File No. 33-13690
811-5125
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X]
Pre-Effective Amendment No. [__]
Post-Effective Amendment No. 23 [ X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X]
Amendment No. 23 [ 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
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
on (DATE) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
----
X on May 1, 1999 pursuant to paragraph (a)(1)
----
75 days after filing pursuant to paragraph (a)(2)
----
on (DATE) pursuant to paragraph (a)(2) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
MONEY MARKET PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
GROWTH AND INCOME PORTFOLIO
SPECIAL VALUE PORTFOLIO
SMALL CAP PORTFOLIO
SMALL COMPANY STOCK PORTFOLIO
DISCIPLINED STOCK PORTFOLIO
INTERNATIONAL VALUE PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
QUALITY BOND PORTFOLIO
ZERO COUPON 2000 PORTFOLIO
BALANCED PORTFOLIO
LIMITED TERM HIGH INCOME PORTFOLIO
PROSPECTUS May 1, 1999
DREYFUS [LOGO]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
CONTENTS
DREYFUS VARIABLE INVESTMENT FUND
- --------------------------------------------------------------------------------
Goal/Approach
Main Risks
Past Performance
Expenses
Money Market Portfolio
Capital Appreciation Portfolio
Growth and Income Portfolio
Special Value Portfolio
Small Cap Portfolio
Small Company Stock Portfolio
Disciplined Stock Portfolio
International Value Portfolio
International Equity Portfolio
Quality Bond Portfolio
Zero Coupon 2000 Portfolio
Balanced Portfolio
Limited Term High Income Portfolio
Management
Financial Highlights
BUY/SELL SHARES
- --------------------------------------------------------------------------------
Account Policies
Distributions and Taxes
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Information on the portfolios' recent
strategies and holdings can be found in the
current annual/semiannual report. See back
cover.
Shares of the portfolios are offered only to separate accounts established by
insurance companies to fund variable annuity contracts ("VA contracts") and
variable life insurance policies ("VLI policies") and to qualified pension and
retirement plans and accounts permitting accumulation of assets on a
tax-deferred basis ("Eligible Plans"). Individuals may not purchase shares
directly from the fund. The VA contracts and the VLI policies are described in
the separate prospectuses issued by the participating insurance companies over
which the fund assumes no responsibility.
Each portfolio has its own investment strategy and risk/return profile. The
differences in strategy among the portfolios determine the types of securities
in which each portfolio invests and can be expected to affect the degree of risk
each portfolio is subject to and its performance.
The investment objective and policies of a portfolio may be similar to those of
other funds managed by the investment advisers. However, the investment results
of the portfolios may be higher or lower than, and may not be comparable to,
those of such other funds.
<PAGE>
MONEY MARKET PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Money Market Portfolio seeks as high a level of current income as is
consistent with the preservation of capital and the maintenance of liquidity. As
a money market fund, the portfolio is subject to maturity, quality and
diversification requirements designed to help it maintain a stable share price
of $1.00.
The portfolio invests in a diversified portfolio of high-quality, short-term
debt securities, including the following:
o securities issued or guaranteed by the U.S. government or its agencies
or instrumentalities
o certificates of deposit, time deposits, bankers' acceptances and other
short-term securities issued by U.S. or foreign banks or their
subsidiaries or branches
o repurchase agreements
o asset-backed securities
o domestic and dollar-denominated foreign commercial paper, and other
short-term corporate and bank obligations of U.S. and foreign issuers
o obligations issued or guaranteed by one or more foreign governments or
their agencies, including obligations of supranational entities
Normally, the portfolio invests at least 25% of its net assets in bank
obligations. The portfolio does not intend to invest more than 20% of its assets
in dollar-denominated foreign securities.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
MONEY MARKET FUND: a specific type of fund that seeks to maintain a $1.00 price
per share. Money market funds are subject to strict federal requirements and
must:
o maintain an average dollar-weighted portfolio maturity of 90 days or
less
o buy individual securities that have remaining maturities of 13 months
or less
o invest only in high-quality dollar-denominated obligations
[ICON] MAIN RISKS
An investment in the portfolio is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
portfolio seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the portfolio. Additionally, the
portfolio's yield will vary as the short-term securities in its portfolio mature
and the proceeds are reinvested in securities with different interest rates.
While the portfolio has maintained a constant share price since inception, and
will continue to try to do so, the following factors could reduce the
portfolio's income level and/or share price:
o interest rates could rise sharply, causing the value of the
portfolio's securities, and share price, to drop
o any of the portfolio's holdings could have its credit rating
downgraded or could default
o the risks generally associated with concentrating investments in the
banking industry, such as interest rate risk, credit risk and
regulatory developments relating to the banking industry
o the risks generally associated with dollar-denominated foreign
investments, such as economic and political developments, seizure or
nationalization of deposits, imposition of taxes or other restrictions
on the payment of principal and interest
[SIDE BAR]
CONCEPTS TO UNDERSTAND
CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.
An issuer with the highest credit rating has a very strong degree of certainty
(or safety) with respect to making all payments. An issuer with the
second-highest credit rating has strong capacity to make all payments, but the
degree of safety is somewhat less.
Generally, the portfolio is required to invest at least 95% of its assets in the
securities of issuers with the highest credit rating or the unrated equivalent
as determined by Dreyfus, with the remainder invested in securities with the
second-highest credit rating.
<PAGE>
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table averages performance over time. Both tables
assume the reinvestment of dividends and distributions. As with all mutual
funds, the past is not a prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
<PAGE>
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.50%
Other expenses %
TOTAL %
EXPENSE EXAMPLE
1 year............... $
--------
3 years.............. $
--------
5 years.............. $
--------
10 years............. $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
<PAGE>
----------------------------------
<PAGE>
CAPITAL APPRECIATION PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Capital Appreciation Portfolio seeks long-term capital growth consistent
with the preservation of capital; current income is a secondary goal. To pursue
these goals, the portfolio invests in the common stock of U.S. and foreign
companies. The portfolio focuses on "blue chip" companies with total market
values of more than $5 billion.
In choosing stocks, the portfolio first identifies economic sectors it believes
will expand over the next three to five years or longer. Using fundamental
analysis, the portfolio then seeks companies within these sectors that have
demonstrated sustained patterns of profitability, strong balance sheets, an
expanding global presence and the potential to achieve predictable,
above-average earnings growth. The portfolio is also alert to companies which it
considers undervalued in terms of earnings, assets or growth prospects. The
portfolio generally maintains relatively large positions in the securities it
purchases.
The portfolio employs a "buy-and-hold" investment strategy, and seeks to keep
annual portfolio turnover below 15%. As a result, the portfolio invests for
long-term growth rather than short-term profits.
The portfolio typically sells a stock when there is a change in a company's
business fundamentals or in the portfolio's view of company management.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
"BLUE CHIP" COMPANIES: established companies that are considered "known
quantities." These companies often have a long record of profit growth and
dividend payment and a reputation for quality management, products and services.
"BUY-AND-HOLD" STRATEGY: an investment strategy characterized by a low portfolio
turnover rate, which helps reduce the portfolio's trading costs and minimizes
tax liability by limiting the distribution of capital gains.
[ICON] MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of a shareholder's investment in the
portfolio will go up and down, which means that shareholders could lose money.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the portfolio's performance may sometimes be
lower or higher than that of other types of funds (such as those emphasizing
smaller companies). Moreover, since the portfolio holds large positions in a
relatively small number of stocks, it can be volatile when the
large-capitalization sector of the market is out of favor with investors.
Growth companies are expected to increase their earnings at a certain rate. When
these expectations are not met, investors can punish the stocks
inordinately--even if earnings showed an absolute increase. In addition, growth
stocks typically lack the dividend yield to cushion stock prices in market
downturns.
Foreign securities, while allowing the portfolio to seek attractive
opportunities worldwide, also include special risks, such as exposure to
currency fluctuations, changing political climate, lack of adequate company
information and potentially less liquidity.
Under adverse market conditions, the portfolio could invest some or all of its
assets in money market securities. Although the portfolio would do this to avoid
losses, it could have the effect of reducing the benefit from any upswing in the
market. ----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may engage in foreign currency transactions, primarily to hedge
its portfolio but also to increase returns; however, there is the risk that such
transactions sometimes may reduce returns or increase volatility.
<PAGE>
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the S&P 500(R), a widely recognized unmanaged index of
stock performance. Both tables assume the reinvestment of dividends and
distributions. As with all mutual funds, the past is not a prediction of the
future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
<PAGE>
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses _____%
TOTAL _____%
EXPENSE EXAMPLE
1 year.................... $
--------
3 years................... $
--------
5 years................... $
--------
10 years.................. $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment advisers for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
<PAGE>
----------------------------------
<PAGE>
GROWTH AND INCOME PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Growth and Income Portfolio seeks long-term capital growth, current income
and growth of income consistent with reasonable investment risk. To pursue these
goals, it invests in stocks, bonds and money market instruments of domestic and
foreign issuers. The portfolio's stock investments may include common stocks,
preferred stocks and convertible securities.
The portfolio manager currently focuses on the stocks of value companies with
market capitalizations of $1 billion or more. In choosing stocks, the portfolio
manager uses a "bottom- up" approach, seeking to compile a portfolio with a
price-to-earnings ratio lower than the S&P 500 and a long-term projected
earnings growth rate greater than the S&P 500. Because the portfolio is
non-diversified, a relatively high percentage of its assets may be invested in a
limited number of issuers; however, the portfolio currently invests in 50 to 75
stocks, with any one position usually not exceeding 3% of assets.
The portfolio will invest in investment grade debt securities (other than
convertible securities). The portfolio may invest up to 35% of its assets in
convertible debt securities rated, when purchased, at least Caa/CCC or the
unrated equivalent as determined by Dreyfus.
The portfolio typically sells a security when it has met the price target
established by the portfolio manager; the original reason for purchasing the
stock is no longer valid; the company shows deteriorating fundamentals; or
another more attractive opportunity has been identified.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
VALUE COMPANIES: companies that appear undervalued in terms of price relative to
other financial measurements of the intrinsic worth or business prospects (such
as price-to-earnings or price-to-book ratios). Because a stock can remain
undervalued for years, value investors often look for factors that could trigger
a rise in price, such as new products or markets; opportunities for greater
market share; more effective management; positive changes in corporate structure
or market perception.
"BOTTOM-UP" APPROACH: an investment style that focuses on selecting outstanding
companies before looking at economic and industry trends.
[ICON] MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of a shareholder's investment in the
portfolio will go up and down, which means that shareholders could lose money.
Midsize companies carry additional risks because their earnings tend to be less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies.
The portfolio's investments in value stocks are subject to the risk that their
intrinsic values may never be realized by the market, or their prices may go
down. Further, while the portfolio's investments in value stocks may limit the
overall downside risk of the portfolio over time, the portfolio may produce more
modest gains than riskier stock funds as a trade-off for this potentially lower
risk.
The portfolio may also invest in lower-rated convertible securities which have
higher credit risk. With this type of investment, there is a greater likelihood
that interest and principal payments will not be made on a timely basis.
Under adverse market conditions, the portfolio could invest some or all of its
assets in money market securities. Although the portfolio would do this to avoid
losses, it could have the effect of reducing the benefit from any upswing in the
market.
-----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may invest some assets in derivative securities, such as options
and futures, and foreign currencies. It may also sell short. These practices are
used primarily to hedge the portfolio but may be used to increase returns;
however, such practices may reduce or increase volatility. Derivatives can be
illiquid, and a small investment in certain derivatives could have a potentially
large impact on the portfolio's performance.
Because a relatively high percentage of the portfolio's assets may be invested
in the securities of a limited number of issuers, its performance may be more
vulnerable to changes in the market value of a single issuer or group of
issuers.
The portfolio can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying the portfolio's gains and losses.
<PAGE>
-----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the S&P 500(R), a widely recognized unmanaged index of
stock performance, and the Wilshire Large Company Value Index, an unmanaged
index of large companies that is constructed by using a blend of price-to- book
and forecast price-to-earnings ratios. Both tables assume the reinvestment of
dividends and distributions. As with all mutual funds, the past is not a
prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses _____%
TOTAL _____%
EXPENSE EXAMPLE
1 year.......................... $
--------
3 years......................... $
--------
5 years......................... $
--------
10 years........................ $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
<PAGE>
----------------------------------
<PAGE>
SPECIAL VALUE PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The portfolio seeks to maximize total return, consisting of capital appreciation
and current income. To pursue this goal, the portfolio invests primarily in
stocks of value companies of any size. The portfolio's stock investments may
include common stocks, preferred stocks and convertible securities of both U.S.
and foreign issuers. In choosing stocks, the portfolio manager looks for value
companies that provide opportunities for capital growth. The manager then
reviews these stocks for factors that could signal a rise in price, such as:
o new products or markets
o opportunities for greater market share
o more effective management
o positive changes in corporate structure or market perception
o potential for improved earnings
The portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the manager's
expectations.
The portfolio also may invest in bonds that offer opportunities for capital
growth. These bonds may be investment grade or below investment grade in
quality, but in any case must be rated, when purchased, no lower than CCC/Caa or
the unrated equivalent as determined by Dreyfus.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
VALUE COMPANIES: companies that appear underpriced according to certain
financial measurements of their intrinsic worth or business prospects (such as
price-to-earnings or price- to-book ratios). Because a stock can remain
undervalued for years, value investors often look for factors that could trigger
a rise in price.
[ICON] MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of a shareholder's investment in the
portfolio will go up and down, which means that shareholders could lose money.
Value stocks involve the risk that they may never reach what the manager
believes is their full market value, either because the market fails to
recognize the stock's intrinsic worth or the manager misgauged that worth. They
also may decline in price, even though in theory they are already underpriced.
Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the portfolio's performance may sometimes be
lower or higher than that of other types of funds (such as those emphasizing
growth stocks).
The portfolio may invest in companies of any size. Investments in small and
mid-size companies carry additional risks because their earnings tend to be less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies. Foreign securities involve special
risks such as changes in currency exchange rates, a lack of adequate company
information, political instability, and potentially less liquidity.
Under adverse market conditions, the portfolio could invest some or all of its
assets in money market securities. Although the portfolio would do this to avoid
losses, it could have the effect of reducing the benefit from any upswing in the
market.
-----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may invest some assets in derivative securities, such as options
and futures, and in foreign currencies. It may also sell short. These practices
are used primarily to hedge the portfolio but may be used to increase returns;
however, such practices sometimes may reduce returns or increase volatility.
Derivatives can be illiquid, and a small investment in certain derivatives could
have a potentially large impact on the portfolio's performance.
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs and taxable distributions.
The portfolio can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying the portfolio's gains or losses.
<PAGE>
-----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the S&P 500(R) and the Dow Jones Industrial Average, widely
recognized unmanaged indices of stock performance, and the Wilshire Midcap Value
Index, an unmanaged index of midcap stocks that is constructed by using a blend
of price-to-book and forecast price-to-earnings ratios. Both tables assume the
reinvestment of dividends and distributions. As with all mutual funds, the past
is not a prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI
policies that may be imposed by participating insurance companies or any charges
imposed by Eligible Plans.
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses _____%
TOTAL _____%
EXPENSE EXAMPLE
1 year..................... $
--------
3 years.................... $
--------
5 years.................... $
--------
10 years................... $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
<PAGE>
----------------------------------
<PAGE>
SMALL CAP PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Small Cap Portfolio seeks to maximize capital appreciation. To pursue this
goal, the portfolio generally invests at least 65% of its assets in the common
stock of U.S. and foreign companies. The portfolio focuses on small-cap
companies with total market values of less than $1.5 billion.
In choosing stocks, the portfolio seeks companies characterized by new or
innovative products or services which should enhance the growth of future
earnings. The portfolio also invests based on economic or political changes and
may invest in special situations, such as corporate restructurings, mergers or
acquisitions.
The portfolio may invest up to 25% of its assets in common stocks of foreign
companies but currently intends to invest no more than 20% of its assets in
foreign securities.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
SMALL-CAP COMPANIES: These companies tend to grow faster than large-cap
companies and typically use profits for expansion rather than to pay dividends.
They are more volatile than larger companies and fail more often.
[ICON] MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of a shareholder's investment in the
portfolio will go up and down, which means that shareholders could lose money.
Small companies may present additional risks because their earnings are less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies. Some of the portfolio's investments
will rise and fall based on investor perception rather than economics. Other
investments, including special situations, anticipate future products, services
or events whose delay could cause the stock price to drop.
Foreign securities, while allowing the portfolio to seek attractive
opportunities worldwide, also include special risks, such as exposure to
currency fluctuations, changing political climate, lack of adequate company
information and potentially less liquidity.
Under adverse market conditions, the portfolio could invest some or all of its
assets in money market securities. Although the portfolio would do this to avoid
losses, it could have the effect of reducing the benefit from any upswing in the
market.
<PAGE>
----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may engage in foreign currency transactions, primarily to hedge
its portfolio but also to increase returns; however, there is the risk that such
transactions sometimes may reduce returns or increase volatility.
<PAGE>
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the Russell 2000 Index, a widely recognized, unmanaged
index of smaller capitalization common stocks. Both tables assume the
reinvestment of dividends and distributions. As with all mutual funds, the past
is not a prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses %
TOTAL %
EXPENSE EXAMPLE
1 year......................... $
--------
3 years........................ $
--------
5 years........................ $
--------
10 years....................... $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
<PAGE>
----------------------------------
<PAGE>
SMALL COMPANY STOCK PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Small Company Stock Portfolio seeks investment returns (consisting of
capital appreciation and income) that are greater than the total return
performance of stocks represented by the Russell 2500(TM) Stock Index. To pursue
its goal, the portfolio normally invests in stocks of small and midsize domestic
companies, whose market values generally range between $100 million and $3
billion. Stocks are chosen through a disciplined process combining computer
modeling techniques, fundamental analysis and risk management. Consistency of
returns and stability of the portfolio's share price compared to the Russell
2500 are primary goals of the investment process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
o value, or how a stock is priced relative to its perceived intrinsic worth
o growth, in this case the sustainability or growth of earnings
o financial profile, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management. Then Dreyfus manages risk by diversifying across
companies and industries, limiting the potential adverse impact from any one
stock or industry. The portfolio is structured so that its sector weightings and
risk characteristics, such as growth, size, quality and yield, are similar to
those of the Russell 2500.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
RUSSELL 2500: a widely recognized, unmanaged index of common stocks of small to
medium sized domestic issuers.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of 2,000 stocks, screening each stock for relative attractiveness within its
economic sector and industry. To ensure that the model remains effective,
Dreyfus reviews each of the screens on a regular basis, and maintains the
flexibility to adapt the screening criteria to changes in market and economic
conditions.
<PAGE>
[ICON] MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of a shareholder's investment in the
portfolio will go up and down, which means that shareholders could lose money.
Small and midsize companies carry additional risks because their earnings are
less predictable, their share prices more volatile and their securities less
liquid than larger more established companies. Some of the fund's investments
will rise and fall based on investor perception rather than economics.
Although the portfolio seeks to manage risk by broadly diversifying among
industries and by maintaining a risk profile similar to the Russell 2500, the
portfolio is expected to hold fewer securities than the index. Owning fewer
securities and the ability to purchase companies not listed in the index can
cause the portfolio to underperform the index.
Under adverse market conditions, the portfolio could invest some or all of its
assets in money market securities. Although the portfolio would do this to avoid
losses, it could have the effect of reducing the benefit from any upswing in the
market.
----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may invest in initial public offerings, and in derivative
securities, such as options and futures, and in foreign currencies. These
practices are used primarily to hedge the portfolio but may be used to increase
returns; however, such practices may reduce or increase volatility. Derivatives
can be illiquid, and a small investment in certain derivatives could have a
potentially large impact on the portfolio's performance.
The portfolio may invest in securities of foreign issuers, which carry
additional risks such as less liquidity, changes in currency exchange rates, a
lack of adequate company information and political instability.
<PAGE>
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the Russell 2500 Index. Both tables assume the reinvestment
of dividends and distributions. As with all mutual funds, the past is not a
prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses _____%
TOTAL _____%
EXPENSE EXAMPLE
1 year.................... $
--------
3 years................... $
--------
5 years................... $
--------
10 years.................. $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
----------------------------------
<PAGE>
DISCIPLINED STOCK PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Disciplined Stock Portfolio seeks investment returns (consisting of capital
appreciation and income) that are greater than the total return performance of
stocks represented by the Standard & Poor's 500 Composite Stock Price Index. To
pursue its goal, the portfolio invests in a blended portfolio of growth and
value stocks chosen through a disciplined investment process. Consistency of
returns and stability of the portfolio's share price compared to the S&P 500 are
primary goals of the process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
o value, or how a stock is priced relative to its perceived intrinsic worth
o growth, in this case the sustainability or growth of earnings
o financial profile, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management. Then Dreyfus manages risk by diversifying across
companies and industries, limiting the potential adverse impact from any one
stock or industry. The portfolio is structured so that its sector weightings and
risk characteristics, such as growth, size, quality and yield, are similar to
those of the S&P 500.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
S&P 500: a widely recognized, unmanaged index of 500 common stocks chosen to
reflect the industries of the U.S. economy.
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of 2,000 stocks, screening each stock for relative attractiveness within its
economic sector and industry. To ensure that the model remains effective,
Dreyfus reviews each of the screens on a regular basis, and maintains the
flexibility to adapt the screening criteria to changes in market and economic
conditions.
[ICON] MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of a shareholder's investment in the
portfolio will go up and down, which means that shareholders could lose money.
Although the portfolio seeks to manage risk by broadly diversifying among
industries and by maintaining a risk profile very similar to the S&P 500, the
portfolio is expected to hold fewer securities than the index. Owning fewer
securities and the ability to purchase companies not listed in the index can
cause the portfolio to underperform the index.
By investing in a mix of growth and value companies, the portfolio assumes the
risks of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.
Under adverse market conditions, the portfolio could invest some or all of its
assets in money market securities. Although the portfolio would do this to avoid
losses, it could have the effect of reducing the benefit from any upswing in the
market.
----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may invest some assets in derivative securities, such as options
and futures. Derivatives are used primarily to hedge the portfolio but may be
used to increase returns; however, they sometimes may reduce returns or increase
volatility. Derivatives can be illiquid, and a small investment in certain
derivatives could have a potentially large impact on the portfolio's
performance.
<PAGE>
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the S&P 500. Both tables assume the reinvestment of
dividends and distributions. As with all mutual funds, the past is not a
prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
<PAGE>
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses %
TOTAL %
EXPENSE EXAMPLE
1 year...................... $
--------
3 years..................... $
--------
5 years..................... $
--------
10 years.................... $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
----------------------------------
<PAGE>
INTERNATIONAL VALUE PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The International Value Portfolio seeks long-term capital growth. To pursue this
goal, the portfolio ordinarily invests most of its assets in equity securities
of foreign issuers which Dreyfus considers to be "value" companies, and to a
limited extent in debt securities of foreign issuers. Though not specifically
limited, the portfolio ordinarily invests in companies in at least three foreign
countries, limits its investments in any single company to no more than 2% of
its assets, and holds no more than twice the Morgan Stanley Capital
International Europe, Australia, Far East Index ("MSCI EAFE") (a standard
benchmark of international investing) weighting of any major economic sector.
The portfolio's investment approach is value oriented, research driven, and risk
averse. In selecting stocks, the portfolio manager identifies potential
investments through extensive quantitative and fundamental research. Emphasizing
individual stock selection rather than economic and industry trends, the
portfolio focuses on three key factors:
o value, or how a stock is valued relative to its intrinsic worth based
on traditional value measures,
o business health, or overall efficiency and profitability as measured
by return on assets and return on equity, and
o business momentum, or the presence of a catalyst (such as corporate
restructuring, change in management or spin-off) that potentially will
trigger a price increase near term to midterm
The portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or declining momentum, or falls
short of the portfolio manager's expectations.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
VALUE COMPANIES: companies that appear underpriced according to certain
financial measurements of their intrinsic worth or business prospects (such as
price-to-earnings or price- to-book ratios). For international investing,
"value" is determined relative to a company's home market. Because a stock can
remain undervalued for years, value investors often look for factors that could
trigger a rise in price.
<PAGE>
[ICON] MAIN RISKS
The portfolio's performance will be influenced by political, social and economic
factors affecting companies in foreign countries. Like the stocks of U.S.
companies, the securities of foreign issuers fluctuate in price, often based on
factors unrelated to the issuers' value, and such fluctuations can be
pronounced. Unlike investing in U.S. companies, foreign securities include
special risks such as exposure to currency fluctuations, a lack of adequate
company information, political instability, and differing auditing and legal
standards. The value of a shareholder's investment in the portfolio will go up
and down, which means that shareholders could lose money.
Value stocks involve the risk that they may never reach what the portfolio
manager believes is their full market value either because the market fails to
recognize the stock's intrinsic worth or the portfolio manager misgauged that
worth. They also may decline in price, even though in theory they are already
underpriced. Because different types of stocks tend to shift in and out of favor
depending on market and economic conditions, the portfolio's performance may
sometimes be lower or higher than that of other types of funds (such as those
emphasizing growth stocks).
The portfolio may invest in companies of any size. Investments in small
companies carry additional risks because their earnings tend to be less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies.
Under adverse market conditions, the portfolio could invest some or all of its
assets in the securities of U.S. issuers or money market securities. Although
the portfolio would do this to avoid losses, it could have the effect of
reducing the benefit from any upswing in the market.
----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may invest some assets in derivative securities, such as options
and futures, and in foreign currencies. These practices are used primarily to
hedge the portfolio, but may be used to increase returns; however, such
practices may lower returns or increase volatility. Derivatives can be illiquid
and a small investment in certain derivatives could have a potentially large
impact on the portfolio's performance.
At times, the portfolio may engage in short-term trading. This could increase
the portfolio's transaction costs and taxable distributions, lowering its
after-tax performance accordingly.
----------------------------------
<PAGE>
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the MSCI EAFE Index, an unmanaged index composed of a
representative sample of companies located in European and Pacific Basin
countries. Both tables assume the reinvestment of dividends and distributions.
As with all mutual funds, the past is not a prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 1.00%
Other expenses %
TOTAL %
EXPENSE EXAMPLE
1 year................... $
--------
3 years.................. $
--------
5 years.................. $
--------
10 years................. $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
----------------------------------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The International Equity Portfolio seeks capital growth. To pursue this goal,
the portfolio invests primarily in the stocks of foreign companies. Typically,
the portfolio invests in 15 to 25 markets around the world, including emerging
markets. The portfolio's stock investments may include common stocks, preferred
stocks and convertible securities. The portfolio actively manages currency
exposure through the use of foreign currency transactions, including futures.
In choosing the markets in which to invest, the portfolio manager evaluates
growth, valuation, interest rates, liquidity, technical factors and currency
rates. In choosing stocks, the portfolio manager is particularly alert to
companies that have higher earnings growth rates than the market in which they
trade, or which have made a change in management, strategy or business structure
that may favorably impact future growth rates. The portfolio manager also looks
for companies that are attractively valued relative to their own history and
that of the local market.
The portfolio typically sells a stock when its growth forecast is reduced, its
valuation target is reached, or the portfolio manager decides to reduce the
weighting in its market.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
FOREIGN COMPANY: a company organized under the laws of a foreign country or for
which the principal trading market is in a foreign country; or a company
organized in the U.S. with a majority of its assets or business outside the U.S.
[ICON] MAIN RISKS
The portfolio's performance will be influenced by political, social and economic
factors affecting companies in foreign countries. Like the stocks of U.S.
companies, the securities of foreign issuers fluctuate in price, often based on
factors unrelated to the issuers' value, and such fluctuations can be
pronounced. Unlike investing in U.S. companies, foreign securities include
special risks such as exposure to currency fluctuations, a lack of adequate
company information, political instability, and differing auditing and legal
standards. The value of a shareholder's investment in the portfolio will go up
and down, which means that shareholders could lose money.
The portfolio expects to invest primarily in the stocks of companies located in
developed countries. However, the portfolio may invest in the stocks of
companies located in emerging markets. These countries generally have economic
structures that are less diverse and mature, and political systems that are less
stable, than those of developed countries. Emerging markets may be more volatile
than the markets of more mature economies and the securities of companies
located in emerging markets are often subject to rapid and large changes in
price; however, these markets also may provide higher long-term rates of return.
Under adverse market conditions, the portfolio could invest some or all of its
assets in the securities of U.S. issuers or money market securities. Although
the portfolio would do this to avoid losses, it could have the effect of
reducing the benefit from any upswing in the market.
----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may invest some assets in derivative securities, such as options
and futures, and in foreign currencies. These practices are used primarily to
hedge the portfolio but may be used to increase returns; however, such practices
sometimes may reduce returns or increase volatility. Derivatives can be
illiquid, and a small investment in certain derivatives could have a potentially
large impact on the portfolio's performance.
Because a relatively high percentage of the portfolio's assets may be invested
in the securities of a limited number of issuers, its performance may be more
vulnerable to changes in the market value of a single issuer or group of
issuers.
<PAGE>
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the Morgan Stanley Capital International Europe, Australia,
Far East Index, an unmanaged index composed of a representative sample of
companies located in European and Pacific Basin countries. Both tables assume
the reinvestment of dividends and distributions. As with all mutual funds, the
past is not a prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
<PAGE>
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses %
TOTAL %
EXPENSE EXAMPLE
1 year............................ $
--------
3 years........................... $
--------
5 years........................... $
--------
10 years.......................... $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
----------------------------------
<PAGE>
QUALITY BOND PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Quality Bond Portfolio seeks to maximize current income as is consistent
with the preservation of capital and the maintenance of liquidity. To pursue
this goal, the portfolio invests at least 80% of net assets in corporate
fixed-income securities that, when purchased, are rated A or better or are the
unrated equivalent as determined by Dreyfus, and in securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
The portfolio may invest up to 20% of net assets in:
o high grade commercial paper of U.S. issuers
o certificates of deposit, time deposits and bankers' acceptances
o corporate bonds rated lower than A (but not lower than B) by both
Moody's and S&P
The portfolio may invest up to 10% of net assets in foreign securities and also
may invest in mortgage-related securities, municipal obligations and zero coupon
securities.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
RATINGS: represent the opinions of rating agencies (like Moody's and S&P) as to
the quality of the fixed-income securities. Ratings are relative and subjective
and are not absolute standards of quality.
[ICON] MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the portfolio to invest for higher yields, the most
immediate effect is usually a drop in bond prices, and therefore in the
portfolio's share price as well. As a result, the value of a shareholder's
investment in the fund could go up and down, which means that shareholders could
lose money.
Although the portfolio invests primarily in high quality bonds, it may invest to
a limited extent in high-yield bonds which involve greater credit risk,
including the risk of default, than investment grade bonds. They tend to be more
volatile in price and less liquid and are considered speculative. As with
stocks, the prices of high-yield bonds can fall in response to bad news about
the issuer, the issuer's industry or the economy in general.
Other risk factors could have an effect on the portfolio's performance:
<PAGE>
o if an issuer fails to make timely interest or principal payments or there
is a decline in the credit quality of a bond, or perception of a decline,
the bond's value could fall, potentially lowering the portfolio's share
price
o if the portfolio's mortgage-related securities are paid off substantially
earlier or later than expected, the portfolio's share price or yields could
be hurt
o the price and yield of foreign debt securities could be affected by factors
ranging from political and economic instability to changes in currency
exchange rates
o during unusual market conditions, the portfolio may not be able to sell
certain securities at the time and price it would like
----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
Most mortgage-backed securities are a form of derivative. Derivatives can be
illiquid and highly sensitive to changes in their underlying securities,
interest rate or index and, as a result, can be highly volatile. Certain
derivatives may be used to leverage the portfolio, meaning that a small
investment could have a potentially large impact on the portfolio.
<PAGE>
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the Merrill Lynch Domestic Master Index, an unmanaged index
of U.S. Government, mortgage and investment grade corporate securities rated A
or better. Both tables assume the reinvestment of dividends and distributions.
As with all mutual funds, the past is not a prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.65%
Other expenses %
TOTAL %
EXPENSE EXAMPLE
1 year....................... $
--------
3 years...................... $
--------
5 years...................... $
--------
10 years..................... $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
----------------------------------
<PAGE>
ZERO COUPON 2000 PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Zero Coupon 2000 Portfolio seeks as high an investment return as is
consistent with the preservation of capital. To pursue its goal, the portfolio
invests primarily in debt obligations issued by the U.S. Treasury that have been
stripped of their unmatured interest coupons, and interest coupons that have
been stripped from these debt obligations ("stripped treasury securities").
The portfolio may invest in other zero coupon securities issued by the U.S.
government and its agencies and instrumentalities, and state and local
governments and their agencies. The portfolio also may invest in investment
grade zero coupon securities issued by domestic corporations. The portfolio may
invest up to 25% of its assets in foreign securities.
The portfolio will invest at least 65% of its assets in zero coupon securities
which will mature on or about December 31, 2000. On that date, the portfolio
will be liquidated. Prior to December 31, 2000, you will be informed of the
liquidation of the portfolio and will have an opportunity to exchange your
investment for another portfolio of Dreyfus Variable Investment Fund. If the
portfolio has not received your instructions before the liquidation date, your
investment will be invested automatically in the Money Market Portfolio.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
STRIPPED SECURITIES: a debt obligation that does not entitle the holder to any
periodic payments of interest prior to maturity. Stripped securities are issued
and trade at a discount from the face amount. The discount varies depending on
the time to maturity, prevailing interest rates and the perceived credit quality
of the issuer. Investors who hold stripped securities until maturity know the
total amount of their return at the time of investment.
[ICON] MAIN RISKS
Prices of stripped treasury securities tend to move inversely with changes in
interest rates. While a rise in rates may allow the portfolio to invest for
higher yields, the most immediate effect is usually a drop in the prices of such
securities, and therefore in the portfolio's share price as well. As a result,
the value of a shareholder's investment in the portfolio will fluctuate and
shareholders could lose money by investing in the portfolio.
The portfolio may be subject to greater fluctuations in response to changing
interest rates than would a fund consisting of debt obligations of comparable
maturities paying interest periodically. Because of the price volatility of
stripped securities prior to maturity, the portfolio may not be appropriate for
investors who have a current need for income from the investment or wish to
liquidate their investment prior to December 31, 2000.
Foreign securities, while allowing the portfolio to seek attractive
opportunities worldwide, also include special risks, such as exposure to
currency fluctuations, changing political climate, lack of adequate company
information and potentially less liquidity.
The portfolio may purchase interest-bearing U.S. government securities and other
money market securities to provide income to pay the portfolio's expenses and to
meet redemption requests. If this income is insufficient, the portfolio may have
to sell certain stripped securities at times or prices that might be
disadvantageous.
----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may invest some of its assets in derivative securities, such as
options and futures. These practices are used primarily to hedge the portfolio
but may be used to increase returns; however, such practices may reduce or
increase volatility. Derivatives can be illiquid, and a small investment in
certain derivatives could have a potentially large impact on the portfolio's
performance.
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the Merrill Lynch U.S. Treasury Coupon 2-Year Strips Index,
an unmanaged zero coupon index with constant maturity and duration. Both tables
assume the reinvestment of dividends and distributions. As with all mutual
funds, the past is not a prediction of the future.
<PAGE>
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contract and VLI policies
that may be imposed by participating insurance companies or charges imposed by
Eligible Plans.
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.45%
Other expenses %
TOTAL %
<PAGE>
EXPENSE EXAMPLE
1 year.................. $
--------
3 years................. $
--------
5 years................. $
--------
10 years................ $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
----------------------------------
<PAGE>
BALANCED PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Balanced Portfolio seeks to provide investment results that are greater than
the total return performance of common stocks and bonds represented by a hybrid
index, 60% of which is the Standard & Poor's 500 Composite Stock Price Index
("S&P 500") and 40% of which is the Lehman Brothers Intermediate
Government/Corporate Bond Index ("Lehman Intermediate Index"). To pursue its
goal, the portfolio invests in a diversified mix of stocks and investment grade
bonds of both U.S. and foreign issuers. The portfolio's normal asset allocation
is approximately 60% stocks and 40% bonds. However, the portfolio is permitted
to invest up to 75%, and as little as 40%, of its assets in stocks and up to
60%, and as little as 25%, of its assets in bonds.
In allocating assets between stocks and bonds, the portfolio managers assess the
relative return and risks of each asset class using a model which analyzes
several factors, including interest rate adjusted price/earnings ratios, the
valuation and volatility levels of stocks relative to bonds, and other economic
factors, such as interest rates.
In selecting stocks, Dreyfus uses a valuation model to identify and rank stocks
within an industry or sector based on:
o value, or how a stock is priced relative to its perceived intrinsic
worth
o growth, in this case the sustainability or growth of earnings
o financial profile, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities. Then Dreyfus manages risk by diversifying across
companies and industries and by maintaining risk characteristics, such as
growth, size, quality and yield, that are similar to those of the S&P 500.
In choosing bonds, the portfolio managers review economic, market and other
factors, leading to valuations by sector, maturity and quality. The portfolio's
bond component consists primarily of domestic and foreign bonds issued by
corporations or governments and rated investment grade or considered to be of
comparable quality by Dreyfus. The portfolio's dollar-weighted average maturity
normally will not exceed 10 years.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
S&P 500: a widely recognized, unmanaged index of 500 common stocks chosen to
reflect the industries of the U.S. economy.
<PAGE>
LEHMAN INTERMEDIATE INDEX: a recognized, unmanaged index of U.S. government and
investment grade corporate bonds.
[ICON] MAIN RISKS
The stock and bond markets can perform differently from each other, so the
portfolio will be affected by its asset allocation. If the portfolio favors an
asset class during a period when that class underperforms, performance may be
hurt. The value of a shareholder's investment in the portfolio will go up and
down, which means that shareholders could lose money.
The portfolio is exposed to risks of both growth and value companies. Value
stocks may never reach what the portfolio manager believes is their full market
value and, even though they are undervalued, may decline in price. Prices of
growth stocks are based in part on future expectations, which means they can
fall sharply if the prospects for a stock, industry or the economy in general
are below the market's expectations.
Bond prices may be hurt by a downgrade of the bond's credit rating, or a decline
in or the perception of a decline in the financial condition of the issuer,
which could potentially lower the portfolio's share price.
In general, the risks of foreign stocks and bonds are greater than the risks of
their U.S. counterparts because of less liquidity, changes in currency exchange
rates, a lack of adequate company information and political instability.
Under adverse market conditions, the portfolio could invest some or all of its
assets in money market securities. Although the portfolio would do this to avoid
losses, it could have the effect of reducing the benefit from any upswing in the
market.
----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may invest some of its assets in derivative securities, such as
options and futures. These practices are used primarily to hedge the portfolio
but may be used to increase returns; however, such practices may reduce or
increase volatility. Derivatives can be illiquid, and a small investment in
certain derivatives could have a potentially large impact on the portfolio's
performance.
The portfolio may also engage in short-term trading. This could increase the
portfolio's transaction costs and taxable distributions, lowering its after-tax
performance accordingly.
<PAGE>
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the S&P 500, the Lehman Intermediate Index, and a Hybrid
Index composed of 60% S&P 500 and 40% Lehman Intermediate Index. Both tables
assume the reinvestment of dividends and distributions. As with all mutual
funds, the past is not a prediction of the future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results.
An investment in the portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. Shareholders could lose money in the portfolio, but
shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses %
TOTAL %
EXPENSE EXAMPLE
1 year.................... $
--------
3 years................... $
--------
5 years................... $
--------
10 years.................. $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
----------------------------------
<PAGE>
LIMITED TERM HIGH INCOME PORTFOLIO
Ticker Symbol: xxxx
[ICON] GOAL/APPROACH
The Limited Term High Income Portfolio seeks to maximize total return,
consisting of capital appreciation and current income. To pursue this goal, the
portfolio normally invests in fixed-income securities rated, when purchased,
below investment grade ("high-yield" or "junk" bonds) or the unrated equivalent
as determined by Dreyfus. The portfolio may invest in various types of
fixed-income securities, including corporate bonds and notes, mortgage-related
securities, asset- backed securities, zero coupon securities, convertible
securities, preferred stock and other debt instruments of U.S. and foreign
issuers.
In choosing securities, the portfolio manager seeks to capture the higher yields
offered by junk bonds, while managing credit risk and the volatility caused by
interest rate movements. The portfolio attempts to reduce interest rate risk by
maintaining an average effective portfolio duration of 3.5 years or less and an
average effective portfolio maturity of 4 years or less, although there is no
limit on the maturity or duration of individual securities.
The portfolio's investment process is based on fundamental credit research and,
at times, focusing on companies that are currently out-of-favor. The portfolio
looks at a variety of factors when assessing a potential investment, including
the company's financial strength, the state of the industry or sector it belongs
to, the long-term fundamentals of that industry or sector, the company's
management, and whether there is sufficient equity value in the company. The
portfolio may also invest in investment grade bonds, typically when it takes a
defensive investment position.
[LEFT SIDE BAR]
CONCEPTS TO UNDERSTAND
HIGH-YIELD BONDS: those rated below BBB or Baa by credit rating agencies such as
Standard & Poor's or Moody's. Because their issuers may be at an early stage of
development or may have been unable to repay past debts, these bonds typically
must offer higher yields than investment grade bonds to compensate investors for
greater credit risk.
DURATION: an indication of an investment's "interest rate risk," or how
sensitive a bond or mutual fund portfolio may be to changes in interest rates.
Generally, the longer a fund's duration, the more it will react to interest rate
fluctuations.
<PAGE>
[ICON] MAIN RISKS
High yield bonds involve greater credit risk than investment grade bonds. They
tend to be more volatile in price and less liquid and are considered
speculative. As with stocks, the prices of high yield bonds can fall in response
to bad news about the issuer, the issuer's industry or the economy in general.
The portfolio's share price could also be hurt if it holds bonds of issuers that
default on payments of principal or interest. As a result, the value of a
shareholder's investment in the fund could go up and down, which means that
shareholders could lose money.
Other risk factors could have an effect on the portfolio's performance:
o if an issuer fails to make timely interest or principal payments or there
is a decline in the credit quality of a bond, or perception of a decline,
the bond's value could fall, potentially lowering the fund's share price
o if the loans underlying the portfolio's mortgage-related securities are
paid off substantially earlier or later than expected, which could occur
because of movements in market interest rates, the portfolio's share price
or yield could be hurt and the duration of its portfolio affected
o price and yield of any foreign debt security the portfolio may own may be
affected by factors ranging from political/economic instability to changes
in currency exchange rates
o if the fund holds securities which are traded in a market that becomes
"illiquid," typically when there are more sellers than buyers for the
securities, the value of such securities, and the fund's share price, may
fall dramatically.
The portfolio's investments in investment grade bonds could also reduce the
portfolio's yield and/or return. Under adverse market conditions, the portfolio
could invest some or all of its assets in money market securities. Although the
portfolio would do this to avoid losses, it could have the effect of reducing
the benefit from any upswing in the market.
----------------------------------
[SIDE BAR]
OTHER POTENTIAL RISKS
The portfolio may invest some of its assets in derivative securities, such as
options, futures and swaps. The portfolio may also sell short. These practices
are used primarily to hedge the portfolio but may be used to increase returns;
however, such practices may reduce or increase volatility. Derivatives can be
illiquid, and a small investment in certain derivatives could have a potentially
large impact on the portfolio's performance.
In addition, the portfolio may borrow for certain purposes including to
facilitate trades in its portfolio securities (a form of leveraging), which
could have the effect of magnifying the portfolio's gains or losses.
<PAGE>
At times, the portfolio may engage in short-term trading. This could increase
the portfolio's transaction costs and taxable distributions, lowering its
after-tax performance accordingly.
<PAGE>
----------------------------------
[ICON] PAST PERFORMANCE
PERFORMANCE INFORMATION FOR THE PORTFOLIO DOES NOT REFLECT CHARGES IMPOSED BY
PARTICIPATING INSURANCE COMPANIES UNDER THEIR VA CONTRACTS OR VLI POLICIES OR
ANY CHARGES IMPOSED BY ELIGIBLE PLANS. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURN FOR THE PERIODS SHOWN. VA CONTRACT HOLDERS, VLI POLICY HOLDERS
AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONSIDER THESE CHARGES WHEN EVALUATING THE
PERFORMANCE OF THE PORTFOLIO AND COMPARING IT TO THE PERFORMANCE OF OTHER MUTUAL
FUNDS. VA CONTRACT HOLDERS AND VLI POLICY HOLDERS SHOULD CONSULT THE PROSPECTUS
FOR THEIR CONTRACT OR POLICY AND ELIGIBLE PLAN PARTICIPANTS SHOULD CONTACT THEIR
PLAN ADMINISTRATOR OR TRUSTEE FOR INFORMATION ON ANY SUCH CHARGES.
The two tables below show the portfolio's annual returns and its long-term
performance. The first table shows how the portfolio's performance has varied
from year to year. The second table compares the performance of the portfolio
over time to that of the Merrill Lynch High Yield Master II Index, an index of
high yield bonds with at least $100 million par amount outstanding and at least
one year to maturity. Both tables assume the reinvestment of dividends and
distributions. As with all mutual funds, the past is not a prediction of the
future.
[To be filed by amendment]
----------------------------------
[SIDE BAR]
WHO ARE THE SHAREHOLDERS
The participating insurance companies and their separate accounts and the
Eligible Plans are the shareholders of the portfolio. From time to time, a
shareholder may own a substantial number of portfolio shares the sale of which
would adversely affect the portfolio's net asset value per share (NAV).
WHAT THE PORTFOLIO IS AND ISN'T
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goal, although as with all mutual funds, it cannot
offer guaranteed results. An investment in the portfolio is not a bank deposit.
It is not insured or guaranteed by the FDIC or any other government agency. It
is not a complete investment program. Shareholders could lose money in the
portfolio, but shareholders also have the potential to make money.
----------------------------------
<PAGE>
[ICON] EXPENSES
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the table below. Annual portfolio operating
expenses are paid out of portfolio assets, so their effect is included in the
portfolio's share price. The information in the table does not reflect account
fees and charges to separate accounts or related VA contracts and VLI policies
that may be imposed by participating insurance companies or any charges imposed
by Eligible Plans.
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.65%
Other expenses %
TOTAL %
EXPENSE EXAMPLE
1 year................... $
--------
3 years.................. $
--------
5 years.................. $
--------
10 years................. $
--------
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual returns and expenses will be different,
the example is for comparison only.
<PAGE>
[ LEFT SIDE BAR ]
CONCEPTS TO UNDERSTAND
MANAGEMENT FEE: the fee paid to the investment adviser for managing the
portfolio and assisting in all aspects of the portfolio's operations.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
<PAGE>
----------------------------------
[ICON] MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $121 billion in over 160 mutual
fund portfolios. Dreyfus is the primary mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $389 billion of assets under management and $1.9 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.
MANAGEMENT PHILOSOPHY
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each portfolio, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each
portfolio with a distinct, stable identity.
PORTFOLIO MANAGERS
The primary portfolio managers of the portfolios are as follows:
BALANCED PORTFOLIO -- Ron Gala and Laurie Carroll. Mr. Gala has managed the
equity portion of the portfolio since the portfolio's inception. Mr. Gala is a
Vice President and portfolio manager for Mellon Bank and a portfolio manager for
Mellon Equity Associates, an affiliate of Dreyfus. Mr. Gala also is responsible
for Mellon Equity Associates' asset allocation. Mr. Gala has been employed by
Mellon Bank in various capacities since 1982. Ms. Carroll has managed the
fixed-income portion of the portfolio since the portfolio's inception. Ms.
Carroll is a Vice President and portfolio manager at Mellon Bank. Ms. Carroll
has been employed by Mellon Bank since 1986. Mr. Gala and Ms. Carroll have been
employed by Dreyfus as portfolio managers since October 1994.
CAPITAL APPRECIATION PORTFOLIO -- Fayez Sarofim. He has been the portfolio's
primary manager since the portfolio's inception. He is the president and
chairman of Fayez Sarofim & Co., Two Houston Center, Suite 2907, Houston, Texas
77010, which serves as the portfolio's sub- investment adviser. Sarofim managed
approximately $_____ billion in discretionary separate accounts and provided
investment advisory services for [four] other investment companies having
aggregate assets of approximately $______ billion as of ______________, 1999.
GROWTH AND INCOME PORTFOLIO -- Douglas D. Ramos. He has been the portfolio's
primary manager and has been employed by Dreyfus since July 1997. For more than
five years prior thereto, Mr. Ramos was employed by Loomis, Sayles & Company,
L.P., most recently serving as a Senior Partner and Investment Counselor.
LIMITED TERM HIGH INCOME PORTFOLIO -- Roger King. He has been the portfolio's
primary manager since the portfolio's inception and has been employed by Dreyfus
since February 1996. Prior thereto, Mr. King was a Vice President of High Yield
Research and, most recently, director of High Yield Research at Citibank
Securities, Inc.
SPECIAL VALUE PORTFOLIO -- Timothy M. Ghriskey. He has been the portfolio's
primary manager since January 1, 1997. Mr. Ghriskey has been employed by Dreyfus
since July 1995. For more than five years prior thereto, he was Vice President
and Associate Managing Partner of Loomis, Sayles & Company, L.P.
SMALL CAP PORTFOLIO -- Hilary R. Woods and Paul Kandel. Ms. Woods and Mr. Kandel
have been the portfolio's primary managers since October 1996. Ms. Woods and Mr.
Kandel have been employed by Dreyfus since 1987 and 1994, respectively. Prior to
joining Dreyfus, Mr. Kandel was a Manager at Ark Asset Management.
SMALL COMPANY STOCK PORTFOLIO -- James Wadsworth. He has been the portfolio's
primary manager since the portfolio's inception. In addition to being a
portfolio manager with Dreyfus, Mr. Wadsworth also has been employed by Laurel
Capital Advisors, an affiliate of Dreyfus, since October 1990, and has been
Chief Investment Officer of Laurel Capital Advisors since June 1994. 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 portfolio's primary
manager since the portfolio's inception, and has been employed by Dreyfus since
October 1994. In addition to being a portfolio manager with Dreyfus and Mr.
Mullins also has been employed by Laurel Capital Advisors, an affiliate of
Dreyfus, since October 1990. Mr. Mullins also is a Vice President, Portfolio
Manager and Senior Security Analyst of Mellon, where he has been employed since
1966.
INTERNATIONAL VALUE PORTFOLIO -- Sandor Cseh. He has been the portfolio's
primary manager since the portfolio's inception, and has been employed by
Dreyfus since May 1996 and by The Boston Company Asset Management, Inc., an
affiliate of Dreyfus, or its predecessor since October 1994. Prior to joining
The Boston Company Asset Management, Inc., 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 -- Ronald Chapman. He has been the portfolio's
primary manager since April 1996 and has been employed by Dreyfus since January
1996. Prior thereto, Mr. Chapman served for ten years as Vice President of the
Global Strategy and Management Group for Northern Trust Company.
QUALITY BOND PORTFOLIO -- Investment decisions are made by the Taxable
Fixed-Income Committee of Dreyfus, and no person is primarily responsible for
making recommendations to that committee.
ZERO COUPON 2000 PORTFOLIO -- Gerald E. Thunelius. He has been the portfolio's
primary manager since March 1997 and a portfolio manager of the portfolio since
June 1994. He has been employed by Dreyfus since September 1989.
[SIDE BAR]
CONCEPTS TO UNDERSTAND
YEAR 2000 ISSUES: the portfolios could be adversely affected if the computer
systems used by Dreyfus and the portfolios' other service providers do not
properly process and calculate date- related information from and after January
1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the portfolios invest may be
adversely affected by year 2000-related problems. This could have an impact on
the value of a portfolio's investments and its share price.
<PAGE>
----------------------------------
[ICON] FINANCIAL HIGHLIGHTS
The following tables describe each portfolio's performance for the fiscal
periods indicated. "Total return" shows how much your investment in the
portfolio would have increased (or decreased) during each period, assuming you
had reinvested all dividends and distributions. These figures have been
independently audited by ____________, whose report, along with the portfolios'
financial statements, is included in the annual report. The total investment
return information set forth below does not reflect certain expenses charged the
separate accounts or related VA contracts and VLI policies by the participating
insurance companies or any charges imposed by Eligible Plans, the inclusion of
which would reduce the portfolios' total investment return for each period
indicated.
[To be filed by amendment]
----------------------------------
<PAGE>
[ICON] ACCOUNT POLICIES
BUYING SHARES
Portfolio shares are offered only to separate accounts of participating
insurance companies and Eligible Plans. Individuals may not purchase shares
directly from the portfolios. VA contract holders and VLI policy holders should
consult the applicable prospectus of the separate account of the participating
insurance company and Eligible Plan participants should consult the Plan's
administrator or trustee for more information about buying portfolio shares.
The price for portfolio shares is the portfolio's NAV, which is generally
calculated as of the close of trading on the New York Stock Exchange (usually
4:00 p.m. Eastern time) every day the exchange is open. Purchase orders from
separate accounts received in proper form by the participating insurance company
or from Eligible Plans on a given business day are priced at the NAV calculated
on such day, provided that the order 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 order are received by the portfolio in proper
form on the next business day. The participating insurance company or Eligible
Plan administrator or trustee is responsible for properly transmitting purchase
orders and Federal Funds.
Wire payments may be made if the bank account of the participating insurance
company or Eligible Plan is in a commercial bank that is a member of the Federal
Reserve System or any other bank having a correspondent bank in New York City.
Immediately available funds may be transmitted by wire to The Bank of New York
(DDA#8900337605/DREYFUS VARIABLE INVESTMENT FUND: NAME OF PORTFOLIO), for
purchase of portfolio shares. The wire must include the portfolio account number
(for new accounts, a taxpayer identification number should be included instead),
account registration and dealer number if applicable of the participating
insurance company or Eligible Plan.
The Money Market Portfolio uses the amortized cost method of valuing its
investments, which does not take into account unrealized gains or losses. Each
other portfolio's investments are generally valued based on market value, or
where market quotations are not readily available, based on fair value as
determined in good faith by the fund's board or by one or more pricing services
approved by the fund's board.
<PAGE>
SELLING SHARES
Portfolio shares may be sold (redeemed) at any time by the separate accounts of
the participating insurance companies or by Eligible Plans. Individuals may not
place sell orders directly with the portfolios. Redemption orders from separate
accounts received in proper form by the participating insurance company or from
Eligible Plans on a given business day are priced at the NAV calculated on such
day, provided that the orders are received by the portfolio in proper form on
the next business day. The participating insurance company or Eligible Plan
administrator or trustee is responsible for properly transmitting redemption
orders. VA contract holders and VLI policy holders should consult the applicable
prospectus of the separate account of the participating insurance company and
Eligible Plan participants should consult the Plan's administrator or trustee
for more information about selling portfolio shares.
<PAGE>
[ICON] DISTRIBUTIONS AND TAXES
MONEY MARKET PORTFOLIO -- Declares dividends from net investment income daily
and pays dividends monthly.
ZERO COUPON 2000 AND QUALITY BOND PORTFOLIOS -- Declare and pay dividends from
net investment income monthly.
BALANCED, GROWTH AND INCOME AND LIMITED TERM HIGH INCOME PORTFOLIOS -- Declare
and pay dividends from net investment income quarterly.
CAPITAL APPRECIATION, DISCIPLINED STOCK, INTERNATIONAL EQUITY, INTERNATIONAL
VALUE, SPECIAL VALUE, SMALL CAP AND SMALL COMPANY STOCK PORTFOLIOS -- Declare
and pay dividends from net investment income annually.
Each portfolio generally will distribute any net capital gains it has realized
once a year.
Distributions will be reinvested in additional shares of the relevant portfolio
unless instructed otherwise by a participating insurance company or Eligible
Plan.
Since each portfolio's shareholders are the participating insurance companies
and their separate accounts and Eligible Plans, the tax treatment of dividends
and distributions will depend on the tax status of the participating insurance
company or Eligible Plan. Accordingly, no discussion is included as to the
federal income tax consequences to VA contract holders, VLI policy holders and
Eligible Plan participants. For this information, VA contract holders and VLI
policy holders should consult the applicable prospectus of the separate account
of the participating insurance company and Eligible Plan participants should
consult the Plan's administrator or trustee. Participating insurance companies
and Eligible Plans should consult their tax advisers about federal, state and
local tax consequences.
FOR MORE INFORMATION
DREYFUS VARIABLE INVESTMENT FUND
SEC file number: 811-5125
More information on this fund and its portfolios is available free upon
request, including the following:
ANNUAL/SEMIANNUAL REPORT
Describes each portfolio's performance, lists portfolio holdings and
contains a letter from the portfolio manager discussing recent market
conditions, economic trends and portfolio strategies that significantly affected
the portfolio's performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Provides more details about the portfolios and their policies. A current
SAI is on file with the Securities and Exchange Commission (SEC) and is
incorporated by reference (is legally considered part of this prospectus).
[SIDE BAR]
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 1-800-___-____
BY MAIL Write to:
The Dreyfus Family of Funds
Attn: Institutional Servicing
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed
online or downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room
in Washington, DC (phone 1-800-SEC-0330) or by sending your request and
a duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(C) 1999, Dreyfus Service Corporation
<PAGE>
- ------------------------------------------------------------------------------
DREYFUS VARIABLE INVESTMENT FUND
BALANCED PORTFOLIO
CAPITAL APPRECIATION PORTFOLIO
DISCIPLINED STOCK PORTFOLIO
GROWTH AND INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
INTERNATIONAL VALUE PORTFOLIO
LIMITED TERM HIGH INCOME PORTFOLIO
MONEY MARKET PORTFOLIO
QUALITY BOND PORTFOLIO
SMALL CAP PORTFOLIO
SMALL COMPANY STOCK PORTFOLIO
SPECIAL VALUE PORTFOLIO
ZERO COUPON 2000 PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Balanced, Capital Appreciation, Disciplined Stock, Growth and Income,
International Equity, International Value, Limited Term High Income, Money
Market, Quality Bond, Small Cap, Small Company Stock, Special Value and Zero
Coupon 2000 Portfolios, each dated May 1, 1999 (each, a "Portfolio," and
collectively, the "Portfolios") of Dreyfus Variable Investment Fund (the
"Fund"), dated May 1, 1999, as each may be revised from time to time. To obtain
a copy of the relevant Portfolio's Prospectus, please write to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call (516) 338-3300.
Shares of the Portfolios are offered only to variable annuity and
variable life insurance separate accounts established by insurance companies
("Participating Insurance Companies") to fund variable annuity contracts and
variable life insurance policies (collectively, "Policies").
The most recent Annual Report and Semi-Annual Report to Shareholders
for each Portfolio are separate documents supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing in the Annual Report are incorporated
by reference into this Statement of Additional Information.
TABLE OF CONTENTS
Page
Description of the Fund and Portfolios..................................B-3
Management of the Fund.................................................B-34
Management Arrangements................................................B-42
How To Buy Shares......................................................B-49
How To Redeem Shares...................................................B-50
Determination if Net Asset Value.......................................B-51
Dividends, Distributions and Taxes.....................................B-53
Portfolio Transactions.................................................B-55
Yield and Performance Information......................................B-58
Information About the Fund.............................................B-62
Counsel and Independent Auditors.......................................B-63
Appendix...............................................................B-64
<PAGE>
DESCRIPTION OF THE FUND AND PORTFOLIOS
The Fund is a Massachusetts business trust that commenced operations on August
31, 1990. Each Portfolio is a separate series of the Fund, an open-end
management investment company, known as a mutual fund. Each of the Balanced,
Capital Appreciation, Disciplined Stock, International Value, Limited Term High
Income, Money Market, Quality Bond, Small Cap, Small Company Stock, Special
Value and Zero Coupon 2000 Portfolios is a diversified fund, which means that,
with respect to 75% of the Portfolio's total assets, the Portfolio will not
invest more than 5% of its assets in the securities of any single issuer. Each
of the Growth and Income and International Equity Portfolios is a
non-diversified fund, which means that the proportion of the Portfolio's assets
that may be invested in the securities of a single issuer is not limited by the
Investment Company Act of 1940, as amended (the "1940 Act").
The Dreyfus Corporation (the "Manager") serves as each Portfolio's investment
adviser. The Manager has engaged Fayez Sarofim & Co. ("Sarofim") to serve as the
sub-investment adviser of the Capital Appreciation Portfolio. Sarofim provides
day-to-day management of the Fund's investments, subject to the supervision of
the Manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor of
each Portfolio's shares.
CERTAIN PORTFOLIO SECURITIES
The following information supplements and should be read in
conjunction with each Portfolio's Prospectus.
DEPOSITARY RECEIPTS. (Balanced, Disciplined Stock, Growth and Income,
International Equity, International Value, Special Value and Small Company Stock
Portfolios) Each of these Portfolios may invest in the securities of foreign
issuers in the form of American Depositary Receipts and American Depositary
Shares (collectively, "ADRs") and Global Depositary Receipts and Global
Depositary Shares (collectively, "GDRs") and other forms of depositary receipts.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a United States bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. GDRs are receipts issued outside the
United States typically by non-United States banks and trust companies that
evidence ownership of either foreign or domestic securities. Generally, ADRs in
registered form are designed for use in the United States securities markets and
GDRs in bearer form are designed for use outside the United States.
These securities may be purchased through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
underlying security and a depositary, 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.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES.
(All Portfolios) Each Portfolio 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 Manager (and, if
applicable, the Portfolio's sub-investment adviser) to be of comparable quality
to the other obligations in which the Portfolio may invest. Such securities also
include debt obligations of supranational entities. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
INVESTMENT COMPANIES. (Balanced, Special Value and Small Company Stock
Portfolios) Each of these Portfolios may invest in securities issued by
investment companies. Under the 1940 Act, the Portfolio's investment in such
securities, subject to certain exceptions, currently is limited to (i) 3% of the
total voting stock of any one investment company, (ii) 5% of the Portfolio's
total assets with respect to any one investment company and (iii) 10% of the
Portfolio's total assets in the aggregate. Investments in the securities of
other investment companies may involve duplication of advisory fees and certain
other expenses.
MONEY MARKET INSTRUMENTS. (All Portfolios) Each Portfolio 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--Each Portfolio may enter into repurchase agreements. In a
repurchase agreement, the Portfolio buys, and the seller agrees to repurchase, a
security at a mutually agreed upon time and price (usually within seven days).
The repurchase agreement thereby determines the yield during the purchaser's
holding period, while the seller's obligation to repurchase is secured by the
value of the underlying security. The Portfolio's custodian or sub-custodian
will have custody of, and will hold in a segregated account, securities acquired
by the Portfolio under a repurchase agreement. Repurchase agreements are
considered by the staff of the Securities and Exchange Commission to be loans by
the Portfolio. In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, the Portfolio will enter into repurchase agreements only
with domestic banks with total assets in excess of $1 billion, or primary
government securities dealers reporting to the Federal Reserve Bank of New York,
with respect to securities of the type in which the Portfolio may invest or
government securities regardless of their remaining maturities, and will require
that additional securities be deposited with it if the value of the securities
purchased should decrease below resale price. Repurchase agreements could
involve risks in the event of a default or insolvency of the other party to the
agreement, including possible delays or restrictions upon the Portfolio's
ability to dispose of the underlying securities. The Portfolio may enter into
repurchase agreements with certain banks or non-bank dealers.
BANK OBLIGATIONS--The Portfolio 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.
Certificates of deposit ("CDs") are negotiable certificates evidencing
the obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits ("TDs") are non-negotiable deposits maintained in a
banking institution for a specified period of time (in no event longer than
seven days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of 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--The Portfolio may purchase commercial paper consisting of
short-term, unsecured promissory notes issued to finance short-term credit
needs. The commercial paper purchased by the Portfolio will consist only of
direct obligations issued by domestic and foreign entities. The other corporate
obligations in which the Portfolio may invest consist of high quality, U.S.
dollar denominated short-term bonds and notes (including variable amount master
demand notes) issued by domestic and foreign corporations, including banks.
PARTICIPATION INTERESTS--The Portfolio may purchase from financial institutions
participation interests in securities in which the Portfolio may invest. A
participation interest gives the Portfolio an undivided interest in the security
in the proportion that the Portfolio's participation interest bears to the total
principal amount of the security. These instruments may have fixed, floating or
variable rates of interest, 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 Portfolio, 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 Manager
(and, if applicable, the Portfolio's sub-investment adviser) must have
determined that the instrument is of comparable quality to those instruments in
which the Portfolio may invest.
CONVERTIBLE SECURITIES. (Balanced, Capital Appreciation, Disciplined
Stock, Growth and Income, International Equity, International Value, Limited
Term High Income, Special Value, Small Cap and Small Company Stock Portfolios)
Convertible securities may be converted at either a stated price or stated rate
into underlying shares of common stock. Convertible securities have
characteristics similar to both fixed-income and equity securities. Convertible
securities generally are subordinated to other similar but non-convertible
securities of the same issuer, although convertible bonds, as corporate debt
obligations, enjoy seniority in right of payment to all equity securities, and
convertible preferred stock is senior to common stock, of the same issuer.
Because of the subordination feature, however, convertible securities typically
have lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income securities
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.
Convertible securities are investments that provide for a stable
stream of income with generally higher yields than common stocks. There can be
no assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
WARRANTS. (Balanced, Capital Appreciation, Growth and Income,
International Equity, International Value, Special Value, 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
Portfolio may invest up to 5% (2% in the case of the Capital Appreciation, Small
Cap and Special Value Portfolios) of its net assets in warrants, except that
this limitation does not apply to warrants purchased by the Portfolio that are
sold in units with, or attached to, other securities. Included in such amount,
but not to exceed 2% of the value of the Portfolio's net assets, may be warrants
which are not listed on the New York or American Stock Exchange.
MUNICIPAL OBLIGATIONS. (Quality Bond, Limited Term High Income and
Growth and Income 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, the interest from which, in the opinion of
bond counsel to the issuer, is exempt from Federal income tax. Municipal
obligations generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds issued
by or on behalf of public authorities. Municipal obligations are classified as
general obligation bonds, revenue bonds and notes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable from the revenue
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source, but not
from the general taxing power. Industrial development bonds, in most cases, are
revenue bonds 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. 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 obligation and purchased and sold separately. The Portfolio
also may acquire call options on specific Municipal obligations. The Portfolio
generally would purchase these call options to protect the Portfolio from the
issuer of the related Municipal obligation redeeming, or other holder of the
call option from calling away, the Municipal obligation before maturity.
While, in general, the Municipal obligations are tax exempt securities
having relatively low yields as compared to taxable, non-Municipal obligations
of similar quality, certain Municipal obligations are taxable obligations,
offering yields comparable to, and in some cases greater than, the yields
available on other permissible Portfolio investments. Dividends received by
shareholders on Portfolio shares which are attributable to interest income
received by the Portfolio from Municipal obligations generally will be subject
to Federal income tax. The Portfolio may invest in Municipal obligations, the
ratings of which correspond with the ratings of other permissible Portfolio
investments. The Portfolio currently intends to invest no more than 25% of its
assets in Municipal obligations. However, this percentage may be varied from
time to time without shareholder approval.
MORTGAGE-RELATED SECURITIES. (Balanced, Growth and Income, Limited
Term High Income and Quality Bond Portfolios) Mortgage-related securities are a
form of derivative collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations.
These securities may include complex instruments such as collateralized mortgage
obligations and stripped mortgage-backed securities, mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs"),
adjustable rate mortgages, real estate investment trusts ("REITs"), or other
kinds of mortgage-backed securities, including those with fixed, floating and
variable interest rates, those with interest rates that change based on
multiples of changes in a specified index of interest rates and those with
interest rates that change inversely to changes in interest rates, as well as
those that do not bear interest.
RESIDENTIAL MORTGAGE-RELATED SECURITIES--A Portfolio may invest in
mortgage-related securities representing participation interests in pools of
one- to four-family residential mortgage loans issued or guaranteed by
governmental agencies or instrumentalities, such as the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"), or issued by
private entities. Similar to commercial mortgage-related securities, residential
mortgage-related securities have been issued using a variety of structures,
including multi-class structures featuring senior and subordinated classes.
Mortgage-related securities issued by GNMA include GNMA Mortgage
Pass-Through Certificates (also know as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA certificates also
are supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of FNMA and are not backed by or
entitled to the full faith and credit of the United States. Fannie Maes are
guaranteed as to timely payment of principal and interest by FNMA.
Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCs"). Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Bank and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the amount due
on account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable.
COMMERCIAL MORTGAGE-RELATED SECURITIES--Commercial mortgage-related securities
generally are multi-class debt or pass-through certificates secured by mortgage
loans on commercial properties. These mortgage-related securities generally are
constructed to provide protection to the senior classes investors against
potential losses on the underlying mortgage loans. This protection generally is
provided by having the holders of subordinated classes of securities
("Subordinated Securities") take the first loss if there are defaults on the
underlying commercial mortgage loans. Other protection, which may benefit all of
the classes or particular classes, may include issuer guarantees, reserve funds,
additional Subordinated Securities, cross- collateralization and
over-collateralization.
SUBORDINATED SECURITIES--A Portfolio may invest in Subordinated Securities
issued or sponsored by commercial banks, savings and loan institutions, mortgage
bankers, private mortgage insurance companies and other non-governmental
issuers. Subordinated Securities have no governmental guarantee, and are
subordinated in some manner as to the payment of principal and/or interest to
the holders of more senior mortgage-related securities arising out of the same
pool of mortgages. The holders of Subordinated Securities typically are
compensated with a higher stated yield than are the holders of more senior
mortgage-related securities. On the other hand, Subordinated Securities
typically subject the holder to greater risk than senior mortgage-related
securities and tend to be rated in a lower rating category, and frequently a
substantially lower rating category, than the senior mortgage-related securities
issued in respect of the same pool of mortgage. Subordinated Securities
generally are likely to be more sensitive to changes in prepayment and interest
rates and the market for such securities may be less liquid than is the case for
traditional fixed-income securities and senior mortgage-related securities.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND MULTI-CLASS
PASS-THROUGH-SECURITIES--A CMO is a multiclass bond backed by a pool of mortgage
pass-through certificates or mortgage loans. CMOs may be collateralized by (a)
Ginnie Mae, Fannie Mae, or Freddie Mac pass-through certificates, (b)
unsecuritized mortgage loans insured by the Federal Housing Administration or
guaranteed by the Department of Veterans' Affairs, (c) unsecuritized
conventional mortgages, (d) other mortgage-related securities, or (e) any
combination thereof.
Each class of CMOs, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
The principal and interest on the underlying mortgages may be allocated among
the several classes of a series of a CMO in many ways. One or more tranches of a
CMO may have coupon rates which reset periodically at a specified increment over
an index, such as the London Interbank Offered Rate ("LIBOR") (or sometimes more
than one index). These floating rate CMOs typically are issued with lifetime
caps on the coupon rate thereon. The Portfolio also may invest in inverse
floating rate CMOs. Inverse floating rate CMOs constitute a tranche of a CMO
with a coupon rate that moves in the reverse direction to an applicable index
such a LIBOR. Accordingly, the coupon rate thereon will increase as interest
rates decrease. Inverse floating rate CMOs are typically more volatile than
fixed or floating rate tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying inversely
to a multiple of an applicable index creates a leverage factor. Inverse floaters
based on multiples of a stated index are designed to be highly sensitive to
changes in interest rates and can subject the holders thereof to extreme
reductions of yield and loss of principal. The markets for inverse floating rate
CMOs with highly leveraged characteristics at times may be very thin. The
Portfolio's ability to dispose of its positions in such securities will depend
on the degree of liquidity in the markets for such securities. It is impossible
to predict the amount of trading interest that may exist in such securities, and
therefore the future degree of liquidity.
STRIPPED MORTGAGE-BACKED SECURITIES--A Portfolio also may invest in stripped
mortgage-backed securities which are created by segregating the cash flows from
underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage securities may be partially stripped so
that each investor class receives some interest and some principal. When
securities are completely stripped, however, all of the interest is distributed
to holders of one type of security, known as an interest-only security, or IO,
and all of the principal is distributed to holders of another type of security
known as a principal-only security, or PO. Strips can be created in a
pass-through structure or as tranches of a CMO. The yields to maturity on IO and
POs are very sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage assets. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, the Portfolio may
not fully recoup its initial investment in IOs. Conversely, if the underlying
mortgage assets experience less than anticipated prepayments of principal, the
yield on POs could be materially and adversely affected.
REAL ESTATE INVESTMENT TRUSTS--A REIT is a corporation, or a business trust that
would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The
Code permits a qualifying REIT to deduct dividends paid, thereby effectively
eliminating corporate level Federal income tax and making the REIT a
pass-through vehicle for Federal income tax purposes. To meet the definitional
requirements of the Code, a REIT must, among other things, invest substantially
all of its assets in interests in real estate (including mortgages and other
REITs) or cash and government securities, derive most of its income from rents
from real property or interest on loans secured by mortgages on real property,
and distribute to shareholders annually a substantial portion of its otherwise
taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own real
estate directly and the value of, and income earned by, the REITs depends upon
the income of the underlying properties and the rental income they earn. Equity
REITs also can realize capital gains (or losses) by selling properties that have
appreciated (or depreciated) in value. Mortgage REITs can make construction,
development or long-term mortgage loans and are sensitive to the credit quality
of the borrower. Mortgage REITs derive their income from interest payments on
such loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also are
subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation and the possibility of failing to qualify for tax-free status
under the Code or to maintain exemption from the 1940 Act.
ADJUSTABLE-RATE MORTGAGE LOANS ("ARMS")--ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest rate
for a specified period of time, generally for either the first three, six,
twelve, thirteen, thirty-six, or sixty scheduled monthly payments. Thereafter,
the interest rates are subject to periodic adjustment based on changes in an
index. ARMs typically have minimum and maximum rates beyond which the mortgage
interest rate may not vary over the lifetime of the loans. Certain ARMs provide
for additional limitations on the maximum amount by which the mortgage interest
rate may adjust for any single adjustment period. Negatively amortizing ARMs may
provide limitations on changes in the required monthly payment. Limitations on
monthly payments can result in monthly payments that are greater or less than
the amount necessary to amortize a negatively amortizing ARM by its maturity at
the interest rate in effect during any particular month.
PRIVATE ENTITY SECURITIES--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other nongovernmental issuers. Timely payment
of principal and interest on mortgage-related securities backed by pools created
by non-governmental issuers often is supported partially by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance. The insurance and guarantees are issued by government entities,
private insurers and the mortgage poolers. There can be no assurance that the
private insurers or mortgage poolers can meet their obligations under the
policies, so that if the issuers default on their obligations the holders of the
security could sustain a loss. No insurance or guarantee covers the Portfolio or
the price of the Portfolio's shares. Mortgage-related securities issued by
non-governmental issuers generally offer a higher rate of interest than
government-agency and government-related securities because there are no direct
or indirect government guarantees of payment.
OTHER MORTGAGE-RELATED SECURITIES--Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals. Other mortgage-related securities may
be equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.
ASSET-BACKED SECURITIES. (Limited Term High Income, and, to a limited
extent, Money Market Portfolios) Asset-backed securities are a form of
derivative. The securitization techniques used for asset-backed securities are
similar to those used for mortgage-related securities. These securities include
debt securities and securities with debt-like characteristics. The collateral
for these securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. A Portfolio may
invest in these and other types of asset-backed securities that may be developed
in the future.
Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may provide a
Portfolio with a less effective security interest in the related collateral than
do mortgage-backed securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available to
support payments on these securities.
The asset-backed securities in which the Money Market Portfolio may
invest are securities issued by special purpose entities whose primary assets
consist of a pool of mortgages, loans, receivables or other assets. Payment of
principal and interest may depend largely on the cash flows generated by the
assets backing the securities and in certain cases, supported by letters of
credit, surety bonds or other forms of credit or liquidity enhancements. The
value of these asset-backed securities also may be affected by the
creditworthiness of the servicing agent for the pool of assets, the originator
of the loans or receivables or the financial institution providing the credit
support.
U.S. TREASURY SECURITIES. (Quality Bond and Zero Coupon 2000
Portfolios) U.S. Treasury securities include Treasury Inflation-Protection
Securities ("TIPS"), which are newly created securities issued by the U.S.
Treasury designed to provide investors a long term investment vehicle that is
not vulnerable to inflation. The interest rate paid by TIPS is fixed, while the
principal value rises or falls semi-annually based on changes in a published
Consumer Price Index. Thus, if inflation occurs, the principal and interest
payments on the TIPS are adjusted accordingly to protect investors from
inflationary loss. During a deflationary period, the principal and interest
payments decrease, although the TIPS' principal will not drop below its face
amount at maturity.
In exchange for the inflation protection, TIPS generally pay lower
interest rates than typical Treasury securities. Only if inflation occurs will
TIPS offer a higher real yield than a conventional Treasury bond of the same
maturity. In addition, it is not possible to predict with assurance how the
market for TIPS will develop; initially, the secondary market for these
securities may not be as active or liquid as the secondary market for
conventional Treasury securities. Principal appreciation and interest payments
on TIPS will be taxed annually as ordinary interest income for Federal income
tax calculations. As a result, any appreciation in principal must be counted as
interest income in the year the increase occurs, even though the investor will
not receive such amounts until the TIPS are sold or mature. Principal
appreciation and interest payments will be exempt from state and local income
taxes.
STRIPPED TREASURY SECURITIES. (Zero Coupon 2000 Portfolio and, to a
limited extent, all other Portfolios) 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). 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.
STRIPPED CORPORATE SECURITIES. (Growth and Income, International
Equity, Limited Term High Income, Special Value, 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 Limited
Term High Income, Special Value, Growth and Income, International Equity or
Quality Bond Portfolios will bear ratings comparable to non-stripped corporate
obligations that may be purchased by such Portfolio. Stripped Corporate
Securities purchased by the Zero Coupon 2000 Portfolio will be rated at least
Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group ("S&P"). With respect to other features of Stripped Corporate
Securities, such as sales at deep discounts, see "Stripped Treasury Securities"
above and "Investment Considerations and Risks--Special Considerations Relating
to Stripped Securities" below.
RATINGS. (Balanced, Growth and Income, Limited Term High Income,
Quality Bond, Small Cap and Special Value Portfolios) Securities 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 IBCA, Inc. ("Fitch") and Duff &
Phelps Credit Rating Co. ("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. 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 and Duff are of poor standing and may be in default
or there may be present elements of danger with respect to principal or
interest. Securities rated C by Moody's are regarded as having extremely poor
prospects of ever attaining any real investment standing. Securities rated D by
S&P, Fitch and Duff are in default and the payment of interest and/or repayment
of principal is in arrears. Such securities, though high yielding, are
characterized by great risk.
The ratings of Moody's, S&P, Fitch and 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 Manager also will evaluate these
securities and the ability of the issuers of such securities to pay interest and
principal. The Portfolio's ability to achieve its investment objective may be
more dependent on Manager's credit analysis than might be the case for a fund
that invested in higher rated securities.
ILLIQUID SECURITIES. (All Portfolios) A Portfolio 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 Portfolio's investment objective. These
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, certain mortgage- backed securities and certain privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Portfolio is subject to a risk that should
the Portfolio desire to sell them when a ready buyer is not available at a price
the Portfolio deems representative of their value, the value of the Portfolio's
net assets could be adversely affected.
INVESTMENT TECHNIQUES
The following information supplements and should be read in
conjunction with each Portfolio's Prospectus.
FOREIGN CURRENCY TRANSACTIONS. (Capital Appreciation, Growth and
Income, International Equity, International Value, Limited Term High Income,
Small Company Stock and Special Value Portfolios) A Portfolio may enter into
foreign currency transactions for a variety of purposes, including: to fix in
U.S. dollars, between trade and settlement date, the value of a security the
Portfolio has agreed to buy or sell; to hedge the U.S. dollar value of
securities the Portfolio already owns, particularly if it expects a decrease in
the value of the currency in which the foreign security is denominated; or to
gain exposure to the foreign currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, a Portfolio's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Portfolio agreeing to
exchange an amount of a currency it did not currently own for another currency
at a future date in anticipation of a decline in the value of the currency sold
relative to the currency the Portfolio contracted to receive in the exchange. A
Portfolio's success in these transactions will depend principally on the ability
of the Manager (and, where applicable, the Portfolio's sub-investment adviser)
to predict accurately the future exchange rates between foreign currencies and
the U.S. dollar.
Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
BORROWING MONEY. (All Portfolios) Each Portfolio is permitted to
borrow to the extent permitted under the 1940 Act, which permits an investment
company to borrow in an amount up to 33-1/3% of the value of its total assets.
Each Portfolio, other than the Growth and Income, Limited Term High Income and
Special Value Portfolios, 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 Portfolio's total assets,
the Portfolio will not make any additional investments. In addition, the
Balanced, 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, Limited Term High Income, Special Value
and, to a limited extent, Balanced, Money Market and Small Company Stock
Portfolios) Leveraging (that is, buying securities using borrowed money)
exaggerates the effect on net asset value of any increase or decrease in the
market value of a Portfolio's portfolio. These borrowings will be subject to
interest costs which may or may not be recovered by appreciation of the
securities purchased; in certain cases, interest costs may exceed the return
received on the securities purchased. For borrowings for investment purposes,
the 1940 Act requires a Portfolio to maintain continuous asset coverage (that
is, total assets including borrowings, less liabilities exclusive of borrowings)
of 300% of the amount borrowed. If the required coverage should decline as a
result of market fluctuations or other reasons, the Portfolio may be required to
sell some of its portfolio securities within three days to reduce the amount of
its borrowings and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
The Portfolio also may be required to maintain minimum average balances in
connection with such borrowing or pay a commitment or other fee to maintain a
line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate.
A Portfolio may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the
Portfolio of an underlying debt instrument in return for cash proceeds based on
a percentage of the value of the security. The Portfolio retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Portfolio repurchases the security at principal plus accrued
interest. Except for these transactions, the Growth and Income and Limited Term
High Income Portfolios' borrowings generally will be unsecured.
To the extent a Portfolio enters into a reverse repurchase agreement,
the Portfolio will maintain in a segregated custodial account permissible liquid
assets at least equal to the aggregate amount of its reverse repurchase
obligations, plus accrued interest, in certain cases, in accordance with
releases promulgated by the Securities and Exchange Commission. The Securities
and Exchange Commission views reverse repurchase transactions as collateralized
borrowings by the Portfolio.
SHORT-SELLING. (Growth and Income, Limited Term High Income, Special
Value and, to a limited extent, Small Cap Portfolios) In these transactions, the
Portfolio sells a security it does not own in anticipation of a decline in the
market value of the security. To complete the transaction, the Portfolio must
borrow the security to make delivery to the buyer. The Portfolio is obligated to
replace the security borrowed by purchasing it subsequently at the market price
at the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Portfolio, which would result in a
loss or gain, respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Portfolio's net assets. The Portfolio may not
make a short sale which results in the Portfolio having sold short in the
aggregate more than 5% of the outstanding securities of any class of an issuer.
The Growth and Income, Limited Term High Income and Special Value
Portfolios also may make short sales "against the box," in which the Portfolio
enters into a short sale of a security it owns. At no time will more than 15% of
the value of the Portfolio's net assets be in deposits on short sales against
the box.
Until the Portfolio closes its short position or replaces the borrowed
security, the Portfolio will: (a) maintain a segregated account, containing
permissible liquid assets, at such a level that the amount deposited in the
account plus the amount deposited with the broker as collateral always equals
the current value of the security sold short; or (b) otherwise cover its short
position.
LENDING PORTFOLIO SECURITIES. (All Portfolios) A Portfolio may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. The
Portfolio continues to be entitled to payments in amounts equal to the interest,
dividends or other distributions payable on the loaned securities, which affords
the Portfolio an opportunity to earn interest on the amount of the loan and on
the loaned securities' collateral. Loans of portfolio securities may not exceed
33-1/3% (20% with respect to the Special Value and Zero Coupon 2000 Portfolios
and 10% with respect to the Capital Appreciation, Quality Bond and Small Cap
Portfolios) of the value of the Portfolio's total assets, and the Portfolio will
receive collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. Such loans are
terminable by the Portfolio at any time upon specified notice. The Portfolio
might experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Portfolio. In
connection with its securities lending transactions, a Portfolio may return to
the borrower or a third party which is unaffiliated with the Portfolio, and
which is acting as a "placing broker," a part of the interest earned from the
investment of collateral received for securities loaned.
DERIVATIVES. (Balanced, Disciplined Stock, Growth and Income,
International Equity, International Value, Limited Term High Income, Quality
Bond, Small Company Stock, Special Value and Zero Coupon 2000 Portfolios) A
Portfolio may invest in, or enter into, derivatives, such as options and futures
(except in the case of the Quality Bond Portfolio) and, in the case of the
Growth and Income and Quality Bond Portfolios, mortgage-related securities, and,
in the case of the Limited Term High Income Portfolio, mortgage-related
securities, asset-backed securities and swaps, for a variety of reasons,
including to hedge certain market risks, to provide a substitute for purchasing
or selling particular securities or to increase potential income gain.
Derivatives may provide a cheaper, quicker or more specifically focused way for
the Portfolio to invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit a Portfolio to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Portfolio can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in derivatives could
have a large potential impact on a Portfolio's performance.
If a Portfolio invests in derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Portfolio's return
or result in a loss. A Portfolio also could experience losses if its derivatives
were poorly correlated with its other investments, or if the Portfolio were
unable to liquidate its position because of an illiquid secondary market. The
market for many derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for derivatives.
Although neither the Fund nor any Portfolio will be a commodity pool,
certain derivatives subject the Portfolios to the rules of the Commodity Futures
Trading Commission which limit the extent to which a Portfolio can invest in
such derivatives. A Portfolio may invest in futures contracts and options with
respect thereto for hedging purposes without limit. However, no Portfolio may
invest in such contracts and options for other purposes if the sum of the amount
of initial margin deposits and premiums paid for unexpired options with respect
to such contracts, other than for bona fide hedging purposes, exceeds 5% of the
liquidation value of the Portfolio's assets, after taking into account
unrealized profits and unrealized losses on such contracts and options;
provided, however, that in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily payment system (i.e., variation 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 (or, if applicable, the
Portfolio's sub- investment adviser) will consider the creditworthiness of
counterparties to over-the-counter derivatives in the same manner as it would
review the credit quality of a security to be purchased by a Portfolio.
Over-the-counter derivatives are less liquid than exchange-traded derivatives
since the other party to the transaction may be the only investor with
sufficient understanding of the derivative to be interested in bidding for it.
FUTURES TRANSACTIONS-IN GENERAL--(Balanced, Disciplined Stock, Growth and
Income, International Equity, International Value, Limited Term High Income,
Small Company Stock, Special Value and Zero Coupon 2000 Portfolios) A Portfolio
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 on exchanges located outside the United States, such as the London
International Financial Futures Exchange, the Deutsche Termine Borse 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 Portfolio might
realize in trading could be eliminated by adverse changes in the exchange rate,
or the Portfolio could incur losses as a result of those changes. Transactions
on foreign exchanges may include both commodities which are traded on domestic
exchanges and those which are not. Unlike trading on domestic commodity
exchanges, trading on foreign commodity exchanges is not regulated by the
Commodity Futures Trading Commission.
Engaging in these transactions involves risk of loss to the Portfolio
which could adversely affect the value of the Portfolio's net assets. Although
each Portfolio intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid market
will exist for any particular contract at any particular time. Many futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Portfolio to
substantial losses.
Successful use of futures by a Portfolio also is subject to the
ability of the Manager (or, if applicable, the Portfolio's 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 Portfolio uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Portfolio will lose part or all of the benefit of the increased
value of securities which it has hedged because it will have offsetting losses
in its futures positions. Furthermore, if in such circumstances the Portfolio
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. A Portfolio may have to sell such securities at a time when
it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, a Portfolio may be required to set aside permissible
liquid assets in a segregated account to cover its obligations relating to its
transactions in derivatives. To maintain this required cover, the Portfolio may
have to sell portfolio securities at disadvantageous prices or times since it
may not be possible to liquidate a derivative position at a reasonable price. In
addition, the segregation of such assets will have the effect of limiting a
Portfolio's ability otherwise to invest those assets.
SPECIFIC FUTURES TRANSACTIONS--The Balanced, Disciplined Stock, Growth and
Income, International Equity, International Value, Small Company Stock and
Special Value Portfolios may purchase and sell stock index futures contracts. A
stock index future obligates the Portfolio to pay or receive an amount of cash
equal to a fixed dollar amount specified in the futures contract multiplied by
the difference between the settlement price of the contract on the contract's
last trading day and the value of the index based on the stock prices of the
securities that comprise it at the opening of trading in such securities on the
next business day.
The Growth and Income, International Equity, International Value,
Limited Term High Income, Small Company Stock and Special Value Portfolios may
purchase and sell currency futures. A foreign currency future obligates the
Portfolio to purchase or sell an amount of a specific currency at a future date
at a specific price.
The Growth and Income, International Equity, International Value,
Limited Term High Income, Special Value and Zero Coupon 2000 Portfolios may
purchase and sell interest rate futures contracts. An interest rate future
obligates the Portfolio to purchase or sell an amount of a specific debt
security at a future date at a specific price.
INTEREST RATE SWAPS--(Limited Term High Income Portfolio) Interest rate swaps
involve the exchange by the Portfolio with another party of their respective
commitments to pay or receive interest (for example, an exchange of floating
rate payments for fixed-rate payments). The exchange commitments can involve
payments to be made in the same currency or in different currencies. The use of
interest rate swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
security transactions. If the Manager is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment performance
of the Portfolio would diminish compared with what it would have been if these
investment techniques were not used. Moreover, even if the Manager is correct in
its forecasts, there is a risk that the swap position may correlate imperfectly
with the price of the asset or liability being hedged. There is no limit on the
amount of interest rate swap transactions that may be entered into by the
Portfolio. These transactions do not involve the delivery of securities or other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest rate swaps is limited to the net amount of interest payments that the
Portfolio is contractually obligated to make. If the other party to an interest
rate swap defaults, the Portfolio's risk of loss consists of the net amount of
interest payments that the Portfolio contractually is entitled to receive.
CREDIT DERIVATIVES--(Limited Term High Income Portfolio) The Portfolio may
engage in credit derivative transactions. There are two broad categories of
credit derivatives: default price risk derivatives and market spread
derivatives. Default price risk derivatives are linked to the price of reference
securities or loans after a default by the issuer or borrower, respectively.
Market spread derivatives are based on the risk that changes in market factors,
such as credit spreads, can cause a decline in the value of a security, loan or
index. There are three basic transactional forms for credit derivatives: swaps,
options and structured instruments. The use of credit derivatives is a highly
specialized activity which involves strategies and risks different from those
associated with ordinary portfolio security transactions. If the Manager is
incorrect in its forecasts of default risks, market spreads or other applicable
factors, the investment performance of the Portfolio would diminish compared
with what it would have been if these techniques were not used. Moreover, even
if the Manager is correct in its forecasts, there is a risk that a credit
derivative position may correlate imperfectly with the price of the asset or
liability being hedged. There is no limit on the amount of credit derivative
transactions that may be entered into by the Portfolio. The Portfolio's risk of
loss in a credit derivative transaction varies with the form of the transaction.
For example, if the Portfolio purchases a default option on a security, and if
no default occurs with respect to the security, the Portfolio's loss is limited
to the premium it paid for the default option. In contrast, if there is a
default by the grantor of a default option, the Portfolio's loss will include
both the premium that it paid for the option and the decline in value of the
underlying security that the default option hedged.
OPTIONS-IN GENERAL--(Balanced, Disciplined Stock, Growth and Income,
International Equity, International Value, Limited Term High Income, Small
Company Stock, Special Value and Zero Coupon 2000 Portfolios) A Portfolio may
invest up to 5% of its assets, represented by the premium paid, in the purchase
of call and put options. A Portfolio may write (i.e., sell) covered call and put
option contracts to the extent of 20% of the value of its net assets at the time
such option contracts are written. A call option gives the purchaser of the
option the right to buy, and obligates the writer to sell, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date. Conversely, a put option gives the purchaser of
the option the right to sell, and obligates the writer to buy, the underlying
security or securities at the exercise price at any time during the option
period.
A covered call option written by a Portfolio is a call option with
respect to which the Portfolio owns the underlying security or otherwise covers
the transaction by segregating cash or other securities. A put option written by
a Portfolio 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 to fulfill the obligation undertaken. The
principal reason for writing covered call and put options is to realize, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone. A Portfolio receives a premium from writing covered
call or put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow, or other unforeseen events, at times have rendered
certain of the clearing facilities inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, a Portfolio is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
SPECIFIC OPTIONS TRANSACTIONS--The Balanced, Disciplined Stock, Growth and
Income, International Equity, International Value, Small Company Stock and
Special Value 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, Limited Term High Income,
Small Company Stock and Special Value Portfolios may purchase and sell call and
put options on foreign currency. These options convey the right to buy or sell
the underlying currency at a price which is expected to be lower or higher than
the spot price of the currency at the time the option is exercised or expires.
Each of the Disciplined Stock, Growth and Income, International
Equity, Small Company Stock and Special Value Portfolios may purchase
cash-settled options on equity index swaps and the Limited Term High Income
Portfolio may purchase cash-settled options on interest rate swaps in pursuit of
its investment objective. Equity index swaps involve the exchange by the
Portfolio with another party of cash flows based upon the performance of an
index or a portion of an index of securities which usually includes dividends. A
cash-settled option on a swap gives the purchaser the right, but not the
obligation, in return for the premium paid, to receive an amount of cash equal
to the value of the underlying swap as of the exercise date. These options
typically are purchased in privately negotiated transactions from financial
institutions, including securities brokerage firms.
Successful use by a Portfolio of options will be subject to the
ability of the Manager (or, if applicable, the Portfolio's sub-investment
adviser) to predict correctly movements in the prices of individual stocks, the
stock market generally, foreign currencies or interest rates. To the extent such
predictions are incorrect, a Portfolio may incur losses.
FUTURE DEVELOPMENTS. (All Portfolios) A Portfolio may take advantage
of opportunities in the area of options and futures contracts and options on
futures contracts and any other derivatives which are not presently contemplated
for use by the Portfolio or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the
Portfolio's investment objective and legally permissible for the Portfolio.
Before entering into such transactions or making any such investment on behalf
of a Portfolio, the Fund will provide appropriate disclosure in its Prospectus
or Statement of Additional Information.
FORWARD COMMITMENTS. (All Portfolios) A Portfolio may purchase or sell
securities on a forward commitment, when-issued or delayed delivery basis, which
means delivery and payment take place a number of days after the date of the
commitment to purchase or sell the securities at a predetermined price and/or
yield. Typically, no interest accrues to the purchaser until the security is
delivered. When purchasing a security on a forward commitment basis, the
Portfolio assumes the rights and risks of ownership of the security, including
the risk of price and yield fluctuations, and takes such fluctuations into
account when determining its net asset value. Because the Portfolio is not
required to pay for these securities until the delivery date, these risks are in
addition to the risks associated with the Portfolio's other investments. If the
Portfolio is fully or almost fully invested when forward commitment purchases
are outstanding, such purchases may result in a form of leverage. The Portfolio
intends to engage in forward commitments to increase its portfolio's financial
exposure to the types of securities in which it invests. Leveraging the
portfolio in this manner will increase the Portfolio's exposure to changes in
interest rates and will increase the volatility of its returns. The Portfolio
will set aside in a segregated account permissible liquid assets at least equal
at all times to the amount of the Portfolio's purchase commitments. At no time
will the Portfolio have more than 33-1/3% of its assets committed to purchase
securities on a forward commitment basis.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose a Portfolio to
risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when-issued basis when a
Portfolio is fully or almost fully invested may result in greater potential
fluctuation in the value of the Portfolio's net assets and its net asset value
per share.
PORTFOLIO MATURITY. (Limited Term High Income Portfolio) Under normal
market conditions, the average effective portfolio maturity for the Limited Term
High Income Portfolio is expected to be four years or less. For purposes of
calculating average effective portfolio maturity, a security that is subject to
redemption at the option of the issuer on a particular date (the "call date")
which is prior to the security's stated maturity may be deemed to mature on the
call date rather than on its stated maturity date. The call date of a security
will be used to calculate average effective portfolio maturity when the Manager
reasonably anticipates, based upon information available to it, that the issuer
will exercise its right to redeem the security. The Manager may base its
conclusion on such factors as the interest rate paid on the security compared to
prevailing market rates, the amount of cash available to the issuer of the
security, events affecting the issuer of the security, and other factors that
may compel or make it advantageous for the issuer to redeem a security prior to
its stated maturity.
INVESTMENT CONSIDERATIONS AND RISKS
EQUITY SECURITIES. (Balanced, Capital Appreciation, Disciplined Stock,
Growth and Income, International Equity, International Value, Small Cap, Small
Company Stock and Special Value 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
Portfolio's investments will result in changes in the value of its shares and
thus the Portfolio's total return to investors.
Certain of these Portfolios may purchase the securities of small
capitalization companies the prices of which may be subject to more abrupt or
erratic market movements than larger, more established companies, because these
securities typically are traded in lower volume and the issuers typically are
more subject to changes in earnings and prospects.
FIXED INCOME SECURITIES. (All Portfolios) Even though interest-bearing
securities are investments which promise a stable stream of income, the prices
of such securities generally are inversely affected by changes in interest rates
and, therefore, are subject to the risk of market price fluctuations. Certain
securities that may be purchased by a Portfolio, such as those with interest
rates that fluctuate directly or indirectly based on multiples of a stated
index, are designed to be highly sensitive to changes in interest rates and can
subject the holders thereof to extreme reductions of yield and possibly loss of
principal.
The values of fixed-income securities also may be affected by changes
in the credit rating or financial condition of the issuer. Certain securities
purchased by the Growth and Income, International Equity, Limited Term High
Income, Quality Bond and Special Value Portfolios, such as those rated Baa or
lower by Moody's and BBB or lower by S&P, Fitch and Duff, may be subject to such
risk with respect to the issuing entity and to greater market fluctuations than
certain lower yielding, higher rated fixed-income securities. Once the rating of
a portfolio security has been changed, the Fund will consider all circumstances
deemed relevant in determining whether to continue to hold the security.
MORTGAGE-RELATED SECURITIES. (Growth and Income, Limited Term High
Income and Quality Bond Portfolios) Mortgage-related securities are complex
derivative instruments, subject to both credit and prepayment risk, and may be
more volatile and less liquid than more traditional debt securities.
Mortgage-related securities are subject to credit risks associated with the
performance of the underlying mortgage properties. Adverse changes in economic
conditions and circumstances are more likely to have an adverse impact on
mortgage-related securities secured by loans on certain types of commercial
properties than on those secured by loans on residential properties. In
addition, these securities are subject to prepayment risk, although commercial
mortgages typically have shorter maturities than residential mortgages and
prepayment protection features. Some mortgage-related securities have structures
that make their reactions to interest rate changes and other factors difficult
to predict, making their value highly volatile.
SPECIAL CONSIDERATIONS RELATING TO STRIPPED SECURITIES. (Zero Coupon
2000 Portfolio and, to a limited extent, all other Portfolios) 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 impositions of excise
taxes, however, the Zero Coupon 2000 Portfolio and any other Portfolio 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 Portfolio 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 or dividends or to meet redemptions at times and at
prices that might be disadvantageous, or, alternatively, to invest assets
received from new purchases at prevailing interest rates, which would expose the
Portfolio 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 Manager
will monitor the Portfolio's 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, Limited Term High Income,
Quality Bond, Special Value and, to a limited extent, Small Cap Portfolios) The
Limited Term High Income Portfolio invests primarily, and each other such
Portfolio may invest a portion of its assets, in higher yielding (and,
therefore, higher risk) debt securities (convertible debt securities with
respect to the Growth and Income Portfolio) 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 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 Limited Term High Income, Small Cap and Special Value
Portfolios. They may be subject to certain risks with respect to the issuing
entity and to greater market fluctuations than certain lower yielding, higher
rated fixed-income securities. The retail secondary market for these securities
may be less liquid than that of higher rated securities; adverse conditions
could make it difficult at times for the Portfolio to sell certain securities or
could result in lower prices than those used in calculating the Portfolio's net
asset value.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities and
will fluctuate over time. For example, during an economic downturn or a
sustained period of rising interest rates, highly leveraged issuers of these
securities may experience financial stress. During such periods, such issuers
may not have sufficient revenues to meet their interest payment obligations. The
issuer's ability to service its debt obligations also may be affected adversely
by specific corporate developments, or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing. The
risk of loss because of default by the issuer is significantly greater for the
holders of these securities because such securities generally are unsecured and
often are subordinated to other creditors of the issuer.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold only
to a limited number of dealers or institutional investors. To the extent a
secondary trading market for these securities does exist, it generally is not as
liquid as the secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on market price and yield and the
Portfolio's ability to dispose of particular issues when necessary to meet such
Portfolio's liquidity needs or in response to a specific economic event such as
a deterioration in the creditworthiness of the issuer. The lack of a liquid
security market for certain securities also may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes of valuing the
Portfolio's portfolio and calculating its net asset value. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may decrease
the values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.
These securities may be particularly susceptible to economic
downturns. It is likely that any economic recession could disrupt severely the
market for such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.
The Portfolio may acquire these securities during an initial offering.
Such securities may involve special risks because they are new issues. The
Portfolio has no arrangement with any persons concerning the acquisition of such
securities, and the Manager (or, if applicable, the Portfolio's sub-investment
adviser) will review carefully the credit and other characteristics pertinent to
such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated Stripped Corporate Securities in which each Portfolio other
than the Quality Bond Portfolio may invest and pay-in-kind bonds in which each
Portfolio may invest up to 5% of its total assets. 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. 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 Portfolio will realize no cash until the cash payment
date unless a portion of such securities are sold and, if the issuer defaults,
the Portfolio may obtain no return at all on its investment. See "Dividends,
Distributions and Taxes."
FOREIGN SECURITIES. (All Portfolios) Foreign securities markets
generally are not as developed or efficient as those in the United States.
Securities of some foreign issuers are less liquid and more volatile than
securities of comparable U.S. issuers. Similarly, volume and liquidity in most
foreign securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Because evidences of ownership of such securities usually are held
outside the United States, the Portfolio will be subject to additional risks
which include possible adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect or restrict the payment of principal and interest
on the foreign securities to investors located outside the country of the
issuer, whether from currency blockage or otherwise.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Portfolio have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations.
The percentage of a Portfolio's 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, Limited Term High Income,
Small Cap, Small Company Stock and Special Value 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.
BANK SECURITIES. (Money Market Portfolio) To the extent the Money
Market Portfolio's investments are concentrated in the banking industry, the
Portfolio 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, 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, Limited Term
High Income and Quality Bond Portfolios) Certain municipal lease/purchase
obligations in which the Portfolio 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 Manager 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 Portfolios) No Portfolio 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 Limited Term High Income, Small Cap and Special Value Portfolios,
to be less than 100% for the Balanced (for both common stock and bond portions
of its portfolio), Disciplined Stock and Small Company Stock Portfolios, to be
less than 150% for the International Equity, International Value and Zero Coupon
2000 Portfolios and to be less than 300% for the Growth and Income and Quality
Bond Portfolios. Because the Capital Appreciation Portfolio invests for
long-term growth rather than short-term profits, its annual portfolio turnover
rate is not expected to exceed 15% and will exceed 25% only in the event of
extraordinary market conditions. Nevertheless, securities transactions for the
Capital Appreciation Portfolio will be based only upon investment considerations
and will not be limited to other considerations when Sarofim deems it
appropriate to make changes in the Portfolio's portfolio securities. A turnover
rate of 100% is equivalent to the Portfolio buying and selling all of the
securities in its portfolio once in the course of a year. 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 Portfolio since it (as is the case for the Quality Bond and
Zero Coupon 2000 Portfolios) usually does not pay brokerage commissions when it
purchases short- term debt obligations.
STATE INSURANCE REGULATION. (All Portfolios) The Fund is intended to
be a funding vehicle for VA contracts and VLI policies to be offered by
Participating Insurance Companies and will seek to be offered in as many
jurisdictions as possible. Certain states have regulations concerning
concentration of investments, purchase and sale of future contracts and short
sales of securities, among other techniques. If applied to the Fund, each
Portfolio may be limited in its ability to engage in such techniques and to
manage its portfolio with the flexibility provided herein. It is the Fund's
intention that each Portfolio operate in material compliance with current
insurance laws and regulations, as applied, in each jurisdiction in which the
Portfolio is offered.
SIMULTANEOUS INVESTMENT BY OTHER PORTFOLIOS OR FUNDS. (All Portfolios)
Investment decisions for each Portfolio are made independently from those of the
other Portfolios and investment companies managed by the Manager (and, where
applicable, the Portfolio's sub- investment adviser). If, however, such other
Portfolios or investment companies desire to invest in, or dispose of, the same
securities as the Portfolio, available investments or opportunities for sales
will be allocated equitably to each. In some cases, this procedure may adversely
affect the size of the position obtained for or disposed of by a Portfolio or
the price paid or received by a Portfolio.
INVESTMENT RESTRICTIONS
Each Portfolio's investment objective is a fundamental policy, which
cannot be changed without approval by the holders of a majority (as defined in
the 1940 Act) of the Portfolio's outstanding voting shares. In addition, the
Portfolios have adopted certain investment restrictions as fundamental policies
and certain other investment restrictions as non-fundamental policies, as
described below.
CAPITAL APPRECIATION, MONEY MARKET, QUALITY BOND, SMALL CAP, SPECIAL
VALUE AND ZERO COUPON 2000 PORTFOLIOS. Each of these Portfolios (except as noted
below) has adopted investment restrictions numbered 1 through 14 as fundamental
policies. However, the amendment of these restrictions to add an additional
Portfolio, which amendment does not substantively affect the restrictions with
respect to an existing Portfolio, will not require approval by the holders of a
majority (as defined in the 1940 Act) of the Portfolio's outstanding voting
shares. Investment restrictions numbered 15 and 16 are not fundamental policies
and may be changed, as to a Portfolio, by a vote of a majority of the Fund's
Board members at any time. 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 Portfolio, by a vote of a
majority of the Fund's Board members at any time. Except where otherwise
expressly stated, none of these Portfolios may:
1. Borrow money, except, with respect to each Portfolio other than the
Money Market Portfolio, to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the
Portfolio's total assets); 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 Portfolio's total
assets, the Portfolio will not make any additional investments.
2. Sell securities short or purchase securities on margin, except that
the Small Cap and Special Value Portfolios may engage in short sales and each
Portfolio 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 Capital Appreciation,
Special Value and Zero Coupon 2000 Portfolios may invest in futures contracts,
including those related to indices, 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 Portfolio 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.
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 Portfolio's total assets may
be invested, and securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities may be purchased, without regard to any such
limitations. 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 Portfolio to hold more than 10% of the voting securities of such issuer.
This restriction applies only with respect to 75% of such Portfolio's total
assets.
10. Invest in the securities of a company for the purpose of
exercising management or control, but the Portfolio will vote the securities it
owns as a shareholder in accordance with its views.
11. Purchase or retain the securities of any issuer if the officers or
Board members of the Fund or the officers or Directors of the Manager (and, with
respect to the Capital Appreciation Portfolio, the officers or Directors of
Sarofim) individually own beneficially more than 1/2% 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, Small
Cap and Special Value 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
Portfolio 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 Capital
Appreciation, Small Cap, Special Value and Zero Coupon 2000 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
Portfolio's 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 Portfolio's net assets would be so invested.
* * *
BALANCED, DISCIPLINED STOCK, GROWTH AND INCOME, INTERNATIONAL EQUITY,
INTERNATIONAL VALUE, LIMITED TERM HIGH INCOME AND SMALL COMPANY STOCK
PORTFOLIOS. Each of these Portfolios has adopted investment restrictions
numbered 1 through 8 as fundamental policies, and each of the Balanced,
Disciplined Stock, International Value, Limited Term High Income and Small
Company Stock Portfolios has adopted investment restrictions numbered 16 and 17
as additional fundamental policies. However, the amendment of these restrictions
to add an additional Portfolio, which amendment does not substantively effect
the restrictions with respect to an existing Portfolio, will not require
approval by the holders of a majority (as defined in the 1940 Act) of the
Portfolio's outstanding shares. Investment restrictions numbered 9 through 15
are not fundamental policies and may be changed, as to a Portfolio, by a vote of
a majority of the Fund's Board members at any time. None of these Portfolios
may:
1. Invest more than 25% of the value of its total assets in the
securities of issuers in any single industry, provided that there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
2. Invest in commodities, except that a Portfolio may purchase and
sell options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
3. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but a Portfolio may purchase and
sell securities that are secured by real estate or issued by companies that
invest or deal in real estate.
4. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of the
Portfolio's total assets). For purposes of this Investment Restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
5. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, a Portfolio may
lend its portfolio securities in an amount not to exceed 33-1/3% of the value of
its total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the Fund's
Board.
6. Act as an underwriter of securities of other issuers, except to the
extent a Portfolio may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.
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 Portfolio may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
9. 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.
R 10. Invest in the securities of a company for the purpose of
exercising management or control, but the Portfolio will vote the securities it
owns as a shareholder in accordance with its views.
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 Portfolio 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 Balanced, Disciplined Stock, International Value, Limited Term High Income
and Small Company Stock Portfolios. None of these Portfolios 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 Portfolio's total assets may
be invested, and securities issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities may be purchased, without regard to any such
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 Portfolio's 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.
In addition, each Portfolio has adopted the following policies as
non-fundamental policies. Each Portfolio intends (i) to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the 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
Portfolio, 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 Board members at any time.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of
each Portfolio. The Board approves all significant agreements with those
companies that furnish services to the Fund. These companies are as follows:
The Dreyfus Corporation.................... Investment Adviser
Fayez Sarofim & Co.......................... Sub-Investment Adviser for the
Capital Appreciation Portfolio
Pemier Mutual Fund Services, Inc........... Distributor
Dreyfus Transfer, Inc...................... Transfer Agent
The Bank of New York....................... Custodian for the
International Equity,
International Value, Money
Market and Special Value
Portfolios
Mellon Bank, N.A........................... Custodian for the Balanced,
Capital Appreciation,
Disciplined Stock, Growth and
Income, Limited Term High
Income, Quality Bond, Small
Cap, Small Company Stock and
Zero Coupon 2000 Portfolios
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five years, are
shown below.
BOARD MEMBERS OF THE FUND
JOSEPH S. DiMARTINO, CHAIRMAN OF THE BOARD. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is also a
director of The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk
management services to health and other benefit programs, Noel Group,
Inc., a venture capital company, Staffing Resources, Inc., a temporary
placement service agency, Carlyle Industries, Inc. (formerly Belding
Heminway Company, Inc.), a button packager and distributor, and Century
Business Services, Inc., a provider of various outsourcing functions
for small and medium sized companies. For more than five years prior to
January 1995, he was President, a director and, until August 1994,
Chief Operating Officer of the Manager and Executive Vice President and
a director of Dreyfus Service Corporation, a wholly-owned subsidiary of
the Manager and, until August 24, 1994, the Fund's distributor. From
August 1994 until December 31, 1994, he was a director of Mellon Bank
Corporation. He is 54 years old and his address is 200 Park Avenue, New
York, New York 10166.
DAVID P. FELDMAN, BOARD MEMBER. A trustee of Corporate Property Investors, a
real estate investment company, and a director of several mutual funds
in the 59 Wall Street Mutual Funds Group and The Jeffrey Company, a
private investment company. From July 1961 until his retirement in
April 1997, he was employed by AT&T Investment Management Corporation,
most recently serving as Chairman and Chief Executive Officer. He is 58
years old and his address is c/o AT&T, One Oak Way, Berkeley Heights,
New Jersey 07022.
JOHN M. FRASER, JR., BOARD MEMBER. 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 76 years old and his address is 133 East 64th Street,
New York, New York 10021.
ROBERT R. GLAUBER, BOARD MEMBER. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard
University, since January 1992. He is also a director of MidOcean
Reinsurance Co., Ltd., Cooke & Bieler, Inc., investment counselors,
NASD Regulation, Inc. and the Federal Reserve Bank of Boston. 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. He is 59 years old and
his address is 79 John F. Kennedy Street, Cambridge, Massachusetts
02138.
JAMES F. HENRY, BOARD MEMBER. 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. He is 67 years old
and his address is c/o CPR Institute for Dispute Resolution, 366
Madison Avenue, New York, New York 10017.
ROSALIND GERSTEN JACOBS, BOARD MEMBER. Director of Merchandise and Marketing for
Corporate Property Investors, a real estate investment company. From
1974 to 1976, she was owner and manager of a merchandise and marketing
consulting firm. Prior to 1974, she was a Vice President of Macy's, New
York. She is 72 years old and her address is c/o Corporate Property
Investors, 305 East 47th Street, New York, New York 10017.
IRVING KRISTOL, BOARD MEMBER. 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; from September 1969 to August 1979, he was Henry R.
Luce Professor of Urban Values at New York University; from 1975 to
1990, he was a director of Lincoln National Corporation, an insurance
company; and from 1977 to 1990, he was a director of Warren-Lambert
Company, a pharmaceutical and consumer products company. He is 78 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, BOARD MEMBER. President and Chief Executive Officer of
Memorial Sloan-Kettering Cancer Center. He is also a director emeritus
of Pfizer, Inc., a pharmaceutical company, where he served as a
director from 1978 to 1996; a director of Tularik, Inc., a
biotechnology company; and a general partner of LINC Venture Lease
Partners II, L.P., a limited partnership engaged in leasing. He was
Vice President for Health Sciences and Director of the Cancer Center at
Columbia University from 1973 to 1980; Professor of Medicine and of
Human Genetics and Development at Columbia University from 1968 to
1982; and a director of Life Technologies, Inc., a life science company
producing products for cell and molecular biology and microbiology,
from 1986 to 1996, Biotechnology General, Inc., a biotechnology
development company, from 1992 to 1993, and National Health
Laboratories, a national chemical diagnostic laboratory, from 1991 to
1995. He is 71 years old and his address is c/o Memorial
Sloan-Kettering Cancer Center, 1275 York Avenue, New York, New York
10021.
DR. MARTIN PERETZ, BOARD MEMBER. 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 of the
Academy for Liberal Education, an accrediting agency for colleges and
universities certified by the U.S. Department of Education; and a
director of LeukoSite Inc., a biopharmaceutical company, and
Co-Chairman of TheStreet.com, a financial daily on the Web. From 1988
to 1991, he was a director of Carmel Container Corporation. He is 58
years old and his address is c/o The New Republic, 1220 19th Street,
N.W., Washington, D.C. 20036.
BERT W. WASSERMAN, BOARD MEMBER. Financial Consultant. He is also a director
of The New Germany Fund, Mountasia Entertainment International, Inc.,
the Lillian Vernon Corporation, Winstar Communications, Inc. and
International Discount Telecommunications Corporation. 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 65 years
old and his address is 126 East 56th Street, Suite 12 North, New York,
New York 10022-3613.
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, 1998, were as follows:
Total Compensation
Aggregate From Fund and
Name of Board Member Compensation Fund Complex Paid
From Fund* to Board Member
Joseph S. DiMartino $ $ ( )
David P. Feldman $ $ ( )
John M. Fraser, Jr. $ $ ( )
Robert R. Glauber $ $ ( )
James F. Henry $ $ ( )
Rosalind Gersten Jacobs $ $ ( )
Irving Kristol $ $ ( )
Dr. Paul A. Marks $ $ ( )
Dr. Martin Peretz $ $ ( )
Bert W. Wasserman $ $ ( )
- -----------------
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $_________ for all Board members as a group.
OFFICERS OF THE FUND
MARIE E. CONNOLLY, PRESIDENT AND TREASURER. President, Chief Executive
Officer, Chief Compliance Officer and a director of the Distributor and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment companies
advised or administered by the Manager. She is 41 years old.
MARGARET W. CHAMBERS, VICE PRESIDENT AND SECRETARY. Senior Vice President and
General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. She is 38
years old.
MICHAEL S. PETRUCELLI, VICE PRESIDENT, ASSISTANT SECRETARY AND ASSISTANT
TREASURER. Senior Vice President of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From December 1989 through November 1996, he was employed by
GE Investment Services where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as a Director of GE Investment Services. He is 36
years old.
STEPHANIE D. PIERCE, VICE PRESIDENT, ASSISTANT SECRETARY AND ASSISTANT
TREASURER. Vice President and Client Development Manager of Funds
Distributor, Inc., and an officer of other investment companies advised
or administered by the Manager. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, N.A. From August 1995
to April 1997, she was an Assistant Vice President with Hudson Valley
Bank, and from September 1990 to August 1995, she was Second Vice
President with Chase Manhattan Bank. She is 30 years old.
MARY A. NELSON, VICE PRESIDENT AND ASSISTANT TREASURER. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for The Boston Company, Inc. She is 34 years old.
GEORGE A. RIO, VICE PRESIDENT AND ASSISTANT TREASURER. Executive Vice
President and Client Service Director of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by the
Manager. From June 1995 to March 1998, he was Senior Vice President and
Senior Key Account Manager for Putnam Mutual Funds. From May 1994 to
June 1995, he was Director of Business Development for First Data
Corporation. From September 1983 to May 1994, he was Senior Vice
President and Manager of Client Services and Director of Internal Audit
at The Boston Company, Inc. He is 43 years old.
JOSEPH F. TOWER, III, VICE PRESIDENT AND ASSISTANT TREASURER. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. 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 36 years old.
DOUGLAS C. CONROY, VICE PRESIDENT AND ASSISTANT SECRETARY. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From April
1993 to January 1995, he was a Senior Fund Accountant for Investors
Bank & Trust Company. He is 29 years old.
CHRISTOPHER J. KELLEY, VICE PRESIDENT AND ASSISTANT SECRETARY. Vice President
and Senior Associate General Counsel of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From April 1994 to July 1996, he was Assistant Counsel at
Forum Financial Group. From October 1992 to March 1994, he was employed
by Putnam Investments in legal and compliance capacities. He is 33
years old.
KATHLEEN K. MORRISEY, VICE PRESIDENT AND ASSISTANT SECRETARY. Manager of
Treasury Services Administration of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. She is 26 years old.
ELBA VASQUEZ, VICE PRESIDENT AND ASSISTANT SECRETARY. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From March
1990 to May 1996, she was employed by U.S. Trust Company of New York
where she held various sales and marketing positions. She is 37 years
old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of each Portfolio's shares outstanding on _____________, 1999.
The following shareholders are known by the Fund to own of record 5%
or more of the indicated Portfolio's shares outstanding on _____________, 1999:
SHAREHOLDER Portfolio Percentage of Shares
[Transamerica Occidental Balanced %
Life Insurance Company Capital Appreciation %
Separate Account VA-2L Disciplined Stock %
Accounting Department Growth and Income %
P.O. Box 33849 International Equity %
Charlotte, NC 28233-3849 International Value %
Limited Term High %
Income %
Money Market %
Quality Bond %
Small Cap %
Small Company Stock %
Special Value %
Zero Coupon 2000
First Transamerica Life Balanced %
Insurance Company Capital Appreciation %
Separate Account VA - Disciplined Stock %
2LNY Growth and Income %
Accounting Department International Equity %
P.O. Box 33849 International Value %
Charlotte, NC 28233-3849 Limited Term High Income %
Money Market
Quality Bond %
Small Cap %
Small Company Stock %
Special Value %
Zero Coupon 2000
Nationwide Life Insurance Growth and Income %
Nationwide NWVA-II
c/o IPO Portfolio
Accounting
P.O. Box 182029
Columbus, OH 43218-2029
Nationwide Life Insurance Quality Bond %
Nationwide Multi - Small Cap %
Felix (NEA)
CO - 48 c/o IPO
Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
Nationwide Life Insurance Capital Appreciation %
NWVA - II
c/o IPO Portfolio
Accounting
P.O. Box 182029
Columbus, OH 43218-2029
MBCIC Balanced %
c/o Mellon Bank, N.A. Zero Coupon 200 %
919 North Market Street
Wilmington, DE 19801-3023
Providian Life and Growth and Income %
Health Insurance Company Quality Bond %
Insurance Company Separate
Account V
P.O. Box 32830
Louisville, KY
40232-2830
Provident Mutual Life & Zero Coupon 2000 %
Annuity Company of America
P.O. Box 1717
Valley Forge, PA
19482-1717
APT Holdings Corporation International Value %
4500 New Linden Hill Road
Wilmington, DE 19808-2922
VALIC Separate Account A Small Cap %
Division 18
2929 Allen Parkway L7-01
Houston, Texas
77019-2197
Lincoln National Life Small Cap %
Insurance
Mutual Fund Accounting - 4C-01
1300, 9 Clinton Street
Fort Wayne, IN 46802-3506]
A shareholder that beneficially owns, directly or indirectly, more
than 25% of the Fund's voting securities may be deemed to be a "control person"
(as defined in the 1940 Act) of the Fund.
MANAGEMENT ARRANGEMENTS
INVESTMENT ADVISER. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the twenty-five largest bank holding companies in the United
States based on total assets.
The Manager provides advisory services pursuant to the Investment
Advisory Agreement (the "Agreement") with the Fund dated August 24, 1994, as
amended January 31, 1997. As to each Portfolio, the Agreement is subject to
annual approval by (i) the Fund's Board or (ii) vote of a majority (as defined
in the 1940 Act) of the outstanding voting securities of such Portfolio,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Agreement was approved by shareholders
of each Portfolio (other than the Balanced, Disciplined Stock, Growth and
Income, International Equity, International Value, Limited Term High Income,
Small Company Stock and Special Value Portfolios) on August 22, 1994, by the
shareholders of the Growth and Income and International Equity Portfolios on
August 2, 1994, and by the shareholders of the Special Value Portfolio on
January 31, 1997. 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 ____________, 1999. As to each Portfolio,
the Agreement is terminable without penalty, on 60 days' notice, by the Fund's
Board or by vote of the holders of a majority of the shares of such Portfolio,
or, upon not less than 90 days' notice, by the Manager. The Agreement will
terminate automatically, as to the relevant Portfolio, in the event of its
assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment Officer
and a director; Thomas F. Eggers, Vice Chairman-Institutional and a director;
Lawrence S. Kash, Vice Chairman and a director; J. David Officer, Vice Chairman
and a director; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr.,
Executive Vice President; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Patrice M. Kozlowski, Vice President-Corporate Communications; Mary
Beth Leibig, Vice President-Human Resources; Andrew S. Wasser, Vice
President-Information Systems; Theodore A. Schachar, Vice President; Wendy
Strutt, Vice President; Richard Terres, Vice President; William H. Maresca,
Controller; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott, Martin
C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
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
Portfolio, 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 Portfolio's outstanding voting securities, provided that in either event the
continuance also is approved by a majority of the Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund or Sarofim, 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 ______________, 1999. 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 Portfolio's outstanding voting securities, or, upon
not less than 90 days' notice, by Sarofim. 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 Sarofim: Fayez
S. Sarofim, Chairman of the Board, President and a director; 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 V. Daniel and James A. Reynolds,
III, Vice Presidents.
The Manager manages the Fund's portfolios of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. With respect to the Capital Appreciation Portfolio, Sarofim provides
day-to-day management of such Portfolio's portfolio of investments, subject to
the supervision of the Manager and the Fund's Board. The Portfolio's adviser is
responsible for investment decisions, and provides the Fund with portfolio
managers who are authorized by the Fund's Board to execute purchases and sales
of securities. The Portfolio's portfolio managers are:
PORTFOLIO PORTFOLIO MANAGER
Balanced Laurie Carroll
Ron Gala
Capital Appreciation Fayez S. Sarofim
Russell B. Hawkins
Catherine P. Crain
Disciplined Stock Bert Mullins
Growth and Income Timothy Ghriskey
Richard Hoey
Douglas D. Ramos
International Equity Ronald Chapman
International Value Sandor Cseh
Limited Term High Income Michael Hoeh
Quality Bond Roger King
Zero Coupon 2000 Kevin M. McClintock
C. Matthew Olson
Gerald E. Thunelius
Money Market Bernard W. Kiernan, Jr.
Patricia A. Larkin
Thomas Riordan
Small Cap Hilary R. Woods
Paul Kandel
Small Company Stock James Wadsworth
Anthony J. Galise
Special Value Timothy M. Ghriskey
Kevin M. McClintock
Douglas D. Ramos
The Manager and Sarofim maintain research departments with
professional portfolio managers and securities analysts who provide research
services for the Fund and for other funds advised by the Manager or Sarofim. All
purchases and sales of each Portfolio are reported for the Board's 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 Portfolio's sub-investment adviser). The expenses borne by the
Fund include: organizational costs, taxes, interest, loan commitment fees,
dividends and interest on securities sold short, brokerage fees and commissions,
if any, fees of Board members who are not officers, directors, employees or
holders of 5% or more of the outstanding voting securities of the Manager or any
sub-investment adviser 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 Portfolio are charged against the assets of that Portfolio; other
expenses of the Fund are allocated among the Portfolios on the basis determined
by the Fund's Board, including, but not limited to, proportionately in relation
to the net assets of each Portfolio.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager, from time to time, may make payments from its
own assets to Participating Insurance Companies in connection with the provision
of certain administrative services to one or more Portfolios and/or to
purchasers of VA contracts or VLI policies. The Manager also may make such
advertising or promotional expenditures, using its own resources, as it from
time to time deems appropriate.
As compensation for its services, the Fund has agreed to pay the
Manager a monthly fee at the annual rate set forth below as a percentage of the
relevant Portfolio's average daily net assets. The effective annual rate of the
monthly investment advisory fee the Fund paid the Manager pursuant to any
undertaking in effect for the fiscal year ended December 31, 1998 as a
percentage of the relevant Portfolio's average daily net assets also is set
forth below:
<TABLE>
<CAPTION>
EFFECTIVE
ANNUAL
ANNUAL RATE RATE OF
OF INVESTMENT INVESTMENT
ADVISORY ADVISORY
NAME OF PORTFOLIO FEE PAYABLE FEE PAID
- ---------------- -------------- ----------
<S> <C>
Balanced Portfolio .75% %
Capital Appreciation Portfolio %
0 to $150 million of average daily net assets .55%
$150 million to $300 million of average daily net assets .50%
$300 million or more of average daily net assets .375%
Disciplined Stock Portfolio .75% %
Growth and Income Portfolio .75% %
International Equity Portfolio .75% %
International Value Portfolio 1.00% %
Limited Term High Income Portfolio .65% %
Money Market Portfolio .50% %
Quality Bond Portfolio .65% %
Small Cap Portfolio .75% %
Small Company Stock Portfolio .75% %
Special Value Portfolio .75% %
Zero Coupon 2000 Portfolio .45% %
</TABLE>
The fees paid by the Fund to the Manager with respect to each
Portfolio for the fiscal years ended December 31, 1996, 1997 and 1998 (to the
extent the Portfolio was operational) were as follows:
<TABLE>
<CAPTION>
Fee Paid For
Year Ended
December 31, 1996
PORTFOLIO ADVISORY FEE PAYABLE REDUCTION IN FEE NET FEE PAID
- --------- -------------------- ---------------- -------------
<S> <C> <C> <C>
Capital Appreciation $ 0 $ 398,748
Disciplined Stock* 55,091 17,101 37,990
Growth and Income 1,135,998 0 1,135,998
International Equity 130,616 0 130,616
International Value* 43,069 21,498 21,571
Money Market 258,755 0 258,755
Quality Bond 330,181 0 330,181
Small Cap 5,766,905 0 5,766,905
Small Company Stock* 36,492 13,463 23,029
Special Value 92,396 0 92,396
Zero Coupon 2000 128,717 0 128,717
- -----------------
* From April 30, 1996 (commencement of operations) through December 31, 1996.
</TABLE>
<TABLE>
<CAPTION>
Fee Paid For
Year Ended
December 31, 1997
PORTFOLIO ADVISORY FEE PAYABLE REDUCTION IN FEE NET FEE PAID
- --------- -------------------- ---------------- -------------
<S> <C> <C> <C>
Balanced* $ 164,386 $ 0 $ 164,386
Capital Appreciation 944,004 0 944,004
Disciplined Stock 243,138 0 243,138
Growth and Income 2,254,248 0 2,254,248
International Equity 246,938 0 246,938
International Value 136,687 0 136,687
Limited Term High 88,699 6,291 82,408
Income**
Money Market 304,681 0 304,681
Quality Bond 467,635 0 467,635
Small Cap 8,317,539 0 8,317,539
Small Company Stock 113,161 0 113,161
Special Value 250,293 0 250,293
Zero Coupon 2000 147,516 0 147,516
- -----------------
* From May 1997 (commencement of operations) through December 31, 1997.
** From April 30, 1997 (commencement of operations) through December 31, 1997.
</TABLE>
Fee Paid For
Year Ended
December 31, 1998
<TABLE>
<CAPTION>
PORTFOLIO ADVISORY FEE PAYABLE REDUCTION IN FEE NET FEE PAID
- --------- -------------------- ---------------- -------------
<S> <C> <C> <C>
Balanced $ $ $
Capital Appreciation $ $ $
Disciplined Stock $ $ $
Growth and Income $ $ $
International Equity $ $ $
International Value $ $ $
Limited Term High Income $ $ $
Money Market $ $ $
Quality Bond $ $ $
Small Cap $ $ $
Small Company Stock $ $ $
Special Value $ $ $
Zero Coupon 2000 $ $ $
</TABLE>
As compensation for Sarofim's services, the Fund has agreed to pay
Sarofim a monthly sub-advisory fee at the annual rate set forth below as a
percentage of the Capital Appreciation Portfolio's average daily net assets. The
effective annual rate of the monthly sub-investment advisory fee the Fund paid
Sarofim for the fiscal year ended December 31, 1998, as a percentage of the
Capital Appreciation Portfolio's average daily net assets also is set forth
below:
<TABLE>
<CAPTION>
EFFECTIVE
ANNUAL RATE OF ANNUAL RATE OF
SUB-INVESTMENT SUB-INVESTMENT
ADVISORY FEE ADVISORY
CAPITAL APPRECIATION PORTFOLIO PAYABLE FEE PAID
- ------------------------------ --------------- ----------------
<S> <C> <C>
0 to $150 million of average daily net assets .20% .20%
$150 million to $300 million of .25%
average daily net assets
$300 million or more of average daily .375%
net assets
</TABLE>
The fees payable by the Fund to Sarofim with respect to the Capital
Appreciation Portfolio for fiscal years ended December 31, 1996, 1997 and 1998
amounted to $145,000, $365,954 and $________, respectively.
The Manager (and, with respect to the Capital Appreciation Portfolio,
Sarofim) 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 Capital Appreciation Portfolio,
Sarofim), or the Manager (and, with respect to the Capital Appreciation
Portfolio, Sarofim) 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) is not subject to reduction as the value of a
Portfolio's assets increases.
THE DISTRIBUTOR. The Distributor, located at 60 State Street, Boston,
Massachusetts 02109, serves as the Fund's distributor on a best efforts basis
pursuant to an agreement which is renewable annually. The Distributor also acts
as distributor for the other funds in the Dreyfus Family of Funds and for
certain other investment companies.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN. Dreyfus
Transfer, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the Manager,
P.O. Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend agent. Under a transfer agency agreement with the Fund, the Transfer
Agent arranges for maintenance of shareholder account records for the Fund, the
handling of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses.
The Bank of New York, 90 Washington Street, New York, New York 10286,
serves as custodian of the Fund's investments with respect to International
Equity, International Value, Money Market and Special Value Portfolios. The Bank
of New York has no part in determining the investment policies of the Fund or
which securities are to be purchased or sold by the Fund.
Mellon Bank, N.A., the Manager's parent, One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, serves as the Fund's custodian with respect to
the Balanced, Capital Appreciation, Disciplined Stock, Growth and Income,
Limited Term High Income, Quality Bond, Small Cap, Small Company Stock and Zero
Coupon 2000 Portfolios. Under a custody agreement with the Fund, Mellon Bank,
N.A. holds each such Portfolio's securities and keeps all necessary accounts and
records. For its custody services, Mellon Bank, N.A. receives a monthly fee
based on the market value of each Portfolio's assets held in custody and
receives certain securities transaction charges.
HOW TO BUY SHARES
Fund shares currently are offered only to separate accounts of
Participating Insurance Companies. Individuals may not place purchase orders
directly with the Fund.
Separate accounts of the Participating Insurance Companies place
orders based on, among other things, the amount of premium payments to be
invested pursuant to VA contracts and VLI policies. See the prospectus of the
separate account of the 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
Portfolio determined on such business day if the orders are received by the Fund
in proper form and in accordance with applicable requirements on the next
business day and Federal Funds (monies of member banks within the Federal
Reserve System which are held on deposit at a Federal Reserve Bank) in the net
amount of such orders are received by the Fund on the next business day in
accordance with applicable requirements. It is each Participating Insurance
Company's responsibility to properly transmit purchase orders and Federal Funds
in accordance with applicable requirements. VA contract holders and VLI policy
holders should refer to the prospectus for their contracts or policies in this
regard.
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 floor of the New York Stock Exchange. Net asset value per share is computed
by dividing the value of the net assets of each Portfolio (i.e., the value of
its assets less liabilities) by the total number of such Portfolio's shares
outstanding. The Limited Term High Income, Quality Bond and Zero Coupon 2000
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 Balanced, Capital
Appreciation, Disciplined Stock, International Equity, International Value,
Growth and Income, Small Cap, Small Company Stock and Special Value 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
Portfolio's investments, see "Determination of Net Asset Value."
HOW TO REDEEM SHARES
Portfolio shares may be redeemed at any time by the separate accounts
of the Participating Insurance Companies. Individuals may not place redemption
orders directly with the Fund. Redemption requests from separate accounts based
on premiums and transaction requests received by the Participating Insurance
Company on a given business day in accordance with procedures established by the
Participating Insurance Company will be effected at the net asset value of the
applicable Portfolio determined on such business day if the requests are
received by the Fund in proper form and in accordance with applicable
requirements on the next business day. It is each Participating Insurance
Company's responsibility to properly transmit redemption requests in accordance
with applicable requirements. VA contract holders and VLI policy holders should
consult their Participating Insurance Company in this regard. The value of the
shares redeemed may be more or less than their original cost, depending on the
Portfolio's then-current net asset value. No charges are imposed by the Fund
when shares are redeemed.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in proper
form, except as provided by the rules of the Securities and Exchange Commission.
Should any conflict between VA contract holders and VLI policy holders
arise which would require that a substantial amount of net assets be withdrawn,
orderly portfolio management could be disrupted to the potential detriment of
such contract holders and policy holders.
REDEMPTION COMMITMENT. The Fund has committed to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of a Portfolio's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission and is a
fundamental policy, as to a Portfolio, which may not be changed without
shareholder approval of such Portfolio. In the case of requests for redemption
in excess of such amount, the Fund's Board reserves the right to make payments
in whole or part in securities or other assets of the Portfolio in case of an
emergency or any time a cash distribution would impair the liquidity of the
Portfolio to the detriment of the existing shareholders. In such event, the
securities would be valued in the same manner as the Portfolio's portfolio is
valued. If the recipient sold such securities, brokerage charges might 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
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 Portfolio 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 Portfolio's price
per share as computed for the purpose of purchases and redemptions at $1.00.
Such procedures include review of the Portfolio's portfolio holdings by the
Fund's Board, at such intervals as it deems appropriate, to determine whether
the Portfolio's 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 Fund's Board. If
such deviation exceeds 1/2%, the Board members promptly will consider what
action, if any, will be initiated. In the event the Board 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.
LIMITED TERM HIGH INCOME, QUALITY BOND AND ZERO COUPON 2000
PORTFOLIOS. Substantially all of each Portfolio's investments are valued each
business day by an independent pricing service (the "Service") approved by the
Fund's Board. 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.
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
Portfolio, 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.
BALANCED, CAPITAL APPRECIATION, DISCIPLINED STOCK, GROWTH AND INCOME,
INTERNATIONAL EQUITY, INTERNATIONAL VALUE, SMALL CAP, SMALL COMPANY STOCK AND
SPECIAL VALUE PORTFOLIOS. Each Portfolio's 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 Portfolio's 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 Board members generally will take the following factors into
consideration: restricted securities which are, or are convertible into,
securities of the same class of securities for which a public market exists
usually will be valued at market value less the same percentage discount at
which purchased. This discount will be revised periodically by the Fund's Board
if the Board members believe that it no longer reflects the value of the
restricted securities. Restricted securities not of the same class as securities
for which a public market exists usually will be valued initially at cost. Any
subsequent adjustment from cost will be based upon considerations deemed
relevant by the Fund's Board.
NEW YORK STOCK EXCHANGE CLOSINGS. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Management believes that each Portfolio has qualified as a "regulated
investment company" under the Code for the fiscal year ended December 31, 1998.
Each Portfolio intends to continue to so qualify if such qualification is in the
best interests of its shareholders. As a regulated investment company, each
Portfolio will pay no Federal income tax on net investment income and net
realized securities gains to the extent that such income and gains are
distributed to shareholders in accordance with applicable provisions of the
Code. To qualify as a regulated investment company, the Portfolio must
distribute at least 90% of its net income (consisting of net investment income
and net short-term capital gain) to its shareholders, and meet certain asset
diversification and other requirements. If a Portfolio did not qualify as a
regulated investment company, it would be treated for tax purposes as an
ordinary corporation subject to Federal income tax. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency.
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 under "Dividends and
Taxes" in the Prospectus. In addition, the Code provides that if a shareholder
holds shares of the Portfolio 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 of the
Code. Finally, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section 1258
of the Code. "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 Portfolio
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 Portfolio's taxable year will be treated as sold for their then
fair market value, resulting in additional gain or loss to the Portfolio
characterized in the manner described above.
Offsetting positions held by a Portfolio involving financial futures
and options transactions may be considered, for tax purposes, to 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, override or modify
the provisions of Sections 988 and 1256 of the Code. 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 Portfolio were treated as entering into straddles by reason of
its engaging in 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
Portfolio may make one or more elections with respect to "mixed straddles."
Depending upon which election is made, if any, the results to the Portfolio may
differ. If no election is made, to the extent the straddle rules apply to
positions established by the Portfolio, losses realized by the Portfolio 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.
The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally will apply if the Fund either (1) holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests ("appreciated financial position") and then enters into a short sale,
futures or forward contract, offsetting notional principal contract or other
transaction described in Treasury regulations to be issued in the future
(collectively, a "Contract") with respect to the same or substantially identical
property or (2) holds an appreciated financial position that is a Contract and
then acquires property that is the same as, or substantially identical to, the
underlying property. In each instance, with certain exceptions, the Fund
generally will be taxed as if the appreciated financial position were sold at
its fair market value on the date the Fund enters into the financial position or
acquires the property, respectively. Transactions that are identified hedging or
straddle transactions under other provisions of the Code can be subject to the
constructive sale provisions.
Investment by a Portfolio 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 Portfolio to
recognize income prior to the receipt of cash payments. For example, the
Portfolio 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 Portfolio may have to dispose of
securities which it might otherwise have continued to hold in order to generate
cash to satisfy these distribution requirements.
Under the Code, each Portfolio of the Fund is treated as a separate
entity for purposes of qualification and taxation as a regulated investment
company. Each Portfolio 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 Portfolio 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 by a Participating Insurance Company. 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.
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
Portfolio satisfies certain conditions, a segregated asset account owning shares
of the Portfolio will be treated as owning multiple investments consisting of
the account's proportionate share of each of the assets of the Portfolio. Each
Portfolio intends to satisfy the requisite conditions so that the shares of the
Portfolio owned by a segregated asset account of a Participating Insurance
Company will be treated as multiple investments. By meeting these and other
requirements, the Participating Insurance Companies, rather than VA contract
holders or VLI holders, should be subject to tax on distributions received with
respect to Portfolio shares. The tax treatment on distributions made to a
Participating Insurance Company will depend on the Participating Insurance
Company's tax status.
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 Portfolio's sub-
investment adviser) to supplement its own research and analysis with the views
and information of other securities firms and may be selected based upon their
sales of shares of funds advised by the Manager or its affiliates.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager (or, if applicable, the
Portfolio's sub-investment adviser) in advising other funds or accounts and,
conversely, research services furnished to the Manager (or, if applicable, the
Portfolio's sub-investment adviser) by brokers in connection with other funds or
accounts may be used in advising a Portfolio. Although it is not possible to
place a dollar value on these services, it is the opinion of the Manager (and,
if applicable, the Portfolio's sub-investment adviser) that the receipt and
study of such services should not reduce the overall research department
expenses.
The Fund contemplates that, consistent with the policy of obtaining
the most favorable net price, brokerage transactions may be conducted through
the Manager or its affiliates, including Dreyfus Investment Services
Corporation. The Fund's Board has adopted procedures, with respect to the
Disciplined Stock Portfolio, in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to the Manager or its affiliates are
reasonable and fair.
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
Portfolio 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, 1996, 1997 and 1998. There were no
concessions on principal transactions for the fiscal years ended December 31,
1996, 1997 and 1998.
BALANCED, CAPITAL APPRECIATION, DISCIPLINED STOCK, GROWTH AND INCOME,
INTERNATIONAL EQUITY, INTERNATIONAL VALUE, LIMITED TERM HIGH INCOME, SMALL CAP,
SMALL COMPANY STOCK AND SPECIAL VALUE 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 Portfolio's 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, 1996, 1997 and 1998 (except as otherwise
indicated), each Portfolio indicated below paid brokerage commissions and, where
determinable, concessions on principal transactions, none of which was paid to
the Distributor, in the following amounts:
<TABLE>
<CAPTION>
NAME OF PORTFOLIO BROKERAGE COMMISSIONS PAID CONCESSIONS ON PRINCIPAL TRANSACTIONS
- ----------------- -------------------------- --------------------------------------
1996 1997 1998 1996 1997 1998
---------- ---------- ---------- ---------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balanced N/A $ 36,932(4) $ N/A $ 5,005 $
Capital Appreciation $ 44,129 106,432 $ 5,460 9,391
Disciplined Stock 20,541(1,2) 71,669(3) -0-(1) -0-
Growth and Income 897,148 172,388 2,330,734 928,323
International Equity 240,958 327,207 47,150 78,064
International Value 35,327(1) 47,303 -0-(1) -0-
Small Cap 1,990,723 1,722,729 6,498,223 3,192,427
Small Company Stock 12,888(1) 39,015 519(1) -0-
Special Value 78,823 308,466 -0- 56,309
- -----------------
(1) From April 30, 1996 (commencement of operations) through December 31, 1996.
(2) $7,143 was paid to Dreyfus Investment Services Corporation, a subsidiary of
Mellon Bank Corporation. This amount represents approximately 35% of the
aggregate brokerage commissions paid by the Portfolio for transactions
involving approximately 37% of the aggregate dollar value of transactions
for which the Portfolio paid brokerage commissions.
(3) $29,358 was paid to Dreyfus Investment Services Corporation, a subsidiary
of Mellon Bank Corporation. This amount represented approximately 41% of
the aggregate brokerage commissions paid by the Portfolio for transactions
involving approximately 47% of the aggregate dollar value of transactions
for which the Portfolio paid brokerage commissions
(4) From May 1, 1997 (commencement of operations) through December 31, 1997.
</TABLE>
The aggregate amount of transactions during the last fiscal year in
securities effected on an agency basis through a broker for, among other things,
research services, and the commissions and concessions related to such
transactions were as follows:
PORTFOLIO TRANSACTION AMOUNT COMMISSIONS AND CONCESSIONS
- --------- ----------------- ---------------------------
Capital Appreciation $ $
Growth and Income
Small Cap
Special Value
YIELD AND 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.
The yield and effective yield for the seven-day period ended December
31, 1998 for the following Portfolio was:
PORTFOLIO YIELD EFFECTIVE YIELD
--------- ----- ---------------
Money Market % %
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 Portfolio's
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. You should remember that yield is a function of the type and quality of
the instruments in the portfolio, portfolio maturity and operating expenses.
Your principal in the Fund is not guaranteed. See "Determination of Net Asset
Value" for a discussion of the manner in which the Portfolio's price per share
is determined.
The current yields for the 30-day period ended December 31, 1998 for
each of the following Portfolios was:
SERIES CURRENT YIELD
------ -------------
Quality Bond %
Zero Coupon 2000 %
The current yield for the 30-day period ended December 31, 1998 for
the following Portfolio was:
PORTFOLIO CURRENT YIELD
--------- -------------
Limited Term High Income %
Current yield is computed pursuant to a formula which operates as
follows: The amount of the relevant Portfolio's expenses accrued for the 30-day
period (net of reimbursements) is subtracted from the amount of the dividends
and interest earned (computed in accordance with regulatory requirements) by
such Portfolio during the period. That result is then divided by the product of:
(a) the average daily number of such Portfolio's shares outstanding during the
period that were entitled to receive dividends, and (b) the net asset value per
share on the last day of the period less any undistributed earned income per
share reasonably expected to be declared as a dividend shortly thereafter. The
quotient is then added to 1, and that sum is raised to the 6th power, after
which 1 is subtracted. The current yield is then arrived at by multiplying the
result by 2.
The average annual total return for the periods indicated for each of
the following Portfolios was:
<TABLE>
<CAPTION>
1-YEAR PERIOD 5-YEAR PERIOD 8.34 YEAR PERIOD
SERIES ENDED DECEMBER 31, 1998 ENDED DECEMBER 31, 1998 ENDED DECEMBER 31, 1998
- ------ ----------------------- ------------------------ ------------------------
<S> <C> <C> <C>
Quality Bond % % %
Small Cap % % %
Special Value % % %
Zero Coupon % % %
</TABLE>
<TABLE>
<CAPTION>
1-YEAR PERIOD 5-YEAR PERIOD 5.75-YEAR PERIOD
ENDED DECEMBER 31, 1998 ENDED DECEMBER 31, 1998 ENDED DECEMBER 31, 1998
----------------------- ----------------------- -----------------
<S> <C> <C> <C>
Capital % % %
Appreciation
</TABLE>
<TABLE>
<CAPTION>
1-YEAR PERIOD 4.67-YEAR PERIOD
ENDED DECEMBER 31, 1998 ENDED DECEMBER 31, 1998
---------------------- ---------------------------
<S> <C> <C>
Growth and Income % %
International Equity % %
</TABLE>
<TABLE>
<CAPTION>
1-YEAR PERIOD 2.67-YEAR PERIOD
ENDED DECEMBER 31, 1998 ENDED DECEMBER 31, 1998
------------------------ ------------------------
<S> <C> <C>
Disciplined Stock % %
International Value % %
Small Company Stock % %
</TABLE>
<TABLE>
<CAPTION>
1-YEAR PERIOD 1.67-YEAR PERIOD
ENDED DECEMBER 31, 1998 ENDED DECEMBER 31, 1998
----------------------- -----------------------
<S> <C> <C>
Balanced % %
Limited Term High % %
Income
</TABLE>
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. Computations of average annual total return for
periods of less than one year represent an annualization of the Series' actual
total return.
Total return for each of the following Portfolios for the period indicated was:
AUGUST 31, 1990 (COMMENCEMENT OF INVESTMENT
PORTFOLIO OPERATIONS) TO DECEMBER 31, 1998
- --------- --------------------------------------------
Quality Bond %
Small Cap %
Special Value %
Zero Coupon 2000 %
APRIL 5, 1993 (COMMENCEMENT OF INVESTMENT OPERATIONS) TO DECEMBER 31,
1998
Capital %
Appreciation
MAY 2, 1994 (COMMENCEMENT OF INVESTMENT OPERATIONS) TO DECEMBER 31,
1998
Growth and Income %
International Equity %
MAY 1, 1996 (COMMENCEMENT OF INVESTMENT OPERATIONS) TO DECEMBER 31,
1998
Disciplined Stock %
International Value %
Small Company Stock %
APRIL 30, 1998 (COMMENCEMENT OF INVESTMENT OPERATIONS) TO DECEMBER
31, 1998
Limited Term High Income %
MAY 1, 1998 (COMMENCEMENT OF INVESTMENT OPERATIONS) TO DECEMBER 31,
1998
Balanced %
Total return is calculated by subtracting the amount of the relevant
Portfolio's net asset value per share at the beginning of a stated period from
the net asset value per share at the end of the period (after giving effect to
the reinvestment of dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning of the period.
Performance will vary from time to time and past results are not
necessarily representative of future results. You 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
Portfolio 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 Portfolio should be distinguished
from the rate of return of a corresponding sub-account or investment division of
a separate account of a Participating Insurance Company, which rate will reflect
the deduction of additional charges, including mortality and expense risk
charges, and will therefore be lower. Variable annuity contract holders and
variable life insurance policy holders should consult the prospectus for their
contract or policy.
Calculations of the Portfolio's yield or performance information may
reflect absorbed expenses pursuant to any undertaking that may be in effect.
Comparative performance information may be used from time to time in advertising
a Portfolio's shares, including data from the Consumer Price Index, Lipper
Analytical Services, Inc., IBC's Money Fund Report(TM), Money Magazine, Bank
Rate Monitor(TM), N. Palm Beach, Fla. 33408, Standard & Poor's 500 Composite
Stock Price Index, Standard & Poor's MidCap 400 Index, Russell 2500(TM) Index,
Morgan Stanley Capital International World Index, the Dow Jones Industrial
Average, Moody's Bond Survey Bond Index, Lehman Brothers Intermediate
Government/Corporate Bond Index, Morningstar, Inc., Value Line Mutual Fund
Survey and other industry publications.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic or financial conditions, developments
and/or events. Advertising materials for the Fund also may refer to Morningstar
ratings and related analyses supporting the rating, and may refer to, or
include, commentary by the Fund's portfolio managers relating to their
investment strategy, asset growth of the Portfolio, current or past business,
political, economic or financial conditions and other matters of general
interest to shareholders.
INFORMATION ABOUT THE FUND
Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.
Under Massachusetts law, shareholders, under certain circumstances,
could be held personally liable for the obligations of the Fund. However, the
Fund's Trust Agreement ("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
Portfolio's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Portfolio. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Portfolio itself would be unable to meet
its obligations, a possibility which management believes is remote. Upon payment
of any liability incurred by the Portfolio, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the
Portfolio. 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 Portfolio.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for a Portfolio to hold annual meetings of shareholders. As a result,
Portfolio shareholders may not consider each year the election of Board members
or the appointment of auditors. However, the holders of at least 10% of the
shares outstanding and entitled to vote may require the Fund to hold a special
meeting of shareholders for purposes of removing a Board member from office.
Shareholders may remove a Board member by the affirmative vote of two-thirds of
the Fund's outstanding voting shares. In addition, the Board will call a meeting
of shareholders for the purpose of electing Board members if, at any time, less
than a majority of the Board members then holding office have been elected by
shareholders.
The Fund is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for certain
matters under the 1940 Act and for other purposes. A shareholder of one
portfolio is not deemed to be a shareholder of any other portfolio. For certain
matters shareholders vote together as a group; as to others they vote separately
by portfolio.
To date, the Board has authorized the creation of thirteen Portfolios
of shares. All consideration received by the Fund for shares of one of the
Portfolios, and all assets in which such consideration is invested, will belong
to that Portfolio (subject only to the rights of creditors of the Fund) and will
be subject to the liabilities related thereto. The income attributable to, and
the expenses of, one Portfolio would be treated separately from those of the
other Portfolios. The Fund has the ability to create, from time to time, new
series without shareholder approval.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of any investment
company, such as the Fund, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each 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.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent 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.
CC
Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual default of interest and/or
principal payments. Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or reorganization of
the obligor. DDD represents the highest potential for recovery on these bonds
and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category.
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
DUFF
BOND RATINGS
AAA
Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
A
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
BBB
Bonds rated BBB are considered to have below average protection
factors but still considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
BB
Bonds rated BB are below investment grade but are deemed by Duff as
likely to meet obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company fortunes. Overall
quality may move up or down frequently within the category.
B
Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating within
this category or into a higher or lower quality rating grade.
CCC
Bonds rated CCC are well below investment grade securities. Such bonds
may be in default or have considerable uncertainty as to timely payment of
interest, preferred dividends and/or principal. Protection factors are narrow
and risk can be substantial with unfavorable economic or industry conditions
and/or with unfavorable company developments.
DD
Defaulted debt obligations. Issuer has failed to meet scheduled
principal and/or interest payments.
Plus (+) and minus (-) signs are used with a rating symbol (except
AAA) to indicate the relative position of a credit within the rating category.
COMMERCIAL PAPER RATING
The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor.
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits
- ------- ----------
(a) Registrant's Agreement and Declaration of Trust and Articles of
Amendment are incorporated by reference to Exhibit (1) of
Post-Effective Amendment No. 13 to the Registration Statement on Form
N-1A, filed on April 19, 1995.
(b) Registrant's By-Laws, as amended, are incorporated by reference to
Exhibit (2) of Post-Effective Amendment No. 20 to the Registration
Statement on Form N-1A, filed on September 20, 1997.
(d)(1) Investment Advisory Agreement is incorporated by reference to Exhibit
(5)(a) of Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A, filed on April 17, 1997.
(d)(2) Sub-Investment Advisory Agreement is incorporated by reference to
Exhibit (5)(c) of Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A, filed on April 19, 1995.
(e) Distribution Agreement, as revised, is incorporated by reference to
Exhibit (6) of Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A, filed on April 17, 1997.
(g)(1) Custody Agreement between the Registrant and The Bank of New York is
incorporated by reference to Exhibit 8(a) of Post-Effective Amendment
No. 13 to the Registration Statement on Form N-1A, filed on April 19,
1995.
(g)(2) Custody Agreement between the Registrant and Mellon Bank, N.A. is
incorporated by reference to Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A, filed on October 25, 1996.
(i) Opinion and consent of Registrant's counsel is incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A, filed on April 19, 1995.
(j) Consent of Independent Auditors.*
(n) Financial Data Schedule.*
- ----------------
* To be filed by amendment.
Other Exhibits
--------------
(a) Powers of Attorney of the Board members and officers.
(b) Certificate of Secretary.
Item 24. Persons Controlled by or under Common Control with Registrant.
- ------- --------------------------------------------------------------
Not Applicable
Item 25. Indemnification
- ------- ---------------
The Statement as to the general effect of any contract, arrangements
or statute under which a director, officer, underwriter or affiliated
person of the Registrant is insured or indemnified in any manner
against any liability which may be incurred in such capacity, other
than insurance provided by any director, officer, affiliated person or
underwriter for their own protection, is incorporated by reference to
Item 27 of Part II of Pre-Effective Amendment No. 7 to the
Registration Statement on Form N-1A, filed on July 10, 1990.
Reference is also made to the Distribution Agreement attached as
Exhibit (6) of Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A, filed on April 17, 1997.
Item 26. Business and Other Connections of Investment Adviser.
- ------- ----------------------------------------------------
The Dreyfus Corporation ("Dreyfus") and subsidiary companies comprise
a financial service organization whose business consists primarily of
providing investment management services as the investment adviser and
manager for sponsored investment companies registered under the
Investment Company Act of 1940 and as an investment adviser to
institutional and individual accounts. Dreyfus also serves as sub-
investment adviser to and/or administrator of other investment
companies. Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, serves primarily as a registered broker-dealer. Dreyfus
Investment Advisors, Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans, institutions
and individuals.
<TABLE>
<CAPTION>
Officers and Directors of Investment Adviser
<S> <C> <C> <C>
Name and Position
With Dreyfus Other Businesses Position Held Dates
Christopher M. Condron Mellon Preferred Director 3/96 - 11/96
Chairman of the Board and Capital Corporation*
Chief Executive Officer
TBCAM Holdings, Inc.* President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Chairman 1/98 - 6/98
Asset Management, LLC* President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Chief Executive Officer 4/95 - 4/97
Pareto Partners Partner Representative 11/95 - 5/97
271 Regent Street
London, England W1R 8PP
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Franklin Portfolio
Associates Trust* Trustee 9/95 - 1/97
Certus Asset Advisors Corp.**
Director 6/95 - Present
The Boston Company of Director 6/95 - 4/96
Southern California Chief Executive Officer 6/95 - 4/96
Los Angeles, CA
Mellon Capital Management Director 5/95 - Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 -1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc.* Director 5/95 - Present
President 5/95 - Present
Access Capital Strategies Corp. Director 5/95 - 1/97
124 Mount Auburn Street
Suite 200 North
Cambridge, MA 02138
Mellon Bank, N.A. + Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - Present
Mellon Bank Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
The Boston Company Financial Director 4/94- 8/96
Services, Inc.* President 4/94 - 8/96
The Boston Company, Inc.* Vice Chairman 1/94 - Present
Director 5/93 - Present
Laurel Capital Advisors, LLP+ Exec. Committee 1/98 - Present
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Chairman 3/93 - 2/96
Company of CA Chief Executive Officer 6/93 - 2/96
Los Angeles, CA Director 6/89 - 2/96
MY, Inc.* President 9/91 - 3/96
Director 9/91 - 3/96
Reco, Inc.* President 8/91 - 11/96
Director 8/91 - 11/96
Boston Safe Deposit and Trust Director 6/89 - 2/96
Company of NY
New York, NY
Boston Safe Deposit and Trust President 9/89 - 6/96
Company* Director 5/93 -Present
The Boston Company Financial President 6/89 - Present
Strategies, Inc. * Director 6/89 - Present
The Boston Company Financial President 6/89 - 1/97
Strategies Group, Inc. * Director 6/89- 1/97
Mandell L. Berman Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
Burton C. Borgelt DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Bank Corporation+ Director 6/91 - Present
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Inc. Director 2/81 - Present
570 West College Avenue Chief Executive Officer 2/81 - 12/96
York, PA Chairman 3/89 - 1/96
Stephen E. Canter Dreyfus Investment Chairman of the Board 1/97 - Present
President, Chief Operating Advisors, Inc.++ Director 5/95 - Present
Officer, Chief Investment President 5/95 - Present
Officer, and Director
Founders Asset Management, LLC Acting Chief Executive 7/98 - 12/98
2930 East Third Ave. Officer
Denver, CO 80206
The Dreyfus Trust Company+++ Director 6/95 - Present
Thomas F. Eggers Dreyfus Service Corporation++ Executive Vice President 4/96 - Present
Vice Chairman - Institutional Director 9/96 - Present
and Director
Steven G. Elliott Mellon Bank Corporation+ Senior Vice Chairman 1/99 - Present
Director Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
Treasurer 1/90 - 5/98
Mellon Bank, N.A.+ Senior Vice Chairman 3/98 - Present
Vice Chairman 6/92 - 3/98
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Corporation Controller 10/90 - Present
500 Grant Street Director 9/88 - Present
Pittsburgh, PA 15258 Vice President 9/88 - Present
Treasurer 9/88 - Present
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Financial Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+ Chairman 7/89 - 11/97
President 4/88 - 11/97
Chief Executive Officer 4/88 - 11/97
Mellon International Investment Director 9/89 - 8/97
Corporation+
Mellon Financial Services Treasurer 12/87 - Present
Corporation # 5+
Lawrence S. Kash Dreyfus Investment Director 4/97 - Present
Vice Chairman Advisors, Inc.++
And Director
Dreyfus Brokerage Services, Inc. Chairman 11/97 - Present
401 North Maple Ave. Chief Executive Officer 11/97 - Present
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - Present
President 9/96 - Present
Dreyfus Precious Metals, Inc.++ + Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - Present
Organization, Inc.++ President 1/97 - Present
Executive Vice President 12/94 - 1/97
Seven Six Seven Agency, Inc. ++ Director 1/97 - Present
Dreyfus Insurance Agency of Chairman 5/97 - Present
Massachusetts, Inc.++++ President 5/97 - Present
Director 5/97 - Present
The Dreyfus Trust Company+++ Chairman 1/97 - Present
President 2/97 - Present
Chief Executive Officer 2/97 - Present
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - Present
Corporation++ President 5/97 - Present
Director 12/94 - Present
The Boston Company Advisors* Chairman 8/93 - 11/95
The Boston Company Advisors, Chairman 12/95 - Present
Inc. Chief Executive Officer 12/95 - Present
Wilmington, DE President 12/95 - Present
Cornice Acquisition Board of Managers 12/97 - Present
Company, LLC
Denver, CO
The Boston Company, Inc.* Director 5/93 - Present
President 5/93 - Present
Mellon Bank, N.A.+ Executive Vice President 2/92 - Present
Laurel Capital Advisors, LLP+ President 12/91 - Present
Executive Committee 12/91 - Present
Member
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Martin G. McGuinn Mellon Bank Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
Mellon Financial Vice President 9/86 - 10/97
Corporation (MD)
Rockville, Maryland
J. David Officer Dreyfus Service Corporation++ Executive Vice President 5/98 - Present
Vice Chairman
And Director Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
North Miami Beach, FL 33180
Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - Present
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - Present
Services, Inc.* Director 8/96 - Present
Boston Safe Deposit and Trust Director
Company* President 7/96 - Present
Executive Vice President 7/96 - 1/99
1/91 - 7/96
Mellon Trust of New York Director
1301 Avenue of the Americas 6/96 - Present
New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon Bank, N.A.+ Executive Vice President 2/94 - Present
Mellon United National Bank Director 3/98 - Present
1399 SW 1st Ave., Suite 400
Miami, Florida
Boston Group Holdings, Inc.* Director 12/97 - Present
Dreyfus Financial Services Corp. + Director 9/96 - Present
Dreyfus Investment Services Director 4/96 - Present
Corporation+
Richard W. Sabo Founders Asset Management LLC President 12/98 - Present
Director 2930 East Third Avenue Chief Executive Officer 12/98 - Present
Denver, CO. 80206
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
Richard F. Syron American Stock Exchange Chairman 4/94 - Present
Director 86 Trinity Place Chief Executive Officer 4/94 - Present
New York, NY 10006
Ronald P. O'Hanley Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Vice Chairman
TBCAM Holdings, Inc.* Chairman 6/98 - Present
Director 10/97 - Present
The Boston Company Asset Chairman 6/98 - Present
Management, LLC* Director 1/98 - 6/98
The Boston Company Asset Director 2/97 - 12/97
Management, Inc. *
Boston Safe Advisors, Inc. * Chairman 6/97 - Present
Director 2/97 - Present
Pareto Partners Partner Representative 5/97 - Present
271 Regent Street
London, England W1R 8PP
Mellon Capital Management Director 5/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon Equity Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon-France Corporation+ Director 3/97 - Present
Laurel Capital Advisors+ Trustee 3/97 - Present
McKinsey & Company, Inc. Partner 8/86 - 2/97
Boston, MA
Mark N. Jacobs Dreyfus Investment Director 4/97 -Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Lion Management, Inc.++ Director 1/88 - 10/96
Vice President 1/88 - 10/96
Secretary 1/88 - 10/96
The Dreyfus Consumer Credit Secretary 4/83 - 3/96
Corporation++
Dreyfus Service Director 3/97 - Present
Organization, Inc.++ Assistant Secretary 4/83 -3/96
Major Trading Corporation++ Assistant Secretary 5/81 - 8/96
William H. Maresca The Dreyfus Trust Company+++ Director 3/97 - Present
Controller
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Dreyfus Consumer Credit Corp.++ Treasurer 10/98 - Present
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, DE 19808
The TruePenny Corporation++ Vice President 10/98 - Present
Dreyfus Precious Metals, Inc.+++ Treasurer 10/98 - 12/98
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Corporation++ Vice President 10/98 - Present
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Assistant Treasurer 3/93 - Present
Organization, Inc.++
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
William T. Sandalls, Jr. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - Present
Treasurer 1/96 - 2/97
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97 - 12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
Wilmington, DE 19808
Dreyfus Acquisition Corporation++ Director VP and CFO 1/96 - 8/96
Vice President 1/96 - 8/96
Chief Financial Officer 1/96 - 8/96
Lion Management, Inc.++ Director 1/96 - 10/96
President 1/96 - 10/96
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
Dreyfus Partnership President 1/97 - 6/97
Management, Inc.++ Director 1/96 - 6/97
Dreyfus Service Organization, Director 1/96 - 6/97
Inc.++ Executive Vice President 1/96 - 6/97
Treasurer 10/96 - Present
Dreyfus Insurance Agency of Director 5/97 - Present
Massachusetts, Inc.++++ Treasurer 5/97 - Present
Executive Vice President 5/97 - Present
Major Trading Corporation++ Director 1/96 - 8/96
Treasurer 1/96 - 8/96
The Dreyfus Trust Company+++ Director 1/96 - 4/97
Treasurer 1/96 - 4/97
Chief Financial Officer 1/96 - 4/97
Dreyfus Personal Director 1/96 - 4/97
Management, Inc.++ Treasurer 1/96 - 4/97
Patrice M. Kozlowski None
Vice President - Corporate
Communications
Mary Beth Leibig None
Vice President -
Human Resources
Andrew S. Wasser Mellon Bank Corporation+ Vice President 1/95 - Present
Vice President -
Information Systems
Theodore A. Schachar Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
Dreyfus Investment Advisors, Inc.++ Vice President - Tax 10/96 - Present
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Inc.++ Vice President - Tax 10/96 - Present
Wendy Strutt None
Vice President
Richard Terres None
Vice President
James Bitetto The TruePenny Corporation++ Secretary 9/98 - Present
Assistant Secretary
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
Steven F. Newman Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
- -------------------------------
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ The address of the business so indicated is 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
++++The address of the business so indicated is 53 State Street, Boston, Massachusetts 02109
</TABLE>
<PAGE>
Item 27. Principal Underwriters
- -------- ----------------------
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management Funds
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Debt and Equity Funds
28) Dreyfus Index Funds, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Preferred Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Funds, Inc.
35) Dreyfus Investment Grade Bond Funds, Inc.
36) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds, Inc.
38) The Dreyfus/Laurel Funds Trust
39) The Dreyfus/Laurel Tax-Free Municipal Funds
40) Dreyfus LifeTime Portfolios, Inc.
41) Dreyfus Liquid Assets, Inc.
42) Dreyfus Massachusetts Intermediate Municipal Bond Fund
43) Dreyfus Massachusetts Municipal Money Market Fund
44) Dreyfus Massachusetts Tax Exempt Bond Fund
45) Dreyfus MidCap Index Fund
46) Dreyfus Money Market Instruments, Inc.
47) Dreyfus Municipal Bond Fund, Inc.
48) Dreyfus Municipal Cash Management Plus
49) Dreyfus Municipal Money Market Fund, Inc.
50) Dreyfus New Jersey Intermediate Municipal Bond Fund
51) Dreyfus New Jersey Municipal Bond Fund, Inc.
52) Dreyfus New Jersey Municipal Money Market Fund, Inc.
53) Dreyfus New Leaders Fund, Inc.
54) Dreyfus New York Insured Tax Exempt Bond Fund
55) Dreyfus New York Municipal Cash Management
56) Dreyfus New York Tax Exempt Bond Fund, Inc.
57) Dreyfus New York Tax Exempt Intermediate Bond Fund
58) Dreyfus New York Tax Exempt Money Market Fund
59) Dreyfus U.S. Treasury Intermediate Term Fund
60) Dreyfus U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Premier California Municipal Bond Fund
66) Dreyfus Premier Equity Funds, Inc.
67) Dreyfus Premier International Funds, Inc.
68) Dreyfus Premier GNMA Fund
69) Dreyfus Premier Worldwide Growth Fund, Inc.
70) Dreyfus Premier Municipal Bond Fund
71) Dreyfus Premier New York Municipal Bond Fund
72) Dreyfus Premier State Municipal Bond Fund
73) Dreyfus Premier Value Fund
74) Dreyfus Short-Intermediate Government Fund
75) Dreyfus Short-Intermediate Municipal Bond Fund
76) The Dreyfus Socially Responsible Growth Fund, Inc.
77) Dreyfus Stock Index Fund, Inc.
78) Dreyfus Tax Exempt Cash Management
79) The Dreyfus Third Century Fund, Inc.
80) Dreyfus Treasury Cash Management
81) Dreyfus Treasury Prime Cash Management
82) Dreyfus Variable Investment Fund
83) Dreyfus Worldwide Dollar Money Market Fund, Inc.
84) Founders Funds, Inc.
85) General California Municipal Bond Fund, Inc.
86) General California Municipal Money Market Fund
87) General Government Securities Money Market Fund, Inc.
88) General Money Market Fund, Inc.
88) General Municipal Bond Fund, Inc.
90) General Municipal Money Market Funds, Inc.
91) General New York Municipal Bond Fund, Inc.
92) General New York Municipal Money Market Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
- ------------------ --------------------------- -------------
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Chief Treasurer
Compliance Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Jean M. O'Leary+ Assistant Vice President, None
Assistant Secretary and
Assistant Clerk
William J. Nutt+ Chairman of the Board None
Michael S. Petrucelli++ Senior Vice President Vice President,
Assistant
Treasurer, and
Assistant Secretary
Patrick W. McKeon+ Vice President None
Joseph A. Vignone+ Vice President None
- --------------------------------
+ Principal business address is 60 State Street, Boston, Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
<PAGE>
Item 28. Location of Accounts and Records
- ------- --------------------------------
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
3. The Bank of New York
90 Washington Street
New York, New York 10286
4. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
5. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 29. Management Services
- ------- -------------------
Not Applicable
Item 30. Undertakings
- ------- ------------
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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
25th day of February, 1999.
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 date indicated.
Signature Title Date
- -------------------------- ------------------- ----------
/s/ Marie E. Connolly* President and Treasurer (Principal 2/25/99
- --------------------- Executive Officer)
Marie E. Connolly
/s/ Joseph F. Tower, III* Vice President and Assistant 2/25/99
- ------------------------ Treasurer (Principal Financial
Joseph F. Tower, III and Accounting Officer)
/s/ Joseph S. DiMartino* Chairman of the Board 2/25/99
- ------------------------
Joseph S. DiMartino
/s/ David P. Feldman* Board Member 2/25/99
- --------------------------
David P. Feldman
/s/ John M. Fraser, Jr.* Board Member 2/25/99
- --------------------------
John M. Fraser, Jr.
/s/ Robert R. Glauber* Board Member 2/25/99
- --------------------------
Robert R. Glauber
/s/ James F. Henry* Board Member 2/25/99
- --------------------------
James F. Henry
/s/ Rosalind Gersten Jacobs* Board Member 2/25/99
- --------------------------
Rosalind Gersten Jacobs
/s/ Irving Kristol* Board Member 2/25/99
- --------------------------
Irving Kristol
/s/ Dr. Paul A. Marks* Board Member 2/25/99
- --------------------------
Dr. Paul A. Marks
/s/ Dr. Martin Peretz* Board Member 2/25/99
- --------------------------
Dr. Martin Peretz
/s/ Bert W. Wasserman* Board Member 2/25/99
- --------------------------
Bert W. Wasserman
*BY: /s/ Stephanie Pierce
----------------------------------
Stephanie Pierce
Attorney-in-Fact
<PAGE>
Post-Effective Amendment No. 23 to
Registration Statement on Form N-1A under
the Securities Act of 1933 and
the Investment Company Act of 1940
--------------------------------------
EXHIBITS
--------------------------------------
<PAGE>
INDEX TO EXHIBITS
PAGE
Other Exhibits
(a) Power of Attorney
(b) Certificate of Secretary
POWER OF ATTORNEY
The undersigned hereby constitute and appoint, Margaret W. Chambers, Marie
E. Connolly, Christopher J. Kelley, Kathleen K. Morrisey, Michael S. Petrucelli,
Stephanie Pierce and Elba Vasquez, and each of them, with full power to act
without the other, his or her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him or her, and in his or her
name, place and stead, in any and all capabiities (until revoked in writing) to
sign any and all amendments to the Registration Statement of Dreyfus Variable
Investment Fund (including post-effective amendments and amendments thereto),
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Joseph S. DiMartino June 8, 1998
Joseph S. DiMartino
/s/ David P. Feldman June 8, 1998
David P. Feldman
/s/ John M. Fraser, Jr. June 8, 1998
John M. Fraser, Jr.
/s/ Robert S. Glauber June 8, 1998
Robert S. Glauber
/s/ James F. Henry June 8, 1998
James F. Henry
/s/ Rosalind Gersten Jacobs June 8, 1998
Rosalind Gersten Jacobs
/s/ Irving Kristol June 8, 1998
Irving Kristol
/s/ Paul A. Marks June 8, 1998
Paul A. Marks
/s/ Martin Peretz June 8, 1998
Martin Peretz
/s/ Bert W. Wasserman June 8, 1998
Bert W. Wasserman
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitute and appoint, Margaret W. Chambers,
Christopher J. Kelley, Kathleen K. Morrisey, Michael S. Petrucelli, Stephanie
Pierce and Elba Vasquez, and each of them, with full power to act without the
other, his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her, and in his or her name, place
and stead, in any and all capacities (until revoked in writing) to sign any and
all amendments to the Registration Statement of Dreyfus Variable Investment Fund
(including post-effective amendments and amendments thereto), and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Marie E. Connolly June 8, 1998
Marie E. Connolly
ASSISTANT SECRETARY'S CERTIFICATE
I, Stephanie Pierce, Assistant Secretary of Dreyfus Variable Investment
Fund (the "Fund", hereby certify the following resolution was adopted at a
Board Meeting held on June 8, 1998 and remains in full force and effect:
RESOLVED, that the Registration Statement and any and all amendments
and supplements thereto may be signed by any one of Margaret W.
Chambers, Marie E. Connolly, Christopher J. Kelley, Kathleen K.
Morrisey, Michael S. Petrucelli, Stephanie Pierce and Elba Vasquez, as
the attorney-in-fact for the proper officers of the Fund, with full
power of substitution and resubstitution; and that the appointment of
each of such persons as such attorney-in-fact hereby is authorized and
approved; and that such attorneys-in-fact, and each of them, shall
have full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection with such
Registration Statement and any and all amendments and supplements
thereto, as whom he or she is acting as attorney-in-fact, might or
could do in person.
IN WITNESS WHEREOF, I have hereunto set my hand as Assistant Secretary
of the Funds and affixed the seal this 25th day of February, 1999.
/s/ Stephanie Pierce
Stephanie Pierce
(SEAL)
DREYFUS VARIABLE INVESTMENT FUND
