[dreyfus lion "d" logo] (reg.tm)
[dreyfus logo] (reg.tm)
DREYFUS VARIABLE INVESTMENT FUND,
GROWTH AND INCOME PORTFOLIO
200 Park Avenue
New York, NY 10166
INVETMENT ADVISER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 108SA986
Variable
Investment Fund,
GROWTH AND INCOME
PORTFOLIO
Semi-Annual
Report
June 30, 1998
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
Dreyfus Variable Investment Fund -- Growth and Income Portfolio completed its
latest semi-annual fiscal period ended June 30, 1998. For the six months, the
Portfolio produced a total return of 6.49%,* a rate of return that we would
consider respectable given current market circumstances. During the reporting
period, we experienced a very narrow, liquidity-driven market. This was
especially true in the second quarter of this year. The strongest performance
tended to come from the largest stocks, the so-called Super Caps. While the
Standard & Poor' s 500 Composite Stock Index, dominated by large-cap stocks,
generated a total return of 17.72%, the Russell 2000 Index of small cap issues
returned only 4.93%.**
Analyzing the performance of the S&P 500 during the past six months highlights
this phenomenon quite clearly. What we find is that large capitalization growth
stocks have continued to dominate the S&P 500. In the first half of 1998, a
touch over 71% of the market' s performance was contributed by just 40 of
approximately 500 companies, with the top five (Microsoft, General Electric,
Lucent Technologies, WalMart, & Coca-Cola) contributing 23.5% and the top 20
contributing over 53% of the Index's return.
As the list above makes abundantly clear, a breakdown of the S&P 500 based on
size (market capitalization) and valuation (price-earnings ratio) indicates that
on average only a very select portion of the S&P 500 actually outperformed the
index. Ranked by capitalization, only the top 10% of companies (consisting of
market capitalizations greater than $47 billion) produced above-average results.
Based on price-earnings ratios, only the stocks with the highest p/e ratios (top
20% , with p/e ratios greater than 34) outperformed on average. Liquidity
continued to be a factor in portfolio selection. We believe that at some point,
the extreme valuations that now exist between very large capitalization high p/e
companies and the rest of the equity market should narrow and we hope to
capitalize on such a development.
Economic Review
In the first half of 1998, three main regions of the world had very different
economic fundamentals. The U.S. entered the year with a strong economy near full
employment, with unemployment only slightly above 4%. The tight labor market led
the Federal Reserve Board to contemplate a rise in interest rates, but the U.S.
economy cooled enough over the course of the half-year that no action was taken.
After many years of subpar economic growth, continental Europe moved into a
better economic expansion. Unlike the U.S., Europe has substantial excess
capacity of productive plant and labor. In Asia, weak economies were pervasive
in the aftermath of the Asian financial crisis late last year.
A main influence on the U.S. economy in the first half of 1998 was Asian
economic weakness. It had both positive and negative effects. The positive
effects hit first. Actual inflation and expected inflation dropped, causing a
decline in long-term Treasury bond yields and mortgage rates. This caused a boom
in housing and rising asset prices, including bonds, stocks and houses. The fall
in inflation helped the consumer sector as more of the growth in consumer income
was left over after inflation to buy goods and services. Consumers benefited
from a combination of good growth in income after inflation, a strong labor
market and rising prices of assets they owned.
The negative effect of Asian weakness was directed towards the industrial
sector rather than the consumer sector. By midyear, the evidence of industrial
weakness was clear-cut in response to a slowing of inventory accumulation and
weakened exports. One result of this industrial weakness was to cool off a U.S.
economy that had been growing so rapidly that there were fears that the Federal
Reserve might raise interest rates. This favorable shift in expectations about
Fed policy was one reason for the rise in U.S. bond and stock prices. Another
background factor was the increasing evidence of prospects for multi-year budget
surpluses in the U.S.
Portfolio Focus
As you will recall from my last letter, my management of the Fund began in
July 1997. I spent the latter half of calendar 1997 restructuring the Fund to
conform to my investment philosophy. During the period, we continued to
reposition the Fund away from small and mid cap stocks towards larger cap
companies, while the p/e discipline was and will be maintained. For example, we
sold positions in Varian Associates, Rouse, Groupe AB A.D.S., and purchased
positions in United Technologies, NationsBank, May Department Stores, and energy
stocks such as Mobil and Texaco.
Equity investment results during the first six months were positively impacted
by two primary factors--financials and technology companies. The greatest impact
came once again from the financial holdings, with Chase Manhattan, BankBoston,
First Union, Travelers Group, and Fleet Financial Group producing above-average
portfolio results. In technology, Xerox, Lexmark International Group Cl. A and
Gateway 2000 were also strong performers.
On the other side of the ledger, issue selection and a small/mid-cap bias hurt
results. An assortment of stocks from various industries (RJR Nabisco Holdings,
Wisconsin Central Transportation, Tosco, Adaptec, and PhyCor) registered
negative results.
In the recent equity environment that has favored large capitalization growth
stocks, we believe that issue selection with a large capitalization bias was a
key factor in the investment process during the period. We continued to look for
stocks with above-average long-term earnings growth potential that we believe
were attractively priced relative to the broad market average. An example of a
recently purchased stock meeting our investment criteria is Tenet Healthcare.
Tenet is the second largest investor-owned health care services company in the
U.S., owning or operating 131 acute care hospitals and related health care
facilities in 22 states. Recently purchased at a 20% p/e discount to the S&P
500, based on 1999 projected earnings, the company is expected to grow its
earnings at a 15% to 17% rate over each of the next two years and 15% longer
term, well above many analysts' projected market growth.
We are grateful for the opportunity to invest your capital and will be working
diligently on your behalf.
Sincerely,
[Douglas Ramos, CFA signature logo]
Douglas Ramos, CFA
Portfolio Manager
July 21, 1998
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid.
The Portfolio's performance does not reflect the deduction of additional charges
and expenses imposed in connection with investing in variable insurance
contracts, which will reduce returns.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The Standard
& Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index of
U.S. stock market performance. The Russell 2000 Index is an unmanaged index and
is composed of the 2000 smallest companies in the Russell 3000 Index. The
Russell 3000 Index is composed of 3000 of the largest U.S. companies by market
capitalization.
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
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STATEMENT OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
Common Stocks--100.8% Shares Value
- -------------------------------------------------------
_____________ ____________
<S> <C> <C>
Consumer Durables--2.0% Leggett & Platt 340,000 $ 8,500,000
_____________
Consumer Non-Durables--8.6% ConAgra 239,700 7,595,494
Kimberly-Clark 169,000 7,752,875
Philip Morris Cos. 210,000 8,268,750
RJR Nabisco Holdings 173,000 4,108,750
Warnaco Group, Cl. A 199,000 8,445,062
_____________
36,170,931
_____________
Electronic Technology--8.6% Compaq Computer 146,000 4,142,750
Gateway 2000 46,600 (a) 2,359,125
Intel 55,000 4,076,875
Lexmark International Group, Cl. A 147,900 (a) 9,021,900
Lockheed Martin 40,000 4,235,000
Sundstrand 76,000 4,351,000
United Technologies 88,100 8,149,250
_____________
36,335,900
_____________
Energy Minerals--7.5% British Petroleum, A.D.S. 93,000 8,207,250
Mobil 121,000 9,271,625
Texaco 154,000 9,191,875
Tosco 177,500 5,214,062
_____________
31,884,812
_____________
Finance--21.4% BankBoston 170,000 9,456,250
Chase Manhattan 114,000 8,607,000
Federal Home Loan Mortgage Corporation 188,000 8,847,750
Federal National Mortgage Association 157,000 9,537,750
First Union 158,500 9,232,625
Fleet Financial Group 111,000 9,268,500
NationsBank 114,000 8,721,000
Standard & Poor's Depository Receipts 88,000 9,971,500
St. Paul Cos. 189,900 7,987,669
Washington Mutual 202,500 8,796,094
_____________
90,426,138
_____________
Health Care--7.4% Aetna 111,000 8,449,875
Beverly Enterprises 630,000 (a) 8,701,875
PhyCor 376,000 (a) 6,227,500
Tenet Healthcare 260,000 (a) 8,125,000
_____________
31,504,250
_____________
Health Technology--3.1% Biogen 172,000 8,428,000
Genzyme-General Division 180,200 4,606,363
_____________
13,034,363
_____________
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
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STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Common Stock (continued) Shares Value
- -------------------------------------------------------
_____________
_____________ ____________
Industrial Services--1.2% USA Waste Services 17,600 (a) $ 869,000
Waste Management 126,000 4,410,000
_____________
5,279,000
_____________
Insurance--5.2% Chubb 104,000 8,359,000
Everest Reinsurance Holdings 109,000 4,189,687
Travelers Group 154,000 9,336,250
_____________
21,884,937
_____________
Non-Energy Minerals--.2% ISPAT International, Cl. A 127,000 (a) 1,050,000
_____________
Process Industries--5.6% dupont (E.I.) de Nemours 95,000 7,089,375
Great Lakes Chemical 110,000 4,338,125
Octel 38,750 (a) 770,156
Owens-Illinois 143,500 (a) 6,421,625
Praxair 109,400 5,121,288
_____________
23,740,569
_____________
Producer Manufacturing--7.4% AlliedSignal 196,000 8,697,500
Armstrong World Industries 16,000 1,078,000
Honeywell 51,000 4,261,688
Masco 137,200 8,300,600
Xerox 88,000 8,943,000
_____________
31,280,788
_____________
Retail Trade--6.1% American Stores 345,000 8,344,688
Federated Department Stores 161,000 8,663,812
May Department Stores 132,000 8,646,000
_____________
25,654,500
_____________
Transportation--3.9% CNF Transportation 203,100 8,631,750
Wisconsin Central Transportation 367,000 (a) 8,028,125
_____________
16,659,875
_____________
Utilities--12.6% AT&T 106,000 6,055,250
Bell Atlantic 208,000 9,490,000
Coastal 141,000 9,843,562
GTE 161,000 8,955,625
SBC Communications 241,000 9,640,000
Texas Utilities 222,000 9,240,750
_____________
53,225,187
_____________
TOTAL COMMON STOCKS
(cost $401,205,773) $426,631,250
=============
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
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STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Short-Term Investments--2.8% Amount Value
- -------------------------------------------------------
_____________ ____________
U.S. Treasury Bills: 4.90%, 9/17/1998 $....5,761,000 $ 5,700,049
4.88%, 9/24/1998 6,057,000 5,987,768
_____________
TOTAL SHORT-TERM INVESTMENTS
(cost $11,687,047) $ 11,687,817
=============
TOTAL INVESTMENTS (cost $412,892,820) 103.6% $ 438,319,067
x ======= =============
LIABILITIES, LESS CASH AND RECEIVABLES (3.6%) $ (15,210,424)
======= =============
NET ASSETS 100.0% $423,108,643
======= =============
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
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STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED)
Cost Value
_____________ ____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $412,892,820 $438,319,067
Cash 160,662
Dividends and interest receivable 734,598
Receivable for investment securities sold 454,134
Receivable for shares of Beneficial Interest subscribed 171,016
Prepaid expenses 3,704
_____________
439,843,181
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 270,337
Payable for investment securities purchased 13,053,543
Payable for shares of Beneficial Interest redeemed 3,381,500
Accrued expenses 29,158
_____________
16,734,538
_____________
NET ASSETS $423,108,643
=============
REPRESENTED BY: Paid-in capital $388,719,664
Accumulated undistributed investment income--net 266,937
Accumulated net realized gain (loss) on investments
and forward currency exchange contracts 8,695,795
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4(b) 25,426,247
_____________
NET ASSETS $423,108,643
=============
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) 19,536,451
NET ASSET VALUE, offering and redemption price per share $21.66
========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
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STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME
INCOME: Cash dividends (net of $10,752 foreign taxes
<S> <C> <C>
withheld at source) $ 3,139,241
Interest 439,333
____________
Total Income $ 3,578,574
EXPENSES: Investment advisory fee--Note 3(a) 1,528,892
Prospectus and shareholders' reports 31,404
Custodian fees--Note 3(a) 21,244
Professional fees 12,041
Registration fees 11,406
Trustees' fees and expenses--Note 3(b) 4,253
Shareholder servicing costs 1,289
Loan commitment fees--Note 2 933
Miscellaneous 2,922
____________
Total Expenses 1,614,384
____________
INVESTMENT INCOME--NET 1,964,190
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments and foreign
currency transactions $ 9,645,170
Net realized gain (loss) on forward currency
exchange contracts 558,598
____________
Net Realized Gain (Loss) 10,203,768
Net unrealized appreciation (depreciation)
on investments 11,512,423
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 21,716,191
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $23,680,381
============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
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STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
________________ _______________
OPERATIONS:
<S> <C> <C>
Investment income--net $ 1,964,190 $ 4,119,396
Net realized gain (loss) on investments 10,203,768 28,865,086
Net unrealized appreciation (depreciation) on investments 11,512,423 11,506,268
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations 23,680,381 44,490,750
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net (1,899,988) (4,098,117)
Net realized gain on investments (7,167,070) (24,999,802)
_____________ _____________
Total Dividends (9,067,058) (29,097,919)
_____________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold 64,393,714 130,840,229
Dividends reinvested 9,067,058 29,097,917
Cost of shares redeemed (34,797,553) (31,433,846)
_____________ _____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 38,663,219 128,504,300
_____________ _____________
Total Increase (Decrease) in Net Assets 53,276,542 143,897,131
NET ASSETS:
Beginning of Period 369,832,101 225,934,970
_____________ _____________
End of Period $ 423,108,643 $ 369,832,101
============= =============
UNDISTRIBUTED INVESTMENT INCOME--NET $ 266,937 $ 202,735
_____________ _____________
Shares Shares
_____________ _____________
CAPITAL SHARE TRANSACTIONS:
Shares sold 2,919,015 6,307,701
Shares issued for dividends reinvested 402,706 1,442,683
Shares redeemed (1,582,692) (1,509,225)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding 1,739,029 6,241,159
============= =============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
- -----------------------------------------------------------------------------
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 each period indicated. This information
has been derived from the Series' financial statements.
Six Months Ended
June 30, 1998 Year Ended December 31,
___________________________________________
PER SHARE DATA: (Unaudited) 1997 1996 1995 1994(1)
__________ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.78 $19.55 $18.33 $11.98 $12.50
______ ______ ______ ______ ______
Investment Operations:
Investment income--net .10 .28 .36 .28 .28
Net realized and unrealized gain (loss)
on investments 1.27 2.79 3.43 7.07 (.43)
______ ______ ______ ______ ______
Total from Investment Operations 1.37 3.07 3.79 7.35 (.15)
______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net (.10) (.28) (.35) (.27) (.28)
Dividends from net realized gain on investments (.39) (1.56) (2.22) (.73) (.09)
______ ______ ______ ______ ______
Total Distributions (.49) (1.84) (2.57) (1.00) (.37)
______ ______ ______ ______ ______
Net asset value, end of period $21.66 $20.78 $19.55 $18.33 $11.98
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN 6.49%(2) 16.21% 20.75% 61.89% (1.22%)(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .39%(2) .80% .83% .92% .22%(2)
Ratio of net investment income
to average net assets .48%(2) 1.37% 1.96% 2.21% 2.25%(2)
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus Corporation -- -- -- .03% 1.28%(2)
Portfolio Turnover Rate 64.77%(2) 180.73% 237.44% 255.42% 237.09%(2)
Net Assets, end of period (000's Omitted) $423,109 $369,832 $225,935 $71,161 $1,040
- -----------------------------
(1) From May 2, 1994 (commencement of operations) to December 31, 1994.
(2) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Variable Investment Fund (the "Fund" ) is registered under the
Investment Company Act of 1940 ("Act") as an open-end management investment
company, operating as a series company, currently offering thirteen series,
including the Growth and Income Portfolio (the "Series") and is intended to be a
funding vehicle for variable annuity contracts and variable life insurance
policies to be offered by the separate accounts of life insurance companies. The
Series is a non-diversified portfolio. The Series' investment objective is to
provide long-term capital growth, current income and growth of income,
consistent with reasonable investment risk. The Dreyfus Corporation ("Dreyfus")
serves as the Series' investment adviser. Dreyfus is a direct subsidiary of
Mellon Bank, N.A. (" Mellon" ). Premier Mutual Fund Services, Inc. is the
distributor of the Series' shares, which are sold without a sales charge.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The Series' financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices, except for open
short positions, where the asked price is used for valuation purposes. Bid price
is used when no asked price is available. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Trustees. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward currency exchange contracts are valued at the forward rate.
(B) FOREIGN CURRENCY TRANSACTIONS: The Series does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in the market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities
of short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amount of
dividends, interest and foreign withholding taxes recorded on the Series' books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custodian agreement, the Series receives
net earnings credits based on available cash balances left on deposit.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
The Series declares and pays dividends from investment income-net on a quarterly
basis. Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
DREYFUS VARIABLE INVESTMENT FUND, GROWTH AND INCOME PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes
NOTE 2--BANK LINE OF CREDIT:
The Series participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (" Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Series has agreed to pay commitment fees on its pro rata portion
of the Facility. Interest is charged to the Series at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended June
30, 1998, the Series did not borrow under the Facility.
NOTE 3--INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment
advisory fee is computed at the annual rate of .75 of 1% of the value of the
Series' average daily net assets and is payable monthly.
The Series compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Series. During the period
ended June 30, 1998, the Series was charged $117 pursuant to the transfer agency
agreement.
The Series compensates Mellon under a custody agreement to provide custodial
services for the Series. During the period ended June 30, 1998, the Series was
charged $21,244 pursuant to the custody agreement.
(B) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities and forward currency exchange contracts, during
the period ended June 30, 1998 amounted to $312,531,709 and $261,595,028,
respectively.
The Series enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings. When executing forward currency exchange contracts, the
Series is obligated to buy or sell a foreign currency at a specified rate on a
certain date in the future. With respect to sales of forward currency exchange
contracts, the Series would incur a loss if the value of the contract increases
between the date the forward contract is opened and the date the forward
contract is closed. The Series realizes a gain if the value of the contract
decreases between those dates. With respect to purchases of forward currency
exchange contracts, the Series would incur a loss if the value of the contract
decreases between the date the forward contract is opened and the date the
forward contract is closed. The Series realizes a gain if the value of the
contract increases between those dates. The Series is also exposed to credit
risk associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gain on each
open contract. At June 30, 1998, there were no open forward currency exchange
contracts.
(B) At June 30, 1998, accumulated net unrealized appreciation on investments
was $25,426,247, consisting of $41,707,288 gross unrealized appreciation and
$16,281,041 gross unrealized depreciation.
At June 30, 1998, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
