File Nos. 33-13690
SECURITIES AND EXCHANGE COMMISSION 811-5125
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]
Amendment No. 14 [X]
(Check appropriate box or boxes.)
DREYFUS VARIABLE INVESTMENT FUND
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212)
922-6000
Daniel C. Maclean III, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
----
on (date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new
effective date for a
previously filed post-effective amendment.
----
Registrant has registered an indefinite number of shares of
beneficial interest under the Securities Act of 1933 pursuant to
Section 24(f) of the Investment Company Act of 1940.
Registrant's Rule 24f-2 Notice for the fiscal year ended
December 31, 1994 was filed on February 24, 1995.
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis *
3 Condensed Financial Information 6
4 General Description of Registrant 8, 38
5 Management of the Fund 29
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 38
7 Purchase of Securities Being Offered 35
8 Redemption or Repurchase 36
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A Caption
Page
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-33
13 Investment Objectives and Policies B-2
14 Management of the Fund B-15
15 Control Persons and Principal B-19
Holders of Securities
16 Investment Advisory and Other B-20
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-30
18 Capital Stock and Other Securities B-33
19 Purchase, Redemption and Pricing B-25, 25, 26
of Securities Being Offered
20 Tax Status *
21 Underwriters B-25
22 Calculations of Performance Data B-31
23 Financial Statements B-43
Items in
Part C of
Form N-1A Caption Page
_________ _______ _____
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-2
Common Control with Registrant
26 Number of Holders of Securities C-2
27 Indemnification C-3
28 Business and Other Connections of C-3
Investment Adviser
29 Principal Underwriters C-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
<PAGE>
PROSPECTUS ___________, 1996
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund (the "Fund") is
an open-end, management investment company, known as a mutual
fund, that is intended to be a funding vehicle for variable
annuity contracts ("VA contracts") and variable life insurance
policies ("VLI policies") offered through separate accounts of
various life insurance companies (the "Participating Insurance
Companies"). The Fund permits investors to invest in eleven
separate portfolios (each, a "Series"), although certain
portfolios may not be available for investment through certain
VA contracts or VLI policies offered by certain Participating
Insurance Companies. A purchaser of a VA contract or VLI policy
should refer to the prospectus for his or her contract or policy
for information as to which portfolios of the Fund are available
for investment through the contract or policy. A general
description of each Series is set forth on the following page.
The Dreyfus Corporation serves as the Fund's
investment adviser. (Continued on next page)
This Prospectus sets forth concisely information about
the Fund that an investor should know before investing in a
Series through a VA contract or VLI policy offered by a
Participating Insurance Company. It should be read and retained
for future reference.
The Statement of Additional Information, dated
_________, 1996, which may be revised from time to time,
provides a further discussion of certain areas in this
Prospectus and other matters which may be of interest to some
investors. It has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. For a free
copy, write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call 1-800-554-4611. When
telephoning, ask for Operator 144.
Mutual fund shares are not deposits or
obligations of, or guaranteed or endorsed by, any bank, and are
not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
Mutual fund shares involve certain investment risks, including
the possible loss of principal. The net asset value of funds
other than money market funds will fluctuate from time to time.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FUND SHARES ARE AVAILABLE EXCLUSIVELY AS A FUNDING VEHICLE FOR
LIFE INSURANCE COMPANIES ISSUING VARIABLE LIFE INSURANCE
POLICIES AND VARIABLE ANNUITY CONTRACTS. THIS PROSPECTUS SHOULD
BE ACCOMPANIED BY A PROSPECTUS FOR SUCH POLICIES OR CONTRACTS.
The MONEY MARKET PORTFOLIO'S goal is to provide
as high a level of current income as is consistent with the
preservation of capital and the maintenance of liquidity. This
Series invests in short-term money market instruments. AN
INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE
THAT THE MONEY MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
The CAPITAL APPRECIATION PORTFOLIO'S primary
goal is to provide long-term capital growth consistent with the
preservation of capital; current income is a secondary goal.
This Series invests primarily in the common stocks of domestic
and foreign issuers.
The GROWTH AND INCOME PORTFOLIO'S goal is to
provide long-term capital growth, current income and growth of
income, consistent with reasonable investment risk. This Series
invests primarily in equity securities, debt securities and
money market instruments of domestic and foreign issuers.
The MANAGED ASSETS PORTFOLIO'S goal is to
maximize total return, consisting of capital appreciation and
current income. This Series follows an asset allocation
strategy by investing in equity securities, debt securities and
money market instruments of domestic and foreign issuers.
The SMALL CAP PORTFOLIO'S goal is to maximize
capital appreciation. This Series invests primarily in common
stocks of domestic and foreign issuers. This Series will be
particularly alert to companies that The Dreyfus Corporation
considers to be emerging smaller-sized companies which are
believed to be characterized by new or innovative products,
services or processes which should enhance prospects for growth
in future earnings.
The SMALL COMPANY STOCK PORTFOLIO'S goal is to
provide investment results that are greater than the total
return performance of publicly-traded common stocks in the
aggregate, as represented by the Russell 2500* Index. This
Series invests primarily in a portfolio of equity securities of
small-to medium-sized domestic issuers, while attempting to
maintain volatility and diversification similar to that of the
Russell 2500* Index.
The DISCIPLINED STOCK PORTFOLIO'S goal is to
provide investment results that are greater than the total
return performance of publicly-traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite
Stock Price Index. This Series will use quantitative
statistical modeling techniques to construct a portfolio in an
attempt to achieve its investment objective, without assuming
undue risk relative to the broad stock market.
The INTERNATIONAL VALUE PORTFOLIO'S goal is
long-term capital growth. This Series invests primarily in a
portfolio of publicly-traded equity securities of foreign
issuers which would be characterized as "value" companies
according to criteria established by the Series' investment
advisers.
The INTERNATIONAL EQUITY PORTFOLIO'S goal is to
maximize capital appreciation. This Series invests primarily in
the equity securities of foreign issuers located throughout the
world.
The QUALITY BOND PORTFOLIO'S goal is to provide
the maximum amount of current income to the extent consistent
with the preservation of capital and the maintenance of
liquidity. This Series invests principally in debt obligations
of corporations, the U.S. Government and its agencies and
instrumentalities, and major banking institutions.
The ZERO COUPON 2000 PORTFOLIO'S goal is to
provide as high an investment return as is consistent with the
preservation of capital. This Series invests primarily in debt
obligations of the U.S. Treasury that have been stripped of
their unmatured interest coupons, interest coupons that have
been stripped from debt obligations issued by the U.S. Treasury,
receipts and certificates for such stripped debt obligations,
and stripped coupons and zero coupon securities issued by
domestic corporations, which will mature on or about December
31, 2000.
<PAGE>
TABLE OF CONTENTS Page
Condensed Financial Information...........................
Performance Information...................................
Description of the Fund...................................
Management of the Fund....................................
How to Buy Shares.........................................
How to Redeem Shares......................................
Dividends, Distributions and Taxes........................
General Information.......................................
Appendix..................................................
<PAGE>
CONDENSED FINANCIAL INFORMATION
The information in the following table has been
audited (except where noted) by Ernst & Young LLP, the Fund's
independent auditors, whose report thereon appears in the
Statement of Additional Information. Further financial data and
related notes are included in the Statement of Additional
Information, available upon request. No financial information
is available for the International Value Portfolio, Small
Company Stock Portfolio and Disciplined Stock Portfolio, which
had not commenced operations as of the date of this Prospectus.
FINANCIAL HIGHLIGHTS--Contained below is per share operating
performance data for a share of beneficial interest outstanding,
total investment return, ratios to average net assets and other
supplemental data for the Series and period indicated. This
information has been derived from the Series' financial
statements. The total investment return information set forth
below does not reflect certain expenses charged the separate
accounts or related insurance policies by the Participating
Insurance Companies, the inclusion of which would reduce the
Series' total investment return for each period indicated.
[TO BE PROVIDED BY AMENDMENT]
Further information about each such Series'
performance is contained in the Fund's annual report which may
be obtained without charge by writing to the address or calling
the number set forth on the cover page of this Prospectus.
PERFORMANCE INFORMATION
MONEY MARKET PORTFOLIO--From time to time, the Series will
advertise its yield and effective yield. It can be expected
that these yields will fluctuate substantially. Both yield
figures are based on historical earnings and are not intended to
indicate future performance. The yield of the Series refers to
the income generated by an investment in the Series over a
seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The effective yield is
calculated similarly, but, when annualized, the income earned by
an investment in the Series is assumed to be reinvested. The
effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
CAPITAL APPRECIATION, DISCIPLINED STOCK, INTERNATIONAL EQUITY,
INTERNATIONAL VALUE, MANAGED ASSETS, SMALL CAP AND SMALL COMPANY
STOCK PORTFOLIOS--The Series may calculate performance on an
average annual total return or total return basis. Average
annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Series was
purchased with an initial payment of $1,000 and that the
investment was redeemed at the end of a stated period of
time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis,
would result in the redeemable value of the investment at the
end of the period. Advertisements of the Series' performance
will include the Series' average annual total return for one,
five and ten year periods, or for shorter time periods depending
upon the length of time during which the Series has operated.
Total return is computed on a per share basis
and assumes the reinvestment of dividends and distributions.
Total return generally is expressed as a percentage rate which
is calculated by combining the income and principal changes for
a specified period and dividing by the net asset value per share
at the beginning of the period. Advertisements may include the
percentage rate of total return or may include the value of a
hypothetical investment at the end of the period, which assumes
the application of the percentage rate of total return.
GROWTH AND INCOME, QUALITY BOND AND ZERO COUPON 2000
PORTFOLIOS--For purposes of advertising, performance may be
calculated on several bases, including current yield, average
annual total return and/or total return.
Current yield refers to the Series' annualized
net investment income per share over a 30-day period, expressed
as a percentage of the net asset value per share at the end of
the period. For purposes of calculating current yield, the
amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is
compounded by assuming that it is reinvested at a constant rate
over a six-month period. An identical result is then assumed to
have occurred during a second six-month period which, when added
to the result for the first six months, provides an "annualized"
yield for an entire one-year period.
Average annual total return and total return for
these Series will be calculated as described above.
In addition, the Zero Coupon 2000 Portfolio will
calculate on each business day its anticipated growth rate,
which is the annualized rate of growth investors may expect from
the time they purchase a share until the Series' target date.
The anticipated growth rate cannot be guaranteed, as it involves
certain assumptions about variable factors such as reinvestment
of dividends and distributions, the Series' expense ratio and
its portfolio composition. The rate will vary from day-to-day
due to changes in interest rates and other market factors
affecting the value of such Series' investments. Furthermore,
differences in the price changes of securities with different
maturities can affect investment return, as can the skill of the
investment adviser in managing the Series. Under certain
circumstances, shareholder redemptions could also affect
anticipated growth rate. See "Description of the Fund--
Investment Considerations and Risks--Special Considerations
Relating to Stripped Securities."
APPLICABLE TO ALL SERIES--Performance will vary from time to
time and past results are not necessarily representative of
future results. Investors should remember that performance is a
function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating
expenses. Performance information, such as that described
above, may not provide a basis for comparison with other
investments or other investment companies using a different
method of calculating performance. Performance information of
any Series should not be compared with other funds that offer
their shares directly to the public since the figures provided
do not reflect charges imposed by Participating Insurance
Companies under their VA contracts or VLI policies. The
effective yield and total return for a Series should be
distinguished from the rate of return of a corresponding
sub-account or investment division of a separate account of a
Participating Insurance Company, which rate will reflect the
deduction of additional charges, including mortality and expense
risk charges, and will therefore be lower. Variable annuity
contract holders and variable life insurance policy holders
should consult the prospectus for their contract or policy.
Calculations of the Series' yield or performance
information may reflect absorbed expenses pursuant to any
undertaking that may be in effect. See "Management of the
Fund." Comparative performance information may be used from
time to time in advertising a Series' shares, including data
from Lipper Analytical Services, Inc., IBC/Donoghue's Money Fund
ReportR, Money Magazine, Bank Rate Monitor*, N. Palm Beach, Fla.
33408, Standard & Poor's 500 Composite Stock Price Index,
Standard & Poor's MidCap 400 Index, Russell 2500* Index, Morgan
Stanley Capital International World Index, the Dow Jones
Industrial Average, Morningstar, Inc., Value Line Mutual Fund
Survey and other industry publications.
DESCRIPTION OF THE FUND
GENERAL--The Fund is intended to be a funding vehicle for
variable annuity contracts ("VA contracts") and variable life
insurance policies ("VLI policies") to be offered by the
separate accounts of Participating Insurance Companies. The VA
contracts and the VLI policies are described in separate
prospectuses issued by the Participating Insurance Companies
over which the Fund assumes no responsibility. The Fund
currently does not foresee any disadvantages to the holders of
VA contracts and VLI policies arising from the fact that the
interests of the holders of such contracts and policies may
differ.
Nevertheless, the Fund's Board intends to
monitor events in order to identify any material conflicts which
may arise and to determine what action, if any, should be taken
in response thereto. Resolution of an irreconcilable conflict
might result in the withdrawal of a substantial amount of a
Series' assets which could adversely affect such Series' net
asset value per share.
Individual VA contract holders and VLI policy
holders are not the "shareholders" of the Fund. Rather, the
Participating Insurance Companies and their separate accounts
are the shareholders (the "shareholders"), although such
companies will pass through voting rights to their VA contract
holders and VLI policy holders.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES--Each Series has a
different investment objective which it pursues through separate
investment policies, as described herein. The differences in
objectives and policies among the Series determine the types of
portfolio securities in which each Series invests, and can be
expected to affect the degree of risk to which each Series is
subject and each Series' yield or return. Each Series'
investment objective cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")) of such Series'
outstanding voting shares. There can be no assurance that a
Series' investment objective will be achieved. The types of
portfolio securities in which each Series may invest are
described in greater detail below and under "Appendix--Certain
Portfolio Securities."
MONEY MARKET PORTFOLIO
The Money Market Portfolio is a diversified
portfolio, the goal of which is to provide as high a level of
current income as is consistent with the preservation of capital
and the maintenance of liquidity. The Series invests in U.S.
dollar denominated short-term money market instruments,
including securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, certificates of
deposit, time deposits, bankers' acceptances and other
short-term obligations issued by domestic banks, foreign
branches of domestic banks, foreign subsidiaries of domestic
banks, and domestic and foreign branches of foreign banks,
repurchase agreements, and high quality domestic and foreign
commercial paper and other short-term corporate and bank
obligations, including those with floating and variable rates of
interest, issued by domestic and foreign corporations. The
Series will invest in U.S. dollar denominated obligations issued
or guaranteed by one or more foreign governments or any of their
political subdivisions, agencies or instrumentalities, including
obligations of supranational entities. The Series currently
does not intend to invest more than 20% of its assets in foreign
securities. Securities in which the Series will invest may not
earn as high a level of current income as long-term or lower
quality securities which generally have less liquidity, greater
market risk and more fluctuation in market value. In addition,
the Series may engage in lending portfolio securities and may
enter into reverse repurchase agreements. See "Appendix--
Investment Techniques." During normal market conditions, at
least 25% of the Series' assets will be invested in bank
obligations. See "Investment Considerations and Risks."
The Money Market Portfolio seeks to maintain a
net asset value of $1.00 per share for purchases and
redemptions. To do so, the Series uses the amortized cost
method of valuing its securities pursuant to Rule 2a-7 under the
1940 Act, certain requirements of which are summarized below.
In accordance with Rule 2a-7, the Series will maintain a
dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of 13
months or less and invest only in U.S. dollar denominated
securities determined in accordance with procedures established
by the Fund's Board to present minimal credit risks and which
are rated in one of the two highest rating categories for debt
obligations by at least two nationally recognized statistical
rating organizations (or one rating organization if the
instrument was rated by only one such organization) or, if
unrated, are of comparable quality as determined in accordance
with procedures established by the Fund's Board. The nationally
recognized statistical rating organizations currently rating
instruments of the type the Money Market Portfolio may purchase
are Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Group, a division of The McGraw Hill Companies,
Inc. ("S&P"), Duff & Phelps Credit Rating Co. ("Duff"), Fitch
Investors Service, L.P. ("Fitch"), IBCA Limited and IBCA Inc.
and Thomson BankWatch, Inc. and their rating criteria are
described in the "Appendix" to the Statement of Additional
Information. For further information regarding the amortized
cost method of valuing securities, see "Determination of Net
Asset Value" in the Statement of Additional Information. There
can be no assurance that the Money Market Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
CAPITAL APPRECIATION PORTFOLIO
The Capital Appreciation Portfolio is a
diversified portfolio, the primary goal of which is to provide
long-term capital growth consistent with the preservation of
capital; current income is a secondary goal. During periods
which Fayez Sarofim & Co. ("Sarofim"), the Series' sub-
investment adviser, determines to be of market strength, the
Series acts aggressively to increase shareholders' capital by
investing principally in common stocks of domestic and foreign
issuers, common stocks with warrants attached and debt
securities of foreign governments. The Series will seek
investment opportunities generally in large capitalization
companies (those with market capitalizations exceeding $500
million) which Sarofim believes have the potential to experience
above average and predictable earnings growth. Market
capitalization of a company's stock is its market price per
share times the number of shares outstanding. The Series will
be alert to those foreign and domestic issuers, which it
considers undervalued by the stock market in terms of current
earnings, assets or growth prospects. These companies will
include those that management believes have new or innovative
products, services or processes which can enhance prospects for
growth in future earnings. Other than in periods of anticipated
market weakness, the Series will invest at least 80% of its net
assets in common stocks. In periods of market weakness, the
Series may adopt a temporary defensive posture to preserve
shareholders' capital by investing the Series' assets in money
market instruments of the type in which the Money Market
Portfolio invests ("Money Market Instruments"). When market
conditions warrant, all of the Series' assets may be so
invested.
The Series may invest up to 10% of the value of
its assets in securities of foreign governments and foreign
companies which are not publicly-traded in the United States.
By investing in foreign securities, the Series seeks to further
its objective of capital growth. See "Investment Considerations
and Risks--Foreign Securities" below.
In addition, the Series may engage in lending
portfolio securities and foreign currency transactions. See
"Investment Considerations and Risks" and "Appendix--Investment
Techniques" below and "Investment Objectives and Management
Policies--Management Policies" in the Statement of Additional
Information.
GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio is a
non-diversified portfolio, the goal of which is long-term
capital growth, current income and growth of income, consistent
with reasonable investment risk. The Series invests in equity
securities, debt securities and Money Market Instruments of
domestic and foreign issuers. The proportion of the Series'
assets invested in each type of security will vary from time to
time in accordance with The Dreyfus Corporation's assessment of
economic conditions and investment opportunities.
The equity securities in which the Series may
invest consist of common stocks, preferred stocks and securities
convertible into common stocks, including those in the form of
American, European and Continental Depositary Receipts, as well
as warrants to purchase such securities. The Series will be
particularly alert to companies which offer opportunities for
capital appreciation and growth of earnings, while paying
current dividends.
The debt securities in which the Series may
invest include bond, debentures, notes, mortgage-related
securities and municipal obligations. Debt securities (other
than convertible debt securities) purchased by the Series must
be rated at least Baa by Moody's or at least BBB by S&P, Fitch
or Duff or, if unrated, deemed to be of comparable quality by
The Dreyfus Corporation. Debt securities rated Baa by Moody's
or BBB by Standard & Poor's, Fitch or Duff are considered
investment grade obligations which lack outstanding investment
characteristics and have speculative characteristics as well.
The Series may invest up to 35% of the value of its net assets
in convertible debt securities rated not lower than Caa by
Moody's or CCC by S&P, Fitch or Duff, or, if unrated, deemed to
be of comparable quality by The Dreyfus Corporation. Debt
securities rated Caa by Moody's and CCC by S&P, Fitch or Duff
are considered to have predominantly speculative characteristics
with respect to capacity to pay interest and repay principal and
are considered to be of poor standing. See "Investment
Considerations and Risks--Lower Rated Securities" below.
While the Series does not intend to limit the
amount of its assets invested in Money Market Instruments,
except to the extent believed necessary to achieve its
investment objective, it does not expect under normal market
conditions to have a substantial portion of its assets invested
in Money Market Instruments. However, when The Dreyfus
Corporation determines that adverse market conditions exist, the
Series may adopt a temporary defensive posture and invest its
entire portfolio in Money Market Instruments. In addition, the
Series may invest in Money Market Instruments in anticipation of
investing cash positions.
In addition, the Series may engage in various
investment techniques, such as foreign currency transactions,
options and futures transactions, leveraging, lending portfolio
securities and short-selling. See also "Investment
Considerations and Risks" and "Appendix--Investment Techniques"
below and "Investment Objectives and Management Policies--
Management Policies" in the Statement of Additional Information.
MANAGED ASSETS PORTFOLIO
The Managed Assets Portfolio is a diversified
portfolio, the goal of which is to maximize total return,
consisting of capital appreciation and current income. The
Series follows an asset allocation strategy by investing in
equity securities, debt securities and Money Market Instruments
of domestic and foreign issuers. The Series will not be managed
as a balanced portfolio and is not required to maintain a
portion of its investments in each of the Series' permitted
investment categories at all times. The asset classes, market
sectors, securities and portfolio strategies selected will be
those that The Dreyfus Corporation and Comstock Partners, Inc.
("Comstock"), the Series' sub-investment adviser, believe
prudent and offer the greatest potential for achieving the
Series' investment objective. The asset allocation mix selected
will be a primary determinant of the Series' investment
performance.
The equity securities in which the Series may
invest include common stocks, preferred stocks, convertible
securities and warrants. The debt securities in which the
Series may invest include bonds, debentures and notes. The
Series may invest up to 60% of the value of its total assets in
the securities of foreign issuers, including those issued in the
form of American Depositary Receipts and European Depositary
Receipts. The Series may invest up to 20% of the value of its
total net assets in securities of issuers principally located in
any one foreign country, except that the Series may invest up to
35% of the value of its total net assets in securities of
issuers located in any one of the following foreign countries:
Australia, Canada, France, Japan, the United Kingdom or Germany.
The Series may invest in the securities of companies whose
principal activities are in, or governments of, emerging
markets. See "Investment Considerations and Risks--Foreign
Securities" below.
The Series generally seeks to invest in equity
securities determined to offer above average potential for total
return. In making this determination, factors including
price-earnings ratios, cash flow and the relationship of asset
value to market value of the securities will be taken into
account. The Series will be alert to companies engaged in
restructuring efforts, such as mergers, acquisitions and
divestitures of less profitable units.
The Series generally seeks to invest in debt
securities where the yield and potential for capital
appreciation of the security are considered sufficiently
attractive in light of the risks of ownership of the security.
In determining whether the Series should invest in particular
debt securities, the factors considered may include: the price,
coupon and yield to maturity; assessment of the credit quality
of the issuer; the issuer's available cash flow and the related
coverage ratios; the property, if any, securing the obligation;
and the terms of the debt securities, including the
subordination, default, sinking fund and early redemption
provisions. Ratings, if any, assigned to the securities by
Moody's or S&P or other recognized rating agencies also will be
considered. The judgment of The Dreyfus Corporation and
Comstock as to credit quality of a debt security may differ,
however, from that suggested by the ratings published by a
rating service. The Series is not subject to any limit on the
percentage of its assets that may be invested in securities
having a certain rating. Low-rated and unrated securities have
special risks relating to the ability of the Series to receive
timely, or perhaps ultimate, payment of principal and interest.
They are considered to have speculative characteristics and to
be of poor quality; some obligations in which the Series may
invest may be in default. See "Investment Considerations and
Risks--Lower Rated Securities" below. The Series may also
invest in Stripped Treasury Securities (as defined below).
The Managed Assets Portfolio may invest up to
100% of its assets in Money Market Instruments, but at no time
will the Series' investments in bank obligations, including time
deposits, exceed 25% of its assets.
To the extent permitted under the 1940 Act, the
Series may invest in securities issued by closed-end investment
companies which principally invest in securities of foreign
issuers. The Series also may purchase to a limited extent
securities representing the right to receive the capital
appreciation above a certain amount, and other securities
representing the right to receive dividends and all other
attributes of beneficial ownership, in respect of an entity's
common stock or other similar instrument. These securities
typically are sold as shares in unit investment trusts.
In addition, the Series may engage in various
investment techniques, such as foreign currency transactions,
options and futures transactions, lending portfolio securities
and short-selling. See also "Investment Considerations and
Risks" and "Appendix--Investment Techniques" below and
"Investment Objectives and Management Policies--Management
Policies" in the Statement of Additional Information.
SMALL CAP PORTFOLIO
The Small Cap Portfolio is a diversified
portfolio, the goal of which is to maximize capital
appreciation. The Series seeks out companies that The Dreyfus
Corporation believes have the potential for significant growth.
During periods The Dreyfus Corporation judges to be of market
strength, the Series will act aggressively to increase
shareholders' capital by investing principally in common stocks
(some of which may be dividend paying) of domestic and foreign
issuers. Under normal market conditions, the Series will invest
at least 65% of its total assets in companies with market
capitalizations of less than $750 million at the time of
purchase, both domestic and foreign, which the Series believes
to be characterized by new or innovative products or services
which should enhance prospects for growth in future earnings.
The Series also will make investments based on prospective
economic or political changes. Further, the Series will invest
in special situations such as corporate restructurings, mergers
or acquisitions, thereby seeking out undervalued securities. In
periods of market weakness, the Series may adopt a temporary
defensive posture to preserve shareholders' capital by investing
the Series' assets in Money Market Instruments. When the Series
has adopted a temporary defensive posture, the entire portfolio
can be so invested.
The Series may invest up to 25% of the value of
its assets in the common stocks of foreign companies which are
not publicly-traded in the United States. The Series currently
does not intend to invest more than 20% of its assets in foreign
securities. See "Investment Considerations and Risks--Foreign
Securities" below.
The Series also may invest in debt securities
rated as low as the lowest rating assigned by Moody's or S&P,
and in unrated debt securities, which have special risks. See
"Investment Considerations and Risks--Fixed-Income Securities"
and "--Lower Rated Securities."
In addition, the Series may engage in lending
portfolio securities, foreign currency transactions and, to a
limited extent, short-selling. See "Investment Considerations
and Risks" and "Appendix--Investment Techniques" below and
"Investment Objectives and Management Policies--Management
Policies" in the Statement of Additional Information.
SMALL COMPANY STOCK PORTFOLIO
The Small Company Stock Portfolio is a
diversified portfolio, the goal of which is to provide
investment results that are greater than the total return
performance of publicly-traded common stocks in the aggregate,
as represented by the Russell 2500* Index. The Series invests
primarily in a portfolio of equity securities of small- to
medium-sized domestic issuers, wile attempting to maintain
volatility and diversification similar to that of the Russell
2500* Index. The Series will invest in the securities of such
issuers that are considered by The Dreyfus Corporation and
Laurel Capital Advisors, the Series' sub-investment adviser, to
offer above-average growth potential. Small- to medium-sized
issuers will include those U.S. companies with market
capitalizations generally ranging in value from $100 million to
$1.5 billion. The equity securities in which the Series invests
consist of common stocks, preferred stocks and securities
convertible into common stocks, including those in the form of
American Depositary Receipts. The Series also may invest up to
20% of its assets in foreign securities. See "Investment
Considerations and Risks--Foreign Securities" below.
The Russell 2500* Index is composed of the 500
smallest (in terms of market capitalization) common stocks in
the Russell 1000(trademark) Index and all 2,000 common stocks in
the Russell 2000(trademark) Index. The Russell 1000(trademark)
Index consists of the 1,000 largest common stocks and the
Russell 2000(trademark) Index consists of the 2,000 smallest
common stocks, as ranked by total market capitalization, in the
Russell 3000(trademark) Index. The Russell 3000(trademark)
Index is composed of the largest 3,000 common stocks and
represents approximately 98% of the U.S. equity market as
determined by market capitalization. Market capitalization of
the common stocks contained in the Russell 2500* Index typically
ranges from $100 million to $1.5 billion.
___________________
* Russell 2500(trademark) is a trademark of Frank Russell
Company. The Series is not sponsored, endorsed, sold or
promoted by Frank Russell Company.
While seeking desirable investments, the Series
may invest in Money Market Instruments. Under normal market
conditions, the Series does not expect to have a substantial
portion of its assets invested in Money Market Instruments.
However, when The Dreyfus Corporation and Laurel Capital
Advisors determine that adverse market conditions exist, the
Series may adopt a temporary defensive posture and invest all of
its assets in Money Market Instruments.
In an effort to increase returns, the Series may
engage in various investment techniques, such as lending
portfolio securities, foreign currency transactions, and options
and futures transactions, and may enter into reverse repurchase
agreements. See also "Investment Considerations and Risks" and
"Appendix--Investment Techniques" below and "Investment
Objectives and Management Policies--Management Policies" in the
Statement of Additional Information.
DISCIPLINED STOCK PORTFOLIO
The Disciplined Stock Portfolio is a diversified
portfolio, the goal of which is to provide investment results
that are greater than the total return performance of publicly-
traded common stocks in the aggregate, as represented by the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500
Index").** The Series uses quantitative statistical modeling
techniques to identify equity securities which emphasize certain
attributes expected to produce in the aggregate total return
greater than that of the S&P 500 Index. This investment process
utilizes disciplined control of fund risk and a process of
rigorous security selection. The Series is not an index fund
and its investments are not limited to securities of issuers in
the S&P 500 Index.
Individual security selection is the foundation
of the Series' investment approach. Consistency of returns
which exceed those of the S&P 500 Index and stability of the
Series' asset value relative to the S&P 500 Index are primary
goals of the investment process. Information from diverse
sources is collected and used to construct valuation models
which are combined to form a comprehensive computerized
valuation ranking system identifying common stocks which appear
to be over or under valued. These models include measures of
actual and estimated earnings changes and relative value based
on dividend discount calculations, book values to stock price
ratios, earnings to stock price ratios and return on equity
ratios. The computerized ranking system incorporates
information from the most recent time period available to the
system and categorizes individual securities within each
industry according to relative attractiveness. The Dreyfus
Corporation and Laurel Capital Advisors, the Series' sub-
investment adviser, then use the data provided by the model to
construct a portfolio in an attempt to achieve the Series'
investment objective, while attempting to maintain risk
characteristics similar to those of the S&P 500 Index.
The S&P 500 Index is composed of 500 common
stocks, most of which are listed on the New York Stock Exchange,
chosen to reflect the industries of the U.S. economy. The
weightings of stocks in the S&P 500 Index are based on each
stocks relative total market capitalization. Because of this
weighting, as of _____________, 1995, approximately ___% of the
S&P 500 Index was composed of the 50 largest companies.
** S&P(registered trademark)" and "Standard & Poor's 500
Composite Stock Price Index" are trademarks of The
McGraw Hill Companies, Inc. The Series is not
sponsored, endorsed, sold or promoted by S&P
or The McGraw Hill Companies, Inc.
Under normal circumstances, at least 65% of the
Series' total assets will be invested in equity securities,
consisting of common stocks, preferred stocks and securities
convertible into common stocks, including those in the form of
American Depositary Receipts. While seeking desirable
investments, the Series may invest in Money Market Instruments.
Under normal market conditions, the Fund does not expect to have
a substantial portion of its assets invested in Money Market
Instruments. However, when The Dreyfus Corporation and Laurel
Capital Advisors determine that adverse market conditions exist,
the Series may adopt a temporary defensive posture and invest
all of its assets in Money Market Instruments.
INTERNATIONAL VALUE PORTFOLIO
The International Value Portfolio is a
diversified portfolio, the goal of which is long-term capital
growth. The Series anticipates that at least 65% of the value
of its total assets (except when maintaining a temporary
defensive position) will be invested in equity securities
principally of foreign issuers which would be characterized as
"value" companies according to criteria established by The
Dreyfus Corporation and The Boston Company Asset Management,
Inc. ("TBC Asset Management"), the Series' sub-investment
adviser. Under normal market conditions, the Series expects
that substantially all of its assets will be invested in
securities of foreign issuers. While there are no prescribed
limits on geographic asset distribution outside the United
States, the Series ordinarily will seek to invest its assets in
not less than three foreign countries. The Series' securities
selections generally will be made without regard to an issuer's
market capitalization. Equity securities consist of common
stocks, convertible securities and preferred stocks.
To manage the Series, The Dreyfus Corporation
and TBC Asset Management classify issuers as "growth" or "value"
companies. In general, the Series' advisers believe that
companies with relatively low price to book ratios, low price to
earnings ratios or higher than average dividend payments in
relation to price should be classified as value companies.
Alternatively, companies which have above average earnings or
sales growth and retention of earnings and command higher price
to earnings ratios fit the more classic growth description.
The Series may invest, to a limited extent, in
debt securities issued by foreign governments and securities
issued by closed-end investment companies. While seeking
desirable investments, the Series may invest in Money Market
Instruments. Under normal market conditions, the Series does
not expect to have a substantial portion of its assets invested
in Money Market Instruments. However, when the Series' advisers
determine that adverse market conditions exist, the Series may
adopt a temporary defensive posture and invest all of its assets
in Money Market Instruments.
In addition, the Series may engage in various
investment techniques, such as foreign currency transactions,
options and futures transactions and lending portfolio
securities. See also "Investment Considerations and Risks" and
"Appendix--Investment Techniques" below and "Investment
Objectives and Management Policies--Management Policies" in the
Statement of Additional Information.
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio is a
non-diversified portfolio, the goal of which is capital growth.
It is a fundamental policy of the Series that at least 65% of
the value of its total assets (except when maintaining a
temporary defensive position) will be invested in equity
securities of foreign issuers. Equity securities consist of
common stocks, convertible securities and preferred stocks. The
Series also may invest in debt securities of foreign issuers
that management believes, based on market conditions, the
financial condition of the issuer, general economic conditions
and other relevant factors, offer opportunities for capital
growth. Under normal market conditions, it is expected that
substantially all of the Series' assets will be invested in
securities of foreign issuers. While there are no prescribed
limits on geographic asset distribution outside the United
States, the Series ordinarily will seek to invest its assets in
no fewer than three foreign countries. The Series may invest up
to 5% of its assets in securities of companies that have been in
continuous operation for fewer than three years.
The debt securities in which the Series may
invest must be rated at least Baa by Moody's or at least BBB by
S&P, Fitch or Duff or, if unrated, deemed to be of comparable
quality by The Dreyfus Corporation and M&G Investment Management
Limited ("M&G"), the Series' sub-investment adviser. Debt
securities rated Baa by Moody's or BBB by S&P, Fitch or Duff are
considered investment grade obligations which lack outstanding
investment characteristics and have speculative characteristics
as well. See "Investment Considerations and Risks--Fixed-Income
Securities" below.
While seeking desirable equity investments, the
Series may invest in Money Market Instruments. Under normal
market conditions, the Series does not expect to have a
substantial portion of its assets invested in Money Market
Instruments. However, when The Dreyfus Corporation and M&G
determine that adverse market conditions exist, the Series may
adopt a temporary defensive posture and invest all of its assets
in Money Market Instruments.
In addition, the Series may engage in various
investment techniques, such as foreign currency transactions,
options and futures transactions and lending portfolio
securities. See also "Investment Considerations and Risks" and
"Appendix--Investment Techniques" below and "Investment
Objectives and Management Policies--Management Policies" in the
Statement of Additional Information.
QUALITY BOND PORTFOLIO
The Quality Bond Portfolio is a diversified
portfolio, the goal of which is to provide the maximum amount of
current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. The Series invests
principally in debt obligations of corporations, the U.S.
Government and its agencies and instrumentalities, and major
U.S. banking institutions. At least 80% of the value of the
Series' net assets will consist of obligations of corporations
which, at the time of purchase by the Series, are rated at least
A by Moody's or S&P, or determined to be of comparable quality
by The Dreyfus Corporation, and of securities issued or
guaranteed as to principal and interest by the U.S. Government
or its agencies or instrumentalities. The Series also may
invest in mortgage-related securities, municipal obligations and
zero coupon securities as described herein. At least 65% of the
value of the Series' net assets (except when maintaining a
temporary defensive position) will be invested in bonds,
debentures and other debt instruments.
Up to 20% of the Series' assets may consist of
high grade commercial paper of U.S. issuers, certificates of
deposit, time deposits and bankers' acceptances, and corporate
bonds which are rated in any category lower than A by both
Moody's and S&P. When deemed necessary for temporary defensive
purposes or in connection with loans of portfolio securities,
the Series' investment in high grade commercial paper,
certificates of deposit, time deposits and bankers' acceptances
may exceed 20% of its assets, although the Series currently does
not intend to invest more than 5% of its assets in any one of
these types of instruments. Under no circumstances will the
Series invest more than 20% of its assets in corporate bonds
which are rated lower than A, but in no case lower than B, by
both Moody's and S&P or are unrated. In addition, the Series
will invest no more than 5% of its assets in bonds rated Ba or B
by Moody's and BB or B by S&P. The Series may invest up to 10%
of its assets in securities of foreign issuers.
In addition, the Series may engage in lending
portfolio securities. See also "Investment Considerations and
Risks" and "Appendix--Investment Techniques--Lending Portfolio
Securities" below and "Investment Objectives and Management
Policies" in the Statement of Additional Information.
ZERO COUPON 2000 PORTFOLIO
The Zero Coupon 2000 Portfolio is a diversified
portfolio, the goal of which is to provide as high an investment
return as is consistent with the preservation of capital. The
Zero Coupon 2000 Portfolio invests in a portfolio consisting
primarily (but currently not anticipated to be in excess of 55%
of the Series' assets) of debt obligations issued by the U.S.
Treasury that have been stripped of their unmatured interest
coupons, interest coupons that have been stripped from debt
obligations issued by the U.S. Treasury, and receipts and
certificates for stripped debt obligations and stripped coupons,
including U.S. Government trust certificates (collectively,
"Stripped Treasury Securities"). See also "Appendix--Certain
Portfolio Securities--Stripped Treasury Securities." The Series
also may purchase other zero coupon securities issued by the
U.S. Government and its agencies and instrumentalities, by a
variety of tax exempt issuers such as state and local
governments and their agencies and instrumentalities and by
"mixed-ownership government corporations" (collectively,
"Stripped Government Securities"). In addition, the Series may
purchase zero coupon securities issued by domestic corporations
which consist of corporate debt obligations without interest
coupons, and, if available, interest coupons that have been
stripped from corporate debt obligations, and receipts and
certificates for such stripped debt obligations and stripped
coupons (collectively, "Stripped Corporate Securities").
Stripped Corporate Securities held by the Series 2000 Portfolio
will be rated at least Baa by Moody's or BBB by S&P. In
addition, the Series may purchase stripped Eurodollar
obligations, which are debt securities denominated in U.S.
dollars that are issued by foreign issuers, often guaranteed
subsidiaries of domestic corporations. The Series may invest up
to 25% of its assets in securities of foreign issuers. At the
present time, the Series does not intend to invest more than 20%
of its assets in securities of foreign issuers. To the extent
that a liquid secondary market is not available for Stripped
Treasury Securities, Stripped Government Securities, Stripped
Corporate Securities or stripped Eurodollar obligations, the
Series will invest no more than 15% of its net assets in such
securities and in other securities that are illiquid. For a
further discussion concerning stripped securities, including
stripped Eurodollar obligations, see "Investment Considerations
and Risks--Special Considerations Relating to Stripped
Securities" below.
Stripped Treasury Securities, Stripped
Government Securities, Stripped Corporate Securities and
stripped Eurodollar obligations are referred to collectively
herein as "Stripped Securities." A Stripped Security pays no
interest to its holder during its life, and its value consists
of the difference between its face value at maturity and its
price. The Zero Coupon 2000 Portfolio is so designated because
at least 65% of the value of the Series' assets will consist of
portfolio securities which will mature on or about December 31,
2000.
In addition to investing at least 65% of its net
assets in Stripped Securities, the Series will purchase
interest-bearing U.S. Government securities and other Money
Market Instruments held for the purpose of providing income with
which to pay the expenses of the Series and to provide funds
with which to meet redemption requests.
There can be no assurance that the Series'
objective can be met if Series shares are redeemed prior to
maturity of the underlying Stripped Securities because market
prices of the Stripped Securities before maturity will vary with
changes in interest rates. Stripped Securities, including
stripped Eurodollar obligations, do not make any periodic
payments of interest prior to maturity and the stripping of the
interest coupons causes the Stripped Securities to be offered at
a substantial (or "deep") discount from their face amounts. The
market value of Stripped Securities, and therefore of the shares
of the Series, will fluctuate with changes in interest rates and
other factors and may be subject to greater fluctuations in
response to changing interest rates than would a fund consisting
of debt obligations of comparable maturities that pay interest
currently. The amount of fluctuation increases with a longer
period to maturity.
On December 31, 2000, the maturity date for the
Zero Coupon 2000 Portfolio, the portfolio will be liquidated.
Some of the Series' portfolio securities may mature up to
several months earlier than the planned maturity date of the
Series. Attempts will be made to match the maturity dates of
the portfolio assets with the Series' maturity date as closely
as possible, but securities may be purchased with earlier
maturities where additional revenue for the Series may be
achieved by such purchases. Prior to December 31, 2000,
shareholders will be informed of the liquidation of the Series
and will be offered the opportunity to exchange their investment
upon maturity for another Series of the Fund. In the event the
Zero Coupon 2000 Portfolio has not received instructions from
shareholders as to the disposition of funds upon maturity of the
Series, such funds will be invested automatically in the Money
Market Portfolio.
In addition, the Series currently intends, to a
limited extent, to engage in options and futures transactions
and lending portfolio securities. See also "Investment
Considerations and Risks" and "Appendix--Investment Techniques"
below and "Investment Objectives and Management Policies--
Management Policies" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL--Since each Series will pursue different types of
investments, the risks of investing will vary depending on the
Series selected for investment. Before selecting a Series in
which to invest, the investor should assess the risks associated
with the types of investments made by the Series. The net asset
value per share of each Series, other than the Money Market
Portfolio, should be expected to fluctuate. Investors should
consider each Series as a supplement to an overall investment
program and should invest only if they are willing to undertake
the risks involved. See "Investment Objectives and Management
Policies--Management Policies" in the Statement of Additional
Information for a further discussion of certain risks.
EQUITY SECURITIES--(Capital Appreciation, Disciplined Stock,
Growth and Income, International Equity, International Value,
Managed Assets, Small Cap and Small Company Stock Portfolios)
Equity securities fluctuate in value, often based on factors
unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the
Series' investments will result in changes in the value of its
shares and thus the Series' total return to investors.
The securities of the smaller companies in which
the Series may invest may be subject to more abrupt or erratic
market movements than larger, more-established companies,
because these securities typically are traded in lower volume
and the issuers typically are subject to a greater degree to
changes in earnings and prospects.
FIXED-INCOME SECURITIES--(All Series) Even though interest-
bearing securities are investments which promise a stable stream
of income, the prices of such securities generally are inversely
affected by changes in interest rates and, therefore, are
subject to the risk of market price fluctuations. Certain
securities that may be purchased by a Series, such as those with
interest rates that fluctuate directly or indirectly based on
multiples of a stated index, are designed to be highly sensitive
to changes in interest rates and can subject the holders thereof
to extreme reductions of yield and possibly loss of principal.
The values of fixed-income securities also may
be affected by changes in the credit rating or financial
condition of the issuer. Certain debt securities purchased by
the Managed Assets, Growth and Income, International Equity and
Quality Bond Portfolios, such as those rated Baa by Moody's and
BBB by S&P, Fitch and Duff, may be subject to such risk with
respect to the issuing entity and to greater market fluctuations
than certain lower yielding, higher rated fixed-income
securities. Obligations rated Baa by Moody's are considered
medium grade obligations; they are neither highly protected nor
poorly secured, and are considered by Moody's to have
speculative characteristics. Bonds rated BBB by S&P, Fitch and
Duff are investment grade and regarded as having adequate
capacity to pay interest and repay principal; however, adverse
changes in economic conditions and circumstances are more likely
to have an adverse impact on these bonds and, therefore, impair
timely payment. See "Appendix--Certain Portfolio Securities--
Ratings" below and "Appendix" in the Statement of Additional
Information.
SPECIAL CONSIDERATIONS RELATING TO STRIPPED SECURITIES--(Zero
Coupon 2000 Portfolio and, to a limited extent, all other
Series) A Stripped Security is a debt obligation that does not
entitle the holder to any periodic payments of interest prior to
maturity and therefore is issued and traded at a discount from
its face amount. The discount from face value at which Stripped
Securities are purchased varies depending on the time remaining
until maturity, prevailing interest rates, the liquidity of the
security and the perceived credit quality of the issuer. Because
the discount from face value is known at the time of investment,
investors holding Stripped Securities until maturity know the
total amount of their investment return at the time of
investment. In contrast, a portion of the total realized return
from conventional interest-paying obligations comes from the
reinvestment of periodic interest. Since the rate to be earned
on these reinvestments may be higher or lower than the rate
quoted on the interest-paying obligations at the time of the
original purchase, the investment's total return is uncertain
even for investors holding the securities to their maturity.
This uncertainty is commonly referred to as reinvestment risk
and can have a significant impact on total realized investment
return. With Stripped Securities, however, there are no cash
distributions to reinvest, so investors bear no reinvestment
risk if they hold the Stripped Securities to maturity.
Stripped Securities can be sold prior to their
due date in the secondary market at their then prevailing market
value, which depends primarily on the time remaining to
maturity, prevailing levels of interest rates and the perceived
credit quality of the issuer, which may be more or less than the
securities' value. The market prices of Stripped Securities are
generally more volatile than the market prices of securities
that pay interest periodically and, accordingly, are likely to
respond to a greater degree to changes in interest rates than do
other debt obligations having similar maturities and credit
quality characteristics. As a result, the net asset value of
shares of the Zero Coupon 2000 Portfolio may fluctuate over a
greater range than shares of other mutual funds that invest in
obligations of the U.S. Government or corporations having
similar maturities but that make current distributions of
interest.
As an open-end investment company, the Zero
Coupon 2000 Portfolio will be issuing new shares and will be
required to redeem its shares upon the request of any
shareholder at the net asset value next determined after receipt
of the request. However, because of the price volatility of
Stripped Securities prior to maturity, a shareholder who redeems
shares may realize an amount that is less or greater than the
entire amount initially invested. Accordingly, the Zero Coupon
2000 Portfolio may not be appropriate for investors that expect
to have a current need for income from the investment or wish to
liquidate their investment prior to December 31, 2000.
Each year the Zero Coupon 2000 Portfolio will be
required to accrue an increasing amount of income on its
Stripped Securities. To maintain its tax status as a regulated
investment company and to avoid imposition of excise taxes,
however, the Zero Coupon 2000 Portfolio and any other Series
that invests in Stripped Securities will be required to
distribute dividends equal to substantially all of its net
investment income, including the accrued income, derived from
its Stripped Securities for which it receives no payments in
cash prior to their maturity.
The Series cannot assure that it will be able to
achieve a certain level of return due to the possible necessity
of having to sell certain Stripped Securities to pay expenses,
dividends or meet redemptions at times and at prices that might
be disadvantageous or, alternatively, the need to invest assets
received from new purchases at prevailing interest rates, which
would expose the Series to reinvestment risk. In addition, no
assurance can be given as to the liquidity of the market for
certain of these securities. Determination as to the liquidity
of such securities will be made in accordance with guidelines
established by the Fund's Board. In accordance with such
guidelines, the Series' adviser will monitor the Series'
investments in such securities with particular regard to trading
activity, availability of reliable price information and other
relevant information.
LOWER RATED SECURITIES--(Growth and Income, Managed Assets,
Quality Bond and, to a limited extent, Small Cap Portfolios)
Shareholders should carefully consider the relative risks of
investing in higher yielding (and, therefore, higher risk) debt
securities (convertible debt securities with respect to the
Growth and Income Portfolio) in which such Series may invest.
These are securities such as those rated Ba by Moody's or BB by
S&P, Fitch or Duff, or as low as those rated B by Moody's and
S&P, Fitch or Duff in the case of the Quality Bond Portfolio, or
as low as those rated Caa by Moody's or CCC by S&P, Fitch or
Duff in the case of the Growth and Income Portfolio, or as low
as the lowest rating assigned by Moody's, S&P, Fitch or Duff in
the case of the Managed Assets and Small Cap Portfolios
(commonly known as junk bonds). They generally are not meant
for short-term investing and may be subject to certain risks
with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated fixed-
income securities. The retail secondary market for these debt
securities may be less liquid than that of higher rated
securities; adverse conditions could make it difficult at times
for the Series to sell certain securities or could result in
lower prices than those used in calculating the Series' net
asset value.
FOREIGN SECURITIES--(All Series) Foreign securities markets
generally are not as developed or efficient as those in the
United States. Securities of some foreign issuers are less
liquid and more volatile than securities of comparable U.S.
issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at
times, volatility of price can be greater than in the United
States.
Because evidences of ownership of such
securities usually are held outside the United States, the
Series will be subject to additional risks which include
possible adverse political and economic developments, possible
seizure or nationalization of foreign deposits and possible
adoption of governmental restrictions which might adversely
affect the payment of principal and interest on the foreign
securities or might restrict the payment of principal and
interest to investors located outside the country of the issuer,
whether from currency blockage or otherwise.
Developing countries have economic structures
that are generally less diverse and mature, and political
systems that are less stable, than those of developed countries.
The markets of developing countries may be more volatile than
the markets of more mature economies; however, such markets may
provide higher rates of return to investors. Many developing
countries providing investment opportunities for the Series have
experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to
have adverse effects on the economies and securities markets of
certain of these countries. In an attempt to control inflation,
wage and price controls have been imposed in certain developing
countries.
Since foreign securities often are purchased
with and payable in currencies of foreign countries, the value
of these assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and
exchange control regulations.
The percentage of a Series' assets which may be
invested in foreign securities as noted above is not a
fundamental policy and may be changed at any time without
shareholder approval.
FOREIGN CURRENCY TRANSACTIONS--(Capital Appreciation, Growth and
Income, International Equity, International Value, Managed
Assets, Small Cap and Small Company Stock Portfolios) Currency
exchange rates may fluctuate significantly over short periods of
time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits
of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen
from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign
governments or central banks, or the failure to intervene, or by
currency controls or political developments in the United States
or abroad. See "Appendix--Investment Techniques--Foreign
Currency Transactions."
USE OF DERIVATIVES--(Managed Assets, Growth and Income, Small
Company Stock, International Value, International Equity and
Zero Coupon 2000 Portfolios) These Series may invest in
derivatives ("Derivatives"). These are financial instruments
which derive their performance, at least in part, from the
performance of an underlying asset, index or interest rate and,
in the case of the Growth and Income Portfolio, mortgage-related
securities. The Derivatives the Series may use include options
and futures. While Derivatives can be used effectively in
furtherance of the Series' investment objective, under certain
market conditions, they can increase the volatility of the
Series' net asset value, can decrease the liquidity of the
Series' investments and make more difficult the accurate pricing
of the Series' portfolio. See "Appendix--Investment Techniques-
- -Use of Derivatives" below, and "Investment Objectives and
Management Policies--Management Policies--Derivatives" in the
Statement of Additional Information.
BANK SECURITIES--(Money Market Portfolio) To the extent the
Money Market Portfolio's investments are concentrated in the
banking industry, the Series will have correspondingly greater
exposure to the risk factors which are characteristic of such
investments. Sustained increases in interest rates can
adversely affect the availability or liquidity and cost of
capital funds for a bank's lending activities, and a
deterioration in general economic conditions could increase the
exposure to credit losses. In addition, the value of and the
investment return on the Money Market Portfolio's shares could
be affected by economic or regulatory developments in or related
to the banking industry, which industry also is subject to the
effects of the concentration of loan portfolios in leveraged
transactions and in particular businesses, and competition
within the banking industry as well as with other types of
financial institutions. The Money Market Portfolio, however,
will seek to minimize its exposure to such risks by investing
only in debt securities which are determined to be of high
quality.
MUNICIPAL LEASE/PURCHASE OBLIGATIONS--(Growth and Income and
Quality Bond Portfolios) Certain municipal lease/purchase
obligations in which the Series may invest may contain
"non-appropriation" clauses which provide that the municipality
has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease/purchase obligations are
secured by the leased property, disposition of the leased
property in the event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase
obligation that is unrated, The Dreyfus Corporation will
consider, on an ongoing basis, a number of factors including the
likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
PORTFOLIO TURNOVER--(All Series) No Series will consider
portfolio turnover to be a limiting factor in making investment
decisions. Under normal market conditions, the portfolio
turnover rates are anticipated to exceed 100% for the Managed
Assets and Small Cap Portfolios, to be less than 100% for the
Capital Appreciation Portfolio and to be less than 150% for the
Growth and Income, Quality Bond, Zero Coupon 2000, Disciplined
Stock, Small Company Stock, International Value and
International Equity Portfolios. Higher portfolio turnover
rates are likely to result in comparatively greater brokerage
commissions and transaction costs. In addition, short-term
gains realized from portfolio transactions are taxable to
shareholders as ordinary income. The Money Market Portfolio may
have a high portfolio turnover, but that should not adversely
affect the Series since it usually does not pay brokerage
commissions when it purchases short-term debt obligations.
NON-DIVERSIFIED PORTFOLIOS--(Growth and Income and International
Equity Portfolios) The Growth and Income and International
Equity Portfolios are classified as "non-diversified" investment
companies, which means that the proportion of such Series'
assets that may be invested in the securities of a single issuer
is not limited by the 1940 Act. A "diversified" investment
company is required by the 1940 Act generally, with respect to
75% of its total assets, to invest not more than 5% of such
assets in the securities of a single issuer. Since a relatively
high percentage of each of these Series' assets may be invested
in the securities of a limited number of issuers, some of which
may be within the same industry, the Series' portfolio may be
more sensitive to changes in the market value of a single issuer
or industry. However, to meet Federal tax requirements, at the
close of each quarter neither of these Series may have more than
25% of its total assets invested in any one issuer and, with
respect to 50% of total assets, more than 5% of its total assets
invested in any one issuer. Neither Series may invest more than
25% of its assets in any one industry. These limitations do not
apply to U.S. Government securities.
STATE INSURANCE REGULATION--(All Series) The Fund is intended to
be a funding vehicle for VA contracts and VLI policies to be
offered by Participating Insurance Companies and will seek to be
offered in as many jurisdictions as possible. Certain states
have regulations concerning concentration of investments,
purchase and sale of futures contracts and short sales of
securities, among other techniques. If applied to the Fund,
each Series may be limited in its ability to engage in such
techniques and to manage its portfolio with the flexibility
provided herein. It is the Fund's intention that each Series
operate in material compliance with current insurance laws and
regulations, as applied, in each jurisdiction in which the
Series is offered.
SIMULTANEOUS INVESTMENT BY OTHER SERIES OR FUNDS--(All Series)
Investment decisions for each Series are made independently from
those of the other Series and investment companies managed by
The Dreyfus Corporation (and, where applicable, the Series' sub-
investment adviser). However, if such other Series or
investment companies are prepared to invest in, or desire to
dispose of, securities of the type in which the Series invests,
available investments or opportunities for sales will be
allocated equitably to each. In some cases, this procedure may
adversely affect the size of the position obtained for or
disposed of by a Series or the price paid or received by a
Series.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER--The Dreyfus Corporation, located at 200 Park
Avenue, New York, New York 10166, was formed in 1947 and serves
as the Fund's investment adviser. The Dreyfus Corporation is a
wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
As of October 31, 1995, The Dreyfus Corporation managed or
administered approximately $81 billion in assets for more than
1.8 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists
in the overall management of the Fund's affairs under an
Investment Advisory Agreement with the Fund, subject to the
overall authority of the Fund's Board in accordance with
Massachusetts law.
Mellon is a publicly owned multibank holding
company incorporated under Pennsylvania law in 1971 and
registered under the Federal Bank Holding Company Act of 1956,
as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding
companies in the United States based on total assets. Mellon's
principal wholly-owned subsidiaries are Mellon Bank, N.A.,
Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of
companies known as Mellon Financial Services Corporations.
Through its subsidiaries, including The Dreyfus Corporation,
Mellon managed more than $209 billion in assets as of
September 30, 1995, including approximately $80 billion in
proprietary mutual fund assets. As of September 30, 1995,
Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for more
than $717 billion in assets including approximately $55 billion
in mutual fund assets.
The primary portfolio managers of the Series are
as follows:
Capital Appreciation Portfolio--Fayez Sarofim. He has been the
Series' primary portfolio manager since the Series commenced
operations and has been employed by Sarofim since 1958.
Growth and Income Portfolio--Richard Hoey. He has been the
Series' primary portfolio manager since the Series commenced
operations and has been employed by The Dreyfus Corporation
since April 1991. From April 1990 to March 1991, Mr. Hoey was
Chief Economist and a Managing Director of Barclays de Zoete
Wedd.
Managed Assets Portfolio--Investment decisions are made by the
Investment Policy Committee of Comstock, and no person is
primarily responsible for making recommendations to that
committee.
Small Cap Portfolio--Thomas A. Frank. He has been the Series'
primary portfolio manager since the Series commenced operations
and has been employed by The Dreyfus Corporation since 1985.
Small Company Stock Portfolio--James Wadsworth. He has been the
Series' primary portfolio manager since the Series' inception
and has been Chief Investment Officer for Laurel Capital
Advisors since October 1990. Mr. Wadsworth also is a First Vice
President of Mellon, where he has been employed since 1977.
Disciplined Stock Portfolio--Bert Mullins. He has been the
Series' primary portfolio manager since the Series' inception
and has been employed by Laurel Capital Advisors since October
1990. Mr. Mullins also is a Vice President, Portfolio Manager
and Senior Security Analyst for Mellon, where he has been
employed since 1966.
International Value Portfolio--Sandor Cseh. He has been the
Series' primary portfolio manager since the Series' inception
and has been employed by TBC Asset Management or its predecessor
since October 1994. Prior to joining TBC Asset Management,
Mr. Cseh was President of Cseh International & Associates Inc.,
the international money management division of Cashman, Farrell
& Association, and was a securities analyst with several banks.
International Equity Portfolio--John Christopher Whitaker. He
has been the Series' primary portfolio manager since October 1,
1995 and has been a Director of M&G since 1991. Prior thereto,
Mr. Whitaker was a Director of County NatWest Investment
Management.
Quality Bond Portfolio--Garitt Kono. He has been the Series'
primary portfolio manager since the Series commenced operations
and has been employed by The Dreyfus Corporation since
September 1992. Prior to joining The Dreyfus Corporation,
Mr. Kono was Vice President--Fixed Income at The First Boston
Corporation.
Zero Coupon 2000 Portfolio--Garrett Kono. He has been the
Series' primary portfolio manager since the Series commenced
operations.
Under the terms of the Investment Advisory
Agreement, the Fund has agreed to pay The Dreyfus Corporation a
monthly fee at the annual rate of .75 of 1% of the value of the
Disciplined Stock Portfolio's average daily net assets; .375 of
1% of the value of the Managed Assets Portfolio's average daily
net assets; .75 of 1% of the value of the Growth and Income
Portfolio's average daily net assets; 1% of the value of the
International Value Portfolio's average daily net assets; .75 of
1% of the value of the International Equity Portfolio's average
daily net assets; .50 of 1% of the value of the Money Market
Portfolio's average daily net assets; .75 of 1% of the value of
the Small Company Stock Portfolio's average daily net assets;
.65 of 1% of the value of the Quality Bond Portfolio's average
daily net assets; .75 of 1% of the value of the Small Cap
Portfolio's average daily net assets; and .45 of 1% of the value
of the Zero Coupon 2000 Portfolio's average daily net assets.
Under the terms of the Investment Advisory Agreement with
respect to the Capital Appreciation Portfolio, the Fund has
agreed to pay The Dreyfus Corporation an annual fee, payable
monthly, as set forth below:
<TABLE>
<CAPTION>
ANNUAL FEE AS A
PERCENTAGE OF
AVERAGE DAILY NET
ASSETS OF THE CAPITAL
APPRECIATION PORTFOLIO
TOTAL ASSETS ________________
- ---------------------
<S> <C>
0 to $150 million.................. .55 of 1%
$150 million to $300 million....... .50 of 1%
$300 million or more............... .375 of 1%
</TABLE>
For the fiscal year ended December 31, 1994, the
Fund paid The Dreyfus Corporation an investment advisory fee
with respect to the Small Cap Portfolio at the effective annual
rate of .23 of 1% of the value of the Small Cap Portfolio's
average daily net assets. For the fiscal year ended
December 31, 1994, the Fund paid no other investment advisory
fees to The Dreyfus Corporation with respect to any of the other
Series pursuant to undertakings by The Dreyfus Corporation.
SUB-INVESTMENT ADVISERS--With respect to the Managed Assets
Portfolio, Comstock Partners, a registered investment adviser
located at 10 Exchange Place, Jersey City, New Jersey 07302,
serves as the Series' sub-investment adviser. Comstock Partners
was formed in 1986 and, as of December 31, 1995, managed
approximately [$979] million in assets for other mutual funds
and several discretionary accounts. Comstock Partners, subject
to the supervision and approval of The Dreyfus Corporation,
provides investment advisory assistance and the day-to-day
management of the Managed Assets Portfolio, as well as research
and statistical information under a Sub-Investment Advisory
Agreement with the Fund, subject to the overall authority of the
Fund's Board in accordance with Massachusetts law. Under the
terms of the Sub-Investment Advisory Agreement with respect to
the Managed Assets Portfolio, the Fund has agreed to pay
Comstock Partners a monthly fee at the annual rate of .375 of 1%
of the value of the Managed Assets Portfolio's average daily net
assets. For the year ended December 31, 1994, the Fund paid
Comstock Partners a sub-investment advisory fee with respect to
the Managed Assets Portfolio at the effective annual rate of .17
of 1% of the Managed Assets Portfolio's average daily net
assets.
With respect to the Capital Appreciation
Portfolio, Sarofim, a registered investment adviser located at
Two Houston Center, Suite 2907, Houston, Texas 77010, serves as
the Series' sub-investment adviser. Sarofim was formed in 1958
and, as of December 31, 1995, provided investment advisory
services to discretionary accounts having aggregate assets of
approximately [$21.2] billion. Sarofim, subject to the
supervision and approval of The Dreyfus Corporation, provides
investment advisory assistance and the day-to-day management of
the Capital Appreciation Portfolio, as well as investment
research and statistical information, under a Sub-Investment
Advisory Agreement with the Fund, subject to the overall
authority of the Fund's Board in accordance with Massachusetts
law. Under the terms of the Sub-Investment Advisory Agreement
with respect to the Capital Appreciation Portfolio, the Fund has
agreed to pay Sarofim an annual fee, payable monthly, as set
forth below:
ANNUAL FEE AS A
PERCENTAGE OF
AVERAGE DAILY NET
ASSETS OF THE CAPITAL
APPRECIATION PORTFOLIO
TOTAL ASSETS
- --------------------- -------------------
0 to $150 million................... .20 of 1%
$150 million to $300 million........ .25 of 1%
$300 million or more................ .375 of 1%
For the year ended December 31, 1994, no sub-investment advisory
fee was paid to Sarofim by the Fund with respect to the Capital
Appreciation Portfolio pursuant to an undertaking then in
effect.
With respect to the Disciplined Stock and Small
Company Stock Portfolios, The Dreyfus Corporation has engaged
Laurel Capital Advisors, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, to serve as each Series' sub-
investment adviser. Laurel Capital Advisors, a registered
investment adviser formed in 1990, is an indirect wholly-owned
subsidiary of Mellon and, thus, an affiliate of The Dreyfus
Corporation. As of December 31, 1995, Laurel Capital Advisors
managed approximately [$5.8] billion in assets. Laurel Capital
Advisors, subject to the supervision and approval of The Dreyfus
Corporation, provides investment advisory assistance and the
day-to-day management of each of the Disciplined Stock and Small
Company Stock Portfolio's investments, as well as investment
research and statistical information, under a Sub-Investment
Advisory Agreement with The Dreyfus Corporation, subject to the
overall authority of the Fund's Board in accordance with
Massachusetts law. Under the terms of the Sub-Investment
Advisory Agreement with respect to each of the Disciplined Stock
and Small Company Stock Portfolio, The Dreyfus Corporation has
agreed to pay Laurel Capital Advisors a monthly fee at the
annual rate of .__ of 1% of the value of each such Portfolio's
average daily net assets.
With respect to the International Equity
Portfolio, The Dreyfus Corporation has engaged M&G, a registered
investment adviser located at Three Quays Tower Hill, London
EC3R 6BQ, England, to serve as the Series' sub-investment
adviser. M&G was formed in 1961 and, as of December 31, 1995,
managed approximately [$21.5] billion in assets. M&G, subject
to the supervision and approval of The Dreyfus Corporation
provides investment advisory assistance and the day-to-day
management of the International Equity Portfolio, as well as
research and statistical information under a Sub-Investment
Advisory Agreement with The Dreyfus Corporation, subject to the
overall authority of the Fund's Board in accordance with
Massachusetts law. Under the terms of the Sub-Investment
Advisory Agreement with respect to the International Equity
Portfolio, The Dreyfus Corporation has agreed to pay M&G a
monthly fee at the annual rate of .30 of 1% of the value of the
International Equity Portfolio's average daily net assets. For
the fiscal year ended December 31, 1994, no sub-investment
advisory fee was paid to M&G by The Dreyfus Corporation with
respect to the International Equity Portfolio pursuant to an
undertaking then in effect.
With respect to the International Value
Portfolio, The Dreyfus Corporation has engaged TBC Asset
Management, located at One Boston Place, Boston, Massachusetts
02108, to serve as the Series' sub-investment adviser. TBC
Asset Management, a registered investment adviser formed in
1970, is an indirect wholly-owned subsidiary of Mellon and,
thus, an affiliate of The Dreyfus Corporation. As of
December 31, 1995, TBC Asset Management managed approximately
[$10.7] billion in assets and serves as the investment adviser
of five other investment companies. TBC Asset Management,
subject to the supervision and approval of The Dreyfus
Corporation, provides investment advisory assistance and the
day-to-day management of the International Value Portfolio's
investments, as well as investment research and statistical
information, under a Sub-Investment Advisory Agreement with The
Dreyfus Corporation, subject to the overall authority of the
Fund's Board in accordance with Massachusetts law. Under the
terms of the Sub-Investment Advisory Agreement with respect to
the International Value Portfolio, The Dreyfus Corporation has
agreed to pay TBC Asset Management a monthly fee at the annual
rate of .50 of 1% of the value of the International Value
Portfolio's average daily net assets.
EXPENSES--All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically assumed by
The Dreyfus Corporation or a sub-investment adviser. The
expenses borne by the Fund include: organizational costs,
taxes, interest, loan commitment fees, interest and
distributions paid on securities sold short, brokerage fees and
commissions, if any, fees of Board members who are not officers,
directors, employees or holders of 5% or more of the outstanding
voting securities of The Dreyfus Corporation or any sub-
investment adviser or their affiliates, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory
fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association
fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Fund's existence,
costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of
preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to
existing shareholders, costs of shareholders' reports and
meetings, and any extraordinary expenses. Expenses attributable
to a particular Series are charged against the assets of that
Series; other expenses of the Fund are allocated among the
Series on the basis determined by the Board, including, but not
limited to, proportionately in relation to the net assets of
each Series.
The advisory fees of the Managed Assets, Capital
Appreciation, Disciplined Stock, Growth and Income,
International Equity, International Value, Small Cap and Small
Company Stock Portfolios are higher than those paid by most
other investment companies. From time to time, The Dreyfus
Corporation (and, with respect to the Managed Assets Portfolio,
Comstock Partners and, with respect to the Capital Appreciation
Portfolio, Sarofim) may waive receipt of its fees and/or
voluntarily assume certain expenses of a Series, which would
have the effect of lowering the overall expense ratio of that
Series and increasing yield to investors at the time such
amounts are waived or assumed, as the case may be. The Fund
will not pay The Dreyfus Corporation (or, with respect to the
Managed Assets Portfolio, Comstock or, with respect to the
Capital Appreciation Portfolio, Sarofim) at a later time for any
amounts it may waive nor will the Fund reimburse The Dreyfus
Corporation (or, with respect to the Managed Assets Portfolio,
Comstock or, with respect to the Capital Appreciation Portfolio,
Sarofim) for any amounts it may assume.
DISTRIBUTOR--The Fund's distributor is Premier Mutual Fund
Services, Inc. (the "Distributor"), located at One Exchange
Place, Boston, Massachusetts 02109. The Distributor's ultimate
parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN--Dreyfus
Transfer, Inc., a wholly-owned subsidiary of The Dreyfus
Corporation, is located at One American Express Plaza,
Providence, Rhode Island 02903, and serves as the Fund's
Transfer and Dividend Disbursing Agent (the "Transfer Agent").
The Bank of New York, 90 Washington Street, New York, New York
10286, is the Fund's Custodian.
HOW TO BUY FUND SHARES
Separate accounts of the Participating Insurance
Companies place orders based on, among other things, the amount
of premium payments to be invested pursuant to VA contracts and
VLI policies. Individuals may not place orders directly with
the Fund. See the prospectus of the separate account of the
Participating Insurance Company for more information on the
purchase of Fund shares and with respect to the availability for
investment in specific portfolios of the Fund. The Fund does
not issue share certificates.
Purchase orders from separate accounts based on
premiums and transaction requests received by the Participating
Insurance Company on a given business day in accordance with
procedures established by the Participating Insurance Company
will be effected at the net asset value of the applicable Series
determined on such business day if the orders are received by
the Fund in proper form and in accordance with applicable
requirements on the next business day and Federal Funds (monies
of member banks within the Federal Reserve System which are held
on deposit at a Federal Reserve Bank) in the net amount of such
orders are received by the Fund on the next business day in
accordance with applicable requirements. It is each
Participating Insurance Company's responsibility to properly
transmit purchase orders and Federal Funds in accordance with
applicable requirements. VA contract holders and VLI policy
holders should refer to the prospectus for their contracts or
policies in this regard.
Fund shares are sold on a continuous basis. Net
asset value per share is determined as of the close of trading
on the floor of the New York Stock Exchange (currently 4:00
p.m., New York time), on each day that the New York Stock
Exchange is open for business. For purposes of determining net
asset value, options and futures will be valued 15 minutes after
the close of trading on the floor of the New York Stock
Exchange. Net asset value per share is computed by dividing the
value of the net assets of each Series (i.e., the value of its
assets less liabilities) by the total number of shares
outstanding. The Zero Coupon 2000 and Quality Bond Portfolios'
investments are valued each business day by an independent
pricing service approved by the Fund's Board and are valued at
fair value as determined by the pricing service. The pricing
service's procedures are reviewed under the general supervision
of the Fund's Board. The Money Market Portfolio uses the
amortized cost method of valuing its investments. The
Disciplined Stock, Managed Assets, Capital Appreciation,
International Equity, International Value, Growth and Income,
Small Cap and Small Company Stock Portfolios' investments are
valued based on market value, or where market quotations are not
readily available, based on fair value as determined in good
faith by the Fund's Board. For further information regarding
the methods employed in valuing each Series' investments, see
"Determination of Net Asset Value" in the Statement of
Additional Information.
HOW TO REDEEM FUND SHARES
Series shares may be redeemed at any time by the
separate accounts of the Participating Insurance Companies.
Individuals may not place redemption orders directly with the
Fund. Redemption requests from separate accounts based on
premiums and transaction requests received by the Participating
Insurance Company on a given business day in accordance with
procedures established by the Participating Insurance Company
will be effected at the net asset value of the applicable Series
determined on such business day if the requests are received by
the Fund in proper form and in accordance with applicable
requirements on the next business day. It is each Participating
Insurance Company's responsibility to properly transmit
redemption requests in accordance with applicable requirements.
VA contract holders and VLI policy holders should consult their
Participating Insurance Company in this regard. The value of
the shares redeemed may be more or less than their original
cost, depending on the Series' then-current net asset value. No
charges are imposed by the Fund when shares are redeemed.
The Fund ordinarily will make payment for all
shares redeemed within seven days after receipt by the Transfer
Agent of a redemption request in proper form, except as provided
by the rules of the Securities and Exchange Commission.
Should any conflict between VA contract holders
and VLI policy holders arise which would require that a
substantial amount of net assets be withdrawn, orderly portfolio
management could be disrupted to the potential detriment of such
contract holders and policy holders.
DIVIDENDS, DISTRIBUTIONS AND TAXES
MONEY MARKET PORTFOLIO--Declares dividends from net investment
income on each day that the Fund determines its net asset value.
Dividends usually are paid on the last calendar day of each
month. The earnings for Saturdays, Sundays and holidays are
declared as dividends on the next business day.
ZERO COUPON 2000 AND QUALITY BOND PORTFOLIOS--Declare and pay
dividends from net investment income monthly.
GROWTH AND INCOME PORTFOLIO--Declares and pays dividends from
net investment income quarterly.
CAPITAL APPRECIATION, DISCIPLINED STOCK, INTERNATIONAL EQUITY,
INTERNATIONAL VALUE, MANAGED ASSETS, SMALL CAP AND SMALL COMPANY
STOCK PORTFOLIOS--Declare and pay dividends from net investment
income annually.
APPLICABLE TO ALL SERIES--Under the Internal Revenue Code of
1986, as amended (the "Code"), each Series of the Fund is
treated as a separate entity for purposes of qualification and
taxation as a regulated investment company. Each Series will
make distributions from net realized securities gains, if any,
once a year, but may make distributions on a more frequent basis
to comply with the distribution requirements of the Code, in all
events in a manner consistent with the provisions of the 1940
Act. No Series will make distributions from net realized
securities gains unless capital loss carryovers, if any, have
been utilized or have expired. Dividends are automatically
reinvested in additional shares at net asset value unless
payment in cash is elected. Shares begin earning dividends on
the day the purchase order is effective. If all shares in an
account are redeemed at any time, all dividends to which the
shareholder is entitled will be paid along with the proceeds of
the redemption. An omnibus accountholder may indicate in a
partial redemption request that a portion of any accrued
dividends to which such account is entitled belongs to an
underlying accountholder who has redeemed all shares in his or
her account, and such portion of the accrued dividends will be
paid to the accountholder along with the proceeds of the
redemption. All expenses are accrued daily and deducted before
declaration of dividends to investors.
Notice as to the tax status of dividends and
distributions will be mailed to shareholders annually.
Dividends from net investment income (including discount
recognized as ordinary income, if any), together with
distributions of net realized short-term securities gains and
all or a portion of any gains realized from the sale or other
disposition of certain market discount bonds, generally are
taxable as ordinary income whether received in cash or
reinvested in additional shares. Distributions from net
realized long-term securities gains generally are taxable as
long-term capital gains whether received in cash or reinvested
in additional shares. Since the Fund's shareholders are the
Participating Insurance Companies and their separate accounts,
no discussion is included herein as to the Federal income tax
consequences to VA contract holders and VLI policy holders. For
information concerning the Federal income tax consequences to
such holders, see the prospectus for such contract or policy.
Section 817(h) of the Code requires that the
investments of a segregated asset account of an insurance
company be "adequately diversified" as provided therein or in
accordance with U.S. Treasury Regulations in order for the
account to serve as the basis for VA contracts or VLI policies.
Section 817(h) and the U.S. Treasury Regulations issued
thereunder provide the manner in which a segregated asset
account will treat investments in a regulated investment company
for purposes of the diversification requirements. If a Series
satisfies certain conditions, a segregated asset account owning
shares of the Series will be treated as owning multiple
investments consisting of the account's proportionate share of
each of the assets of the Series. Each Series intends to
satisfy the requisite conditions so that the shares of the
Series owned by a segregated asset account of a Participating
Insurance Company will be treated as multiple investments.
Management of the Fund believes that each Series
(other than the Disciplined Stock, International Value and Small
Company Stock Portfolios which had not commenced operations) has
qualified for the fiscal year ended December 31, 1995 as a
"regulated investment company" under the Code. Each Series
intends to continue to so qualify if such qualification is in
the best interests of its shareholders. It is expected that
each of the Disciplined Stock, International Value and Small
Company Stock Portfolios will qualify as a "regulated investment
company" under the Code so long as such qualification is in the
best interests of its shareholders. Qualification as a
regulated investment company relieves the Series of any
liability for Federal income taxes to the extent its earnings
are distributed in accordance with applicable provisions of the
Code. The Series may be subject to a non-deductible 4% excise
tax, measured with respect to certain undistributed amounts of
investment income and capital gains. Participating Insurance
Companies should consult their tax advisers regarding specific
questions as to Federal, state or local taxes.
GENERAL INFORMATION
The Fund was organized as an unincorporated
business trust under the laws of the Commonwealth of
Massachusetts pursuant to an Agreement and Declaration of Trust
(the "Trust Agreement") dated October 29, 1986, and commenced
operations on August 31, 1990. The Fund is authorized to issue
an unlimited number of shares of beneficial interest, par value
$.001 per share. Each share has one vote. In accordance with
current law, the Fund anticipates that a Participating Insurance
Company issuing a VA contract or VLI policy that participates in
the Fund will request voting actions from policy holders and
will vote shares in proportion to the voting instructions
received. For further information on voting rights, see the
prospectus for the VA contract or VLI policy for information in
respect of voting.
The Fund is a "series fund," which is a mutual
fund divided into separate portfolios, each of which is treated
as a separate entity for certain matters under the 1940 Act and
for other purposes. A shareholder of one portfolio is not
deemed to be a shareholder of any other portfolio. For certain
matters shareholders vote together as a group; as to others they
vote separately by portfolio.
To date, the Board has authorized the creation
of eleven Series of shares. All consideration received by the
Fund for shares of one of the Series, and all assets in which
such consideration is invested, will belong to that Series
(subject only to the rights of creditors of the Fund) and will
be subject to the liabilities related thereto. The income
attributable to, and the expenses of, one Series would be
treated separately from those of the other Series. The Fund has
the ability to create, from time to time, new series without
shareholder approval.
Under Massachusetts law, shareholders, under
certain circumstances, could be held personally liable for the
obligations of the Fund. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by
the Fund or a Trustee. The Trust Agreement provides for
indemnification from the Fund's property for all losses and
expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be
unable to meet its obligations, a possibility which management
believes is remote. Upon payment of any liability incurred by
the Fund, the shareholder paying such liability will be entitled
to reimbursement from the general assets of the Fund. The Fund
intends to conduct its operations in such a way so as to avoid,
as far as possible, ultimate liability of the shareholders for
liabilities of the Fund. As described under "Management of the
Fund" in the Statement of Additional Information, the Fund
ordinarily will not hold shareholder meetings; however,
shareholders under certain circumstances may have the right to
call a meeting of shareholders for the purpose of voting to
remove Trustees.
The Transfer Agent maintains a record of each
shareholder's ownership and will send confirmations and
statements of account. Shareholder inquiries may be made by
writing to the Fund at 144 Glenn Curtiss Boulevard, Uniondale,
New York 11556-0144, or by calling 516-338-3300.
Owners of VLI policies and VA contracts issued
by Participating Insurance Companies for which shares of one or
more Series are the investment vehicle will receive from the
Participating Insurance Companies unaudited semi-annual
financial statements and audited year-end financial statements
certified by the Fund's independent public auditors. Each
report will show the investments owned by the Fund and the
market values thereof as determined by the Fund's Board and will
provide other information about the Fund and its operations.
<PAGE>
APPENDIX
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS--(Capital Appreciation, Growth and
Income, Managed Assets, Small Company Stock, International
Equity and International Value Portfolios) Foreign currency
transactions may be entered into for a variety of purposes,
including: to fix in U.S. dollars, between trade and settlement
date, the value of a security the Series has agreed to buy or
sell; or to hedge the U.S. dollar value of securities the Series
already owns, particularly if it expects a decrease in the value
of the currency in which the foreign security is denominated; or
to gain exposure to the foreign currency in an attempt to
realize gains.
Foreign currency transactions may involve, for
example, the Series' purchase of foreign currencies for U.S.
dollars or the maintenance of short positions in foreign
currencies, which would involve the Series agreeing to exchange
an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the
value of the currency sold relative to the currency the Fund
contracted to receive in the exchange. The Series' success in
these transactions will depend principally on The Dreyfus
Corporation's (and, where applicable, the Series' sub-investment
adviser's) ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar.
SHORT-SELLING--(Growth and Income and, to a limited extent,
Managed Assets and Small Cap Portfolios) In these transactions,
the Series sells a security it does not own in anticipation of a
decline in the market value of the security. To complete the
transaction, the Series must borrow the security to make
delivery to the buyer. The Series is obligated to replace the
security borrowed by purchasing it subsequently at the market
price at the time of replacement. The price at such time may be
more or less than the price at which the security was sold by
the Series. The Series will 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; it will
realize a gain if the security declines in price between those
dates.
Securities will not be sold short if, after
effect is given to any such short sale, the total market value
of all securities sold short would exceed 25% of the value of
the Series' net assets. The Series may not sell short the
securities of any single issuer listed on a national securities
exchange to the extent of more than 5% of the value of the
Series' net assets. The Series may not sell short the
securities of any class of an issuer if, as a result of such
sale, the Series would have sold short in the aggregate more
than 5% of the outstanding securities of that class.
The Growth and Income Portfolio also may make,
and the Managed Assets and Small Cap Portfolios only may make,
short sales "against the box," in which the Series enters into a
short sale of a security it owns in order to hedge an unrealized
gain on the security. At no time will more than 15% of the
value of the Series' net assets be in deposits on short sales
against the box.
BORROWING MONEY--(All Series) Each Series is permitted to borrow
to the extent permitted under the 1940 Act, which permits an
investment company to borrow in an amount up to 33-1/3% of the
value of such company's total assets. Each Series, other than
the Growth and Income Portfolio, currently intends to borrow
money only for temporary or emergency (not leveraging) purposes,
in an amount up to 15% of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) at
the time the borrowing is made. While borrowings exceed 5% of
the Series' total assets, the Series will not make any
additional investments. In addition, the Money Market and Small
Company Stock Portfolios may borrow for investment purposes on a
secured basis through entering into reverse repurchase
agreements as described below.
LEVERAGE--(Growth and Income and, to a limited extent, Money
Market and Small Company Stock Portfolios) Leveraging will
exaggerate the effect on net asset value of any increase or
decrease in the market value of the Series' portfolio. Money
borrowed for leveraging will be limited to 33-1/3% of the value
of the Series' total assets. These borrowings will be subject
to interest costs which may or may not be recovered by
appreciation of the securities purchased; in certain cases,
interest costs may exceed the return received on the securities
purchased.
The Series may enter into reverse repurchase
agreements with banks, brokers or dealers. This form of
borrowing involves the transfer by the Series of an underlying
debt instrument in return for cash proceeds based on a
percentage of the value of the security. The Series retains the
right to receive interest and principal payments on the
security. At an agreed upon future date, the Series repurchases
the security at principal plus accrued interest. Except for
these transactions, the Growth and Income Portfolio's borrowings
generally will be unsecured.
USE OF DERIVATIVES--(Growth and Income, International Equity,
International Value, Managed Assets, Small Company Stock and
Zero Coupon 2000 Portfolios) Although neither the Fund nor any
Series will be a commodity pool, Derivatives subject the Series
to the rules of the Commodity Futures Trading Commission which
limit the extent to which the Series can invest in certain
Derivatives. The Series may invest in futures contracts and
options with respect thereto for hedging purposes without limit.
However, the Series may not invest in such contracts and options
for other purposes if the sum of the amount of initial margin
deposits and premiums paid for unexpired options with respect to
such contracts,other than for bona fide hedging purposes, exceed
5% of the liquidation value of the Series' assets, after taking
into account unrealized profits and unrealized losses on such
contracts and options; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-
money amount may be excluded in calculating the 5% limitation.
The Series may invest up to 5% of its assets,
represented by the premium paid, in the purchase of call and put
options. The Series may write (i.e., sell) covered call and put
option contracts to the extent of 20% of the value of its net
assets at the time such option contracts are written. When
required by the Securities and Exchange Commission, the Series
will set aside permissible liquid assets in a segregated account
to cover its obligations relating to its purchase of
Derivatives. To maintain this required cover, the Series may
have to sell portfolio securities at disadvantageous prices or
times since it may not be possible to liquidate a Derivative
position at a reasonable price.
Derivatives may entail investment exposures that
are greater than their cost would suggest, meaning that a small
investment in Derivatives could have a large potential impact on
the Series' performance.
If the Series invests in Derivatives at
inappropriate times or judges market conditions incorrectly,
such investments may lower the Series' return or result in a
loss. The Series also could experience losses if it were unable
to liquidate its position because of an illiquid secondary
market. The market for many Derivatives is, or suddenly can
become, illiquid. Changes in liquidity may result in
significant, rapid and unpredictable changes in the prices for
Derivatives.
LENDING PORTFOLIO SECURITIES--(All Series) Each Series may lend
securities from its portfolio to brokers, dealers and other
financial institutions needing to borrow securities to complete
certain transactions. In connection with such loans, the Series
continues to be entitled to payments in amounts equal to the
interest or other distributions payable on the loaned
securities. Loans of portfolio securities afford the Series an
opportunity to earn interest on the amount of the loan and at
the same time to earn income on the loaned securities'
collateral. Loans of portfolio securities may not exceed 33-
1/3% (20% with respect to the Managed Assets and Zero Coupon
2000 Portfolios and 10% with respect to the Capital
Appreciation, Small Cap and Quality Bond Portfolios) of the
value of the Series' total assets. In connection with such
loans, the Series will receive collateral consisting of cash,
U.S. Government securities or irrevocable letters of credit
which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities.
Such loans are terminable by the Series at any time upon
specified notice. The Series might experience risk of loss if
the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Series.
FORWARD COMMITMENTS--(All Series) Each Series may purchase
securities on a forward commitment or when-issued basis, which
means that delivery and payment take place a number of days
after the date of the commitment to purchase. The payment
obligation and the interest rate that will be received on a
forward commitment or when-issued security are fixed at the time
the Series enters into the commitment. However, the Series does
not make a payment until it receives delivery from the other
party to the transaction. The Series will make commitments to
purchase such securities only with the intention of actually
acquiring the securities, but the Series may sell these
securities before the settlement date if it is deemed advisable.
A segregated account of the Series consisting of cash, cash
equivalents or U.S. Government securities or other high quality
liquid debt securities at least equal at all times to the amount
of the commitments will be established and maintained at the
Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CONVERTIBLE SECURITIES--(Capital Appreciation, Disciplined
Stock, Growth and Income, International Equity, International
Value, Managed Assets, Small Cap and Small Company Stock
Portfolios) Convertible securities are fixed-income securities
that may be converted at either a stated price or stated rate
into underlying shares of common stock. Convertible securities
have characteristics similar to both fixed-income and equity
securities. Convertible securities generally are subordinated
to other similar but non-convertible securities of the same
issuer, although convertible bonds, as corporate debt
obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common
stock, of the same issuer. Because of the subordination
feature, however, convertible securities typically have lower
ratings than similar non-convertible securities.
WARRANTS--(Capital Appreciation, Growth and Income,
International Equity, International Value, Managed Assets, Small
Cap and Small Company Stock Portfolios) A warrant is an
instrument issued by a corporation which gives the holder the
right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time.
The Series may invest up to 5% (2% in the case of the Managed
Assets, Capital Appreciation and Small Cap Portfolios) of its
net assets in warrants, except that this limitation does not
apply to warrants purchased by the Series that are sold in units
with, or attached to, other securities.
MORTGAGE-RELATED SECURITIES--(Growth and Income Portfolio)
Mortgage-related securities are a form of Derivative
collateralized by pools of mortgages assembled for sale to
investors by various governmental agencies, such as the
Government National Mortgage Association and government-related
organizations such as the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation, as well as by
private issuers such as commercial banks, savings and loan
institutions, mortgage banks and private mortgage insurance
companies, and similar foreign entities. The mortgage-related
securities which may be purchased include those with fixed,
floating and variable interest rates, those with interest rates
that change based on multiples of changes in interest rates and
those with interest rates that change inversely to changes in
interest rates, as well as stripped mortgage-backed securities.
Stripped mortgage-backed securities usually are structured with
two classes that receive different proportions of interest and
principal distributions on a pool of mortgage-backed securities
or whole loans. A common type of stripped mortgage-backed
security will have one class receiving some of the interest and
most of the principal from the mortgage collateral, while the
other class will receive most of the interest and the remainder
of the principal. Although certain mortgage-related securities
are guaranteed by a third party or otherwise similarly secured,
the market value of the security, which may fluctuate, is not
secured. If a mortgage-related security is purchased at a
premium, all or part of the premium may be lost if there is a
decline in the market value of the security, whether resulting
from changes in interest rates or prepayments on the underlying
mortgage collateral. As with other interest-bearing securities,
the prices of certain of these securities are inversely affected
by changes in interest rates. However, although the value of a
mortgage-related security may decline when interest rates rise,
the converse is not necessarily true, since in periods of
declining interest rates the mortgages underlying the security
are more likely to be prepaid. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by
unscheduled prepayments on the underlying mortgages, and,
therefore, it is not possible to predict accurately the
security's return to the Series. Moreover, with respect to
stripped mortgage-backed securities, if the underlying mortgage
securities experience greater than anticipated prepayments of
principal, the Series may fail to fully recoup its initial
investment even if the securities are rated in the highest
rating category by a nationally recognized statistical rating
organization. For further discussion concerning the investment
considerations involved, see "Description of the Fund--
Investment Considerations and Risks--Fixed-Income Securities"
and "Illiquid Securities" below.
MUNICIPAL OBLIGATIONS--(Growth and Income and Quality Bond
Portfolios) Municipal obligations are debt obligations issued by
states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies
and instrumentalities, or multistate agencies or authorities.
Municipal obligations bear fixed, floating or variable rates of
interest. Certain municipal obligations are subject to
redemption at a date earlier than their stated maturity pursuant
to call options, which may be separated from the related
municipal obligations and purchased and sold separately. The
Series also may acquire call options on specific municipal
obligations. The Series generally would purchase these call
options to protect the Series from the issuer of the related
municipal obligation redeeming, or other holder of the call
option from calling away, the municipal obligation before
maturity.
While, in general, municipal obligations are tax
exempt securities having relatively low yields as compared to
taxable, non-municipal obligations of similar quality, certain
municipal obligations are taxable obligations, offering yields
comparable to, and in some cases greater than, the yields
available on other permissible Series investments. Dividends
received by shareholders on Series shares which are attributable
to interest income received by the Series from municipal
obligations generally will be subject to Federal income tax.
The Series will invest in municipal obligations, the ratings of
which correspond with the ratings of other permissible Series
investments. The Series currently intends to invest no more
than 25% of its assets in municipal obligations. However, this
percentage may be varied from time to time without shareholder
approval.
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS--
(Disciplined Stock, Growth and Income, International Equity,
International Value, Managed Assets and Small Company Stock
Portfolios) The Series may invest in the securities of foreign
issuers in the form of American Depositary Receipts ("ADRs") and
European Depositary Receipts ("EDRs"). These securities may not
necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts
typically issued by a United States bank or trust company which
evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as
Continental Depositary Receipts ("CDRs"), are receipts issued in
Europe typically by non-United States banks and trust companies
that evidence ownership of either foreign or domestic
securities. Generally, ADRs in registered form are designed for
use in the United States securities markets and EDRs and CDRs in
bearer form are designed for use in Europe.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL
ENTITIES--(All Series) Each Series may invest in obligations
issued or guaranteed by one or more foreign governments or any
of their political subdivisions, agencies or instrumentalities
that are determined by The Dreyfus Corporation (and, if
applicable, the Series' sub-investment adviser) to be of
comparable quality to the other obligations in which the Series
may invest. Supranational entities include international
organizations designated or supported by governmental entities
to promote economic reconstruction or development and
international banking institutions and related government
agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European
Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
MONEY MARKET INSTRUMENTS--(All Series) Each Series may invest in
the following types of Money Market Instruments.
U.S. GOVERNMENT SECURITIES. Securities issued
or guaranteed by the U.S. Government or its agencies or
instrumentalities include U.S. Treasury securities that differ
in their interest rates, maturities and times of issuance. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of
the U.S. Treasury; others, by the right of the issuer to borrow
from the Treasury; others, by discretionary authority of the
U.S. Government to purchase certain obligations of the agency or
instrumentality; and others, only by the credit of the agency or
instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides
financial support to such U.S. Government-sponsored agencies and
instrumentalities, no assurance can be given that it will always
do so since it is not so obligated by law.
REPURCHASE AGREEMENTS. In a repurchase
agreement, the Series buys, and the seller agrees to repurchase,
a security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby determines
the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the
underlying security. Repurchase agreements could involve risks
in the event of a default or insolvency of the other party to
the agreement, including possible delays or restrictions upon
the Series' ability to dispose of the underlying securities.
The Series may enter into repurchase agreements with certain
banks or non-bank dealers.
BANK OBLIGATIONS. The Series may purchase
certificates of deposit, time deposits, bankers' acceptances and
other short-term obligations issued by domestic banks, foreign
subsidiaries or foreign branches of domestic banks, domestic and
foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to
such securities issued by foreign subsidiaries or foreign
branches of domestic banks, and domestic and foreign branches of
foreign banks, the Series may be subject to additional
investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of
U.S. domestic issuers.
Certificates of deposit are negotiable
certificates evidencing the obligation of a bank to repay funds
deposited with it for a specified period of time.
Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of
time (in no event longer than seven days) at a stated interest
rate.
Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it
by a customer. These instruments reflect the obligation both of
the bank and the drawer to pay the face amount of the instrument
upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or
variable interest rates.
COMMERCIAL PAPER. Commercial paper consists of
short-term, unsecured promissory notes issued to finance short-
term credit needs. The commercial paper purchased by the Series
will consist only of direct obligations which, at the time of
their purchase, are (a) rated not lower than Prime-1 by Moody's,
A-1 by S&P, F-1 by Fitch or Duff-1 by Duff, (b) issued by
companies having an outstanding unsecured debt issue currently
rated at least A3 by Moody's or A- by S&P, Fitch or Duff, or (c)
if unrated, determined by The Dreyfus Corporation (and, if
applicable, the Series' sub-investment adviser) to be of
comparable quality to those rated obligations which may be
purchased by the Series.
PARTICIPATION INTERESTS. The Series may
purchase from financial institutions participation interests in
securities in which the Series may invest. A participation
interest gives the Series an undivided interest in the security
in the proportion that the Series' participation interest bears
to the total principal amount of the security. These
instruments may have fixed, floating or variable rates of
interest with remaining maturities of 13 months or less. If the
participation interest is unrated, or has been given a rating
below that which is permissible for purchase by the Series, the
participation interest will be backed by an irrevocable letter
of credit or guarantee of a bank, or the payment obligation
otherwise will be collateralized by U.S. Government securities,
or, in the case of unrated participation interests, The Dreyfus
Corporation must have determined that the instrument is of
comparable quality to those instruments in which the Series may
invest.
INVESTMENT COMPANIES--(Managed Assets and Small Company Stock
Portfolios) The Series may invest in securities issued by
investment companies. Under the 1940 Act, the Series'
investment in such securities, subject to certain exceptions,
currently is limited to (i) 3% of the total voting stock of any
one investment company, (ii) 5% of the Series' net assets with
respect to any one investment company and (iii) 10% of the
Series' net assets in the aggregate. Investments in the
securities of other investment companies may involve duplication
of advisory fees and certain other expenses.
STRIPPED TREASURY SECURITIES--(Zero Coupon 2000 Portfolio and,
to a limited extent, all other Series) Stripped Treasury
Securities are U.S. Treasury securities that have been stripped
of their unmatured interest coupons (which typically provide for
interest payments semi-annually), interest coupons that have
been stripped from such U.S. Treasury securities, and receipts
and certificates for such stripped debt obligations and stripped
coupons.
Stripped bonds and stripped coupons are sold at
a deep discount because the buyer of those securities receives
only the right to receive a future fixed payment on the security
and does not receive any rights to periodic interest payments on
the security.
Stripped Treasury Securities will include one or
more of the following types of securities: (a) U.S. Treasury
debt obligations originally issued as bearer coupon bonds which
have been stripped of their unmatured interest coupons, (b)
coupons which have been stripped from U.S. Treasury bonds,
either of which may be held through the Federal Reserve Bank's
book entry system called "Separate Trading of Registered
Interest and Principal of Securities" ("STRIPS") or "Coupon
Under Book-Entry Safekeeping" ("CUBES"), and (c) receipts or
certificates for stripped U.S. Treasury debt obligations
evidencing ownership of future interest or principal payments on
U.S. Treasury notes or bonds which are direct obligations of the
United States. The receipts or certificates must be issued in
registered form by a major bank which acts as custodian and
nominal holder of the underlying stripped U.S. Treasury
obligation (which may be held by it either in physical or in
book-entry form). See "Investment Objectives and Management
Policies--Management Policies" in the Statement of Additional
Information.
STRIPPED CORPORATE SECURITIES--(Growth and Income, International
Equity, Managed Assets, Quality Bond and Zero Coupon 2000
Portfolios) Stripped Corporate Securities consist of corporate
debt obligations issued by domestic corporations without
interest coupons, and, if available, interest coupons that have
been stripped from corporate debt obligations, and receipts and
certificates for such stripped debt obligations and stripped
coupons. Stripped Corporate Securities purchased by the Managed
Assets, Growth and Income, International Equity or Quality Bond
Portfolios will bear ratings comparable to non-stripped
corporate obligations that may be purchased by such Series.
Stripped Corporate Securities purchased by the Zero Coupon 2000
Portfolio will be rated at least Baa by Moody's or BBB by S&P.
With respect to other features of Stripped Corporate Securities,
such as sales at deep discounts, see "Stripped Treasury
Securities" above and "Description of the Fund--Investment
Considerations and Risks--Special Considerations Relating to
Stripped Securities."
ILLIQUID SECURITIES--(All Series) Each Series may invest up to
15% (10% with respect to the Money Market Portfolio) of the
value of its net assets in securities as to which a liquid
trading market does not exist, provided such investments are
consistent with the Series' investment objective. Such
securities may include securities that are not readily
marketable, such as certain securities that are subject to legal
or contractual restrictions on resale, repurchase agreements
providing for settlement in more than seven days after notice,
and certain privately negotiated, non-exchange traded options
and securities used to cover such options. As to these
securities, the Series is subject to a risk that should the
Series desire to sell them when a ready buyer is not available
at a price the Series deems representative of their value, the
value of the Series' net assets could be adversely affected.
RATINGS--(Growth and Income, Managed Assets, Small Cap and
Quality Bond Portfolios) Securities rated Ba by Moody's are
judged to have speculative elements; their future cannot be
considered as well assured and often the protection of interest
and principal payments may be very moderate. Securities rated
BB by S&P, Fitch or Duff are regarded as having predominantly
speculative characteristics and, while such obligations have
less near-term vulnerability to default than other speculative
grade debt, they face major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and
principal payments. Securities rated Caa by Moody's or CCC by
S&P, Fitch or Duff are of poor standing and may be in default or
there may be present elements of danger with respect to
principal or interest. Such securities, though high yielding,
are characterized by great risk. Once the rating of a portfolio
security has been changed, the Fund will consider all
circumstances deemed relevant in determining whether to continue
to hold the security. See "Appendix" in the Statement of
Additional Information for a general description of securities
ratings.
The ratings of Moody's, S&P, Fitch or Duff
represent their opinions as to the quality of the obligations
which they undertake to rate. Ratings are relative and
subjective and, although ratings may be useful in evaluating the
safety of interest and principal payments, they do not evaluate
the market value risk of such obligations. Although these
ratings may be an initial criterion for selection of portfolio
investments, The Dreyfus Corporation also will evaluate these
securities and the ability of the issuers of such securities to
pay interest and principal. The Series' ability to achieve its
investment objective may be more dependent on The Dreyfus
Corporation's credit analysis than might be the case for a fund
that invested in higher rated securities.
No person has been authorized to give any
information or to make any representations other than those
contained in this Prospectus and in the Fund's official sales
literature in connection with the offer of the Fund's shares,
and, if given or made, such other information or representations
must not be relied upon as having been authorized by the Fund.
This Prospectus does not constitute an offer in any State in
which, or to any person to whom, such offering may not lawfully
be made.
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
___________, 1996
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 _________, 1996, 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-21
Investment Advisory Agreements. . . . . . . . . . . . B-26
Purchase of Fund Shares . . . . . . . . . . . . . . . B-34
Redemption of Fund Shares . . . . . . . . . . . . . . B-34
Determination of Net Asset Value. . . . . . . . . . . B-35
Dividends, Distributions and Taxes. . . . . . . . . . B-37
Portfolio Transactions. . . . . . . . . . . . . . . . B-39
Yield and Performance Information . . . . . . . . . . B-41
Information About the Fund. . . . . . . . . . . . . . B-43
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors . . . . . . . . . . B-44
Appendix. . . . . . . . . . . . . . . . . . . . . . . B-45
Financial Statements. . . . . . . . . . . . . . . . . B-53
Report of Independent Auditors. . . . . . . . . . . . B-__
<PAGE>
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
Portfolio Securities
American, European and Continental Depositary Receipts.
(Disciplined Stock, Growth and Income, International Equity,
International Value, Managed Assets and Small Company Stock
Portfolios) The Series may invest in American Depositary
Receipts, European Depositary Receipts and Continental
Depositary Receipts through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the
issuer of the underlying security and a depositary, whereas a
depositary may establish an unsponsored facility without
participation by the issuer of the deposited security. Holders
of unsponsored depositary receipts generally bear all the costs
of such facilities and the depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited
security or to pass through voting rights to the holders of such
receipts in respect of the deposited securities.
Repurchase Agreements. (All Series) The Funds' custodian
or sub-custodian will have custody of, and will hold in a
segregated account, securities acquired by a Series under a
repurchase agreement. Repurchase agreements are considered by
the staff of the Securities and Exchange Commission to be loans
by the Series. In an attempt to reduce the risk of incurring a
loss on a repurchase agreement, each Series will enter into
repurchase agreements only with domestic banks with total assets
in excess of $1 billion, or primary government securities
dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Series may
invest, and will require that additional securities be deposited
with it if the value of the securities purchased should decrease
below the resale price.
Commercial Paper and Other Short-Term Corporate
Obligations. (All Series) These instruments include variable
amount master demand notes, which are obligations that permit a
Series to invest fluctuating amounts at varying rates of
interest pursuant to direct arrangements between the Series, as
lender, and the borrower. These notes permit daily changes in
the amounts borrowed. Because these obligations are direct
lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and
there generally is no established secondary market for these
obligations, although they are redeemable at face value, plus
accrued interest, at any time. Accordingly, where these
obligations are not secured by letters of credit or other credit
support arrangements, the Series' right to redeem is dependent
on the ability of the borrower to pay principal and interest on
demand. Such obligations frequently are not rated by credit
rating agencies, and a Fund may invest in them only if at the
time of an investment the borrower meets the criteria set forth
in the Fund's Prospectus for other commercial paper issuers.
Convertible Securities. (Capital Appreciation, Disciplined
Stock, Growth and Income, International Equity, International
Value, Managed Assets, Small Cap and Small Company Stock
Portfolios) Convertible securities are fixed-income securities
that may be converted at either a stated price or stated rate
into underlying shares of common stock and, therefore, are
deemed to be equity securities for purposes of the Series'
management policies. Convertible securities have
characteristics similar to both fixed-income and equity
securities. Convertible securities generally are subordinated
to other similar but non-convertible securities of the same
issuer, although convertible bonds, as corporate debt
obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common
stock, of the same issuer. Because of the subordination
feature, however, convertible securities typically have lower
ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income
securities generally, the market value of convertible securities
tends to decline as interest rates increase and, conversely,
tends to increase as interest rates decline. In addition,
because of the conversion feature, the market value of
convertible securities tends to vary with fluctuations in the
market value of the underlying common stock. A unique feature
of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience
market value declines to the same extent as the underlying
common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.
As fixed-income securities, convertible securities are
investments that provide for a stable stream of income with
generally higher yields than common stocks. As with all fixed-
income securities, there can be no assurance of current income
because the issuers of the convertible securities may default on
their obligations. Convertible securities, however, generally
offer lower interest or dividend yields than non-convertible
securities of similar quality because of the potential for
capital appreciation. A convertible security, in addition to
providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the
holder to benefit from increases in the market price of the
underlying common stock. There can be no assurance of capital
appreciation, however, because securities prices fluctuate.
Municipal Obligations. (Quality Bond and Growth and Income
Portfolios) Municipal obligations generally include debt
obligations issued to obtain funds for various public purposes
as well as certain industrial development bonds issued by or on
behalf of public authorities. Municipal obligations are
classified as general obligation bonds, revenue bonds and notes.
General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable from the revenue
derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power.
Industrial development bonds, in most cases, are revenue bonds
and generally do not carry the pledge of the credit of the
issuing municipality, but generally are guaranteed by the
corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a
bond sale, collection of taxes or receipt of other revenues.
Municipal obligations include municipal lease/purchase
agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities.
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.
Investment Companies. (All Series) A Series may invest in
securities issued by investment companies. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), a Series'
investment in such securities, subject to certain exceptions,
currently is limited to (i) 3% of the total voting stock of any
one investment company, (ii) 5% of the Series' net assets with
respect to any one investment company and (iii) 10% of the
Series' net assets in the aggregate. Investments in the
securities of other investment companies may involve duplication
of advisory fees and certain other expenses.
Stripped Treasury Securities. (Zero Coupon 2000 Portfolio
and, to a limited extent, all other Series) The U.S. Government
does not issue Stripped Treasury Securities directly. The
STRIPS program, which is ongoing, is designed to facilitate the
secondary market stripping of selected U.S. Treasury notes and
bonds into separate interest and principal components. Under
the program, the U.S. Treasury continues to sell its notes and
bonds through its customary auction process. A purchaser of
those specified notes and bonds who has access to a book-entry
account at a Federal Reserve bank, however, may separate the
Treasury notes and bonds into interest and principal components.
The selected Treasury securities thereafter may be maintained in
the book-entry system operated by the Federal Reserve in a
manner that permits the separate trading and ownership of the
interest and principal payments. Investment banks also may
strip U.S. Treasury securities and sell them under proprietary
names. Such securities may not be as liquid as STRIPS and CUBES
and are not viewed by the staff of the Securities and Exchange
Commission as U.S. Government securities for purposes of the
1940 Act. CUBES, like STRIPS, are direct obligations of the
U.S. Government. CUBES are coupons that have previously been
physically stripped from U.S. Treasury notes and bonds, but
which were deposited with the Federal Reserve Bank's book-entry
system and are now carried and transferable in book-entry form
only. Only stripped U.S. Treasury coupons maturing on or after
January 15, 1988, that were stripped prior to January 5, 1987,
were eligible for conversion to book-entry form under the CUBES
program.
By agreement, the underlying debt obligations will be held
separate from the general assets of the custodian and nominal
holder of such securities, and will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of
or against the custodian or any person claiming through the
custodian, and the custodian will be responsible for applying
all payments received on those underlying debt obligations to
the related receipts or certificates without making any
deductions other than applicable tax withholding. The custodian
is required to maintain insurance for the protection of holders
of receipts or certificates in customary amounts against losses
resulting from the custody arrangement due to dishonest or
fraudulent action by the custodian's employees. The holders of
receipts or certificates, as the real parties in interest, are
entitled to the rights and privileges of the underlying debt
obligations, including the right, in the event of default in
payment of principal or interest, to proceed individually
against the issuer without acting in concert with other holders
of those receipts or certificates or the custodian.
Publicly filed documents state that counsel to the
underwriters of certificates or other evidences of ownership of
U.S. Treasury securities have stated that for Federal tax and
securities purposes, purchasers of such certificates most likely
will be deemed the beneficial holders of the underlying U.S.
Government securities, which are payable in full at their stated
maturity amount and are not subject to redemption prior to
maturity. See "Description of the Fund--Investment
Considerations and Risks--Special Considerations Relating to
Stripped Securities" in the Prospectus.
Illiquid Securities. (All Series) When purchasing
securities that have not been registered under the Securities
Act of 1933, as amended, and are not readily marketable, a
Series will endeavor, to the extent practicable, to obtain the
right to registration at the expense of the issuer. Generally,
there will be a lapse of time between the Series' decision to
sell any such security and the registration of the security
permitting sale. During any such period, the price of the
securities will be subject to market fluctuations. However,
where a substantial market of qualified institutional buyers has
developed for certain unregistered securities purchased by the
Series pursuant to Rule 144A under the Securities Act of 1933,
as amended, the Series intends to treat such securities as
liquid securities in accordance with procedures approved by the
Fund's Board. Because it is not possible to predict with
assurance how the market for specific restricted securities sold
pursuant to Rule 144A will develop, the Fund's Board has
directed the Manager to monitor carefully the relevant 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 cease purchasing restricted
securities pursuant to Rule 144A, a Series' investing in such
securities may have the effect of increasing the level of
illiquidity in its investment portfolio during such period.
Management Policies
Leverage. (Growth and Income and, to a limited extent,
Money Market and Small Company Stock Portfolios) For borrowings
for investment purposes, the 1940 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 required coverage should
decline as a result of market fluctuations or other reasons, the
Series may be required to sell some of its portfolio securities
within three days to reduce the amount of its borrowings and
restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities
at that time. The Series also may be required to maintain
minimum average balances in connection with such borrowing or
pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of
borrowing over the stated interest rate. To the extent a Series
enters into a reverse repurchase agreement, the Series will
maintain in a segregated custodial account cash or U.S.
Government securities or other high quality liquid debt
securities at least equal to the aggregate amount of its reverse
repurchase obligations, plus accrued interest, in certain cases,
in accordance with releases promulgated by the Securities and
Exchange Commission. The Securities and Exchange Commission
views reverse repurchase transactions as collateralized
borrowings by a Series.
Short-Selling. (Growth and Income and, to a limited
extent, Managed Assets and Small Cap Portfolios) In these
transactions, a Series sells a security it does not own in
anticipation of a decline in the market value of the security.
To complete the transaction, the Series must borrow the security
to make delivery to the buyer. The Series is obligated to
replace the security borrowed by purchasing it subsequently at
the market price at the time of replacement. A Series will
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; it will realize a gain if the security
declines in price between those dates.
Securities will not be sold short if, after effect is given
to any such short sale, the total market value of all securities
sold short would exceed 25% of the value of a Series' net
assets. A Series may not sell short the securities of any
single issuer listed on a national securities exchange to the
extent of more than 5% of the value of the Series' net assets.
A Series may not sell short the securities of any class of an
issuer if, as a result of such sale, the Series would have sold
short in the aggregate more than 5% of the outstanding
securities of that class.
A Series also may make short sales "against the box," in
which the Series enters into a short sale of a security it owns
in order to hedge an unrealized gain on the security. At no
time will more than 15% of the value of the Series' net assets
be in deposits on short sales against the box.
Until a Series closes its short position or replaces the
borrowed security, it will: (a) maintain a segregated account,
containing cash or U.S. Government securities, at such a level
that 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; or (b) otherwise cover its
short position.
Lending Portfolio Securities. (All Series) In connection
with its securities lending transactions, a Series may return to
the borrower or a third party which is unaffiliated with the
Series, 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 voting rights on the loaned securities
may pass to the borrower, the Fund's Board must terminate the
loan and regain the right to vote the securities if a material
event adversely affecting the investment occurs.
Derivatives. (Growth and Income, International Equity,
International Value, Managed Assets, Small Company Stock and
Zero Coupon 2000 Portfolio) A Series may invest in Derivatives
(as defined in the Fund's Prospectus) for a variety of reasons,
including to hedge certain market risks, to provide a substitute
for purchasing or selling particular securities or to increase
potential income gain. Derivatives may provide a cheaper,
quicker or more specifically focused way for the Series to
invest than "traditional" securities would.
Derivatives can be volatile and involve various types and
degrees of risk, depending upon the characteristics of the
particular Derivative and the portfolio as a whole. Derivatives
permit a Series to increase, decrease or change the level of
risk to which its portfolio is exposed in much the same way as
the Series can increase, decrease or change the risk of its
portfolio by making investments in specific securities.
In addition, Derivatives may entail investment exposures
that are greater than their cost would suggest, meaning that a
small investment in Derivatives could have a large potential
impact on a Series' performance.
If a Series invests in Derivatives at inappropriate times
or judges market conditions incorrectly, such investments may
lower the Series' return or result in a loss. A Series also
could experience losses if its Derivatives were poorly
correlated with its other investments, or if the Series were
unable to liquidate its position because of an illiquid
secondary market. The market for many Derivatives is, or
suddenly can become, illiquid. Changes in liquidity may result
in significant, rapid and unpredictable changes in the prices
for Derivatives.
A Series may invest up to 5% of its assets, represented by
the premium paid, in the purchase of call and put options. A
Series may write (i.e., sell) covered call and put option
contracts to the extent of 20% of the value of its net assets at
the time such option contracts are written. When required by
the Securities and Exchange Commission, the Series will set
aside permissible liquid assets in a segregated account to cover
its obligations relating to its purchase of Derivatives. To
maintain this required cover, a Series may have to sell
portfolio securities at disadvantageous prices or times since it
may not be possible to liquidate a Derivative position at a
reasonable price. Derivatives may be purchased on established
exchanges or through privately negotiated transactions referred
to as over-the-counter Derivatives. Exchange-traded Derivatives
generally are guaranteed by the clearing agency which is the
issuer or counterparty to such Derivatives. This guarantee
usually is supported by a daily payment system (i.e., margin
requirements) operated by the clearing agency in order to reduce
overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk
associated with Derivatives purchased on an exchange. By
contrast, no clearing agency guarantees over-the-counter
Derivatives. Therefore, each party to an over-the-counter
Derivative bears the risk that the counterparty will default.
Accordingly, the Manager will consider the creditworthiness of
counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be
purchased by a Series. Over-the-counter Derivatives are less
liquid than exchange-traded Derivatives since the other party to
the transaction may be the only investor with sufficient
understanding of the Derivative to be interested in bidding for
it.
Futures Transactions--In General. (Growth and Income,
International Equity, International Value, Managed Assets, Small
Company Stock and Zero Coupon 2000 Portfolios) A Series may
enter into futures contracts in U.S. domestic markets, such as
the Chicago Board of Trade and the International Monetary Market
of the Chicago Mercantile Exchange, or, if permitted in the
Fund's Prospectus, on exchanges located outside the United
States, such as the London International Financial Futures
Exchange and the Sydney Futures Exchange Limited. Foreign
markets may offer advantages such as trading opportunities or
arbitrage possibilities not available in the United States.
Foreign markets, however, may have greater risk potential than
domestic markets. For example, some foreign exchanges are
principal markets so that no common clearing facility exists and
an investor may look only to the broker for performance of the
contract. In addition, any profits that a Series might realize
in trading could be eliminated by adverse changes in the
exchange rate, or the Series could incur losses as a result of
those changes. Transactions on foreign exchanges may include
both commodities which are traded on domestic exchanges and
those which are not. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not
regulated by the Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to a
Fund which could adversely affect the value of the Series' net
assets. Although each Series intends to purchase or sell
futures contracts only if there is an active market for such
contracts, no assurance can be given that a liquid market will
exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single
trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified
periods during the trading day. Futures contract prices could
move to the limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of
futures positions and potentially subjecting the Series to
substantial losses.
Successful use of futures by a Series also is subject to
the ability of the Manager or, if applicable, the Series' sub-
investment adviser to predict correctly movements in the
direction of the relevant market and, to the extent the
transaction is entered into for hedging purposes, to ascertain
the appropriate correlation between the transaction being hedged
and the price movements of the futures contract. For example,
if a Series uses futures to hedge against the possibility of a
decline in the market value of securities held in its portfolio
and the prices of such securities instead increase, the Series
will lose part or all of the benefit of the increased value of
securities which it has hedged because it will have offsetting
losses in its futures positions. Furthermore, if in such
circumstances the Series has insufficient cash, it may have to
sell securities to meet daily variation margin requirements. A
Series may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the
Securities and Exchange Commission, a Series may be required to
segregate cash or high quality money market instruments in
connection with its commodities transactions in an amount
generally equal to the value of the underlying commodity. The
segregation of such assets will have the effect of limiting a
Series' ability otherwise to invest those assets.
Specific Futures Transactions. The Growth and Income,
International Equity, International Value, Managed Assets and
Small Company Stock Portfolios may purchase and sell stock index
futures contracts. A stock index future obligates the Series to
pay or receive an amount of cash equal to a fixed dollar amount
specified in the futures contract multiplied by the difference
between the settlement price of the contract on the contract's
last trading day and the value of the index based on the stock
prices of the securities that comprise it at the opening of
trading in such securities on the next business day.
The Growth and Income, International Equity, International
Value, Managed Assets and Small Company Stock Portfolios may
purchase and sell currency futures. A foreign currency future
obligates the Series to purchase or sell an amount of a specific
currency at a future date at a specific price.
The Growth and Income International Equity, International
Value, Managed Assets and Zero Coupon 2000 Portfolio may
purchase and sell interest rate futures contracts. An interest
rate future obligates the Series to purchase or sell an amount
of a specific debt security at a future date at a specific
price.
Options--In General. (Growth and Income, International
Equity, Managed Assets, Small Company Stock and Zero Coupon 2000
Portfolios) The Series may purchase and write (i.e., sell) call
or put options with respect to specific securities. A call
option gives the purchaser of the option the right to buy, and
obligates the writer to sell, the underlying security or
securities at the exercise price at any time during the option
period, or at a specific date. Conversely, a put option gives
the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at the
exercise price at any time during the option period.
A covered call option written by a Series is a call option
with respect to which the Series owns the underlying security or
otherwise covers the transaction by segregating cash or other
securities. A put option written by a Series is covered when,
among other things, cash or liquid securities having a value
equal to or greater than the exercise price of the option are
placed in a segregated account with the Fund's custodian to
fulfill the obligation undertaken. The principal reason for
writing covered call and put options is to realize, through the
receipt of premiums, a greater return than would be realized on
the underlying securities alone. A Series receives a premium
from writing covered call or put options which it retains
whether or not the option is exercised.
There is no assurance that sufficient trading interest to
create a liquid secondary market on a securities exchange will
exist for any particular option or at any particular time, and
for some options no such secondary market may exist. A liquid
secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated
trading activity or order flow, or other unforeseen events, at
times have rendered certain of the clearing facilities
inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain
types of orders or trading halts or suspensions in one or more
options. There can be no assurance that similar events, or
events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not
be possible to effect closing transactions in particular
options. If, as a covered call option writer, the 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 or it otherwise covers its position.
Specific Options Transactions. The Growth and Income,
International Equity, Managed Assets and Small Company Stock
Portfolios may purchase and sell call and put options in respect
of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities
exchanges or traded in the over-the-counter market. An option
on a stock index is similar to an option in respect of specific
securities, except that settlement does not occur by delivery of
the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the stock
index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise
price of the option. Thus, the effectiveness of purchasing or
writing stock index options will depend upon price movements in
the level of the index rather than the price of a particular
stock.
The Growth and Income, International Equity, Managed Assets
and Small Company Stock Portfolios may purchase and sell call
and put options on foreign currency. These options convey the
right to buy or sell the underlying currency at a price which is
expected to be lower or higher than the spot price of the
currency at the time the option is exercised or expires.
The Growth and Income, International Equity, Managed Assets
and Small Company Stock Portfolios may purchase cash-settled
options on equity index swaps in pursuit of its investment
objective. Equity index swaps involve the exchange by the
Series with another party of cash flows based upon the
performance of an index or a portion of an index of securities
which usually includes dividends. A cash-settled option on a
swap gives the purchaser the right, but not the obligation, in
return for the premium paid, to receive an amount of cash equal
to the value of the underlying swap as of the exercise date.
These options typically are purchased in privately negotiated
transactions from financial institutions, including securities
brokerage firms.
Successful use by a Series of options will be subject to
the ability of the Manager or, if applicable, the Series' sub-
investment adviser, to predict correctly movements in the prices
of individual stocks or the stock market generally. To the
extent such predictions are incorrect, a Series may incur
losses.
Future Developments. A Series may take advantage of
opportunities in the area of options and futures contracts and
options on futures contracts and any other Derivatives which are
not presently contemplated for use by the Series or which are
not currently available but which may be developed, to the
extent such opportunities are both consistent with the Series'
investment objective and legally permissible for the Series.
Before entering into such transactions or making any such
investment on behalf of a Series, the Fund will provide
appropriate disclosure in its Prospectus or Statement of
Additional Information.
Forward Commitments. (All Series) A Series may purchase
securities on a forward commitment or when-issued basis, which
means that delivery and payment take place a number of days
after the date of the commitment to purchase. The payment
obligation and the interest rate that will be received on a
forward commitment or when-issued security are fixed at the time
the Series enters into the commitment. However, a Series does
not make a payment until it receives delivery from the other
party to the transaction. A Series will make commitments to
purchase such securities only with the intention of actually
acquiring the securities, but the Series may sell these
securities before the settlement date if it is deemed advisable.
A segregated account of the Series consisting of cash, cash
equivalents or U.S. Government securities or other high quality
liquid debt securities at least equal at all times to the amount
of the commitments will be established and maintained at the
Fund's custodian bank.
Securities purchased on a forward commitment or when-issued
basis are subject to changes in value (generally changing in the
same way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may
expose a Series to risks because they may experience such
fluctuations prior to their actual delivery. Purchasing
securities on a when-issued basis can involve the additional
risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the
transaction itself. Purchasing securities on a forward
commitment or when-issued basis when a Series is fully or almost
fully invested may result in greater potential fluctuation in
the value of the Series' net assets and its net asset value per
share.
Investment Considerations and Risks
Lower Rated Securities. (Growth and Income, Managed
Assets, Small Cap and Quality Bond Portfolios) Each of the
Growth and Income, Managed Assets, Small Cap 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 Ratings
Group ("S&P"), Fitch Investors Service, L.P. ("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.
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 1940
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 1940 Act (which currently limits borrowing to no more than
33/% 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.
Disciplined Stock, Growth and Income, International Equity,
International Value and Small Company Stock Portfolios. Each of
the Disciplined Stock, Growth and Income, International Equity,
International Value and Small Company Stock Portfolios has
adopted investment restrictions numbered 1 through 8 as
fundamental policies, and each of the Disciplined Stock,
International Value and Small Company Stock Portfolios has
adopted investment restrictions numbered 16 and 17 as additional
fundamental policies. These restrictions cannot be changed, as
to a Series, without approval by the holders of a majority (as
defined in the 1940 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
1940 Act (which currently limits borrowing to no more than 33/%
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. How-
ever, 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 guide-
lines 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 1940 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 1940 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.
The following investment restrictions numbered 16 and 17
apply only to the Disciplined Stock, International Value and
Small Company Stock Portfolios. None of these Series may:
16. Invest more than 5% of its assets in the obligations
of any single 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. invested, and securities issued or
guaranteed by the U.S. Government, or its agencies or
instrumentalities may be purchased, without regard to any such
limitation.
17. Hold more than 10% of the outstanding voting
securities of any single issuer. This investment Restriction
applies only with respect to 75% of the Series' total assets.
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 Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) to comply in all material
respects with insurance laws and regulations that the Fund has
been advised are applicable to investments of separate accounts
of Participating Insurance Companies. 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 1940 Act, is indicated by an asterisk.
Trustees of the Fund
* JOSEPH S. DiMARTINO, Chairman of the Board. Since January
1995, Chairman of the Board of various funds in the Dreyfus
Family of Funds. 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 Manager and, until August
24, 1994, the Company's distributor. From August 1994
until December 31, 1994, he was a director of Mellon Bank
Corporation. He is also Chairman of the Board of Directors
of Noel Group, Inc., a venture capital company; a trustee
of Bucknell University; and a director of The Muscular
Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway Company, Inc., a manufacturer and marketer
of industrial threads, specialty yarns, home furnishings
and fabrics, Curtis Industries, Inc., a national
distributor of security products, chemicals and automotive
and other hardware, Simmons Outdoor Corporation and
Staffing Resources, Inc. He is 52 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 56 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 74 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 56 years old and his address is
79 John F. Kennedy Street, Cambridge, Massachusetts 02138.
JAMES F. HENRY, Trustee. President of the CPR Institute for
Dispute Resolution, 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 the firm
from January 1977 to September 1979. He was President and
a director of the Edna McConnell Clark Foundation, a
philanthropic organization, from September 1971 to December
1976. Mr. Henry is 65 years old and his address is c/o CPR
Institute for Dispute Resolution, 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. Mrs. Jacobs is 70 years old and her address is c/o
Corporate Property Investors, 305 East 47th Street, New
York, New York 10017.
IRVING KRISTOL, Trustee. 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 May 1981 to
December 1994, he was a consultant to the Manager on
economic matters; from 1969 to 1988, he was Professor of
Social Thought at the Graduate School of Business
Administration, New York University; and from September
1969 to August 1979, he was Henry R. Luce Professor of
Urban Values at New York University. 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-Ketterin Cancer Center. He was
Vice President for Health Sciences and Director of the
Cancer Center at Columbia University from 1973 to 1980, and
Professor of Medicine and of Human Genetics and Development
at Columbia University from 1968 to 1982. He is also a
director of Pfizer, Inc., a pharmaceutical company, Life
Technologies, Inc., a life science company producing
products for cell and molecular biology and microbiology,
and Tularik, Inc., a biotechnology company, and a general
partner of LINC Venture Lease Partners II, L.P., a limited
partnership engaged in leasing. Dr. Marks is 69 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. Dr. Peretz is 56 years
old and his address is c/o The New Republic, 1220 19th
Street, N.W., Washington, D.C. 20036.
BERT W. WASSERMAN, Trustee. Financial Consultant. From January
1990 to March 1995, Executive Vice President and Chief
Financial Officer, and, from January 1990 to March 1993, a
director 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 and a director of The
New Germany Fund, Mountasia Entertainment International,
Inc. and the Lillian Vernon Corporation. Mr. Wasserman is
63 years old and his address is 126 East 56th Street, Suite
12 North, New York, New York 10022-3613.
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 1940 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.
The Fund typically pays its Board members an annual
retainer and a per meeting fee and reimburses them for their
expenses. The Chairman of the Board receives an additional 25%
of such compensation. Emeritus Board members are entitled to
receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by the Fund, and by all
other funds in the Dreyfus Family of Funds for which such person
is a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation) for
the year ended December 31, 1994, were as follows:
<TABLE>
<CAPTION>
(5)
(3) Total Compensation
(2) Pension or (4) From Company and
(1) Aggregate Retirement Benefits Estimated Annual Fund Complex
Name of Board Compensation Accrued as Part of Benefits Upon Paid to Board
Member From Company* Company's Expenses Retirement Member
<S> <C> <C> <C> <C>
Joseph S. DiMartino $____ none none $445,000**(93)
David P. Feldman $____ none none $85,631(37)
John M. Fraser, Jr. $____ none none $46,766(14)
Robert R. Glauber $____ none none $79,696(20)
James F. Henry $____ none none $44,946(10)
Rosalind Gersten
Jacobs $____ none none $57,638(20)
Irving Kristol $____ none none $44,946(10)
Dr. Paul A. Marks $____ none none $44,946(10)
Dr. Martin Peretz $____ none none $44,946(10)
Bert W. Wasserman $____ none none $40,720(10)
Amount does not include reimbursed expenses for attending Board meetings, which amounted to $____ for all Board members as a group.
** Estimated amount for the year ended December 31, 1995.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief
Executive 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., the ultimate parent of
which is Boston Institutional Group, 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 38 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. From August 1990 to February 1992, he was employed as
an Associate at Ropes & Gray. He is 31 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. He is 30 years old.
ELIZABETH BACHMAN, Vice President and Assistant Secretary.
Assistant Vice President of the Distributor and an officer
of other investment companies advised or administered by
the Manager. She is 26 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.
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 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the
Distributor and an officer of other investment companies
advised or administered by the Manager. From 1984 to July
1994, he was Assistant Vice President in the Mutual Fund
Accounting Department of the Manager. He is 60 years old.
MARGARET PARDO, Assistant Secretary. Legal Assistant with the
Distributor and an officer of other investment companies
advised or administered by the Manager. From June 1992 to
April 1995, she was a Medical Coordinator Officer at ORBIS
International. Prior to June 1992, she worked as Program
Coordinator at Physicians World Communications Group. She
is 27 years old.
The address of each officer of the Company is 200 Park
Avenue, New York, New York 10166.
The following shareholders are known by the Fund to own of
record or beneficially 5% or more of the indicated Series'
shares of beneficial interest outstanding on ________, 1995:
[TO BE PROVIDED]. 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 1940 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 or (ii) vote
of a majority (as defined in the 1940 Act) of the outstanding
voting securities of such Series, provided that in either event
the continuance also is approved by a majority of the Board
members who are not "interested persons" (as defined in the 1940
Act) of the Fund or the Manager, by vote cast in person at a
meeting called for the purpose of voting on such approval. The
Agreement was 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, including a
majority of the Board members 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 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 1940
Act).
The following persons are officers and/or directors of the
Manager: Howard Stein, Chairman of the Board and Chief
Executive Officer; W. Keith Smith, Vice Chairman of the Board;
Christopher M. Condron, President, Chief Operating Officer and a
director; Stephen E. Canter, Vice Chairman, Chief Investment
Officer and a director; Lawrence S. Kash, Vice Chairman
- --Distribution and a director; Philip L. Toia, Vice Chairman
- --Operations and Administration and a director; Barbara E.
Casey, Vice President--Dreyfus Retirement Services; Diane M.
Coffey, Vice President--Corporate Communications; Elie M.
Genadry, Vice President--Institutional Sales; William F. Glavin,
Jr., Vice President--Corporate Development; Henry D. Gottmann,
Vice President--Retail Sales and Service; Mark N. Jacobs, Vice
President-- Legal and Secretary; Daniel C. Maclean, Vice
President and General Counsel; Jeffrey N. Nachman,
Vice President--Mutual Fund Accounting; Andrew S. Wasser, Vice
President--Information Services; Katherine C. Wickham, Vice
President--Human Resources; Maurice Bendrihem, Controller;
Elvira Oslapas, Assistant Secretary; and Mandell L. Berman,
Frank V. Cahouet, Alvin E. Friedman, 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
or (ii) vote of a majority (as defined in the 1940 Act) of the
Series' outstanding voting securities, provided that in either
event the continuance also is approved by a majority of the
Board members who are not "interested persons" (as defined in
the 1940 Act) of the Fund or 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, including a majority of the Board members 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 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 1940 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
or (ii) vote of a majority (as defined in the 1940 Act) of the
Series' outstanding voting securities, provided that in either
event the continuance also is approved by a majority of the
Board members who are not "interested persons" (as defined in
the 1940 Act) of the Fund or 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, including a majority of the Board members
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 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 1940 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 or (ii) vote of a majority (as defined in
the 1940 Act) of the Series' outstanding voting securities,
provided that in either event the continuance also is approved
by a majority of the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Fund or 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 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 1940 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.
With respect to the Disciplined Stock and Small Company
Stock Portfolios, the Manager has entered into a Sub-Investment
Advisory Agreement (the "Laurel Sub-Advisory Agreement") with
Laurel Capital Advisors dated December 11, 1995. As to such
Series, the Laurel Sub-Advisory Agreement is subject to annual
approval by (i) the Fund's Board or (ii) vote of a majority (as
defined in the 1940 Act) of the Series' outstanding voting
securities, provided that in either event the continuance also
is approved by a majority of the Board Members who are not
"interested persons" (as defined in the 1940 Act) of the Fund or
Laurel Capital Advisors, by vote cast in person at a meeting
called for the purpose of voting on such approval. The Laurel
Sub-Advisory Agreement is terminable without penalty, (i) by the
Managers on 60 days' notice, (ii) by the Fund's Board 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 Laurel Capital Advisors. The Laurel
Sub-Advisory Agreement will terminate automatically in the event
of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of
Laurel Capital Advisors: [TO BE PROVIDED].
With respect to the International Value Portfolio, the
Manager has entered into a Sub-Investment Advisory Agreement
(the "TBC Asset Management Sub-Advisory Agreement") with The
Boston Company Asset Management, Inc. dated December 11, 1995.
As to such Series, the TBC Asset Management Sub-Advisory
Agreement is subject to annual approval by (i) the Fund's Board
or (ii) vote of a majority (as defined in the 1940 Act) of the
Series' outstanding voting securities, provided that in either
event the continuance also is approved by a majority of the
Board members who are not "interested persons" (as defined in
the 1940 Act) of the Fund or The Boston Company Asset
Management, Inc., by vote cast in person at a meeting called for
the purpose of voting on such approval. The TBC Asset
Management Sub-Advisory Agreement is terminable without penalty,
(i) by the Managers on 60 days' notice, (ii) by the
Fund's Board 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 The Boston Company
Asset Management, Inc. The TBC Asset Management Sub-Advisory
Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of The
Boston Company Asset Management, Inc.: Christopher M. Condron,
Chairman of the Board and Chief Executive Officer; and Philip R.
Roberts and W. Keith Smith, directors.
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. With respect to the Managed
Assets Portfolio, Comstock Partners, Inc., with respect to the
Capital Appreciation Portfolio, Fayez Sarofim & Co., with
respect to the Disciplined Stock and Small Company Stock
Portfolios, Laurel Capital Advisors, with respect to the
International Value Portfolio, The Boston Company Asset
Management, Inc., and, with respect to the International Equity
Portfolio, M&G Investment Management Limited, provides
day-to-day management of such Series' portfolio of
investments, in each case subject to the supervision of the
Manager and the Fund's Board. The Series' adviser is
responsible for investment decisions, and provides the Fund with
portfolio managers who are authorized by the Fund's Board to
execute purchases and sales of securities. 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,
with respect to the Disciplined Stock Portfolio, Bert Mullins,
with respect to the Small Company Stock Portfolio, James
Wadsworth, with respect to the International Value
Portfolio, Sandor Cseh, and, with respect to the International
Equity Portfolio, William Vincent. The Manager, Comstock
Partners, Inc., Fayez Sarofim & Co., Laurel Capital Advisors,
The Boston Company Asset Management, Inc. 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., Laurel Capital Advisors, The Boston Company Asset
Management, Inc. 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, if applicable, the Series sub-investment
advisor). The expenses borne by the Fund include:
organizational costs, taxes, interest, loan commitment fees,
dividends and interest on securities sold short, brokerage fees
and commissions, if any, fees of Board members who are not
officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager, Comstock Partners,
Inc., Fayez Sarofim & Co., Laurel Capital Advisors, The Boston
Company Asset Management, Inc. 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 Fund's Board,
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; .75 of 1% of
the value of the Small Company Stock Portfolio's average daily
net assets; .75 of 1% of the value of the Disciplined Stock
Portfolio's average daily net assets; .75 of 1% of the value of
the International Equity Portfolio's average daily net assets;
and 1% of the value of the International Value 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 (other than the Disciplined
Stock, Small Company Stock and International Value Portfolios
which had not commenced operations) 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
Dally 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 on a best efforts basis pursuant to an agreement
which is renewable annually. The Distributor also acts as
distributor for the other funds in the Dreyfus Family of Funds
and for certain other investment companies.
REDEMPTION OF 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 Fund's Board 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 Fund's
Board, 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 Fund's Board.
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, Disciplined Stock, Growth and Income,
International Equity, International Value, Managed Assets, Small
Company Stock 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 Fund's
Board. 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 Fund's
Board, are valued at fair value as determined in good faith by
the Fund's Board. The Fund's Board will review the method of
valuation on a current basis. In making their good faith
valuation of restricted securities, the 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 Fund's
Board.
New York Stock Exchange Closings. The holidays (as
observed) on which the New York Stock Exchange is closed
currently are: New Year's Day, 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 (other than the Disciplined Stock, Small
Company Stock and International Value Portfolios which had not
commenced operations) has qualified as a "regulated investment
company" under the Code for the fiscal year ended December 31,
1994. It is expected that each of the Disciplined Stock, Small
Company Stock and International Value Portfolios will qualify as
a regulated investment company under the Code. 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, if applicable, the
Series' sub-investment adviser) 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, if applicable, the Series' sub-investment adviser) in
advising other funds or accounts and, conversely, research
services furnished to the Manager (or, if applicable, the
Series' sub-investment adviser) 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, if applicable,
the Series' sub-investment adviser) 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, Disciplined Stock, Growth and Income,
International Equity, International Value, Managed Assets, Small
Company Stock 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.
No performance information is available for the Disciplined
Stock, Small Company Stock or International Value Portfolios
which had not commenced operations.
Money Market Portfolio. For the seven-day period ended
June 30, 1995, the Money Market Portfolio's yield was ____% and
effective yield was ____%. 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 June 30, 1995 would have
been ____% and ____%, 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 June 30, 1995 was
____% and ____%, 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 June 30, 1995 would have been
____% and ____%, 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 _____ year periods ended June 30, 1995 was
____% and _____%, respectively. The Quality Bond Portfolio's
average annual total return for the 1 and _____ year periods
ended June 30, 1995 was _____% and ____%, respectively. The
Growth and Income Portfolio's average annual total return from
May 2, 1994 (commencement of operations) through June 30, 1994
was ___%. 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 June 30, 1995 was _____% and _____%,
respectively. The Growth and Income Portfolio's total return
from May 2, 1994 (commencement of operations) through June 30,
1994 was ___%. 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 _____ year periods
ended June 30, 1995 was ____% and ____%, respectively. The
Small Cap Portfolio's average annual total return for the 1 and
_____ year periods ended June 30, 1995 was ____% and _____%,
respectively. The Capital Appreciation Portfolio's average
annual total return for the 1 and _____ year periods ended June
30, 1995 was ____% and ____%, respectively. The International
Equity Portfolio's average annual total return from May 2, 1995
(commencement of operations) through June 30, 1995 was ____%.
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
June 30, 1995 was _____% and ______%, respectively. The Capital
Appreciation Portfolio's total return for the period April 5,
1993 (commencement of operations) through June 30, 1995 was
____%. The International Equity Portfolio's total return from
May 2, 1995 (commencement of operations) through June 30, 1995
was _____%. 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.
Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted under the provisions of the 1940 Act or
applicable state law or otherwise to the holders of the
outstanding voting securities of any investment company, such as
the Fund, will not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding
shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by
a matter unless it is clear that the interests of each series in
the matter are identical or that the matter does not affect any
interest of such series. However, the Rule exempts the
selection of independent accountants and the election of Board
members from the separate voting requirements of the rule.
The Fund sends annual and semi-annual financial statements
to all its shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, is located at One American Express Plaza, Providence,
Rhode Island 02903, and serves as the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement
with the Fund, the Transfer Agent arranges for the maintenance
of shareholder account records for the fund, the handling of
certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For
these services, the Transfer Agent receives a monthly fee
computed on the basis of the number of shareholder accounts
during the month, and is reimbursed for certain out-of-pocket
expenses. The Bank of New York, 90 Washington Street, New York,
New York 10286, acts as custodian of the Fund's investments.
Neither the Transfer Agent nor The Bank of New York 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.
<PAGE>
APPENDIX
Description of Certain Ratings:
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned to a debt
obligation. Capacity to pay interest and repay principal is
extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues
only in small degree.
A
Bonds rated A have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated
categories.
BB
Bonds rated BB have less near-term vulnerability to default
than other speculative grade bonds. However, they face major
ongoing uncertainties or exposure to adverse business, financial
or economic conditions which could lead to inadequate capacity
to meet timely interest and principal payment.
B
Bonds rated B have a greater vulnerability to default but
presently have the capacity to meet interest payments and
principal repayments. Adverse business, financial or economic
conditions would likely impair capacity or willingness to pay
interest and repay principal.
CCC
Bonds rated CCC have a current identifiable vulnerability
to default, and are dependent upon favorable business, financial
and economic conditions to meet timely payments of interest and
repayment of principal. In the event of adverse business,
financial or economic conditions, they are not likely to have
the capacity to pay interest and repay principal.
CC
The rating CC is typically applied to bonds subordinated to
senior debt which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to bonds subordinated to
senior debt which is assigned an actual or implied CCC- rating.
D
Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a
plus or a minus sign, which is used to show relative standing
within the major ratings categories, except in the AAA (Prime
Grade) category.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original
maturity of no more than 365 days. Issues assigned an A rating
are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1, 2 and
3 to indicate the relative degree of safety.
A-1
This designation indicates the degree of safety regarding
timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics
are denoted with a plus sign (+) designation.
A-2
Capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as
high as for issues designated A-1.
Moody's
Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba
Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca
Bonds which are rated Ca present obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show
relative standing within the major rating categories, except in
the Aaa category and in the categories below B. The modifier 1
indicates a rating for the security in the higher end of a
rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates a ranking in the lower end of a
rating category.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Issuers of P-1 paper must have a
superior capacity for repayment of short-term promissory
obligations, and ordinarily will be evidenced by leading market
positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high
internal cash generation, and well established access to a range
of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2
(P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by
many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's
ability to meet the obligations of a specific debt issue or
class of debt. The ratings take into consideration special
features of the issue, its relationship to other obligations of
the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the
political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and
of the highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest
and repay principal is very strong, although not quite as strong
as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and
of satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have an adverse impact on these
bonds and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's
ability to pay interest and repay principal may be affected over
time by adverse economic changes. However, business and
financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While
bonds in this class are currently meeting debt service
requirements, the probability of continued timely payment of
principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics,
which, if not remedied, may lead to default. The ability to
meet obligations requires an advantageous business and economic
environment.
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.
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A of the Registration Statement:
Condensed Financial Information.*
Included in Part B of the Registration Statement:
Statement of Investments--December 31, 1994.*
Statement of Financial Futures--December 31, 1994.*
Statement of Assets and Liabilities--December 31, 1994.*
Statement of Operations--for the year ended
December 31, 1994.*
Statement of Changes in Net Assets--for each of the
two years in the period ended December 31, 1994.*
Notes to Financial Statements.*
Report of Ernst & Young LLP, Independent Auditors.*
Statement of Investments--June 30, 1995 (unaudited).*
Statement of Financial Futures--for the six months
ended June 30, 1995 (unaudited).*
Statement of Assets and Liabilities--June 30, 1995
(unaudited).*
Statement of Operations--for the six months ended
June 30, 1995 (unaudited).*
Statement of Changes in Net Assets--for the six months
ended June 30, 1995 (unaudited).*
Notes to Financial Statements (unaudited).*
__________
* To be filed by Amendment.
(b) Exhibits:
(1) Agreement and Declaration of Trust.*
(2) By-Laws.*
(5)(a) Investment Advisory Agreement.*
(b) Sub-Investment Advisory Agreements.*
(6) Distribution Agreement.*
(8) Amended and Restated Custody Agreement is
incorporated by reference to Exhibit (8) of
Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A, filed on
April 19, 1995.
. (10) Opinion, including consent, of Stroock & Stroock
& Lavan.*
(11) Consent of Independent Auditors.*
(16) Schedules of Computation of Performance Data are
incorporated by reference to Exhibit (16) of
Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A, filed on
April 28, 1994.
(17) Financial Data Schedule.*
Other Exhibits:
(a) Powers of Attorney incorporated by reference to
Other Exhibits of Post-Effective Amendment No. 12
to the Registration Statement on Form N-1A, filed
on September 16, 1994.
(b) Assistant Secretary's Certificate incorporated by
reference to Other Exhibits of Post-Effective
Amendment No. 7 to the Registration Statement on
Form N-1A, filed on July 10, 1990.
___________
* To be filed by Amendment.
Item 25. Persons Controlled by or Under Common Control with
Registrant
Not applicable.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class December 19, 1995
Beneficial Interests, par value
$.001 per share
Capital Appreciation Portfolio 2
Disciplined Stock Portfolio 0
Growth and Income Portfolio 5
International Equity Portfolio 3
International Value Portfolio 0
Managed Assets Portfolio 4
Money Market Portfolio 4
Small Cap Portfolio 7
Small Company Stock Portfolio 0
Quality Bond Portfolio 6
Zero Coupon 2000 Portfolio 6
Item 27. Indemnification
Reference is made to Article EIGHTH of the Registrant's
Agreement and Declaration of Trust to be filed as Exhibit 1
hereto. The application of these provisions is limited by
Article 10 of the Registrant's By-Laws to be filed as Exhibit 2
hereto and by the following undertaking set forth in the rules
promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
trustee, officer or controlling person of the registrant
in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by
it is against public policy as expressed in such Act and
will be governed by the final adjudication of such issue.
Reference also is made to the Distribution Agreement to be
filed as Exhibit 6.
Item 28(a). Business and Other Connections of Investment
Adviser
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business
consists primarily of providing investment management services
as the investment adviser, manager and distributor for sponsored
investment companies registered under the Investment Company Act
of 1940 and as an investment adviser to institutional and
individual accounts. Dreyfus also serves as sub-investment
adviser to and/or administrator of other investment companies.
Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, is a registered broker-dealer. Dreyfus Management,
Inc., another wholly-owned subsidiary, provides investment
management services to various pension plans, institutions and
individuals.
Officers and Directors of Dreyfus
<PAGE>
Name and Position with
Dreyfus Other Businesses
MANDELL L. BERMAN Real estate consultant and private
Director investor
29100 Northwestern Highway--Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees
of Skillman Foundation;
Member of the Board of Vintners
International
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation****;
Mellon Bank, N.A.****;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and member of the
Executive Committee of Avnet, Inc.**
DAVID B. TRUMAN Educational consultant;
Director Past President of the Russell Sage
Foundation
230 Park Avenue
New York, New York 10017;
Past President of Mount Holyoke College
South Hadley, Massachusetts 01075;
Former Director:
Student Loan Marketing Association
1055 Thomas Jefferson Street, N.W.
Washington, D.C. 20006;
Former Trustee:
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017
HOWARD STEIN Chairman of the Board:
Chairman of the Board Dreyfus Acquisition Corporation*;
and Chief Executive The Dreyfus Consumer Credit
Officer Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International
Limited+++++;
Dreyfus Partnership Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
World Balanced Fund+++;
Trustee:
Corporate Property Investors
New York, New York
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company*****;
Vice Chairman of the Board:
Mellon Bank Corporation****;
Mellon Bank, N.A.****;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****;
Operating Officer and The Boston Company*****;
a Director Deputy Director:
Mellon Trust****;
Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****;
President:
Boston Safe Deposit and Trust
Company*****
STEPHEN E. CANTER Former Chairman and Chief Executive
Vice Chairman, Chief Officer:
Investment Officer and Kleinwort Benson Investment Management
a Director Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman--Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.***;
Director:
The Dreyfus Consumer Credit
Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company*****;
Laurel Capital Advisors****;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.****;
Boston Safe Deposit & Trust*****;
LAWRENCE M. GREENE Director:
Director Dreyfus America Fund++++
JULIAN M. SMERLING None
Director
PHILIP L. TOIA Chairman of the Board and Trust
Vice Chairman-- Investment Officer:
Operations and The Dreyfus Trust Company++;
Administration Chairman of the Board and Chief
and a Director Executive Officer:
Major Trading Corporation*;
Director:
The Dreyfus Security Savings Bank,
F.S.B.+;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
BARBARA E. CASEY President:
Vice President-- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.*****;
Dreyfus Service Corporation*
DIANE M. COFFEY None
Vice President--
Corporate Communications
ELIE M. GENADRY President:
Vice President-- Institutional Services Division of
Institutional Sales Dreyfus Service Corporation*;
Broker-Dealer Division of Dreyfus
Service Corporation*;
Group Retirement Plans Division of
Dreyfus Service Corporation*;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Vice President:
The Dreyfus Trust Company++
HENRY D. GOTTMANN Executive Vice President:
Vice President--Retail Dreyfus Service Corporation*;
Sales and Service Vice President:
Dreyfus Precious Metals*
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and Dreyfus Precious Metals, Inc.*;
General Counsel Director and Vice President:
The Dreyfus Consumer Credit
Corporation*;
Director and Secretary:
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation+;
Director:
The Dreyfus Trust Company++;
Secretary:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*
JEFFREY N. NACHMAN None
Vice President--Mutual
Fund Accounting
KATHERINE C. WICKHAM Formerly, Assistant Commissioner:
Vice President-- Department of Parks and Recreation
of Human Resources the City of New York
830 Fifth Avenue
New York, New York 10022
WILLIAM F. GLAVIN, JR. Senior Vice President:
Vice President--Corporate The Boston Company Advisors, Inc.
Development 53 State Street
Exchange Place
Boston, Massachusetts 02109
ANDREW S. WASSER Vice President:
Vice President--Information Mellon Bank Corporation****
Services
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management,
Inc.***;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit
Corporation*;
Assistant Treasurer:
Dreyfus Precious Metals*;
Formerly, Vice President-Financial
Planning, Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
MARK N. JACOBS Vice President, Secretary and Director:
Vice President-- Lion Management, Inc.*;
Legal and Secretary Secretary:
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation*
* The address of the business so indicated is 200 Park
Avenue, New York, New York 10166.
** The address of the business so indicated is 80 Cutter
Mill Road, Great Neck, New York 11021.
*** The address of the business so indicated is 131 Second
Street, Lewes, Delaware 19958.
**** The address of the business so indicated is One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston
Place, Boston, Massachusetts 02108.
+ The address of the business so indicated is Atrium
Building, 80 Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One
Rockefeller Plaza, New York, New York 10020.
++++ The address of the business so indicated is 2
Boulevard Royal, Luxembourg.
+++++ The address of the business so indicated is Nassau,
Bahamas Islands.
Item 28(b). Business and Other Connections of Sub-Investment
Advisers
(i) Registrant is fulfilling the requirement of this
Item 28(b) to provide a list of the officers and directors of
Comstock Partners, Inc. ("Comstock"), the sub-investment adviser
to Registrant's Managed Assets Portfolio, together with
information as to any other business, profession, vocation or
employment of a substantial nature engaged in by Comstock or
those of its officers and directors during the past two years,
by incorporating by reference the information contained in the
Form ADV filed with the SEC pursuant to the Investment Advisers
Act of 1940 by Comstock (SEC File No. 801-28570).
(ii) Registrant is fulfilling the requirement of this
Item 28(b) to provide a list of the officers and directors of
Fayez Sarofim & Co. ("Sarofim"), the sub-investment adviser to
Registrant's Capital Appreciation Portfolio, together with
information as to any other business, profession, vocation or
employment of a substantial nature engaged in by Sarofim or
those of its officers and directors during the past two years,
by incorporating by reference the information contained in the
Form ADV filed with the SEC pursuant to the Investment Advisers
Act of 1940 by Sarofim (SEC File No. 801-1725).
(iii) Registrant is fulfilling the requirement of
this Item 28(b) to provide a list of the officers and directors
of M&G Investment Management Limited ("M&G"), the sub-investment
adviser to Registrant's International Equity Portfolio, together
with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by M&G or those
of its officers and directors during the past two years, by
incorporating by reference the information contained in the Form
ADV filed with the SEC pursuant to the Investment Advisers Act
of 1940 by M&G (SEC File No. 801-21981).
(iv) Registrant is fulfilling the requirement of this
Item 28(b) to provide a list of the officers and directors of
The Boston Company Asset Management, Inc. ("TBC Asset
Management"), the Registrant's sub-investment adviser to
Registrant's International Value Portfolio, together with
information as to any other business, profession, vocation or
employment of a substantial nature engaged in by TBC Asset
Management or those of its officers and directors during the
past two years, by incorporating by reference the information
contained in the Form ADV filed with the SEC pursuant to the
Investment Advisers Act of 1940 by TBC Asset Management (SEC
File No. 801-6829).
(v) Registrant is fulfilling the requirement of this
Item 28(b) to provide a list of the officers and directors of
Laurel Capital Advisors ("Laurel Capital"), the Registrant's
sub-investment adviser to Registrant's Disciplined Stock
Portfolio and Small Company Stock Portfolio, together with
information as to any other business, profession, vocation or
employment of a substantial nature engaged in by Laurel Capital
or those of its officers and directors during the past two
years, by incorporating by reference the information contained
in the Form ADV filed with the SEC pursuant to the Investment
Advisers Act of 1940 by Laurel Capital (SEC File No. 801-37598).
Item 29. Principal Underwriters
(a) Other investment companies for which Registrant's
principal underwriter (exclusive distributor) acts as
principal underwriter or exclusive distributor:
1. Comstock Partners Strategy Fund, Inc.
2. Dreyfus A Bonds Plus, Inc.
3. Dreyfus Appreciation Fund, Inc.
4. Dreyfus Asset Allocation Fund, Inc.
5. Dreyfus Balanced Fund, Inc.
6. Dreyfus BASIC GNMA Fund
7. Dreyfus BASIC Money Market Fund, Inc.
8. Dreyfus BASIC Municipal Fund, Inc.
9. Dreyfus BASIC U.S. Government Money Market Fund
10. Dreyfus California Intermediate Municipal Bond Fund
11. Dreyfus California Tax Exempt Bond Fund, Inc.
12. Dreyfus California Tax Exempt Money Market Fund
13. Dreyfus Capital Value Fund (A Premier Fund)
14. Dreyfus Cash Management
15. Dreyfus Cash Management Plus, Inc.
16. Dreyfus Connecticut Intermediate Municipal Bond Fund
17. Dreyfus Connecticut Municipal Money Market Fund, Inc.
18. Dreyfus Edison Electric Index Fund, Inc.
19. Dreyfus Florida Intermediate Municipal Bond Fund
20. Dreyfus Florida Municipal Money Market Fund
21. The Dreyfus Fund Incorporated
22. Dreyfus Global Bond Fund, Inc.
23. Dreyfus Global Growth, L.P. (A Strategic Fund)
24. Dreyfus GNMA Fund, Inc.
25. Dreyfus Government Cash Management
26. Dreyfus Growth and Income Fund, Inc.
27. Dreyfus Growth and Value Fund, Inc.
28. Dreyfus Growth Opportunity Fund, Inc.
29. Dreyfus Institutional Money Market Fund
30. Dreyfus Institutional Short Term Treasury Fund
31. Dreyfus Insured Municipal Bond Fund, Inc.
32. Dreyfus Intermediate Municipal Bond Fund, Inc.
33. Dreyfus International Equity Fund, Inc.
34. Dreyfus International Recovery Fund, Inc.
35. The Dreyfus/Laurel Funds, Inc.
36. The Dreyfus/Laurel Funds Trust
37. The Dreyfus/Laurel Tax-Free Municipal Funds
38. The Dreyfus/Laurel Investment Series
39. Dreyfus Life and Annuity Index Fund, Inc.
40. Dreyfus Lifetime Portfolios, Inc.
41. Dreyfus Liquid Assets, Inc.
42. Dreyfus Massachusetts Intermediate Municipal Bond Fund
43. Dreyfus Massachusetts Municipal Money Market Fund
44. Dreyfus Massachusetts Tax Exempt Bond Fund
45. Dreyfus Michigan Municipal Money Market Fund, Inc.
46. Dreyfus Money Market Instruments, Inc.
47. Dreyfus Municipal Bond Fund, Inc.
48. Dreyfus Municipal Cash Management Plus
49. Dreyfus Municipal Money Market Fund, Inc.
50. Dreyfus New Jersey Intermediate Municipal Bond Fund
51. Dreyfus New Jersey Municipal Bond Fund, Inc.
52. Dreyfus New Jersey Municipal Money Market Fund, Inc.
53. Dreyfus New Leaders Fund, Inc.
54. Dreyfus New York Insured Tax Exempt Bond Fund
55. Dreyfus New York Municipal Cash Management
56. Dreyfus New York Tax Exempt Bond Fund, Inc.
57. Dreyfus New York Tax Exempt Intermediate Bond Fund
58. Dreyfus New York Tax Exempt Money Market Fund
59. Dreyfus Ohio Municipal Money Market Fund, Inc.
60. Dreyfus 100% U.S. Treasury Intermediate Term Fund
61. Dreyfus 100% U.S. Treasury Long Term Fund
62. Dreyfus 100% U.S. Treasury Money Market Fund
63. Dreyfus 100% U.S. Treasury Short Term Fund
64. Dreyfus Pennsylvania Intermediate Municipal
Bond Fund
65. Dreyfus Pennsylvania Municipal Money Market Fund
66. Dreyfus Short-Intermediate Government Fund
67. Dreyfus Short-Intermediate Municipal Bond Fund
68. Dreyfus Short-Term Income Fund, Inc.
69. The Dreyfus Socially Responsible Growth Fund, Inc.
70. Dreyfus Strategic Growth, L.P.
71. Dreyfus Strategic Income
72. Dreyfus Strategic Investing
73. Dreyfus Tax Exempt Cash Management
74. The Dreyfus Third Century Fund, Inc.
75. Dreyfus Treasury Cash Management
76. Dreyfus Treasury Prime Cash Management
77. Dreyfus Variable Investment Fund
78. Dreyfus-Wilshire Target Funds, Inc.
79. Dreyfus Worldwide Dollar Money Market Fund, Inc.
80. General California Municipal Bond Fund, Inc.
81. General California Municipal Money Market Fund
82. General Government Securities Money Market
Fund, Inc.
83. General Money Market Fund, Inc.
84. General Municipal Bond Fund, Inc.
85. General Municipal Money Market Fund, Inc.
86. General New York Municipal Bond Fund, Inc.
87. General New York Municipal Money Market Fund
88. Pacifica Funds Trust--Pacific American Money Market
Portfolio, Pacific American U.S. Treasury Portfolio
89. Peoples Index Fund, Inc.
90. Peoples S&P MidCap Index Fund, Inc.
91. Premier California Municipal Bond Fund
92. Premier Equity Funds, Inc.
93. Premier Global Investing, Inc.
94. Premier GNMA Fund
95. Premier Growth Fund, Inc.
96. Premier Insured Municipal Bond Fund
97. Premier Municipal Bond Fund
98. Premier New York Municipal Bond Fund
99. Premier State Municipal Bond Fund
(b)
<TABLE>
<CAPTION>
Positions and offices with Positions and
Name and principal Premier Mutual offices with
business address Fund Services, Inc. Registrant
<C> <C> <C>
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Treasurer
Compliance Officer
Joseph F. Tower, III+ Senior Vice President, Assistant
Treasurer and Chief Treasurer
Financial Officer
John E. Pelletier+ Senior Vice President, Vice President
General Counsel, Secretary and Secretary
and Clerk
Frederick C. Dey++ Senior Vice President Vice President
and Assistant
Treasurer
Eric B. Fischman++ Vice President and Vice President
Associate General Counsel and Assistant
Secretary
Paul Prescott+ Vice President None
Elizabeth Bachman+ Assistant Vice President Vice President
and Assistant
Secretary
Mary Nelson+ Assistant Treasurer None
John J. Pyburn++ Assistant Treasurer Assistant
Treasurer
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
+ Principal business address is One Exchange Place, Boston, Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
</TABLE>
Item 30. Location of Accounts and Records
1. First Data Investors Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Registrant hereby undertakes
(1) to file a post-effective amendment, using financial
statements which need not be certified, within four to
six months from the effective date of Registrant's
1933 Act Registration Statement pertaining to
Registrant's Disciplined Stock, International Value
and Small Company Stock Portfolios.
(2) to call a meeting of shareholders for the purpose of
voting upon the question of removal of a trustee or
trustees when requested in writing to do so by the
holders of at least 10% of the Registrant's
outstanding shares of beneficial interest and in
connection with such meeting to comply with the
provisions of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications.
(3) to furnish each person to whom a prospectus is
delivered with a copy of the Fund's latest Annual
Report to Shareholders, upon request and without
charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant has
duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, on
the 21st day of December, 1995.
DREYFUS VARIABLE INVESTMENT FUND
(Registrant)
By:/s/Marie E. Connolly*
_____________________
Marie E. Connolly, President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Marie E. Connolly* President and Treasurer December 21, 1995
Marie E. Connolly (Principal Executive,
Financial and Accounting
Officer)
/s/Joseph S. DiMartino* Trustee December 21, 1995
Joseph S. DiMartino
/s/John M. Fraser, Jr.* Trustee December 21, 1995
John M. Fraser, Jr.
/s/David P. Feldman* Trustee December 21, 1995
David P. Feldman
/s/Robert R. Glauber* Trustee December 21, 1995
Robert R. Glauber
/s/James F. Henry* Trustee December 21, 1995
James F. Henry
/s/Rosalind Gersten Jacobs* Trustee December 21, 1995
Rosalind Gersten Jacobs
/s/Irving Kristol* Trustee December 21, 1995
Irving Kristol
/s/Paul A. Marks* Trustee December 21, 1995
Paul A. Marks*
/s/Martin Peretz* Trustee December 21, 1995
Martin Peretz
/s/Bert W. Wasserman* Trustee December 21, 1995
Bert W. Wasserman
*By: /s/Eric B. Fischman
Eric B. Fischman,
Attorney-in-Fact
</TABLE>
