit Investment Trust Purchases. (Managed Assets Portfolio) Under
the Investment Company Act of 1940, as amended (the "Act"), the Series'
purchases of securities of unit investment trusts are limited, subject to
certain exceptions, to a maximum of (i) 3% of the total outstanding voting
stock of any one unit investment trust, (ii) 5% of the value of the Series'
total assets with respect to the purchase of the securities of any one unit
investment trust and (iii) 10% of the value of the Series' total assets
with respect to its aggregate purchases of securities of unit investment
trusts.
Repurchase Agreements. The Fund's custodian or sub-custodian will
have custody of, and will hold in a segregated account, securities acquired
by the Series under a repurchase agreement. Repurchase agreements are
considered by the staff of the Securities and Exchange Commission to be
loans by the Series entering into them. In an attempt to reduce the risk
of incurring a loss on the repurchase agreement, a Series will enter into
repurchase agreements only with domestic banks with total assets in excess
of one billion dollars or primary government securities dealers reporting
to the Federal Reserve Bank of New York, with respect to securities of the
type in which it may invest or government securities regardless of their
remaining maturities, and will require that additional securities be
deposited with it if the value of the securities purchased should decrease
below resale price. The Series' adviser will monitor on an ongoing basis
the value of the collateral to assure that it always equals or exceeds the
repurchase price. Each Series will consider on an ongoing basis the
creditworthiness of the institutions with which such Series enters into
repurchase agreements.
Illiquid Securities. If a substantial market of qualified
institutional buyers develops pursuant to Rule 144A under the Securities
Act of 1933, as amended, for certain of these securities held by a Series,
the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board of Trustees.
Because it is not possible to predict with assurance how the market for
restricted securities will develop, the Fund's Board of Trustees has
directed the Series' adviser to monitor carefully such Series' investments
in such securities with particular regard to trading activity, availability
of reliable price information and other relevant information. To the
extent that for a period of time, qualified institutional buyers become
uninterested in purchasing restricted securities pursuant to Rule 144A, a
Series' investing in such securities may have the effect of increasing the
level of illiquidity in the Series' portfolio during such period.
Management Policies
Leverage Through Borrowing. (Growth and Income and Money Market
Portfolios) The Growth and Income Portfolio and, to a limited extent,
Money Market Portfolio may borrow for investment purposes. The Act
requires the Series to maintain continuous asset coverage (that is, total
assets including borrowings, less liabilities exclusive of borrowings) of
300% of the amount borrowed. If the 300% asset coverage should decline as
a result of market fluctuations or other reasons, the Series may be
required to sell some of its portfolio holdings within three days to reduce
the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that
time. The Series also may be required to maintain minimum average balances
in connection with such borrowing or to 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.
Options Transactions. (Capital Appreciation, Growth and Income,
International Equity, Managed Assets and Small Cap Portfolios) Each of the
Capital Appreciation, Growth and Income, International Equity, Managed
Assets and Small Cap Portfolios may write covered call options on
securities owned by such Series and, except for the Capital Appreciation
Portfolio, may engage in other options transactions, such as purchasing or
writing covered put options. In return for a premium, the writer of a
covered call option forfeits the right to any appreciation in the value of
the underlying security above the strike price for the life of the option
(or until a closing purchase transaction can be effected). Nevertheless,
the call writer retains the risk of a decline in the price of the
underlying security. The writer of a covered put option accepts the risk
of a decline in the price of the underlying security. The size of the
premiums that the Series may receive may be adversely affected as new or
existing institutions, including other investment companies, engage in or
increase their option-writing activities.
Options written ordinarily will have expiration dates between one and
nine months from the date written. The exercise price of the options may
be below, equal to or above the market values of the underlying securities
at the times the options are written. In the case of call options, these
exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. A Series may write (a) in-the-money call
options when it is expected that the price of the underlying security will
remain stable or decline moderately during the option period, (b)
at-the-money call options when it is expected that the price of the
underlying security will remain stable or advance moderately during the
option period and (c) out-of-the-money call options when it is expected
that the premiums received from writing the call option plus the
appreciation in market price of the underlying security up to the exercise
price will be greater than the appreciation in the price of the underlying
security alone. In these circumstances, if the market price of the
underlying security declines and the security is sold at this lower price,
the amount of any realized loss will be offset wholly or in part by the
premium received. Out-of-the-money, at-the-money and in-the-money put
options (the reverse of call options as to the relation of exercise price
to market price) may be utilized in the same market environments that such
call options are used in equivalent transactions.
So long as a Series' obligation as the writer of an option continues,
the Series may be assigned an exercise notice by the broker-dealer through
which the option was sold, requiring the Series to deliver, in the case of
a call, or take delivery of, in the case of a put, the underlying security
against payment of the exercise price. This obligation terminates when the
option expires or the Series effects a closing purchase transaction. The
Series can no longer effect a closing purchase transaction with respect to
an option once it has been assigned an exercise notice. To secure its
obligation to deliver the underlying security when it writes a call option,
or to pay for the underlying security when it writes a put option, the
Series will be required to deposit in escrow the underlying security or
other assets.
An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized
securities exchange or in the over-the-counter market. The Fund expects
the Series to write options on securities exchanges and in the
over-the-counter market.
While it may choose to do otherwise, a Series generally will purchase
or write only those options for which it is believed there is an active
secondary market so as to facilitate closing transactions. 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 clearing facilities and securities exchanges 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 a Series 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.
Stock Index Options. (Growth and Income, International Equity and
Managed Assets Portfolios) The Growth and Income, International Equity and
Managed Assets Portfolios may purchase and write put and call options on
stock indices listed on securities exchanges or traded in the over-the-
counter market. A stock index fluctuates with changes in the market values
of the stocks included in the index.
Options on stock indices are similar to options on stock except that
(a) the expiration cycles of stock index options are monthly, while those
of stock options are currently quarterly, and (b) the delivery requirements
are different. Instead of giving the right to take or make delivery of
stock at a specified price, an option on a stock index gives the holder the
right to receive a cash "exercise settlement amount" equal to (i) the
amount, if any, by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing
value of the underlying index on the date of exercise, multiplied by (ii) a
fixed "index multiplier." Receipt of this cash amount will depend upon the
closing level of the stock index upon which the option is based being
greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the option. The amount of cash received will be
equal to such difference between the closing price of the index and the
exercise price of the option expressed in dollars times a specified
multiple. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset its
position in stock index options prior to expiration by entering into a
closing transaction on an exchange or it may let the option expire
unexercised.
Futures Contracts and Options on Futures Contracts. (Growth and
Income, International Equity, Managed Assets and Zero Coupon 2000
Portfolios) Upon exercise of an option, the writer of the option will
deliver to the holder of the option the futures position and the
accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. The potential loss
related to the purchase of an option on futures contracts is limited to the
premium paid for the option (plus transaction costs). Because the value of
the option is fixed at the point of sale, there are no daily cash payments
to reflect changes in the value of the underlying contract; however, the
value of the option does change daily and that change would be reflected in
the net asset value of the relevant Series.
Foreign Currency Transactions. (Capital Appreciation, Growth and
Income, International Equity, Managed Assets and Small Cap Portfolios) If
a Series enters into a currency transaction, the Fund will deposit, if so
required by applicable regulations, with its custodian or sub-custodian
cash or readily marketable securities in a segregated account of the Series
in an amount equal to the value of the Series' total assets committed to
the consummation of the forward contract. If the value of the securities
placed in the segregated account declines, additional cash or securities
will be placed in the account so that the value of the account will equal
the amount of the Series' commitment with respect to the contract.
At or before the maturity of a forward contract, the Series either may
sell a portfolio security and make delivery of the currency, or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Series will obtain, on
the same maturity date, the same amount of the currency as it is obligated
to deliver. If the Series retains the portfolio security and engages in an
offsetting transaction, the Series, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that
movement has occurred in forward contract prices. Should forward prices
decline during the period between its entering into a forward contract for
the sale of a currency and the date it enters into an offsetting contract
for the purchase of the currency, the Series will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase,
the Series will suffer a loss to the extent the price of the currency it
has agreed to purchase exceeds the price of the currency it has agreed to
sell.
The cost to a Series of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because transactions in
currency exchange are usually conducted on a principal basis, no fees or
commissions are involved. The use of forward currency contracts does not
eliminate fluctuations in the underlying prices of the securities, but it
does establish a rate of exchange that can be achieved in the future.
If a devaluation is generally anticipated, a Series may not be able to
contract to sell the currency at a price above the devaluation level it
anticipates. The requirements for qualification as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"),
may cause a Series to restrict the degree to which it engages in currency
transactions. See "Dividends, Distributions and Taxes."
Lending Portfolio Securities. (All Series) To a limited extent, each
Series may lend its portfolio securities to brokers, dealers and other
financial institutions, provided it receives cash collateral which at all
times is maintained in an amount equal to at least 100% of the current
market value of the securities loaned. By lending its portfolio
securities, a Series can increase its income through the investment of the
cash collateral. For the purposes of this policy, the Fund considers
collateral consisting of U.S. Government securities or irrevocable letters
of credit issued by banks whose securities meet the standards for
investment by the Series to be the equivalent of cash. From time to time,
a Series may return to the borrower or a third party which is unaffiliated
with the Fund, and which is acting as a "placing broker," a part of the
interest earned from the investment of collateral received for securities
loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Series must receive at least 100% cash collateral from the
borrower; (2) the borrower must increase such collateral whenever the
market value of the securities rises above the level of such collateral;
(3) the Series must be able to terminate the loan at any time; (4) the
Series must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions payable on the loaned
securities, and any increase in market value; (5) the Series may pay only
reasonable custodian fees in connection with the loan; and (6) while any
voting rights on the loaned securities may pass to the borrower, the Fund's
Trustees must terminate the loan and regain the right to vote the
securities if a material event adversely affecting the investment occurs.
These conditions may be subject to future modification.
Short-selling. (Growth and Income Portfolio) The Growth and Income
Portfolio may engage in short-selling of securities it does not own. Until
the Growth and Income Portfolio replaces a borrowed security in connection
with a short sale, the Series will: (a) maintain daily a segregated
account, containing cash or U.S. Government securities, at such a level
that (i) the amount deposited in the account plus the amount deposited with
the broker as collateral will equal the current value of the security sold
short and (ii) the amount deposited in the segregated account plus the
amount deposited with the broker as collateral will not be less than the
market value of the security at the time it was sold short; or (b)
otherwise cover its short position.
The Growth and Income Portfolio will incur a loss as a result of the
short sale if the price of the security increases between the date of the
short sale and the date on which the Series replaces the borrowed security.
The Series will realize a gain if the security declines in price between
those dates.
Risk Factors--Lower Rated Securities. (Growth and Income, Managed
Assets and Quality Bond Portfolios) Each of the Growth and Income, Managed
Assets and Quality Bond Portfolios is permitted to invest in debt
securities (convertible debt securities with respect to the Growth and
Income Portfolio) rated below Baa by Moody's Investors Service, Inc.
("Moody's") and below BBB by Standard & Poor's Corporation ("S&P"), Fitch
Investors Service, Inc. ("Fitch") and Duff & Phelps Credit Rating Co.
("Duff"). In no case, however, will the Quality Bond Portfolio invest in
bonds rated lower than B by Moody's and S&P and in no case will the Growth
and Income Portfolio invest in convertible debt securities rated lower than
Caa by Moody's and CCC by S&P, Fitch and Duff. Bonds rated below Baa by
Moody's and below BBB by S&P, Fitch and Duff, though higher yielding, are
characterized by greater risk. See "Description of the Fund--Investment
Considerations and Risks--Lower Rated Securities" in the Prospectus for a
discussion of certain risks and "Appendix" for a general description of
Moody's, S&P, Fitch and Duff ratings. Although ratings may be useful in
evaluating the safety of interest and principal payments, they do not
evaluate the market value risk of these securities. The Series will rely
on its adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer. In this evaluation, the Series' adviser
will take into consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, its operating
history, the quality of the issuer's management and regulatory matters. It
also is possible that a rating agency might not timely change the rating on
a particular issue to reflect subsequent events. Once the rating of a bond
in the Series' portfolio has been changed, the Series' adviser will
consider all circumstances deemed relevant in determining whether such
Series should continue to hold the security.
Companies that issue certain of these bonds 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 bonds may experience financial stress. During such periods, such
issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations also may
be affected adversely by specific corporate developments, or the issuer's
inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss because of
default by the issuer is significantly greater for the holders of these
bonds because such bonds 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 Manager 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 bonds 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 Series' ability to dispose of
particular issues when necessary to meet such Series' 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 Series to obtain
accurate market quotations for purposes of valuing the Series' 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.
Investors should be aware that the market values of many of these
bonds tend to be more sensitive to economic conditions than are higher
rated securities. These bonds are considered by S&P, Moody's, Fitch and
Duff, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than securities in
the higher rating categories.
These bonds may be particularly susceptible to economic downturns. It
is likely that any economic recession could disrupt severely the market for
such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon and increase the incidence of
default for such securities.
The Series may acquire these securities during an initial offering.
Such securities may involve special risks because they are new issues. The
Series has no arrangement with any persons concerning the acquisition of
such securities, and the Series' adviser will review carefully the credit
and other characteristics pertinent to such new issues.
Stripped Corporate Securities in which each Series other than the
Quality Bond Portfolio may invest and pay-in-kind bonds in which each
Series may invest up to 5% of its total assets involve special
considerations. Stripped Corporate Securities are debt obligations which
do not entitle the holder to any periodic payments of interest prior to
maturity or a specified cash payment date when the securities begin paying
current interest (the "cash payment date") and therefore are issued and
traded at a discount from their face amounts or par value. The discount
varies depending on the time remaining until maturity or cash payment date,
prevailing interest rates, liquidity of the security and perceived credit
quality of the issuer. The discount, in the absence of financial
difficulties of the issuer, decreases as the final maturity or cash payment
date of the security approaches.
The market prices of Stripped Corporate Securities generally are more
volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a
greater degree than do non-zero coupon securities having similar maturities
and credit quality. The credit risk factors pertaining to lower rated
securities also apply to lower rated Stripped Corporate Securities and
pay-in-kind bonds. Such Stripped Corporate Securities, pay-in-kind or
delayed interest bonds carry an additional risk in that, unlike bonds which
pay interest throughout the period to maturity, the relevant Series will
realize no cash until the cash payment date unless a portion of such
securities are sold and, if the issuer defaults, the Series may obtain no
return at all on its investment. See "Dividends, Distributions and Taxes."
Investment Restrictions
Capital Appreciation, Managed Assets, Money Market, Quality Bond,
Small Cap and Zero Coupon 2000 Portfolios. Each of these Series (except as
noted below) has adopted investment restrictions numbered 1 through 14 as
fundamental policies. These restrictions cannot be changed, as to a
Series, without approval by the holders of a majority (as defined in the
Act) of such Series' outstanding voting shares. However, the amendment of
these restrictions to add an additional Series, which amendment does not
substantively affect the restrictions with respect to an existing Series,
will not require approval as described in the preceding sentence.
Investment restrictions numbered 15 and 16 are not fundamental policies and
may be changed, as to a Series, by vote of a majority of the Fund's
Trustees at any time. With respect to the Capital Appreciation Portfolio,
investment restrictions numbered 2 and 3, 10 through 12 and 14 are not
fundamental policies and may be changed, as to that Series, by vote of a
majority of the Trustees at any time. Except where otherwise expressly
stated, each such Series may not:
1. Borrow money, except, with respect to each Series other than the
Money Market Portfolio, to the extent permitted under the Act (which
currently limits borrowing to no more than 33 1/3% of the value of the Series'
total assets); the Money Market Portfolio may borrow money only (i) from
banks for temporary or emergency (not leveraging) purposes in an amount up
to 15% of the value of its total assets (including the amount borrowed)
based on the lesser of cost or market, less liabilities (not including the
amount borrowed) at the time the borrowing is made and (ii) in connection
with the entry into reverse repurchase agreements to the extent described
in the Prospectus. While borrowings under (i) above exceed 5% of a Series'
total assets, the Series will not make any additional investments.
2. Sell securities short or purchase securities on margin, except
that the Managed Assets and Small Cap Portfolios may engage in short sales
and each Series may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of securities.
3. Purchase or write puts and calls or combinations thereof, except
as described in the Prospectus and Statement of Additional Information.
4. Act as an underwriter of securities of other issuers.
5. Purchase or sell real estate or real estate investment trust
securities, but each Series may purchase and sell securities that are
secured by real estate and may purchase and sell securities issued by
companies that invest or deal in real estate.
6. Invest in commodities, except that the Managed Assets, Capital
Appreciation and Zero Coupon 2000 Portfolios may invest in futures
contracts, including those related to indexes, and options on futures
contracts or indices, and commodities underlying or related to any such
futures contracts as well as invest in forward contracts and currency
options.
7. Lend any funds or other assets except through the purchase of
bonds, debentures or other debt securities, or the purchase of bankers'
acceptances, commercial paper of corporations, and repurchase agreements.
However, each Series may lend its portfolio securities to the extent set
forth in the Prospectus. Any portfolio securities will be loaned according
to guidelines established by the Securities and Exchange Commission and the
Fund's Board of Trustees.
8. Invest more than 5% of its assets in the obligations of any one
issuer, except that up to 25% of the value of the Series' 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. Notwithstanding the foregoing, to the extent required by
the rules of the Securities and Exchange Commission, the Money Market
Portfolio will not invest more than 5% of its assets in the obligations of
any one bank.
9. Purchase the securities of any issuer if such purchase would cause
the Series to hold more than 10% of the voting securities of such issuer.
This restriction applies only with respect to 75% of such Series' total
assets.
10. Invest in the securities of a company for the purpose of
exercising management or control, but the Series will vote the securities
it owns as a shareholder in accordance with its views.
11. Purchase or retain the securities of any issuer if the officers
or Trustees of the Fund or the officers or Directors of the Manager (and,
with respect to the Managed Assets Portfolio, the officers and Directors of
Comstock Partners, Inc. and, with respect to the Capital Appreciation
Portfolio, the officers and Directors of Fayez Sarofim & Co.) individually
own beneficially more than 1/2 of l% of the securities of such issuer or
together own beneficially more than 5% of the securities of such issuer.
12. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of its investments in all such companies to
exceed 5% of the value of its total assets.
13. Invest, except in the case of the Money Market Portfolio, more
than 25% of its total assets in the securities of issuers in any single
industry; provided that for temporary defensive purposes, there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. The Money Market Portfolio
may not invest less than 25% of its assets in obligations issued by banks
under normal market conditions.
14. Purchase warrants, except each of the Capital Appreciation,
Managed Assets and Small Cap Portfolios may purchase warrants not to exceed
2% of its respective net assets. For purposes of this restriction, such
warrants shall be valued at the lower of cost or market, except that
warrants acquired by the Series in units or attached to securities shall
not be included within this 2% restriction.
15. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings. The Managed
Assets, Capital Appreciation, Zero Coupon 2000 and Small Cap Portfolios'
entry into collateral arrangements with respect to options, currency
options, futures contracts, including those related to indices, and options
on futures contracts or indices and arrangements with respect to initial or
variation margin for futures contracts or options will not be deemed to be
pledges of such Series' assets.
16. 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% (10% with respect to the Money Market
Portfolio) of the value of the Series' net assets would be so invested.
Growth and Income and International Equity Portfolios. Each of the
Growth and Income and International Equity Portfolios has adopted
investment restrictions numbered 1 through 8 as fundamental policies.
These restrictions cannot be changed, as to a Series, without approval by
the holders of a majority (as defined in the Act) of such Series'
outstanding voting shares. However, the amendment of these restrictions to
add an additional Series, which amendment does not substantively effect the
restrictions with respect to an existing Series, will not require approval
as described in the preceding sentence. Investment restrictions numbered 9
through 15 are not fundamental policies and may be changed, as to a Series,
by vote of a majority of the Fund's Trustees at any time. Each such Series
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 a Series 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 a Series may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate.
4. Borrow money, except to the extent permitted under the Act (which
currently limits borrowing to no more than 33 1/3% of the value of the Series'
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. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, a Series
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 of Trustees.
6. Act as an underwriter of securities of other issuers, except to
the extent a Series 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 Act), except to the extent the activities permitted in
Investment Restriction Nos. 2, 4, 11 and 12 may be deemed to give rise to a
senior security.
8. Purchase securities on margin, but a Series 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. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessor) if such
purchase would cause the value of its investments in all such companies to
exceed 5% of the value of its total assets.
10. Invest in the securities of a company for the purpose of
exercising management or control, but the Series will vote the securities
it owns as a shareholder in accordance with its views.
11. 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.
12. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Prospectus and Statement of Additional
Information.
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.
14. Purchase securities of other investment companies, except to the
extent permitted under the Act.
15. Purchase warrants in excess of 5% of its net assets. For
purposes of this restriction, such warrants shall be valued at the lower of
cost or market, except that warrants acquired by a Series in units or
attached to securities shall not be included within this restriction.
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.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of a Series' shares in certain
states. Should the Fund determine that a commitment is no longer in the
best interest of a Series and its shareholders, the Fund reserves the right
to revoke the commitment by terminating the sale of such Series' shares in
the state involved.
In addition, each Series has adopted the following policies as
non-fundamental policies. Each Series intends (i) to comply with the
diversification requirements prescribed in regulations under Section 817(h)
of 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. In
addition, each Series, except the Growth and Income and International
Equity Portfolios, has agreed not to invest more than 10% of its total
assets in the obligations of any one issuer (excluding U.S. Government
securities) and to purchase no more than 10% of an issuer's outstanding
securities. As non-fundamental policies, these policies may be changed by
vote of a majority of the Trustees at any time.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below. Each Trustee who is deemed to be an "interested person"
of the Fund, as defined in the Act, is indicated by an asterisk.
Trustees of the Fund
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Mr.
DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. For more than five years prior thereto, he
was President, a director and, until August 1994, Chief Operating
Officer of the Manager and Executive Vice President and a director of
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manger
and, until August 24, 1994, the Fund's distributor. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
Mr. DiMartino is a director and former Treasurer of the Muscular
Dystrophy Association; a trustee of Bucknell University; Chairman of
the Board of Directors of Noel Group, Inc.; and a director of
HealthPlan Corporation. Mr. DiMartino is also a Board member of 90
other funds in the Dreyfus Family of Funds. He is 51 years old and
his address is 200 Park Avenue, New York, New York 10166.
*DAVID P. FELDMAN, Trustee. Chairman and Chief Executive Officer of AT&T-
Investment Management Corporation. He is also a trustee of Corporate
Property Investors, a real estate investment company. He is also a
Board member of 37 other funds in the Dreyfus Family of Funds. Mr.
Feldman is 55 years old and his address is One Oak Way, Berkeley
Heights, New Jersey 07922.
JOHN M. FRASER, JR., Trustee. President of Fraser Associates, a service
company for planning and arranging corporate meetings and other
events. From September 1975 to June 1978, he was Executive Vice
President of Flagship Cruises, Ltd. Prior thereto, he was Senior Vice
President and Resident Director of the Swedish-American Line for the
United States and Canada. He is also a Board member of 14 other funds
in the Dreyfus Family of Funds. Mr. Fraser is 73 years old and his
address is 133 East 64th Street, New York, New York 10021.
ROBERT R. GLAUBER, Trustee. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard
University, since January 1992. He was Under Secretary of the
Treasury for Finance at the U.S. Treasury Department from May 1989 to
January 1992. For more than five years prior thereto, he was a
Professor of Finance at the Graduate School of Business Administration
of Harvard University and, from 1985 to 1989, Chairman of its Advanced
Management Program. He is also a Board member of 20 other funds in
the Dreyfus Family of Funds. Mr. Glauber is 56 years old and his
address is 79 John F. Kennedy Street, Cambridge, Massachusetts 02138.
JAMES F. HENRY, Trustee. President of the Center for Public Resources, a
non-profit organization principally engaged in the development of
alternatives to business litigation. He was of counsel to the law
firm of Lovejoy, Wasson & Ashton from October 1975 to December 1976
and from October 1979 to June 1983, and was a partner of that firm
from January 1977 to September 1979. From September 1971 to December
1976, he was President and a director of the Edna McConnell Clark
Foundation, a philanthropic organization. He is also a Board member
of 10 other funds in the Dreyfus Family of Funds. Mr. Henry is 64
years old and his address is c/o Center for Public Resources, 366
Madison Avenue, New York, New York 10017.
ROSALIND GERSTEN JACOBS, Trustee. Director of Merchandise and Marketing
for Corporate Property Investors, a real estate investment company.
From 1974 to 1976, she was owner and manager of a merchandise and
marketing consulting firm. Prior to 1974, she was a Vice President of
Macy's, New York. She is also a Board member of 20 other funds in the
Dreyfus Family of Funds. Mrs. Jacobs is 69 years old and her address
is c/o Corporate Property Investors, 305 East 47th Street, New York,
New York 10017.
IRVING KRISTOL, Trustee. He is also John M. Olin Distinguished Fellow of
the American Enterprise Institute for Public Policy Research,
co-editor of The Public Interest magazine, and an author or co-editor
of several books. From 1969 to 1988, he was Professor of Social
Thought at the Graduate School of Business Administration, New York
University; from September 1969 to August 1979, he was Henry R. Luce
Professor of Urban Values at New York University; from 1975 to 1990,
he was a director of Lincoln National Corporation, an insurance
company; and from 1977 to 1990, he was a director of Warner-Lambert
Company, a pharmaceutical and consumer products company. He is also a
Board member of 10 other funds in the Dreyfus Family of Funds. Mr.
Kristol is 75 years old and his address is c/o The Public Interest,
1112 16th Street, N.W., Suite 530, Washington, D.C. 20036.
DR. PAUL A. MARKS, Trustee. President and Chief Executive Officer of
Memorial Sloan-Kettering Cancer Center. He was Vice President for
Health Sciences and Director of the Cancer Center at Columbia
University from 1973 to 1980, and was Professor of Medicine and of
Human Genetics and Development at Columbia University from 1968 to
1982. From 1976 to 1991, he was a director of the Charles H. Revson
Foundation; and, from 1992 to 1993, he was a director of Biotechnology
General, Inc., a biotechnology development company. He serves as a
director of Pfizer, Inc., a pharmaceutical company, Life Technologies,
Inc., a life science company providing products for cell and molecular
biology and microbiology, National Health Laboratories, a national
clinical diagnostic laboratory, and Tulerik, Inc., a biotechnology
company. He is also a Board member of 10 other funds in the Dreyfus
Family of Funds. Dr. Marks is 68 years old and his address is c/o
Memorial Sloan-Kettering Cancer Center, 1275 York Avenue, New York,
New York 10021.
DR. MARTIN PERETZ, Trustee. Editor-in-Chief of The New Republic magazine
and a lecturer in Social Studies at Harvard University where he has
been a member of the faculty since 1965. He is a trustee of The
Center for Blood Research at the Harvard Medical School and a director
of Leukosite Inc., a biopharmaceutical company. From 1988 to 1989, he
was a director of Bank of Leumi Trust Company of New York; and, from
1988 to 1991, he was a director of Carmel Container Corporation. He
is also a Board member of 10 other funds in the Dreyfus Family of
Funds. Dr. Peretz is 55 years old and his address is c/o The New
Republic, 1220 19th Street, N.W., Washington, D.C. 20036.
BERT WASSERMAN, Trustee. Executive Vice President and Chief Financial
Officer since January 1990, and a director, from January 1990 to March
1993, of Time Warner Inc. From 1981 to 1990, he was a member of the
office of the President and a director of Warner Communications, Inc.
He is also a member of the Chemical Bank National Advisory Board. He
is also a Board member of 10 other funds in the Dreyfus Family of
Funds. Mr. Wasserman is 62 years old and his address is c/o Time
Warner Inc., 75 Rockefeller Plaza, New York, New York 10019.
The Fund typically pays its Trustees an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. For the fiscal year
ended December 31, 1994, the aggregate amount of compensation paid to each
Trustee by the Fund and all other funds in the Dreyfus Family of Funds for
which such person is a Board member were as follows:
<TABLE>
<CAPTION>
(5)
(3) Total
(2) Pension or (4) Compensation from
(1) Aggregate Retirement Benefits Estimated Annual Fund and Fund
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member Fund * Fund's Expenses Retirement Board Members *
- ---------------------- --------------------- ---------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Joseph S. DiMartino ** $4,375 none none $445,000
David P. Feldman $ 387 none none $ 85,631
John M. Fraser, Jr. $3,500 none none $ 46,766
Robert R. Glauber $3,500 none none $ 79,696
James F. Henry $3,500 none none $ 44,946
Rosalind Gersten Jacobs $3,500 none none $ 57,638
Irving Kristol $3,500 none none $ 44,946
Dr. Paul A. Marks $3,500 none none $ 44,946
Dr. Martin Peretz $3,500 none none $ 44,946
Bert W. Wasserman $3,500 none none $ 40,720
____________________________
* Amount does not include reimbursed expenses for attending Board meetings, which amounted to $709 for all
Trustees as a group.
** Estimated amounts for the current fiscal year ending December 31, 1995.
</TABLE>
There ordinarily will be no meetings of shareholders for the purpose
of electing Trustees unless and until such time as less than a majority of
the Trustees holding office have been elected by shareholders, at which
time the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Under the Act, shareholders of record of not less
than two-thirds of the outstanding shares of the Fund may remove a Trustee
through a declaration in writing or by vote cast in person or by proxy at a
meeting called for that purpose. The Trustees are required to call a
meeting of shareholders for the purpose of voting upon the question of
removal of any such Trustee when requested in writing to do so by the
shareholders of record of not less than 10% of the Fund's outstanding
shares.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991
to July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., a wholly-owned subsidiary of The Boston Company,
Inc. Prior to December 1991, she served as Vice President and
Controller, and later as Senior Vice President, of The Boston Company
Advisors, Inc. She is 37 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. Prior thereto, he was employed as an Associate at Ropes & Gray,
and prior to August 1990, he was employed as an Associate at Sidley &
Austin. He is 30 years old.
JOSEPH S. TOWER,III, Assistant Treasurer. Senior Vice President, Treasurer
and Chief Financial Officer of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
July 1988 to August 1994, he was employed by The Boston Company, Inc.
where he held various management positions in the Corporate Finance
and Treasury areas. He is 32 years old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to August
1994, he was Manager of the High Performance Fabric Division of
Springs Industries Inc. He is 33 years old.
ERIC B. FISCHMAN, Vice-President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September 1992
to August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System. Prior to September 1992, he attended the
Boston University School of Law. He is 30 years old.
JOHN J. PYBURN, Assistant Treasurer. Vice President of the Distributor and
an officer of other investment companies advised or administered by
the Manager. From 1984 to July 1994, he held the position of
Assistant Vice President in the Mutual Fund Accounting Department of
the Manager. He is 59 years old.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts. She is 50 years old.
PAUL FURCINITO, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by Dreyfus. From January 1992 to July 1994, he was a
Senior Legal Product Manager, and, from January 1990 to January 1992,
he was a mutual fund accountant for The Boston Company Advisors, Inc.
He is 28 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The following shareholders are known by the Fund to own of record 5% or
more of the Fund's shares of beneficial interest outstanding on March 20, 1995:
(1) Transamerica Occidental Life Insurance Company, 1150 S. Olive St., Los
Angeles, CA 90015-2211 (23,419,380.57 shares of the Money Market Portfolio -
69.37%; 1,535,608.782 shares of the Managed Assets Portfolio - 60.76%;
590,543.01 shares of the Zero Coupon 2000 Portfolio - 56.61%; 1,277,924.08
shares of the Quality Bond Portfolio - 81.92%; 1,515,656.73 shares of the Small
Cap Portfolio - 23.50%; 1,064,670.934 shares of the Capital Appreciation
Portfolio - 77.14%; 231,816.788 shares of the Growth and Income Portfolio -
47.70%; and 76,912.763 shares of the International Equity Portfolio -77.14%);
(2) Mutual Benefit Life, 520 Broad St., Newark, NJ 07102-3298 (61,716.87 shares
of the Zero Coupon 2000 Portfolio -5.92%); (3) First Transamerica Life Insurance
Company, 1150 S. Olive St., Los Angeles, CA 90015-2211 (9,204,364.58 shares of
the Money Market Portfolio - 27.26%; 249,338.013 shares of the Zero Coupon 2000
Portfolio - 23.90%; 315,444.131 shares of the Capital Appreciation Portfolio -
22.86%; 861,558.14 shares of the Managed Assets Portfolio - 34.09%; 719,150.68
shares of the Small Cap Portfolio - 11.15%; and 225,835.891 shares of the
Quality Bond Portfolio - 14.47%); (4) Valic Separate Account A, 2929 Allen
Parkway, Houston, Texas (3,860,243.886 shares of the Small Cap Portfolio -
59.85%); (5) Major Trading Corporation, 200 Park Avenue, New York, New York
10166 (82,457.028 shares of the Growth and Income Portfolio - 25.77%; 81,530.782
shares of the International Equity Portfolio - 50.57%. A shareholder that
beneficially owns, directly or indirectly, 25% or more of a Series' voting
securities may be deemed to be a "control person" (as defined in the Act) of
such Series.
INVESTMENT ADVISORY AGREEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides advisory services pursuant to the Investment
Advisory Agreement (the "Agreement") with the Fund dated August 24, 1994.
As to each Series, the Agreement is subject to annual approval by (i) the
Fund's Board of Trustees or (ii) vote of a majority (as defined in the Act)
of the outstanding voting securities of such Series, provided that in
either event the continuance also is approved by a majority of the Trustees
who are not "interested persons" (as defined in the Act) of the Fund or the
Manager, by vote cast in person at a meeting called for the purpose of
voting on such approval. The Agreement was approved by shareholders of
each Series (other than the Growth and Income and International Equity
Portfolios) on August 22, 1994 and by the shareholder of the Growth and
Income and International Equity Portfolios on August 2, 1994. The
Agreement was last approved by the Fund's Board of Trustees, including a
majority of the Trustees who are not "interested persons" of any party to
the Agreement, at a meeting held on March 13, 1995. As to each Series, the
Agreement is terminable without penalty, on 60 days' notice, by the Fund's
Board of Trustees or by vote of the holders of a majority of the shares of
such Series, or, upon not less than 90 days' notice, by the Manager. The
Agreement will terminate automatically, as to the relevant Series, in the
event of its assignment (as defined in the Act).
The following persons are officers and/or directors of Dreyfus:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board of Directors; Robert E. Riley, President,
Chief Operating Officer and a director; Lawrence S. Kash, Vice Chairman,
Distribution; Philip L. Toia, Vice Chairman, Operations and Administration;
Paul H. Snyder, Vice President and Chief Financial Officer; Daniel C.
Maclean III, General Counsel and Vice President; Elie M. Genadry, Vice
President, Wholesale; Henry D. Gottmann, Vice President, Retail; Jeffrey N.
Nachman, Vice President, Fund Administration; Barbara E. Casey, Vice
President, Retirement Services; Diane M. Coffey, Vice President, Corporate
Communications; William F. Glavin, Jr., Vice President-Product Management;
Katherine C. Wickham, Vice President, Human Resources; Andrew S. Wasser,
Vice President-Information Systems; Maurice Bendrihem, Controller; Mark N.
Jacobs, Vice President, Fund Legal and Compliance; and Mandell L. Berman,
Alvin E. Friedman, Frank Cahouet, Lawrence M. Greene, Julian M. Smerling
and David B. Truman, directors.
With respect to the Managed Assets Portfolio, the Fund has entered
into a Sub-Investment Advisory Agreement (the "Comstock Sub-Advisory
Agreement") with Comstock Partners, Inc. dated May 21, 1990. As to such
Series, the Comstock Sub-Advisory Agreement is subject to annual approval
by (i) the Fund's Board of Trustees or (ii) vote of a majority (as defined
in the Act) of the Series' outstanding voting securities, provided that in
either event the continuance also is approved by a majority of the Trustees
who are not "interested persons" (as defined in the Act) of the Fund or
Comstock Partners, Inc., by vote cast in person at a meeting called for the
purpose of voting on such approval. The Comstock Sub-Advisory Agreement
was approved by shareholders on July 12, 1991, and was last approved by the
Fund's Board of Trustees, including a majority of the Trustees who are not
"interested persons" of any party to the Comstock Sub-Advisory Agreement,
at a meeting held on March 13, 1995. The Comstock Sub-Advisory Agreement
is terminable without penalty, on 60 days' notice, by the Fund's Board of
Trustees or by vote of the holders of a majority of the Series' outstanding
voting securities, or, upon not less than 90 days' notice, by Comstock
Partners, Inc. The Comstock Sub-Advisory Agreement will terminate
automatically in the event of its assignment (as defined in the Act).
The following persons are officers and/or directors of Comstock
Partners, Inc.: Stanley D. Salvigsen, Chairman of the Board and Chief
Executive Officer; Charles L. Minter, Vice Chairman of the Board and Chief
Operating Officer; and Edward A. Leskowicz, Jr., Vice President, Treasurer
and Chief Financial Officer.
With respect to the Capital Appreciation Portfolio, the Fund has
entered into a Sub-Investment Advisory Agreement (the "Sarofim Sub-Advisory
Agreement") with Fayez Sarofim & Co. dated August 17, 1992. As to such
Series, the Sarofim Sub-Advisory Agreement is subject to annual approval by
(i) the Fund's Board of Trustees or (ii) vote of a majority (as defined in
the Act) of the Series' outstanding voting securities, provided that in
either event the continuance also is approved by a majority of the Trustees
who are not "interested persons" (as defined in the Act) of the Fund or
Fayez Sarofim & Co., by vote cast in person at a meeting called for the
purpose of voting on such approval. The Sarofim Sub-Advisory Agreement was
last approved by the Fund's Board of Trustees, including a majority of the
Trustees who are not "interested persons" of any party to the Sarofim Sub-
Advisory Agreement, at a meeting held on March 13, 1995. The Sarofim
Sub-Advisory Agreement is terminable without penalty, on 60 days' notice,
by the Fund's Board of Trustees or by vote of the holders of a majority of
the Series' outstanding voting securities, or, upon not less than 90 days'
notice, by Fayez Sarofim & Co. The Sarofim Sub-Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the
Act).
The following persons are officers and/or directors of Fayez Sarofim &
Co.: Fayez S. Sarofim, Chairman of the Board and President; Raye G. White,
Executive Vice President, Secretary, Treasurer and a director; Russell M.
Frankel, Russell B. Hawkins, William K. McGee, Jr., Charles E. Sheedy and
Ralph B. Thomas, Senior Vice Presidents; and Nancy Daniel, Frank P. Lee and
James A. Reynolds, III, Vice Presidents.
With respect to the International Equity Portfolio, the Manager has
entered into a Sub-Investment Advisory Agreement (the "M&G Sub-Advisory
Agreement") with M&G Investment Management Limited dated August 24, 1994.
As to such Series, the M&G Sub-Advisory Agreement is subject to annual
approval by (i) the Fund's Board of Trustees or (ii) vote of a majority (as
defined in the Act) of the Series' outstanding voting securities, provided
that in either event the continuance also is approved by a majority of the
Trustees who are not "interested persons" (as defined in the Act) of the
Fund or M&G Investment Management Limited, by vote cast in person at a
meeting called for the purpose of voting on such approval. The M&G
Sub-Advisory Agreement is terminable without penalty, (i) by the Managers
on 60 days' notice, (ii) by the Fund's Board of Trustees or by vote of the
holders of a majority of the Series' outstanding voting securities on 60
days' notice, or (iii) upon not less than 90 days' notice, by M&G
Investment Management Limited. The M&G Sub-Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the
Act).
The following persons are officers and/or directors of M&G Investment
Management Limited: David L. Morgan, Chairman of the Board of Directors;
John P. Allard, John W. Boeckmann, Gordon P. Craig, Robert A.R. Hayes,
Richard S. Hughes, David J. Hutchins, Peter D. Jones, James R.D. Korner,
Michael G.A. McLintock, Ewen A. Macpherson, Paul R. Marsh, Nigel D.
Morrison, Roger D. Nightingale, William J. Nott, Neil A. Pegrum, Duncan N.
Robertson and J. Christopher Whitaker, directors; and Anthony J. Ashplant,
Secretary.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board of Trustees. With respect to the Managed Assets Portfolio, Comstock
Partners, Inc. provides day-to-day management of such Series' portfolio of
investments, subject to the supervision of the Manager and the Board of
Trustees. With respect to the Capital Appreciation Portfolio, Fayez
Sarofim & Co. and, with respect to the International Equity Portfolio, M&G
Investment Management Limited, provides day-to-day management of such
Series' portfolio of investments, subject to the supervision of the Manager
and the Board of Trustees. The Manager (and, with respect to the Managed
Assets Portfolio, Comstock Partners, Inc., with respect to the Capital
Appreciation Portfolio, Fayez Sarofim & Co. and, with respect to the
International Equity Portfolio, M&G Investment Management Limited) is
responsible for investment decisions, and provides the Fund with portfolio
managers who are authorized by the Board of Trustees to execute purchases
and sales of securities. The Fund's portfolio managers are Thomas A.
Frank, Richard B. Hoey, Garitt Kono, Patricia A. Larkin, Elaine Rees,
Howard Stein, Gerald Thunelius and, with respect to the Managed Assets
Portfolio, Stanley D. Salvigsen and Charles L. Minter, with respect to the
Capital Appreciation Portfolio, Russell B. Hawkins and Fayez S. Sarofim
and, with respect to the International Equity Portfolio, William Vincent.
The Manager, Comstock Partners, Inc., Fayez Sarofim & Co. and M&G
Investment Management Limited maintain research departments with
professional portfolio managers and securities analysts who provide
research services for the Fund as well as for other funds advised by the
Manager, Comstock Partners, Inc., Fayez Sarofim & Co. or M&G Investment
Management Limited. All purchases and sales of each Series are reported
for the Trustees' review at the meeting subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager (or, with
respect to the Managed Assets Portfolio, Comstock Partners, Inc., or with
respect to the Capital Appreciation Portfolio, Fayez Sarofim & Co. or, with
respect to or the International Equity Portfolio, M&G Investment Management
Limited). 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 Trustees who
are not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager, Comstock Partners, Inc.,
Fayez Sarofim & Co. or M&G Investment Management Limited or any affiliates
thereof, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining
the Fund's existence, costs of independent pricing services, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of shareholders' reports and meetings, costs
of preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders, and any extraordinary expenses. Expenses attributable to a
particular Series are charged against the assets of that Series; other
expenses of the Fund are allocated between the Series on the basis
determined by the Board of Trustees, including, but not limited to,
proportionately in relation to the net assets of each Series.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
As compensation for its services, the Fund has agreed to pay the
Manager a monthly fee at the annual rate of .50 of l% of the value of the
Money Market Portfolio's average daily net assets; .375 of l% of the value
of the Managed Assets Portfolio's average daily net assets; .45 of l% of
the value of the Zero Coupon 2000 Portfolio's average daily net assets; .65
of l% of the value of the Quality Bond Portfolio's average daily net
assets; .75 of l% of the value of the Small Cap Portfolio's average daily
net assets; .75 of l% of the value of the Growth and Income Portfolio's
average daily net assets; and .75 of l% of the value of the International
Equity Portfolio's average daily net assets. With respect to the Capital
Appreciation Portfolio, the Fund has agreed to pay the Manager a monthly
advisory fee at the annual rate as set forth below:
Annual Fee as a
Percentage of Average
Daily Net Assets of the
Total Assets Capital Appreciation Portfolio
------------ ------------------------------
0 to $150 million .55 of l%
$150 million to $300 million .50 of 1%
$300 million or more .375 of 1%
The fees paid by each Series to the Manager for the fiscal years ended
December 31, 1992, 1993 and 1994 were as follows:
Fee Paid For
Year Ended
December 31, 1992
- -----------------
Management Reduction Net
Series Fee Payable in Fee Fee Paid
------ ----------- --------- --------
Money Market $6,616 $6,616 $ 0
Managed Assets 7,254 437 6,817
Zero Coupon 2000 5,940 358 5,582
Quality Bond 2,527 2,527 0
Small Cap 13,883 837 13,046
Fee Paid For
Year Ended
December 31, 1993
- -----------------
Management Reduction Net
Series Fee Payable in Fee Fee Paid
------ ----------- --------- --------
Capital Appreciation* $ 4,494 $ 4,494 $ 0
Money Market 13,390 13,390 0
Managed Assets 11,281 11,281 0
Zero Coupon 2000 9,842 9,842 0
Quality Bond 9,382 9,382 0
Small Cap 45,094 45,094 0
_____________________________________
* From April 5, 1993 (commencement of operations) through December 31,
1993.
Fee Paid For
Year Ended
December 31, 1994
- -----------------
Management Reduction Net
Series Fee Payable in Fee Fee Paid
------ ----------- ---------- ---------
Capital Appreciation $ 49,561 $ 49,561 $ 0
Growth and Income* 5,069 5,069 0
International Equity* 5,080 5,080 0
Money Market 108,958 108,958 0
Managed Assets 79,001 79,001 0
Zero Coupon 2000 38,947 38,947 0
Quality Bond 60,106 60,106 0
Small Cap 487,316 340,893 146,423
_____________________________
* From May 2, 1994 (commencement of operations) through December 31,
1994.
As compensation for Comstock Partners, Inc.'s services, the Fund has
agreed to pay Comstock Partners, Inc. a monthly sub-advisory fee at the
annual rate of .375 of 1% of the value of the Managed Assets Portfolio's
average daily net assets. The fees payable by the Fund to Comstock
Partners, Inc. with respect to the Managed Assets Portfolio for the fiscal
years ended December 31, 1992, 1993 and 1994 were $7,254, $11,281 and
$79,001, respectively. The net fees paid to Comstock Partners, Inc. for
the fiscal years ended December 31, 1992, 1993 and 1994 were $7,254, $11,281
and $34,850, respectively.
As compensation for Fayez Sarofim & Co.'s services, the Fund has
agreed to pay Fayez Sarofim & Co. a monthly sub-advisory fee at the annual
rate as set forth below:
Annual Fee as a
Percentage of Average
Daily Net Assets of the
Total Assets Capital Appreciation Portfolio
------------ ------------------------------
0 to $150 million .20 of 1%
$150 million to $300 million .25 of 1%
$300 million or more .375 of 1%
The fees payable by the Fund to Fayez Sarofim & Co. with respect to
the Capital Appreciation Portfolio for the period April 5, 1993
(commencement of operations) through December 31, 1993 and for the fiscal
year ended December 31, 1994 were $1,634 and $18,022, respectively.
However, no sub-advisory fee was paid to Fayez Sarofim & Co. for the period
April 5, 1993 (commencement of operations) through December 31, 1993 or for
the fiscal year ended December 31, 1994 pursuant to an undertaking then in
effect.
As compensation for M&G Investment Management Limited's services, the
Manager has agreed to pay M&G Investment Management Limited a monthly fee
at the annual rate of .30 of 1% of the value of the International Equity
Portfolio's average daily net assets. No sub-advisory fee was paid by the
Manager to M&G Investment Management Limited with respect to the
International Equity Portfolio for the period May 2, 1994 (commencement of
operations) through December 31, 1994, pursuant to an undertaking then in
effect.
The Manager (and, with respect to the Managed Assets Portfolio,
Comstock Partners, Inc., with respect to the Capital Appreciation
Portfolio, Fayez Sarofim & Co. and, with respect to the International
Equity Portfolio, M&G Investment Management Limited) has agreed that if, in
any fiscal year, the aggregate expenses of the Fund, exclusive of taxes,
brokerage, interest on borrowings and (with the prior written consent of
the necessary state securities commissions) extraordinary expenses, but
including the advisory fees, exceed the expense limitation of any state
having jurisdiction over the Fund, the Fund may deduct from the payment to
be made to the Manager (and, with respect to the Managed Assets Portfolio,
Comstock Partners, Inc., with respect to the Capital Appreciation
Portfolio, Fayez Sarofim & Co. and, with respect to the International
Equity Portfolio, M&G Investment Management Limited), or the Manager (and,
with respect to the Managed Assets Portfolio, Comstock Partners, Inc., with
respect to the Capital Appreciation Portfolio, Fayez Sarofim & Co. and,
with respect to the International Equity Portfolio, M&G Investment
Management Limited) will bear, such excess expense to the extent required
by state law. Such deduction or payment, if any, will be estimated daily,
and reconciled and effected or paid, as the case may be, on a monthly
basis.
The aggregate of the fees payable to the Manager (other than for the
Capital Appreciation Portfolio) and Comstock Partners, Inc. is not subject
to reduction as the value of a Series' assets increases.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Redemption Commitment. The Fund has committed to pay in cash all
redemption requests by any shareholder of record, limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the value of a Series'
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 Board of
Trustees reserves the right to make payments in whole or part in securities
or other assets of the Series in case of an emergency or any time a cash
distribution would impair the liquidity of the Series to the detriment of
the existing shareholders. In such event, the securities would be valued
in the same manner as the Series' portfolio is valued. If the recipient
sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
Money Market Portfolio. The valuation of the Money Market Portfolio's
securities is based upon their amortized cost which does not take into
account unrealized capital gains or losses. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While
this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower
than the price the Series would receive if it sold the instrument.
The Board of Trustees has established, as a particular responsibility
within the overall duty of care owed to the Money Market Portfolio's
shareholders, procedures reasonably designed to stabilize the Series' price
per share as computed for the purpose of sales and redemptions at $1.00.
Such procedures include review of the Series' portfolio holdings by the
Board of Trustees, at such intervals as it deems appropriate, to determine
whether the Series' net asset value per share calculated by using available
market quotations or market equivalents deviates from $1.00 per share based
on amortized cost. In such review, investments for which market quotations
are readily available will be valued at the most recent bid price or yield
equivalent for such securities or for securities of comparable maturity,
quality and type, as obtained from one or more of the major market makers
for the securities to be valued. Other investments and assets will be
valued at fair value as determined in good faith by the Board of Trustees.
The extent of any deviation between the Money Market Portfolio's net
asset value based upon available market quotations or market equivalents
and $1.00 per share based on amortized cost will be examined by the Board
of Trustees. If such deviation exceeds 1/2 of l%, the Board of Trustees
promptly will consider what action, if any, will be initiated. In the
event the Board of Trustees determines that a deviation exists which may
result in material dilution or other unfair results to investors or
existing shareholders, it has agreed to take such corrective action as it
regards as necessary and appropriate, including: selling portfolio
instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends or paying
distributions from capital or capital gains; redeeming shares in kind; or
establishing a net asset value per share by using available market
quotations or market equivalents.
Zero Coupon 2000 and Quality Bond Portfolios. Substantially all of
each Series' investments are valued each business day by an independent
pricing service (the "Service") approved by the Board of Trustees. When,
in the judgment of the Service, quoted bid prices for investments are
readily available and are representative of the bid side of the market,
these investments 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 investments are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of municipal bonds of comparable quality, coupon, maturity
and type; indications as to values from dealers; and general market
conditions. The Service's procedures are reviewed by the Fund's officers
under the general supervision of the Board of Trustees. Short-term
investments are not valued by the Service and are carried at amortized
cost, which approximates value. Other investments 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. Investments traded in
foreign currencies are translated to U.S. dollars at the prevailing rates
of exchange. Expenses and fees of a Series, including the advisory fee
(reduced by the expense limitation, if any), are accrued daily and taken
into account for the purpose of determining the net asset value of shares.
Capital Appreciation, Growth and Income, International Equity, Managed
Assets and Small Cap Portfolios. Each Series' portfolio 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 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 many of the Series' portfolio securities.
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 Board of Trustees. Expenses and fees, including the advisory
fees (reduced by the expense limitation, if any), are accrued daily and
taken into account for the purpose of determining the net asset value of
shares.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Trustees, are valued at fair value as
determined in good faith by the Board of Trustees. The Board of Trustees
will review the method of valuation on a current basis. In making their
good faith valuation of restricted securities, the Trustees 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 Board of Trustees if the Trustees 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 Board of Trustees.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Each Series has qualified as a "regulated investment company" under
the Code for the fiscal year ended December 31, 1994. Each Series intends
to continue to so qualify as long as such qualification is in the best
interests of its shareholders. Among the requirements for such
qualification is that less than 30% of a Series' income must be derived
from gains from the sale or other disposition of securities held for less
than three months. Accordingly, each Series may be restricted in the
selling of securities held for less than three months, and, for the Growth
and Income, Managed Assets and Small Cap Portfolios, in effecting short
sales of securities held for less than three months (or of substantially
identical stock or securities), in the writing of options on securities
which have been held for less than three months, in the writing of options
which expire in less than three months and in effecting closing purchase
transactions with respect to options which have been written less than
three months prior to such transactions.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of the shares below the
cost of the investment. Such a dividend or distribution would be a return
of investment in an economic sense, although taxable as stated above. In
addition, the Code provides that if a shareholder holds shares of the
Series for six months or less and has received a capital gain distribution
with respect to such shares, any loss incurred on the sale of such shares
will be treated as long-term capital loss to the extent of the capital gain
distribution received.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, all or a portion of the
gain or loss realized from the disposition of foreign currency, non-U.S.
dollar denominated debt instruments, and certain financial futures and
options, may be treated as ordinary income or loss under Section 988 of the
Code. In addition, all or a portion of the gain realized from the
disposition of certain market discount bonds will be treated as ordinary
income under Section 1276. Finally, all or a portion of the gain realized
from engaging in "conversion transactions" may be treated as ordinary
income under Section 1258. "Conversion transactions" are defined to
include certain forward, futures, option and straddle transactions,
transactions marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by a Series from
certain financial futures and options transactions (other than those taxed
under Section 988 of the Code) will be treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss. Gain or loss will
arise upon the exercise or lapse of such futures and options as well as
from closing transactions. In addition, any such futures or options
remaining unexercised at the end of the Series' taxable year will be
treated as sold for their then fair market value, resulting in additional
gain or loss to the Series characterized in the manner described above.
Offsetting positions held by a Series involving financial futures and
options may constitute "straddles." Straddles are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of straddles is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, overrides or modifies the provisions of
Sections 988 and 1256. As such, all or a portion of any short- or long-
term capital gain from certain "straddle" transactions may be
recharacterized as ordinary income.
If a Series were treated as entering into straddles by reason of its
futures or options transactions, such straddles could be characterized as
"mixed straddles" if the futures or options transactions comprising such
straddles were governed by Section 1256 of the Code. The Series may make
one or more elections with respect to "mixed straddles." Depending upon
which election is made, if any, the results to the Series may differ. If
no election is made, to the extent the straddle rules apply to positions
established by the Series, losses realized by the Series will be deferred
to the extent of unrealized gain in any offsetting positions. Moreover, as
a result of the straddle and conversion transaction rules, short-term
capital loss on straddle positions may be recharacterized as long-term
capital loss, and long-term capital gain may be recharacterized as short-
term capital gain or ordinary income.
Investment by a Series in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders by causing a Series to recognize
income prior to the receipt of cash payments. For example, the Series
could be required to recognize annually a portion of the discount (or
deemed discount) at which such securities were issued and to distribute an
amount equal to such income in order to maintain its qualification as a
regulated investment company. In such case, the Series may have to dispose
of securities which it might otherwise have continued to hold in order to
generate cash to satisfy these distribution requirements.
Since shareholders of the Fund will be the separate accounts of
Participating Insurance Companies, no discussion is included herein as to
the Federal income tax consequences at the level of the holders of the VA
contracts or VLI policies. For information concerning the Federal income
tax consequences to such holders, see the prospectuses for such VA
contracts or VLI policies.
PORTFOLIO TRANSACTIONS
General. 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, with
respect to the Managed Assets Portfolio, Comstock Partners, Inc., with
respect to the Capital Appreciation Portfolio, Fayez Sarofim & Co. and,
with respect to the International Equity Portfolio, M&G Investment
Management Limited) to supplement its own research and analysis with the
views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager (or Comstock Partners,
Inc., Fayez Sarofim & Co. or M&G Investment Management Limited) in advising
other funds or accounts and, conversely, research services furnished to the
Manager (or Comstock Partners, Inc., Fayez Sarofim & Co. or M&G Investment
Management Limited) by brokers in connection with other funds or accounts
may be used in advising a Series. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager (and
Comstock Partners, Inc., Fayez Sarofim & Co. or M&G Investment Management
Limited) that the receipt and study of such services should not reduce the
overall research department expenses.
Money Market, Quality Bond and Zero Coupon 2000 Portfolios. Purchases
and sales of portfolio securities usually are principal transactions.
Portfolio securities ordinarily are purchased directly from the issuer or
from an underwriter or market maker. Usually no brokerage commissions are
paid by the Series for such purchases and sales. The prices paid to
underwriters of newly-issued securities usually include a concession paid
by the issuer to the underwriter, and purchases of securities from market
makers may include the spread between the bid and asked price. No
brokerage commissions were paid for the fiscal years ended December 31,
1992, 1993 and 1994. There were no concessions on principal transactions
for the fiscal years ended December 31, 1992, 1993 and 1994, except that
concessions on principal transactions of the Quality Bond Portfolio, where
determinable, amounted to $1,250 for the fiscal year ended December 31,
1993, none of which was paid to the Distributor.
Capital Appreciation, Growth and Income, International Equity, Managed
Assets and Small Cap Portfolios. Brokers also will be selected because of
their ability to handle special executions such as are involved in large
block trades or broad distributions, provided the primary consideration is
met. Large block trades may, in certain cases, result from two or more
funds in the Dreyfus Family of Funds being engaged simultaneously in the
purchase or sale of the same security. Certain of the Series' 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 years ended December 31, 1992, 1993 and 1994 the Managed Assets
Portfolio paid brokerage commissions of $8,918, $5,937 and $38,724
respectively, none of which was paid to the Distributor. In connection
with its portfolio securities transactions for the fiscal years ended
December 31, 1992, 1993 and 1994, the Small Cap Portfolio paid brokerage
commissions of $49,622, $6,138 and $409,523 respectively, none of which was
paid to the Distributor. The above figures for the Managed Assets
Portfolio do not include concessions on principal transactions, which,
where determinable, amounted to $1,560, $37,885, and $21,115 for the fiscal
years ended December 31, 1992, 1993 and 1994, respectively, none of which
was paid to the Distributor. The above figures for the Small Cap Portfolio
do not include concessions on principal transactions, which, where
determinable, amounted to $169,752, $311,099 and $402,933 for the fiscal
years ended December 31, 1992, 1993, and 1994, respectively, none of which
was paid to the Distributor. In connection with its portfolio securities
transactions for the period April 5, 1993 (commencement of operations)
through December 31, 1993 and for the fiscal year ended December 31, 1994,
the Capital Appreciation Portfolio paid brokerage commissions of $3,731 and
$8,911, respectively, none of which was paid to the Distributor. There
were no concessions on principal transactions for these periods. In
connection with portfolio securities transactions for the period May 2,
1994 (commencement of operations) through December 31, 1994, the Growth and
Income and International Equity Portfolios paid brokerage commissions of
$6,175 and $5,171, respectively. There were no concessions on principal
transactions for this period for either Series during this period.
YIELD AND PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
The performance figures shown below do not reflect the separate
charges applicable to the variable annuity contracts and variable life
policies offered by Participating Insurance Companies.
Money Market Portfolio. For the seven-day period ended December 31,
1994, the Money Market Portfolio's yield was 5.94% and effective yield was
6.12%. The Series' yield and effective yield reflect the absorption of
certain expenses of the Series by the Manager, without which the Series'
yield and effective yield for the seven-day period ended December 31, 1994
would have been 5.27% and 5.41%, respectively. See "Management of the
Fund" in the Prospectus. Yield is computed in accordance with a
standardized method which involves determining the net change in the value
of a hypothetical pre-existing Money Market Portfolio account having a
balance of one share at the beginning of a seven calendar day period for
which yield is to be quoted, dividing the net change by the value of the
account at the beginning of the period to obtain the base period return,
and annualizing the results (i.e., multiplying the base period return by
365/7). The net change in the value of the account reflects the value of
additional shares purchased with dividends declared on the original share
and any such additional shares and fees that may be charged to shareholder
accounts, in proportion to the length of the base period and the Series'
average account size, but does not include realized gains and losses or
unrealized appreciation and depreciation. Effective annualized yield is
computed by adding 1 to the base period return (calculated as described
above), raising that sum to a power equal to 365 divided by 7, and
subtracting 1 from the result.
Yields will fluctuate and are not necessarily representative of future
results. The investor should remember that yield is a function of the type
and quality of the instruments in the portfolio, portfolio maturity and
operating expenses. An investor's principal in the Fund is not guaranteed.
See "Determination of Net Asset Value" for a discussion of the manner in
which the Series' price per share is determined.
Zero Coupon 2000, Quality Bond and Growth and Income Portfolios. The
Zero Coupon 2000 and Quality Bond Portfolios' current yield for the 30-day
period ended December 31, 1994 was 7.57% and 8.02%, respectively. Each
Series' yield reflects the absorption of certain expenses of the Series by
the Manager, without which the Zero Coupon 2000 and Quality Bond
Portfolios' 30-day yield for the period ended December 31, 1994 would have
been 6.72% and 7.04%, respectively. See "Management of the Fund" in the
Prospectus. Current yield is computed pursuant to a formula which operates
as follows: The amount of the relevant Series' 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 Series during the period. That result is then
divided by the product of: (a) the average daily number of such Series'
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 Zero Coupon 2000 Portfolio's average annual total return for the 1
and 4.337 year periods ended December 31, 1994 was -3.91% and 10.55%,
respectively. The Quality Bond Portfolio's average annual total return for
the 1 and 4.337 year periods ended December 31, 1994 was -4.59% and 8.80%,
respectively. The Growth and Income Portfolio's average annual total
return from May 2, 1994 (commencement of operations) through December 31,
1994 was -1.82%. 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.
The Zero Coupon 2000 and Quality Bond Portfolios' total return for the
period August 31, 1990 (commencement of operations) to December 31, 1994
was 54.50% and 44.14%, respectively. The Growth and Income Portfolio's
total return from May 2, 1994 (commencement of operations) through December
31, 1994 was -1.22%. Total return is calculated by subtracting the amount
of the relevant Series' 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.
Managed Assets, Capital Appreciation, Small Cap and International
Equity Portfolios. The Managed Assets Portfolio's average annual total
return for the 1 and 4.337 year periods ended December 31, 1994 was -1.56%
and 8.81%, respectively. The Small Cap Portfolio's average annual total
return for the 1 and 4.337 year periods ended December 31, 1994 was 7.75%
and 62.62%, respectively. The Capital Appreciation Portfolio's average
annual total return for the 1 and 1.742 year periods ended December 31,
1994 was 3.04% and 5.61%, respectively. The International Equity
Portfolio's average annual total return from May 2, 1994 (commencement of
operations) through December 31, 1994 was -2.98%. Average annual total
return is calculated as described above.
The Managed Assets and Small Cap Portfolios' total return for the
period August 31, 1990 (commencement of operations) to December 31, 1994
was 44.23% and 723.77%, respectively. The Capital Appreciation Portfolio's
total return for the period April 5, 1993 (commencement of operations)
through December 31, 1994 was 9.98%. The International Equity Portfolio's
total return from May 2, 1994 (commencement of operations) through December
31, 1994 was -2.00%. Total return is calculated as described above.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic or financial conditions, developments
and/or events. From time to time advertising materials for the Fund also
may refer to Morningstar ratings and related analyses supporting the
rating. From time to time, advertising materials from the Fund may refer
to, or include, commentary by the Fund's portfolio managers relating to
their investment strategy, asset growth of the Series, current or past
business, political, economic or financial conditions and other matters of
general interest to shareholders.
From time to time, the Fund may advertise that Thomas A. Frank was
awarded "1994 Variable Fund Manager of the Year" by Morningstar, Inc. for
managing the Fund's Small Cap Portfolio.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Series share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. Shares have no preemptive, subscription or conversion
rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT AUDITORS
The Bank of New York, 90 Washington Street, New York, New York 10286,
acts as custodian of the Fund's investments. The Shareholder Services
Group, Inc., a subsidiary of First Data Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, acts as the Fund's transfer and
dividend disbursing agent. Neither The Bank of New York nor The
Shareholder Services Group, Inc. has any part in determining the investment
policies of the Fund or which securities are to be purchased or sold by the
Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares of beneficial interest being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX
Description of Certain Ratings:
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned to a debt
obligation. Capacity to pay interest and repay principal is extremely
strong.
AA
Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small
degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in
higher rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
BB
Bonds rated BB have less near-term vulnerability to default
than other speculative grade bonds. However, they face major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payment.
B
Bonds rated B have a greater vulnerability to default but
presently have the capacity to meet interest payments and principal
repayments. Adverse business, financial or economic conditions would
likely impair capacity or willingness to pay interest and repay principal.
CCC
Bonds rated CCC have a current identifiable vulnerability to
default, and are dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal.
In the event of adverse business, financial or economic conditions, they
are not likely to have the capacity to pay interest and repay principal.
CC
The rating CC is typically applied to bonds subordinated to
senior debt which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to bonds subordinated to senior
debt which is assigned an actual or implied CCC- rating.
D
Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or
a minus sign, which is used to show relative standing within the major
ratings categories, except in the AAA (Prime Grade) category.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Issues assigned an A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
A-1
This designation indicates the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign
(+) designation.
A-2
Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated A-1.
Moody's
Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa
Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca present obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show
relative standing within the major rating categories, except in the Aaa
category and in the categories below B. The modifier 1 indicates a rating
for the security in the higher end of a rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a ranking in
the lower end of a rating category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2)
have a strong capacity for repayment of short-term promissory obligations.
This ordinarily will be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained. Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability
to meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issue, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an adverse
impact on these bonds and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability
to pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in
this class are currently meeting debt service requirements, the probability
of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business and
economic activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which,
if not remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
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 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.
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.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, Money Market Portfolio
STATEMENT OF INVESTMENTS DECEMBER 31, 1994
PRINCIPAL
NEGOTIABLE BANK CERTIFICATES OF DEPOSITS--18.4% AMOUNT VALUE
------------- -------------
<S> <C> <C>
Chase Manhattan Bank N.A. (London)
6.56%, 5/1/95........................................................... $ 1,500,000 $ 1,500,000
Fleet Bank of Massachussets (London)
6.55%, 4/13/95.......................................................... 1,000,000 1,000,000
Industrial Bank of Japan Ltd. (Yankee)
6.50%, 5/22/95.......................................................... 1,500,000 1,500,000
Sanwa Bank Ltd. (Yankee)
5.76%-5.77%, 2/10/95-4/21/95............................................ 1,500,000 1,500,022
Sumitomo Bank Ltd. (Yankee)
5.23%, 3/7/95........................................................... 900,000 900,000
------------
TOTAL NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
(cost $ 6,400,022 )..................................................... $ 6,400,022
============
BANKERS' ACCEPTANCES-4.2%
Dai-Ichi Kangyo Bank Ltd. (Yankee)
6.77%, 5/30/95
(cost $1,459,149)....................................................... $ 1,500,000 $ 1,459,149
============
COMMERCIAL PAPER-57.0%
Den Danske Corp. Inc.
5.54%, 1/13/95.......................................................... $ 1,000,000 $ 998,180
Dresdner U.S. Finance Inc.
6.52%, 5/22/95.......................................................... 1,500,000 1,462,694
Ford Motor Credit Co.
6.49%, 4/11/95.......................................................... 1,000,000 982,361
General Electric Capital Corp.
5.11%-5.47%, 1/12/95-3/10/95............................................ 1,500,000 1,493,703
General Electric Capital Services Inc.
5.47%-6.56%, 1/12/95-4/12/95............................................ 1,650,000 1,636,642
General Motors Acceptance Corp.
5.13%-6.49%, 1/30/95-4/6/95............................................. 1,400,000 1,381,632
Generale Bank Inc.
6.49%, 4/20/95.......................................................... 1,500,000 1,471,160
Goldman Sachs Group L.P.
5.12%-6.08%, 1/5/95-4/14/95............................................. 1,500,000 1,482,726
ITT Corp.
5.71%, 1/17/95.......................................................... 1,000,000 997,489
ITT Financial Corp.
5.02%-5.91%, 1/4/95-2/21/95............................................. 1,550,000 1,541,365
Merrill Lynch & Co. Inc.
5.48%, 1/20/95.......................................................... 800,000 797,720
NYNEX Corp.
6.28%, 4/4/95........................................................... 1,500,000 1,476,169
Sears Roebuck Acceptance Corp.
5.45%-5.56%, 1/13/95-1/25/95............................................ 1,500,000 1,495,519
Spintab AB
6.02%-6.04%, 3/15/95-3/23/95............................................ 1,600,000 1,580,044
DREYFUS VARIABLE INVESTMENT FUND, Money Market Portfolio
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
PRINCIPAL
COMMERCIAL PAPER (CONTINUED) AMOUNT VALUE
------------- -------------
SwedBank Inc.
5.65%, 1/26/95.......................................................... $ 1,000,000 $ 996,125
-------------
TOTAL COMMERCIAL PAPER (cost $19,793,529)................................... $19,793,529
============
CORPORATE NOTES-4.9%
Bear Stearns Companies Inc.
5.85%, 8/25/95........................................................ (a) $ 1,000,000 $ 1,000,000
Merrill Lynch & Co. Inc.
5.79%, 4/26/95........................................................ (a) 700,000 700,000
-------------
TOTAL CORPORATE NOTES (cost $1,700,000)..................................... $ 1,700,000
============
U.S. GOVERNMENT AGENCIES-17.0%
Federal Home Loan Mortgage Corp., Discount Notes
6.25%, 1/3/95
(cost $5,896,952)....................................................... $ 5,899,000 $ 5,896,952
============
TOTAL INVESTMENTS (cost $35,249,652)......................... 101.5% $35,249,652
====== ============
LIABILITIES, LESS CASH AND RECEIVABLES....................... (1.5%) $ (521,249)
====== ============
NET ASSETS ............................................. 100.0% $34,728,403
====== ============
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Variable interest rate-subject to periodic change.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
STATEMENT OF INVESTMENTS
DECEMBER 31, 1994
COMMON STOCKS--25.8% SHARES VALUE
------------- -------------
<S> <C> <C>
AGRICULTURE--1.2% IMC Global 8,400 $ 363,300
-------------
COAL--.2% Addington Resources (a) 5,000 48,750
-------------
CONSUMER
GROWTH STAPLES--.5% Paragon Trade Brands................... (a) 12,000 159,000
-------------
CONSUMER STAPLES--.1% Kimberly-Clark, Cl. A 3,500 42,072
-------------
ENERGY--.4% Baker Hughes 7,500 136,875
-------------
FOODS & BEVERAGES--.3% Dole Food 3,400 78,200
-------------
HEALTH CARE--.4% National Medical Enterprises (a) 8,500 120,063
-------------
MINING & METALS--22.2% ASARCO 9,000 256,500
Amax Gold............................ (a) 43,000 258,000
American Barrick Resources............. 5,200 115,700
Anglovaal.............................. 5,000 161,548
Ashanti Goldfields, G.D.R. ........ (a,b) 3,000 65,437
Battle Mountain Gold, Cl. A............ 30,000 330,000
Bema Gold............................ (a) 87,000 146,812
Buffelsfontein Gold Mining, A.D.R...... 13,000 113,750
Canyon Resources..................... (a) 68,000 106,250
Crystallex International............. (a) 16,000 39,943
Driefontein Consolidated, A.D.R........ 6,300 95,288
Echo Bay Mines......................... 3,000 31,875
El Callao Mining..................... (a) 8,000 7,703
Free State Consolidated Gold Mines, A.D.R. 4,800 73,800
Freeport McMoRan Copper & Gold, Cl. A.. 3,800 80,750
Goldcorp, Cl. A........................ 29,040 163,117
Herald Resources....................... 90,200 72,049
Homestake Mining....................... 30,700 525,738
ISCOR................................ (a) 102,400 117,747
Impala Platinum Holdings, A.D.R........ 11,000 270,270
Inco................................... 12,200 349,225
International Gold Resources......... (a) 80,000 251,070
International Gold Resources (Warrants) (a) 20,750 2,960
Johannesburg Consolidated Investment, A.D.R. (a) 1,400 35,946
Kloof Gold Mining, A.D.R............... 6,300 93,713
MK Gold.............................. (a) 99,000 457,875
Menzies Gold......................... (a) 250,000 162,855
Newmont Mining......................... 14,871 535,356
Pegasus Gold......................... (a) 17,500 199,063
Placer Dome............................ 14,400 313,200
Prime Resource Group................. (a) 26,000 187,767
Randfontein Estates Gold Mining, A.D.R. 7,200 82,260
Rio Amarillo Mining................ (a,b) 80,000 41,084
Royal Oak Mines...................... (a) 33,000 107,250
Santa Fe Pacific Gold................ (a) 23,000 296,125
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- -------------
MINING & METALS (CONTINUED) Southwestern Gold (a) 25,000 $ 200,606
TVX Gold............................. (a) 29,200 197,860
Vaal Reefs Exploration & Mining, A.D.R. 7,500 67,969
Vengold.............................. (a) 82,000 174,842
-------------
6,789,303
-------------
RETAIL TRADE--.5% K mart 11,000 143,000
-------------
TOTAL COMMON STOCKS
(cost $7,788,805).................... $ 7,880,563
=============
PREFERRED STOCK--0.8%
MINING & METALS; Freeport McMoRan Copper & Gold, Cl. A,
(cost $291,563)...................... 7,500 $ 247,500
=============
CONTRACTS
SUBJECT
PUT OPTIONS--2.9% TO PUT
-------------
Brokerage Basket;
November '95 @ $95................. (g) 21,930 $ 118,860
Standard & Poor's 500 Index Flex Options:
September '95 @ $450................. 4,500 65,250
December '95 @ $450.................. 11,000 187,000
Standard & Poor's 500 Index:
March '95 @ $450..................... 8,000 54,000
June '95 @ $450...................... 15,000 150,000
September '95 @ $450................. 12,000 168,000
December '95 @ $450.................. 4,000 62,000
March '96 @ $453................... (g) 4,547 85,520
-------------
TOTAL PUT OPTIONS
(cost $1,421,430).................... $ 890,630
=============
PRINCIPAL
BONDS--16.3% AMOUNT
-------------
FOREIGN: Austrian Securities;
Republic of Austria,
4.50%, 2/12/2000............... (c) $ 1,910,585 $ 1,866,259
German Securities;
Bundesrepublik Deutschland,
9%, 10/20/2000................. (d) 1,612,903 1,717,742
South African Securities;
Eskom,
11%, 6/1/2008.................. (e) 1,965,602 1,383,980
-------------
TOTAL BONDS
(cost $4,898,166).................... $ 4,967,981
=============
DREYFUS VARIABLE INVESTMENT FUND, Managed Assets Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
PRINCIPAL
SHORT-TERM INVESTMENTS--53.1% AMOUNT VALUE
------------- -------------
U.S. GOVERNMENT
AGENCIES--26.2%Federal Home Loan Bank
5.78%, 1/5/95........................ $ 8,000,000 $ 7,994,862
-------------
U.S. TREASURY BILLS--26.9% 5.27%, 2/9/95 (f) 136,000 135,224
5.38%, 3/16/95......................... 8,154,000 8,063,826
-------------
8,199,050
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $16,193,912)................... $16,193,912
=============
TOTAL INVESTMENTS (cost $30,593,876) ................................ 98.9% $30,180,586
====== =============
CASH AND RECEIVABLES (NET) ......................................... 1.1% $ 328,936
====== =============
NET ASSETS.................................................................. 100.0% $30,509,522
====== =============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
December 31, 1994, these securities amounted to $106,521 or .3% of net
assets.
(c) Denominated in Swiss Francs.
(d) Denominated in German Marks.
(e) Denominated in South African Rand.
(f) Partially held by the custodian in a segregated account as
collateral for open financial futures positions.
(g) Securities restricted as to public resale. Investments in
restricted securities, with an aggregate market value of $204,380,
represents approximately .7% of net assets:
<TABLE>
<CAPTION>
ACQUISITION PURCHASE PERCENTAGE OF
PUT OPTIONS: DATE PRICE NET ASSETS VALUATION*
- ------------- ------------ ---------- --------------- ------------
<S> <C> <C> <C> <C>
Brokerage Basket**
November '95 @ $95....................... 11/11/94 $5.70 0.39 fair value
Standard & Poor's 500 Index
March '96 @ $453......................... 12/14/94 $21.99 0.28 fair value
</TABLE>
* The valuation of these securities has been determined in good faith
under the direction of the Board of Directors.
**Consists of Common Stocks of six publicly traded brokerage firms.
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL FUTURES DECEMBER 31, 1994
FINANCIAL FUTURES SOLD SHORT; MARKET VALUE UNREALIZED
NUMBER OF COVERED (DEPRECIATION)
ISSUER CONTRACTS BY CONTRACTS EXPIRATION AT 12/31/94
- ------ ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
Standard & Poor's 500........................ 11 $(2,537,425) March '95 $(34,100)
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, Zero Coupon 2000 Portfolio
STATEMENT OF INVESTMENTS DECEMBER 31, 1994
PRINCIPAL
BONDS AND NOTES--84.8% AMOUNT VALUE
------------- -------------
<S> <C> <C>
BANKING--3.0% CoreStates Capital,
Sub. Notes, 9 5/8%, 2001............. $ 200,000 $ 209,639
J.P. Morgan and Co.,
Sub. Notes, Zero Coupon, 1998........ 160,000 123,634
-------------
333,273
-------------
CONSUMER--1.3% News America Holdings (Gtd. by News),
Sr. Notes, 7 1/2%, 2000.............. 150,000 141,824
-------------
INDUSTRIAL--4.0% USX,
Deb., 9 1/8%, 2013................... 450,000 435,831
-------------
INSURANCE--1.2% SunAmerica,
Notes, 9%, 1999...................... 130,000 131,985
-------------
FOREIGN--.7% Kingdom of Sweden,
Bonds, Ser. A, Zero Coupon, 1997..... 40,000 33,379
Montreal Urban Community,
Deb., 9 1/8%, 2001................... 40,000 41,504
-------------
74,883
-------------
OTHER--7.6% FICO Coupon Strips:
Ser.17, Zero Coupon, 4/5/2000........ 500,000 331,274
Zero Coupon, 10/6/2000............... 478,000 304,378
Ser. 1, Zero Coupon, 11/11/2000...... 150,000 94,779
Ser.10, Zero Coupon, 11/30/2000...... 152,000 95,645
-------------
826,076
-------------
U.S. GOVERNMENT
AND AGENCIES--67.0% Chattanooga Valley,
Secured First Mortgage, Zero Coupon, 1/1/2000 176,000 118,723
Federal National Mortgage Association,
Callable Principal Strips, Ser. 1:
Zero Coupon, 8/21/1996......... (a) 145,000 127,078
Zero Coupon, 10/10/2001.......... 400,000 339,250
Resolution Funding, Coupon Strips:
Zero Coupon, 7/15/2000............... 260,000 169,360
Zero Coupon, 10/15/2000.............. 2,830,000 1,812,406
U.S. Treasury Coupon Receipts,
Zero Coupon, 11/15/2000.............. 430,355 272,589
U.S. Treasury Coupon Strips,
Zero Coupon, 11/15/2000.............. 1,800,000 1,147,549
U.S. Treasury Principal Strips:
Zero Coupon, 8/15/2000............... 500,000 324,884
Zero Coupon, 11/15/2000.............. 4,700,000 2,996,377
-------------
7,308,216
-------------
TOTAL BONDS AND NOTES
(cost $9,933,455).................... $ 9,252,088
=============
DREYFUS VARIABLE INVESTMENT FUND, Zero Coupon 2000 Portfolio
STATEMENT OF INVESTMENTS(CONTINUED) DECEMBER 31, 1994
PRINCIPAL
SHORT-TERM INVESTMENT--13.7% AMOUNT VALUE
------------- -------------
AGENCY DISCOUNT NOTE; Federal Home Loan Mortgage Corp.,
6 1/4%, 1/3/1995
(cost $1,501,478).................... $ 1,502,000 $ 1,501,478
=============
TOTAL INVESTMENTS (cost $11,434,933)........................................ 98.5% $10,753,566
====== =============
CASH AND RECEIVABLES (NET).................................................. 1.5% $ 159,883
====== =============
NET ASSETS.................................................................. 100.0% $10,913,449
====== =============
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Zero coupon until 8/21/1996, date on which a stated coupon rate of
8.40% becomes effective; the stated maturity date is 2001.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, Quality Bond Portfolio
STATEMENT OF INVESTMENTS DECEMBER 31, 1994
PRINCIPAL
BONDS AND NOTES--92.0% AMOUNT VALUE
------------- -------------
<S> <C> <C>
AEROSPACE--2.8% Boeing,
Deb., 7 1/4%, 2025................... $ 200,000 $ 170,717
McDonnell Douglas,
Notes, 8 1/4%, 2000.................. 200,000 195,719
-------------
366,436
-------------
BANKING--1.9% First Chicago, Sub. Notes:
8 1/4%, 2002......................... 15,000 14,609
6 7/8%, 2003......................... 100,000 89,042
NationsBank,
Sub. Notes, 6 1/2%, 2003............. 175,000 151,521
-------------
255,172
-------------
CONSUMER--2.3% News America Holdings (Gtd. by News):
Sr. Deb., 8 1/4%, 2018............... 100,000 88,542
Sr. Notes, 9 1/8%, 1999.............. 25,000 25,258
Rite Aid,
Sr. Deb., 6 7/8%, 2013............... 100,000 81,996
Time Warner,
Deb., 9.15%, 2023.................... 125,000 112,487
-------------
308,283
-------------
FINANCE--10.3% Ford Motor Credit,
Notes, 7 1/2%, 2004.................. 1,000,000 930,765
Heller Financial,
Floating Rate Notes, 5 15/16%, 1999 (a) 100,000 99,639
Merrill Lynch & Co.,
Notes, 8.30%, 2002................... 350,000 341,406
-------------
1,371,810
-------------
INDUSTRIAL--13.5% American Brands,
Deb., 8 5/8%, 2021................... 400,000 393,889
Eastman Kodak,
Deb., 9.95%, 2018.................... 400,000 454,966
Ford Motor,
Deb., 8 7/8%, 2022................... 400,000 407,129
USX,
Deb., 9 1/8%, 2013................... 550,000 532,683
-------------
1,788,667
-------------
INSURANCE--6.9% SunAmerica:
Deb., 9.95%, 2012.................... 13,000 14,063
Notes, 9%, 1999...................... 130,000 131,985
USF&G,
Sr. Notes, 8 3/8%, 2001.............. 800,000 766,032
-------------
912,080
-------------
DREYFUS VARIABLE INVESTMENT FUND, Quality Bond Portfolio
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------- -------------
FOREIGN--3.4% Kingdom of Sweden,
Bonds, Ser. A, Zero Coupon, 1997..... $ 60,000 $ 50,068
Province of Quebec,
Deb., 8.80%, 2003.................... 400,000 405,068
-------------
455,136
-------------
OTHER--.7% City of New York,
General Obligation Bonds, Ser. D, 10%, 2007 25,000 25,594
FICO Coupon Strips,
Ser. 1, Zero Coupon, 5/11/2000....... 95,000 62,671
-------------
88,265
-------------
U.S. GOVERNMENT
AND AGENCIES--50.2% Federal National Mortgage Association,
Callable Principal Strips,
Ser. 1, Zero Coupon, 8/21/1996..... (b) 55,000 48,202
U.S. Treasury Bonds:
10 3/4%, 8/15/2005................... 100,000 120,141
11 1/4%, 2/15/2015................... 100,000 132,187
7 1/4%, 5/15/2016.................... 1,200,000 1,109,626
8%, 11/15/2021....................... 1,000,000 1,004,219
7 1/8%, 2/15/2023.................... 300,000 273,047
U.S. Treasury Notes:
7 1/4%, 8/31/1996.................... 230,000 228,634
7 1/4%, 11/30/1996................... 2,000,000 1,984,688
7 3/8%, 11/15/1997................... 1,000,000 989,531
8 1/2%, 11/15/2000................... 600,000 618,656
U.S. Treasury Principal Strips,
Zero Coupon, 5/15/2020............... 1,000,000 136,412
-------------
6,645,343
-------------
TOTAL BONDS AND NOTES
(cost $12,942,799)................... $12,191,192
=============
SHORT-TERM INVESTMENT--5.3%
AGENCY DISCOUNT NOTE; Federal Home Loan Mortgage Corp.,
6 1/4%, 1/3/1995
(cost $699,757)...................... $ 700,000 $ 699,757
=============
TOTAL INVESTMENTS (cost $13,642,556)........................................ 97.3% $12,890,949
====== =============
CASH AND RECEIVABLES (NET).................................................. 2.7% $ 353,190
====== =============
NET ASSETS.................................................................. 100.0% $13,244,139
====== =============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Variable rate security - interest rate subject to periodic change.
(b) Zero coupon until 8/21/96, date on which a stated coupon rate of
8.40% becomes effective; the stated maturity date is 2001.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
STATEMENT OF INVESTMENTS DECEMBER 31, 1994
COMMON STOCKS--70.2% SHARES VALUE
-------------- --------------
<S> <C> <C>
CONSUMER
NON-DURABLE--6.4% Bush Boake Allen......................... 155,000 $ 4,185,000
Canandaigua Wine, Cl. A.............. (a) 75,000 2,850,000
Eskimo Pie............................. 95,000 1,781,250
Norton McNaughton...................... 150,000 2,287,500
-------------
11,103,750
-------------
CONSUMER SERVICES--1.7% Au Bon Pain, Cl. A (a) 190,000 3,040,000
-------------
ENERGY--6.8% Cairn Energy USA (a) 200,000 1,625,000
Coda Energy.......................... (a) 350,000 2,100,000
Cross Timbers Oil...................... 105,000 1,575,000
Global Industries.................... (a) 50,000 1,143,750
Hornbeck Offshore Services........... (a) 150,000 1,875,000
International Colin Energy........... (a) 175,000 1,203,125
Optima Petroleum..................... (a) 150,000 592,980
Tide West Oil........................ (a) 157,500 1,594,688
Unit................................. (a) 44,800 134,400
-------------
11,843,943
-------------
FINANCIAL--8.0% Dime Bancorp (a) 175,000 1,356,250
Executive Risk......................... 131,000 1,866,750
FirstFed Michigan...................... 145,000 2,972,500
Fremont General........................ 73,400 1,715,725
Hibernia, Cl. A........................ 325,000 2,518,750
Presidential Life...................... 140,000 735,000
Western National....................... 210,000 2,703,750
-------------
13,868,725
-------------
HEALTH CARE--9.2% Advantage Health (a) 37,500 1,190,625
Coram Healthcare....................... 70,000 1,155,000
Corvel............................... (a) 112,500 3,121,875
FPA Medical Management................. 75,000 937,500
Horizon Healthcare................... (a) 95,000 2,660,000
National Health Laboratories Holdings.. 225,000 2,981,250
Ramsay Health Care................... (a) 125,000 812,500
Universal Health Services, Cl. B..... (a) 125,000 3,062,500
-------------
15,921,250
-------------
NON-ENERGY MINERALS--2.5% Cleveland-Cliffs 70,000 2,590,000
IMCO Recycling......................... 111,100 1,680,387
-------------
4,270,387
-------------
PROCESS INDUSTRIES--7.9% Albany International, Cl. A 125,000 2,406,250
Ferro.................................. 150,000 3,581,250
Longview Fibre......................... 125,000 1,968,750
OM Group............................... 135,000 3,240,000
Schulman (A.).......................... 90,000 2,475,000
-------------
13,671,250
-------------
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
-------------- --------------
PRODUCER
MANUFACTURING--8.4% Andros................................. (a) 100,000 $ 1,650,000
Apogee................................. 165,000 2,887,500
Applied Power, Cl. A................... 75,000 1,903,125
Central Tractor Farm & Country......... 100,000 1,450,000
Flair.................................. 35,000 665,000
Greenfield Industries.................. 50,000 1,200,000
Moorco International................... 67,300 992,675
Roper Industries....................... 90,000 2,272,500
Titan Wheel International.............. 31,000 860,250
Wyman-Gordon......................... (a) 100,000 625,000
-------------
14,506,050
-------------
RETAIL TRADE--1.7% Genovese Drug Stores, Cl. A 61,000 693,875
Talbots................................ 70,000 2,187,500
-------------
2,881,375
-------------
TECHNOLOGY--15.0% Aspen Technology 125,000 2,453,125
Glenayre Technologies................ (a) 57,500 3,320,625
International Rectifier.............. (a) 135,000 3,273,750
LSI Logic............................ (a) 50,000 2,018,750
Rohr................................. (a) 175,000 1,815,625
Sierra On-Line....................... (a) 90,000 3,082,500
SoftKey International.................. 95,000 2,422,500
Spectrum HoloByte...................... 40,000 540,000
Sybase............................... (a) 35,000 1,820,000
Thermedics........................... (a) 150,000 1,912,500
Veeco Instruments...................... 190,000 1,923,750
Xilinx............................... (a) 25,000 1,481,250
-------------
26,064,375
-------------
TRANSPORTATION--1.6% U.S. Delivery Systems 72,500 996,875
Werner Enterprises..................... 75,000 1,781,250
-------------
2,778,125
-------------
UTILITIES--1.0% IntelCom Group (a) 125,000 1,656,250
-------------
TOTAL COMMON STOCKS
(cost $115,862,706).................. $121,605,480
=============
PRINCIPAL
SHORT-TERM INVESTMENTS--35.7% AMOUNT
--------------
U.S. TREASURY BILLS: 4.90%, 1/12/95 $ 747,000 $ 745,882
5.00%, 1/19/95......................... 1,006,000 1,003,485
5.10%, 1/26/95......................... 12,677,000 12,632,116
5.11%, 2/2/95.......................... 6,005,000 5,977,728
5.27%, 2/9/95.......................... 959,000 953,525
5.23%, 2/16/95......................... 1,042,000 1,035,036
5.18%, 3/2/95.......................... 2,109,000 2,090,792
DREYFUS VARIABLE INVESTMENT FUND, Small Cap Portfolio
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
PRINCIPAL
SHORT-TERM INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
U.S. TREASURY BILLS (CONTINUED): 5.33%, 3/9/95 $ 17,088,000 $ 16,918,608
5.39%, 3/16/95......................... 20,614,000 20,385,452
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $61,742,624)................... $ 61,742,624
=============
TOTAL INVESTMENTS (cost $177,605,330)....................................... 105.9% $183,348,104
====== =============
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (5.9%) $ (10,133,103)
====== =============
NET ASSETS.................................................................. 100.0% $173,215,001
====== =============
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
STATEMENT OF INVESTMENTS DECEMBER 31, 1994
COMMON STOCKS--70.9% SHARES VALUE
------------- -------------
<S> <C> <C> <C>
AEROSPACE
& ELECTRONICS--6.4% Emerson Electric......................... 2,000 $ 125,000
General Electric....................... 12,050 614,550
Motorola............................... 3,050 176,519
Texas Instruments...................... 1,600 119,800
-------------
1,035,869
-------------
AUTO RELATED--1.5% Chrysler 5,000 245,000
-------------
BANKING--3.0% Banc One 1,800 45,675
Citicorp............................... 8,525 352,722
KeyCorp................................ 1,800 45,000
PNC Bank............................... 1,800 38,025
-------------
481,422
-------------
CAPITAL GOODS--.2% Cooper Industries 1,000 34,125
-------------
CHEMICALS--5.7% Dow Chemical 6,000 403,500
duPont (E.I.) de Nemours............... 6,000 337,500
Rohm & Haas............................ 3,000 171,375
-------------
912,375
-------------
ENERGY--6.3% Chevron 5,500 245,437
Exxon.................................. 4,025 244,519
Mobil.................................. 3,025 254,856
Royal Dutch Petroleum.................. 2,500 268,750
-------------
1,013,562
-------------
FINANCE-MISCELLANEOUS--3.3%. American General 3,000 84,750
Federal National Mortgage Association.. 3,500 255,063
HSBC Holdings PLC...................... 2,400 25,902
HSBC Holdings PLC, A.D.R............... 1,000 108,500
Merrill Lynch.......................... 1,800 64,350
-------------
538,565
-------------
FOOD,
BEVERAGE & TOBACCO--14.1% Anheuser-Busch Cos....................... 700 35,612
Coca-Cola.............................. 15,000 772,500
General Mills.......................... 600 34,200
Kellogg................................ 2,000 116,250
Nestle, A.D.R.......................... 1,000 47,625
PepsiCo................................ 9,000 326,250
Philip Morris Cos...................... 11,500 661,250
Sara Lee............................... 2,500 63,125
Seagram................................ 7,500 221,250
-------------
2,278,062
-------------
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- -------------
HEALTH CARE--9.5% Abbott Laboratories 3,000 $ 97,875
Amgen................................ (a) 2,500 147,500
Johnson & Johnson...................... 7,050 385,987
Merck & Co............................. 12,000 457,500
Pfizer................................. 4,550 351,487
Roche Holdings A.D.S................... 2,000 95,875
-------------
1,536,224
-------------
MEDIA/ENTERTAINMENT--2.5% McGraw-Hill 2,000 133,750
News Corp. A.D.S....................... 5,000 78,125
Reader's Digest Association, Cl. A..... 4,000 196,500
-------------
408,375
-------------
MULTI INDUSTRY--3.2% AlliedSignal 5,000 170,000
Minnesota Mining & Manufacturing....... 6,500 346,938
-------------
516,938
-------------
OFFICE & BUSINESS
EQUIPMENT--2.2% AT&T 5,500 276,375
Ericsson (LM) Telephone, Cl. B, A.D.R.. 800 44,100
MCI Communications..................... 1,800 33,075
-------------
353,550
-------------
PERSONAL CARE--5.0% Colgate-Palmolive 1,000 63,375
Gillette............................... 4,500 336,375
Procter & Gamble....................... 5,500 341,000
Unilever, N.V.......................... 500 58,250
-------------
799,000
-------------
PERSONNEL SERVICES--.7% Block (H & R) 3,000 111,375
-------------
PHOTOGRAPHY--1.3% Eastman Kodak 4,500 214,875
-------------
RETAIL--3.6% May Department Stores 6,000 202,500
Toys R Us.............................. (a) 2,950 89,975
Wal-Mart Stores........................ 7,000 148,750
Walgreen............................... 3,000 131,250
-------------
572,475
-------------
TRANSPORTATION--2.4% Norfolk Southern 4,000 242,500
Union Pacific.......................... 3,000 136,875
-------------
379,375
-------------
TOTAL COMMON STOCKS
(cost $11,259,865)................... $11,431,167
=============
DREYFUS VARIABLE INVESTMENT FUND, Capital Appreciation Portfolio
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
PREFERRED STOCKS--2.8% SHARES VALUE
------------- -------------
AUTO RELATED--2.6% Ford Motor, Ser. A, Cum. Conv., $4.20 4,500 $ 414,000
-------------
MEDIA/ENTERTAINMENT--.2% News Corp. 2,500 34,688
-------------
TOTAL PREFERRED STOCKS
(cost $445,524)...................... $ 448,688
=============
PRINCIPAL
SHORT-TERM INVESTMENTS--25.6% AMOUNT
-------------
U.S. TREASURY BILLS: 4.75%,2/2/1995 $ 21,000 $ 20,909
4.95%,3/2/1995......................... 202,000 200,152
4%,3/9/1995............................ 3,642,000 3,604,597
4.91%,3/16/1995........................ 305,000 301,556
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $4,127,214).................... $ 4,127,214
=============
TOTAL INVESTMENTS (cost $15,832,603)........................................ 99.3% $16,007,069
====== =============
CASH AND RECEIVABLES (NET)................................................... .7% $ 111,228
====== =============
NET ASSETS................................................................... 100.0% $16,118,297
====== =============
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, Growth & Income Portfolio
STATEMENT OF INVESTMENTS DECEMBER 31, 1994
COMMON STOCKS--55.0% SHARES VALUE
------------ ------------
<S> <C> <C>
BASIC INDUSTRIES--4.1% Minnesota Mining & Manufacturing 800 $ 42,700
------------
CAPITAL GOODS--6.3% Albany International, Cl. A 1,400 26,950
Methanex............................. (a) 3,000 38,812
------------
65,762
------------
ENERGY--11.7% Coastal 1,200 30,900
Schlumberger........................... 1,000 50,375
UGI.................................... 2,000 40,750
------------
122,025
------------
FINANCIAL-BROKERAGE--4.0% Bank of Boston 1,600 41,400
------------
MANUFACTURING--3.4% Premark International 800 35,800
------------
MEDICAL SUPPLIES--4.6% DENTSPLY International 1,500 47,250
------------
TELECOMMUNICATIONS--14.6% AT&T 800 40,200
GTE.................................... 1,200 36,450
IntelCom Group....................... (a) 3,000 39,750
US West................................ 1,000 35,625
------------
152,025
------------
TRANSPORTATION--2.9% Canadian Pacific 2,000 30,000
------------
UTILITIES-ELECTRIC POWER--3.4% Entergy 1,600 35,000
------------
TOTAL COMMON STOCKS
(cost $611,293)...................... $ 571,962
============
CONVERTIBLE PREFERRED STOCKS-12.2%
ELECTRICAL & ELECTRONICS--3.9% Cooper Industries, Cum., $1.60 2,000 $ 41,000
------------
REAL ESTATE--4.0% Tanger Factory Outlet Centers, Cum., $1.66 2,000 41,250
------------
RETAILERS-MERCHANDISING--4.3% Sears, Roebuck & Co., Ser. A, $3.75 800 44,500
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $130,436)...................... $ 126,750
============
PRINCIPAL
SHORT-TERM INVESTMENTS--37.1% AMOUNT
------------
U.S. TREASURY BILLS; 4.91%, 3/16/1995
(cost $385,597)...................... $ 390,000 $ 385,597
============
TOTAL INVESTMENTS (cost $1,127,326)......................................... 104.3% $1,084,309
====== ============
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (4.3%) $ (44,415)
====== ============
NET ASSETS.................................................................. 100.0% $1,039,894
====== ============
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
STATEMENT OF INVESTMENTS DECEMBER 31, 1994
COMMON STOCKS--83.2% SHARES VALUE
------------ ------------
<S> <C> <C> <C>
AUSTRALIA-- 5.0% Commonwealth Bank of Australia 2,500 $ 15,433
Mayne Nickless......................... 2,800 14,331
Newcrest Mining........................ 5,500 24,525
------------
54,289
------------
AUSTRIA-- 1.3% Burgenland Holding 400 14,509
------------
FRANCE-- 8.1% BUT S.A. 100 16,579
Naf Naf S.A............................ 315 12,392
Naf Naf S.A. (Warrants).............. (a) 35 74
Renault S.A............................ 370 12,234
Roussel Uclaf S.A...................... 210 25,139
Vallourec Usines a Tubes de Lorraine Escaut
et Vallourec Reunies............... (a) 450 21,750
------------
88,168
------------
GERMANY-- 2.6% BASF AG 75 15,460
Continental AG......................... 90 13,122
------------
28,582
------------
HONG KONG-- 3.6% China Light & Power 4,000 17,061
HSBC Holdings PLC...................... 2,000 21,585
------------
38,646
------------
JAPAN-- 22.9% Amway Japan 1,000 34,421
East Japan Railway..................... 4 19,990
Honda Motor............................ 1,000 17,762
Mitsubishi Bank........................ 1,000 24,586
Mitsui Fudosan......................... 1,000 10,637
NGK Spark Plug......................... 2,000 26,292
Nippon Telegraph & Telephone........... 2 17,682
Sony................................... 500 28,349
Tokio Marine & Fire Insurance.......... 1,000 12,243
Toshoku................................ 3,300 22,320
Ushio.................................. 3,000 34,621
------------
248,903
------------
MALAYSIA-- 3.6% Leader Universal Holdings Berhad 6,666 21,392
Renong Berhad.......................... 14,000 17,311
------------
38,703
------------
MEXICO-- 3.6% Cemex S.A., Cl.B, A.D.R. 1,181 12,105
Grupo Carso S.A., Ser.B, A.D.R. ... (a,b) 800 11,600
Panamerican Beverages, Cl. A........... 500 15,813
------------
39,518
------------
NETHERLANDS-- 2.3% Philips Electronics 850 25,182
------------
DREYFUS VARIABLE INVESTMENT FUND, International Equity Portfolio
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
COMMON STOCKS (CONTINUED) SHARES VALUE
------------ ------------
SINGAPORE--2.3% Keppel 3,000 $ 25,514
------------
SOUTH AFRICA--4.0% Premier Group Holdings 15,000 19,349
South African Breweries................ 1,000 23,649
------------
42,998
------------
SPAIN--5.1% Banco Bilbao Vizcaya S.A. 870 21,585
Iberdrola S.A.......................... 2,900 17,894
Repsol S.A............................. 600 16,276
------------
55,755
------------
SWITZERLAND--6.3% Baloise Holdings 20 36,377
Baloise Holdings (Warrants).......... (a) 20 176
Elektrowatt AG......................... 120 31,731
------------
68,284
------------
UNITED KINGDOM--12.5% BAT Industries PLC 3,000 20,285
Booker PLC............................. 3,500 21,938
British Steel PLC...................... 9,000 21,930
Lucas Industries PLC................... 7,000 22,596
Royal Doulton PLC...................... 5,500 21,977
Zeneca Group PLC....................... 2,000 27,485
------------
136,211
------------
TOTAL COMMON STOCKS
(cost $919,899)...................... $ 905,262
============
PREFERRED STOCK--1.0%
GERMANY; Herlitz AG
(cost $14,543)....................... 65 $ 11,113
============
PRINCIPAL
SHORT-TERM INVESTMENTS--10.0% AMOUNT
------------
UNITED STATES; U.S. Treasury Bills:
4.85%, 2/9/95........................ $ 13,000 $ 12,932
5.30%, 3/9/95........................ 97,000 96,043
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $108,975)...................... $ 108,975
============
TOTAL INVESTMENTS (cost $1,043,417)......................................... 94.2% $1,025,350
====== ============
CASH AND RECEIVABLES (NET).................................................. 5.8% $ 63,229
====== ============
NET ASSETS.................................................................. 100.0% $1,088,579
====== ============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Security exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1994, this security amounted to $11,600 or 1.1% of net assets.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1994
MONEY MANAGED ZERO COUPON QUALITY
MARKET ASSETS 2000 BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
[cost_Note 4(b)]_see statement....... $35,249,652 $30,180,586 $10,753,566 $12,890,949
Cash................................... 231,532 219,408 91,573 137,083
Dividends and interest receivable...... 48,986 130,888 36,528 188,433
Receivable for futures variation margin_Note 4(a) -- 17,875 -- --
Prepaid expenses and other assets...... 4,446 4,372 4,462 4,321
Due from The Dreyfus Corporation....... 82,227 -- 51,830 51,163
------------- ------------- ------------- -------------
35,616,843 30,553,129 10,937,959 13,271,949
------------- ------------- ------------- -------------
LIABILITIES:
Due to The Dreyfus Corporation......... $ -- $ 11,223 $ -- $ --
Payable for shares of Beneficial Interest redeemed 844,089 -- 785 594
Accrued expenses and other liabilities. 44,351 32,384 23,725 27,216
------------- ------------- ------------- -------------
888,440 43,607 24,510 27,810
------------- ------------- ------------- -------------
NET ASSETS ..................... $34,728,403 $30,509,522 $10,913,449 $13,244,139
============= ============= ============= =============
REPRESENTED BY:
Paid-in capital........................ $34,722,439 $30,808,212 $11,592,449 $14,092,165
Accumulated undistributed investment
income_net........................... 5,895 -- 2,786 4,797
Accumulated distributions in excess of
investment income_net................ -- (48,981) -- --
Accumulated undistributed net realized gain
(loss) on investments and foreign
currency transactions................ 69 197,455 (419) (101,216)
Accumulated net unrealized (depreciation) on
investments and foreign currency transactions
[including $(34,100) net unrealized
(depreciation) on financial futures for
Managed Assets Portfolio]_Note 4(b).. -- (447,164) (681,367) (751,607)
------------- ------------- ------------- -------------
NET ASSETS at value, applicable to outstanding
shares of Beneficial Interest.......... $34,728,403 $30,509,522 $10,913,449 $13,244,139
============= ============= ============= =============
SHARES OUTSTANDING (unlimited number of
$.001 par value shares authorized for each series) 34,722,439 2,466,347 957,822 1,257,435
============= ============= ============= =============
NET ASSET VALUE per share
(Net Assets / Shares Outstanding)...... $1.00 $12.37 $11.39 $10.53
====== ======= ======= =======
See notes to financial statements.
DREYFUS VARIABLE INVESTMENT FUND
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1994
CAPITAL GROWTH AND INTERNATIONAL
SMALL CAP APPRECIATION INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- -------------
ASSETS:
Investments in securities, at value
[cost_Note 4(b)]_see statement....... $183,348,104 $16,007,069 $ 1,084,309 $ 1,025,350
Cash................................... 1,531,615 95,800 47,677 75,058
Receivable for investment securities sold 1,297,449 -- -- --
Dividends and interest receivable...... 66,117 33,169 3,011 2,538
Prepaid expenses and other assets...... 4,366 90 -- --
Due from The Dreyfus Corporation....... -- 9,740 7,857 385
------------- ------------- ------------- -------------
186,247,651 16,145,868 1,142,854 1,103,331
------------- ------------- ------------- -------------
LIABILITIES:
Due to The Dreyfus Corporation......... $ 98,483 $ -- $ -- $ --
Payable for investment securities purchased 12,820,444 -- 92,837 --
Payable for shares of Beneficial Interest redeemed -- -- 10 --
Net unrealized depreciation on forward currency
exchange contracts_Note 4(a)......... -- -- -- 254
Accrued expenses and other liabilities. 113,723 27,571 10,113 14,498
------------- ------------- ------------- -------------
13,032,650 27,571 102,960 14,752
------------- ------------- ------------- -------------
NET ASSETS .................... $173,215,001 $16,118,297 $ 1,039,894 $ 1,088,579
============= ============= ============= =============
REPRESENTED BY:
Paid-in capital........................ $168,735,476 $15,941,804 $ 1,082,331 $ 1,126,622
Accumulated undistributed investment
income_net........................... 35,405 1,355 58 --
Accumulated distributions in excess of
investment income_net................ -- -- -- (7,247)
Accumulated undistributed net realized gain
(loss) on investments and foreign currency
transactions......................... (817,310) 672 522 (12,479)
Accumulated distributions in excess of net realized
gains on investments................. (481,344) -- -- --
Accumulated net unrealized appreciation
(depreciation) on investments and foreign
currency transactions_Note 4(b)...... 5,742,774 174,466 (43,017) (18,317)
------------- ------------- ------------- -------------
NET ASSETS at value, applicable to outstanding
shares of Beneficial Interest.......... $173,215,001 $16,118,297 $ 1,039,894 $ 1,088,579
============= ============= ============= =============
SHARES OUTSTANDING (unlimited number of
$.001 par value shares authorized for each series) 4,743,058 1,198,926 86,822 90,532
============= ============= ============= =============
NET ASSET VALUE per share
(Net Assets / Shares Outstanding)...... $36.52 $13.44 $11.98 $12.02
====== ======= ======= =======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
MONEY MANAGED ZERO COUPON QUALITY
MARKET ASSETS 2000 BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest............................. $1,006,418 $ 727,651 $ 522,791 $ 649,784
Cash dividends (net of $7,289 foreign taxes
withheld at source for the Managed
Assets Portfolio)................ -- 71,099 --_ --_
------------- ------------- ------------- -------------
TOTAL INCOME................... 1,006,418 798,750 522,791 649,784
------------- ------------- ------------- -------------
EXPENSES--NOTE 2(D):
Investment advisory fee_Note 3(a).... $ 108,958 $ 79,001 $ 38,947 $ 60,106
Sub-investment advisory fee_Note 3(a) ___ 79,001 ___ ___
Legal fees........................... 24,877 20,998 8,875 9,386
Auditing fees........................ 19,829 18,047 17,242 16,521
Custodian fees....................... 14,440 16,114 10,091 10,284
Registration fees.................... 8,980 7,946 1,780 2,893
Organization expenses................ 6,950 5,968 6,895 6,465
Trustees' fees and expenses_Note 3(b) 3,005 3,960 1,176 1,791
Prospectus and shareholders' reports. 2,791 6,500 2,047 ___
Shareholder servicing costs.......... 598 306 299 241
Miscellaneous........................ 957 969 3,425 3,581
------------- ------------- ------------- -------------
191,385 238,810 90,777 111,268
Less_expense reimbursement from The
Dreyfus Corporation and Comstock
Partners due to undertakings_Note 3(a) 191,385 185,292 90,777 111,268
------------- ------------- ------------- -------------
TOTAL EXPENSES................. ___ 53,518 ___ ___
------------- ------------- ------------- -------------
INVESTMENT INCOME--NET......... 1,006,418 745,232 522,791 649,784
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments (including
foreign currency transactions)_Note 4(a) $ 40 $ 59,386 $ ___ $(101,063)
Net realized gain on financial futures_Note 4(a) ___ 87,189 ___ -__
------------- ------------- ------------- -------------
NET REALIZED GAIN (LOSS)............. 40 146,575 ___ (101,063)
Net unrealized (depreciation) on investments and
foreign currency transactions [including $(29,115)
net unrealized (depreciation) on financial
futures for the Managed Assets Portfolio] ___ (1,091,304) (791,423) (776,871)
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 40 (944,729) (791,423) (877,934)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. $1,006,458 $ (199,497) $(268,632) $(228,150)
============= ============= ============= =============
See notes to financial statements.
DREYFUS VARIABLE INVESTMENT FUND
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1994
CAPITAL GROWTH AND INTERNATIONAL
SMALL CAP APPRECIATION INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO*
------------- ------------- ------------- -------------
INVESTMENT INCOME:
INCOME:
Interest............................. $ 822,120 $ 97,376 $ 13,052 $ 2,834
Cash dividends (net of $2,354, $35 and $1,441
foreign taxes withheld at source for the
Capital Appreciation, Growth and Income and
International Equity Portfolios, respectively) 299,488 195,251 11,999 10,744
------------- ------------- ------------- -------------
TOTAL INCOME................... 1,121,608 292,627 25,051 13,578
------------- ------------- ------------- -------------
EXPENSES--NOTE 2(D):
Investment advisory fee_Note 3(a).... $ 487,316 $ 49,561 $ 5,069 $ 5,080
Sub-investment advisory fee_Note 3(a) ___ 18,022 __- ---
Legal fees........................... 74,443 9,192 402 514
Registration fees.................... 51,931 4,132 363 382
Auditing fees........................ 25,921 9,500 6,333 6,330
Custodian fees....................... 24,874 4,137 860 5,294
Trustees' fees and expenses_Note 3(b) 13,356 1,990 129 124
Prospectus and shareholders' reports. 11,615 2,368 1,301 1,059
Organization expenses................ 5,565 __-- __--- __---
Shareholder servicing costs.......... 672 263 15 7
Miscellaneous........................ 1,166 1,057 718 789
------------- ------------- ------------- -------------
696,859 100,222 15,190 19,579
Less_expense reimbursement from The
Dreyfus Corporation due to
undertakings_Note 3(a)........... 340,893 77,322 12,926 17,220
------------- ------------- ------------- -------------
TOTAL EXPENSES................. 355,966 22,900 2,264 2,359
------------- ------------- ------------- -------------
INVESTMENT INCOME--NET......... 765,642 269,727 22,787 11,219
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments_Note 4(a):
Long transactions (including foreign currency
transactions).................... $ (692,673) $ 588 $ 7,824 $(12,479)
Short sale transactions.............. (119,353) __-- __--- __---
------------- ------------- ------------- -------------
NET REALIZED GAIN (LOSS)............. (812,026) 588 7,824 (12,479)
Net unrealized appreciation (depreciation) on
investments, foreign currency transactions and
securities sold short................ 3,743,892 93,162 (43,017) (18,317)
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS. 2,931,866 93,750 (35,193) (30,796)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. $3,697,508 $363,477 $(12,406) $(19,577)
============= ============= ============= =============
</TABLE>
* From May 2, 1994 (commencement of operations) to December 31, 1994.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS VARIABLE INVESTMENT FUND
STATEMENT OF CHANGES IN NET ASSETS
MONEY MARKET PORTFOLIO MANAGED ASSETS PORTFOLIO
-------------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------- ------------------------------
1993 1994 1993 1994
-------------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income_net.................. $ 86,426 $ 1,006,418 $ 56,340 $ 745,232
Net realized gain on investments, foreign
currency transactions and financial futures 35 40 36,233 146,575
Net unrealized appreciation (depreciation) on
investments and foreign currency transactions
for the year......................... ___ ___- 626,021 (1,091,304)
-------------- --------------- ------------ -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............ 86,461 1,006,458 718,594 (199,497)
-------------- --------------- ------------ -------------
DIVIDENDS TO SHAREHOLDERS:
From investment income_net............. (86,426) (1,000,523) (51,408) (769,916)
In excess of investment income_net..... ___ ___- __-- (48,981)
From net realized gain on investments.. (273) ___- __-- __--
-------------- --------------- ------------ -------------
TOTAL DIVIDENDS...................... (86,699) (1,000,523) (51,408) (818,897)
-------------- --------------- ------------ -------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold.......... 40,424,117(3) 141,994,565(3) 5,959,592 26,699,972
Dividends reinvested................... 86,613(3) 1,000,523(3) 51,408 818,897
Cost of shares redeemed................ (33,650,057)(3)(115,923,303)(3) (586,787) (3,947,678)
-------------- --------------- ------------ -------------
INCREASE IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS............ 6,860,673 27,071,785 5,424,213 23,571,191
-------------- --------------- ------------ -------------
TOTAL INCREASE IN NET ASSETS..... 6,860,435 27,077,720 6,091,399 22,552,797
NET ASSETS:
Beginning of year...................... 790,248 7,650,683 1,865,326 7,956,725
-------------- --------------- ------------ -------------
End of year............................ $ 7,650,683 $ 34,728,403(1) $7,956,725(2) $30,509,522(2)
============= ============= ============= =============
SHARES SHARES
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 478,384 2,094,088
Shares issued for dividends reinvested.................................. 4,070 67,318
Shares redeemed......................................................... (50,692) (310,779)
------------ -------------
NET INCREASE IN SHARES OUTSTANDING.................................... 431,762 1,850,627
============ =============
(1) Includes undistributed investment income_net; $5,895 in 1994.
(2) Includes distributions in excess of investment income_net: $(13,920) in
1993 and $(48,981) in 1994.
(3) $1.00 per share.
See notes to financial statements.
DREYFUS VARIABLE INVESTMENT FUND
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
ZERO COUPON 2000 PORTFOLIO QUALITY BOND PORTFOLIO
------------------------------ ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------ ------------------------------
1993 1994 1993 1994
-------------- --------------- ------------ -------------
OPERATIONS:
Investment income_net.................. $ 135,741 $ 522,791 $ 93,931 $ 649,784
Net realized gain (loss) on investments 79,385 ___ 13,099 (101,063)
Net unrealized (depreciation) on investments for
the year............................. (11,552) (791,423) (7,491) (776,871)
-------------- --------------- ------------ -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............ 203,574 (268,632) 99,539 (228,150)
-------------- --------------- ------------ -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net.................. (134,657) (519,948) (93,069) (645,868)
Net realized gain on investments....... (72,191) (7,541) (2,048) (11,191)
-------------- --------------- ------------ -------------
TOTAL DIVIDENDS...................... (206,848) (527,489) (95,117) (657,059)
-------------- --------------- ------------ -------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold.......... 5,035,897 8,129,045 4,643,084 10,900,540
Dividends reinvested................... 206,848 479,850 95,117 657,134
Cost of shares redeemed................ (905,731) (2,595,464) (440,933) (2,134,797)
-------------- --------------- ------------ -------------
INCREASE IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS............ 4,337,014 6,013,431 4,297,268 9,422,877
-------------- --------------- ------------ -------------
TOTAL INCREASE IN NET ASSETS..... 4,333,740 5,217,310 4,301,690 8,537,668
NET ASSETS:
Beginning of year...................... 1,362,399 5,696,139 404,781 4,706,471
-------------- --------------- ------------ -------------
End of year............................ $5,696,139(1) $10,913,449(1) $4,706,471(2) $13,244,139(2)
============= ============= ============= =============
SHARES SHARES SHARES SHARES
-------------- --------------- ------------ -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 392,187 683,960 390,577 991,178
Shares issued for dividends reinvested. 16,372 40,904 8,057 61,022
Shares redeemed........................ (71,372) (220,025) (37,102) (193,286)
-------------- --------------- ------------ -------------
NET INCREASE IN SHARES OUTSTANDING... 337,187 504,839 361,532 858,914
============= ============= ============= =============
- ----------------------------
(1) Includes distributions in excess of investment income_net; $(57) in
1993 and undistributed investment income_net; $2,786 in 1994.
(2) Includes undistributed investment income_net: $881 in 1993 and $4,797
in 1994.
See notes to financial statements.
DREYFUS VARIABLE INVESTMENT FUND
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SMALL CAP PORTFOLIO CAPITAL APPRECIATION PORTFOLIO
------------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- ------------------------------
1993 1994 1993(1) 1994
------------- -------------- ------------ -------------
OPERATIONS:
Investment income_net.................. $ 53,316 $ 765,642 $ 20,787 $ 269,727
Net realized gain (loss) on investments 1,862,231 (812,026) 84 588
Net unrealized appreciation on investments
for the year......................... 1,392,389 3,743,892 81,304 93,162
------------- -------------- ------------ -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................... 3,307,936 3,697,508 102,175 363,477
------------- -------------- ------------ -------------
DIVIDENDS TO SHAREHOLDERS:
From investment income_net............. (56,919) (727,613) (19,425) (269,734)
In excess of investment income_net..... (2,625) ___ ___ ___
From net realized gain on investments.. (1,237,464) (720,564) ___ ___
In excess of net realized gain on investments ___ (481,344) ___ ___
------------- -------------- ------------ -------------
TOTAL DIVIDENDS...................... (1,297,008) (1,929,521) (19,425) (269,734)
------------- -------------- ------------ -------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold.......... 13,550,837 158,015,337 3,764,767 13,455,892
Dividends reinvested................... 1,297,008 1,929,521 19,425 269,733
Cost of shares redeemed................ (1,200,662) (6,835,267) (146,916) (1,471,097)
------------- -------------- ------------ -------------
INCREASE IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS............ 13,647,183 153,109,591 3,637,276 12,254,528
------------- -------------- ------------ -------------
TOTAL INCREASE IN NET ASSETS..... 15,658,111 154,877,578 3,720,026 12,348,271
NET ASSETS:
Beginning of year...................... 2,679,312 18,337,423 50,000 3,770,026
------------- -------------- ------------ -------------
End of year............................ $18,337,423(2) $173,215,001(2) $3,770,026(3) $16,118,297(3)
============= ============= ============= =============
SHARES SHARES SHARES SHARES
------------- -------------- ------------ -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 410,543 4,347,955 289,718 1,004,793
Shares issued for dividends reinvested. 40,243 52,997 1,466 20,097
Shares redeemed........................ (36,379) (190,260) (11,139) (110,009)
------------- -------------- ------------ -------------
NET INCREASE IN SHARES OUTSTANDING... 414,407 4,210,692 280,045 914,881
============= ============= ============= =============
- ----------------------
(1) From April 5, 1993 (commencement of operations) to December 31, 1993.
(2) Includes distribution in excess of investment income_net; $(2,625) in 1993 and undistributed investment income_net;
$35,405 in 1994.
(3) Includes undistributed investment income_net: $1,362 in 1993 and $1,355
in 1994.
See notes to financial statements.
DREYFUS VARIABLE INVESTMENT FUND
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
FROM MAY 2, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994.
GROWTH AND INTERNATIONAL
INCOME EQUITY
PORTFOLIO PORTFOLIO
------------ ------------
OPERATIONS:
Investment income_net................................................... $ 22,787 $ 11,219
Net realized gain (loss) on investments and foreign currency transactions 7,824 (12,479)
Net unrealized (depreciation) on investments and foreign
currency transactions for the period.................................. (43,017) (18,317)
------------ ------------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................ (12,406) (19,577)
------------ ------------
DIVIDENDS TO SHAREHOLDERS:
From investment income_net.............................................. (22,729) (11,219)
In excess of investment income_net...................................... ___ (7,247)
From net realized gain on investments and foreign currency
transactions.......................................................... (7,302) ___
------------ ------------
TOTAL DIVIDENDS....................................................... (30,031) (18,466)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................... 1,053,630 1,120,503
Dividends reinvested.................................................... 30,031 18,466
Cost of shares redeemed................................................. (1,330) (12,347)
------------ ------------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.......... 1,082,331 1,126,622
------------ ------------
TOTAL INCREASE IN NET ASSETS...................................... 1,039,894 1,088,579
NET ASSETS:
Beginning of period..................................................... ___ ___
------------ ------------
End of period........................................................... $1,039,894(1) $1,088,579(2)
============ ============
SHARES SHARES
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 84,474 90,002
Shares issued for dividends reinvested.................................. 2,457 1,536
Shares redeemed......................................................... (109) (1,006)
------------ ------------
NET INCREASE IN SHARES OUTSTANDING.................................... 86,822 90,532
============ ============
</TABLE>
- -----------------
(1) Includes undistributed investment income_net; $58 in 1994.
(2) Includes distributions in excess of investment income_net; $(7,247) in
1994.
See notes to financial statements.
DREYFUS VARIABLE INVESTMENT FUND
FINANCIAL HIGHLIGHTS
Reference is made to pp. 4-8 of the Prospectus dated May 1, 1995.
DREYFUS VARIABLE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1--GENERAL:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as an open-end management investment company and is intended to be a funding
vehicle for variable annuity contracts and variable life insurance policies
to be offered by the separate accounts of life insurance companies. The Money
Market, Managed Assets, Zero Coupon 2000, Quality Bond, Small Cap and Capital
Appreciation Portfolios are diversified portfolios. The Growth and Income and
International Equity Portfolios are non-diversified portfolios. The Growth
and Income and International Equity Portfolios commenced operations on May 2,
1994. The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
adviser. Effective August 24, 1994, Dreyfus became a direct subsidiary of Mell
on Bank, N.A. With respect to the Managed Assets, Capital Appreciation and
International Equity Portfolios, Comstock Partners, Inc. ("Comstock
Partners"), Fayez Sarofim & Co. ("Sarofim") and M&G Investment Management
Limited ("M&G") serve as the Series' sub-investment adviser, respectively.
Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus, until
August 24, 1994, acted as the exclusive distributor of the Fund's shares,
which are sold without a sales charge.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of Institutional Administration Services, Inc., a provider of
mutual fund administration services, the parent company of which is Boston
Institutional Group, Inc.
On May 4, 1994, the shareholders of the Managed Assets Portfolio approved
a change of the Portfolio's name from "Asset Allocation Portfolio" to
"Managed Assets Portfolio".
It is the Fund's policy, with respect to the Money Market Portfolio, to
maintain a continuous net asset value per share of $1.00; the Fund has
adopted certain investment, portfolio valuation and dividend and distribution
policies to enable it to do so. There is no assurance, however, that the Fund
will be able to maintain a stable net asset value of $1.00, with respect to
the Money Market Portfolio.
The Fund currently functions as the funding vehicle for the Dreyfus
Series 2000 Variable Annuity Contract (the "Account") issued by Mutual
Benefit Life Insurance Company ("Mutual Benefit Life"). On July 16, 1991, the
Superior Court of New Jersey entered an Order (the "Order") appointing the
New Jersey Insurance Commissioner as Rehabilitator of Mutual Benefit Life.
The Commissioner was granted immediate exclusive possession and control of,
and title to, the business and assets of Mutual Benefit Life, including the
assets and liabilities of the Account.
The Commissioner was empowered by the Order to take such steps as he
deemed appropriate toward removing the cause and conditions that made
rehabilitation necessary. On January 15, 1993, the Commissioner filed the
First Amended Plan of Rehabilitation ("Plan") with the Court. The Plan
stipulated that the assets and liabilities of the Account will be transferred
to a separate account of MBL Life Assurance Corporation ("MBLLAC"), a
wholly-owned subsidiary of Mutual Benefit Life. The Plan also provided for the
transfer of the ownership of the stock of MBLLAC to a Trust. The
Commissioner was designated as the sole Trustee of the Trust. On August 12,
1993, the Court rendered an opinion approving the Plan with certain
modifications. Two subsequent amendments to the Plan were filed and approved
by the Court. None of the modifications or amendments affected the status of
the Account. On November 10, 1993, the Court issued an Order of Confirmation
permitting the implementation of the Plan.
DREYFUS VARIABLE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
An order was also issued by the Court on January 28, 1994, approving the
form of the Third Amended Plan of Rehabilitation, the Election Materials and
related documents. On April 29, 1994, the Plan was implemented. Substantially
all of the assets of Mutual Benefit Life were transferred to MBLLAC and
MBLLAC assumed and reinsured Mutual Benefit's restructured insurance
liabilities. The stock of MBLLAC was assigned to the Stock Trust and the
Commissioner was designated as Trustee.
In view of the terms and conditions of both the Order and the Plan,
applications for new contracts and additional purchase payments under
existing contracts are currently not being accepted by the Account. The terms
of the Order and the Plan permit redemptions from the Account to continue as
requested.
The proceedings of the New Jersey Insurance Commissioner with respect to
Mutual Benefit Life or the Account do not apply to the separate accounts of
other life insurance companies that may use the Fund as a funding vehicle for
contracts or policies issued by them.
<TABLE>
<CAPTION>
As of December 31, 1994, Dreyfus held the following shares:
<S> <C> <C> <C>
Money Market Portfolio.............. 25,215 Small Cap Portfolio.............. 4,511
Managed Assets Portfolio............ 2,332 Growth and Income Portfolio....... 82,457
Zero Coupon 2000 Portfolio.......... 2,714 International Equity Portfolio.... 81,531
Quality Bond Portfolio.............. 2,738
</TABLE>
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
(A) PORTFOLIO VALUATION:
Money Market Portfolio:
Investments are valued at amortized cost, which has been determined by
the Fund's Board of Trustees to represent the fair value of the Series'
investments.
Managed Assets, Capital Appreciation, Small Cap, Growth and Income and
International Equity Portfolios:
Investments in securities (including options and financial futures) are
valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices, except for open
short positions, where the asked price is used for valuation purposes. Bid
price is used when no asked price is available. Short-term investments are
carried at amortized cost, which approximates value. Investments traded in
foreign currencies are translated to U.S. dollars at the prevailing rates of
exchange. Forward currency exchange contracts are valued at the offsetting rate.
Zero Coupon 2000 and Quality Bond Portfolios:
Investments (excluding short-term investments and U.S. Government
obligations) are valued each business day by an independent pricing service
("Service") approved by the Board of Trustees. Investments for which quoted
bid prices are readily available and are representative of the bid side of
the market in the judgment of the Service 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 investments (which
constitute a majority of the portfolio securities) are carried at fair value
as determined by the Service, based on
DREYFUS VARIABLE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. Investments in U.S. Government
obligations are valued at the mean between quoted bid and asked prices.
Short-term investments are carried at amortized cost, which approximates
value.
(B) FOREIGN CURRENCY TRANSACTIONS: The Fund does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
and maturities of short-term securities, sales of foreign currencies,
currency gains or losses realized on securities transactions, the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Fund's books, and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains or losses
arise from changes in the value of assets and liabilities other than
investments in securities at fiscal year end, resulting from changes in
exchange rates.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(D) EXPENSES: Expenses directly attributable to each series are charged
to that series' operations; expenses which are applicable to all series are
allocated among them.
(E) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are
recorded by the Fund on the ex-dividend date.
The Money Market Portfolio declares dividends daily from investment
income-net; such dividends are paid monthly. The Managed Assets, Capital
Appreciation, Small Cap and International Equity Portfolios declare and pay
dividends from investment income-net annually. The Zero Coupon 2000 and
Quality Bond Portfolios declare and pay dividends from investment income-net
monthly. The Growth and Income Portfolio declares and pays dividends from
investment income-net quarterly. Dividends from net realized capital gain for
each series are normally declared and paid annually.
Each series may make distributions from capital gains and with respect to
the Managed Assets, Capital Appreciation, Small Cap and International Equity
series distributions from investment income-net on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. This
may result in distributions that are in excess of investment income-net and
net realized capital gains on a fiscal year basis. However, to the extent
that a net realized capital gain of any series can be reduced by a capital
loss carryover, if any, of that series, such gain will not be distributed.
The Managed Assets and International Equity Portfolios had dividends in
excess of investment income_net for financial statement purposes resulting
from Federal income tax distribution requirements, primarily from gains of
Passive Foreign Investment Companies.
During the year ended December 31, 1994, the Managed Assets Portfolio
reclassified $38,604 charged to undistributed income_net in prior years to
paid-in capital.
DREYFUS VARIABLE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Small Cap Portfolio had dividends in excess of net realized gains for
financial statement purposes resulting from Federal income tax distribution
requirements.
(F) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes. For Federal income tax purposes, each series is treated as a
single entity for the purpose of determining such qualification.
The Managed Assets Portfolio has an unused capital loss carryover of
approximately $369,600 available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
December 31, 1994. If not applied, $5,500 of the carryover expires in fiscal
2001 and $364,100 expires in fiscal 2002.
The Quality Bond Portfolio has an unused capital loss carryover of
approximately $31,100 available for Federal income tax purposes to be applied
against future net securities profits, if any, realized subsequent to
December 31, 1994. The carryover does not include net realized securities
losses from November 1, 1994 through December 31, 1994 which are treated, for
Federal income tax purposes, as arising in fiscal 1995. If not applied, the
carryover expires in fiscal 2002.
The International Equity Portfolio has an unused capital loss carryover
of approximately $8,300 available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
December 31, 1994. The carryover does not include net realized securities
losses from November 1, 1994 through December 31, 1994 which are treated, for
Federal income tax purposes, as arising in fiscal 1995. If not applied, the
carryover expires in fiscal 2002.
NOTE 3--INVESTMENT ADVISORY FEE, SUB-INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS
WITH AFFILIATES:
(A) Fees payable by the Fund pursuant to the provisions of an Investment
Advisory Agreement with Dreyfus are payable monthly, computed on the average
daily value of each series' net assets at the following annual rates: .50 of
1% of the Money Market Portfolio, .375 of 1% of the Managed Assets Portfolio,
.45 of 1% of the Zero Coupon 2000 Portfolio, .65 of 1% of the Quality Bond
Portfolio, .75 of 1% of the Small Cap Portfolio, .55 of 1% of the first $150
million; .50 of 1% of the next $150 million; and .375 of 1% over $300 million
of the Capital Appreciation Portfolio, .75 of 1% of the Growth and Income
Portfolio and .75 of 1% of the International Equity Portfolio. With respect
to the Managed Assets Portfolio, pursuant to a Sub-Investment Advisory
Agreement with Comstock Partners, the sub-investment advisory fee is computed
at an annual rate of .375 of 1% of the average daily value of the series' net
assets and is payable monthly. With respect to the Capital Appreciation
Portfolio, pursuant to a Sub-Investment Advisory Agreement with Sarofim, the
sub-investment advisory fee is computed at an annual rate of .20 of 1% of the
first $150 million; .25 of 1% of the next $150 million; and .375 of 1% over
$300 million of the average daily value of the series' net assets and is
payable monthly. With respect to the International Equity Portfolio, pursuant
to a Sub-Investment Advisory Agreement between Dreyfus and M&G, the
sub-investment advisory fee is computed at an annual rate of .30 of 1% of the
average daily value of the series' net assets and is payable monthly by
Dreyfus.
DREYFUS VARIABLE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The agreements further provide that if in any full year the aggregate
expenses of any series, exclusive of taxes, brokerage, interest on borrowings
and extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund, that series may deduct from the payments to be
made to Dreyfus (and Comstock Partners, Sarofim or M&G, with respect to the
Managed Assets, Capital Appreciation and International Equity Portfolios,
respectively), or Dreyfus (and Comstock Partners, Sarofim or M&G, with
respect to the Managed Assets, Capital Appreciation and International Equity
Portfolios, respectively) will bear the amount of such excess to the extent
required by state law.
However, Dreyfus has undertaken, with respect to the Money Market
Portfolio, from January 1, 1994 through December 31, 1994, to reimburse all
fees and expenses (excluding certain expenses as described above) of the
series. With respect to the Managed Assets Portfolio, Dreyfus has undertaken
from January 1, 1994 to reduce the investment advisory fee, or reimburse such
excess expenses of the series, to the extent that such expenses exceeded
specified annual percentages of the average daily value of the series' net
assets. In addition, Comstock Partners has undertaken from July 1, 1994
through December 31, 1994 to waive the sub-investment advisory fee. With
respect to the Capital Appreciation, Growth and Income and International
Equity Portfolios, Dreyfus has undertaken, from January 1, 1994(May 2, 1994,
Commencement of operations for the Growth and Income and International Equity
Portfolios) through December 31, 1994 to reimburse expenses (excluding
certain expenses as described above) in excess of an annual rate of .25 of 1%
of the average daily value of the series net assets. With respect to the Zero
Coupon 2000 and Quality Bond Portfolios, Dreyfus has undertaken, from January
1, 1994 through December 31, 1994, to reimburse all fees and expenses (excludi
ng certain expenses as described above) of the series. With respect to the
Small Cap Portfolio, Dreyfus had undertaken, from January 1, 1994 through
November 7, 1994, to reduce the investment advisory fee and/or reimburse such
excess expenses of the series, to the extent that such expenses exceeded
specified annual percentages of the average daily value of the series' net
assets.
The expense reimbursements, pursuant to the undertakings, amounted to
the following for the year ended December 31, 1994:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio.............. $191,385 Small Cap Portfolio............ $340,893
Managed Assets Portfolio............ 141,141 Capital Appreciation Portfolio.. 77,322
Zero Coupon 2000 Portfolio.......... 90,777 Growth and Income Portfolio...... 12,926
Quality Bond Portfolio.............. 111,268 International Equity Portfolio.. 17,220
</TABLE>
In addition, Comstock Partners, pursuant to the undertakings, waived
sub-investment advisory fees of $44,151 for the Managed Assets Portfolio.
The undertakings may be modified by Dreyfus from time to time, provided
that the resulting expense reimbursement would not be less than the amount
required pursuant to the agreements.
DREYFUS VARIABLE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) Prior to August 24, 1994, certain officers and trustees of the Fund
were "affiliated persons," as defined in the Act, of Dreyfus, Comstock
Partners, Sarofim, M&G and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual fee of $2,500
and an attendance fee of $250 per meeting.
NOTE 4--SECURITIES TRANSACTIONS:
(A) The following summarizes the aggregate amount of purchases and sales
of investment securities and securities sold short by the Fund, excluding
short-term securities, options and forward currency exchange contracts, for
the year ended December 31, 1994:
<TABLE>
<CAPTION>
LONG TRANSACTIONS:
PURCHASES SALES PURCHASES SALES
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Managed Assets Portfolio $ 13,258,729 $ 1,928,580 Capital Appreciation Portfolio $8,670,726 $ 8,376
Zero Coupon 2000 Portfolio 4,331,463 _ Growth and Income Portfolio. 2,077,561 1,343,816
Quality Bond Portfolio. 13,418,997 4,463,039 International Equity Portfolio 1,104,219 162,355
Small Cap Portfolio.... 157,127,951 54,726,841
SHORT SALE TRANSACTIONS;
PURCHASES SALES
------------- ------------
Small Cap Portfolio..... $ 2,090,925 $ 1,971,572
</TABLE>
With respect to the Small Cap Portfolio, the series is engaged in
short-selling which obligates the series to replace the
security borrowed by purchasing the security at current market value. The
series would incur a loss if the price of the security increases between the
date of the short sale and the date on which the series replaces the borrowed
security. The series would realize a gain if the price of the security
declines between those dates. Until the series replaces the borrowed
security, the series will maintain daily, a segregated account with a broker
and custodian of cash and/or U.S. Government securities sufficient to cover
its short position. At December 31, 1994, there were no securities sold short
outstanding.
In addition, the following summarizes open forward currency exchange
contracts for the International Equity Portfolio at December 31, 1994;
<TABLE>
<CAPTION>
U.S. DOLLAR UNREALIZED
FORWARD CURRENCY SALE CONTRACTS PROCEEDS VALUE DEPRECIATION
- ------------------------------------- -------------- ------------- -------------
<S> <C> <C> <C>
Japanese Yen, expiring 4/12/95............................... $86,128 $86,382 $(254)
======
</TABLE>
When executing forward currency exchange contracts, the series is
obligated to buy or sell a foreign currency at a specified
rate on a certain date in the future. With respect to sales of forward
currency exchange contracts, the series would incur a loss if the value of
the contract increases between the date the forward contract is opened and
the date the forward contract is closed. The series realizes a gain if the
value of the contract decreases between those dates. With respect to
purchases of forward currency exchange contracts, the series would incur a
loss if the value of the contract decreases between the date the forward
contract is opened and the date the forward contract is closed. The series
realizes a gain if the value of the contract increases between those dates.
The series' exposure to credit risk associated with counter party
nonperformance on these investments is typically limited to the unrealized
gains in such contracts that are recognized in the Statement of Assets and
Liabilities.
DREYFUS VARIABLE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
With respect to the Managed Assets Portfolio, the series is engaged in
trading financial futures contracts. The series is exposed to market risk as
a result of changes in the value of the underlying financial instruments (see
the Statement of Financial Futures). Investments in financial futures require
the series to "mark to market" on a daily basis, which reflects the change in
the market value of the contract at the close of each day's trading.
Accordingly, variation margin payments are made or received to reflect daily
unrealized gains or losses. When the contracts are closed, the series
recognizes a realized gain or loss. These investments require initial margin
deposits with a custodian, which consist of cash or cash equivalents, up to
approximately 10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the contract is traded
and is subject to change. Contracts open at December 31, 1994 and their
related unrealized market depreciation are set forth in the Statement of
Financial Futures.
With respect to the Managed Assets Portfolio, the series is also engaged
in trading restricted options, which are not exchange traded. The series'
exposure to credit risk associated with counter party nonperformance on these
investments is typically limited to the market value of such investments that
are disclosed in the Statement of Investments.
(B) The following summarizes the accumulated net unrealized
appreciation(depreciation) on investments and financial futures for each
series at December 31, 1994, excluding foreign currency transactions for the
Managed Assets and International Equity Portfolios:
<TABLE>
<CAPTION>
GROSS GROSS
APPRECIATION (DEPRECIATION) NET
-------------- ------------- --------------
<S> <C> <C> <C>
Money Market Portfolio....................................... $ ---- $ ---- $ ------
Managed Assets Portfolio..................................... 1,152,659 (1,600,048) (447,389)
Zero Coupon 2000 Portfolio................................... 9,619 (690,986) (681,367)
Quality Bond Portfolio....................................... 5,272 (756,879) (751,607)
Small Cap Portfolio.......................................... 9,611,890 (3,869,116) 5,742,774
Capital Appreciation Portfolio............................... 611,091 (436,625) 174,466
Growth and Income Portfolio.................................. 2,574 (45,591) (43,017)
International Equity Portfolio............................... 37,794 (56,115) (18,321)
</TABLE>
At December 31, 1994, the cost of investments of each series for Federal
income tax purposes was substantially the same as
the cost for financial reporting purposes. The cost of investments for each
series for financial reporting purposes as of December 31, 1994 was as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Portfolio......... $35,249,652 Small Cap Portfolio............... $177,605,330
Managed Assets Portfolio....... 30,593,876 Capital Appreciation Portfolio 15,832,603
Zero Coupon 2000 Portfolio..... 11,434,933 Growth and Income Portfolio 1,127,326
Quality Bond Portfolio......... 13,642,556 International Equity Portfolio 1,043,417
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS VARIABLE INVESTMENT FUND
We have audited the accompanying statements of assets and liabilities,
including the statements of investments and financial futures, of Dreyfus
Variable Investment Fund (comprising, respectively, the Money Market, Managed
Assets, Zero Coupon 2000, Quality Bond, Small Cap, Capital Appreciation,
Growth and Income and International Equity Portfolios) as of December 31,
1994, and the related statements of operations and changes in net assets, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1994 by correspondence with the custodian
and others. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting the Dreyfus
Variable Investment Fund at December 31, 1994, and the results of their
operations, the changes in their net assets and the financial highlights for
each of the indicated periods, in conformity with generally accepted
accounting principles.
(Ernst & Young LLP Signature Logo)
New York, New York
February 13, 1995
