Dreyfus Variable Investment Fund
Appreciation Portfolio
Balanced 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
PROSPECTUS May 1, 2000
(reg.tm)
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Contents
The Portfolios
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Appreciation Portfolio INSIDE COVER
Balanced Portfolio 3
Disciplined Stock Portfolio 6
Growth and Income Portfolio 9
International Equity Portfolio 12
International Value Portfolio 15
Limited Term High
Income Portfolio 18
Money Market Portfolio 21
Quality Bond Portfolio 24
Small Cap Portfolio 27
Small Company Stock Portfolio 30
Special Value Portfolio 33
Zero Coupon 2000 Portfolio 36
Management 39
Financial Highlights 42
Account Information
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Account Policies 49
Distributions and Taxes 50
For More Information
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INFORMATION ON THE PORTFOLIOS' RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN
THE CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
Portfolio shares are offered only to separate accounts established by insurance
companies to fund variable annuity contracts ("VA contracts") and variable life
insurance policies (" VLI policies" ). Individuals may not purchase shares
directly from, or place sell orders directly with, the portfolios. The VA
contracts and the VLI policies are described in the separate prospectuses issued
by the participating insurance companies, over which the portfolios assume no
responsibility. Conflicts may arise between the interests of VA contract holders
and VLI policyholders. The board of trustees will monitor events to identify any
material conflicts and, if such conflicts arise, determine what action, if any,
should be taken.
Each portfolio has its own investment strategy and risk/return profile. The
differences in strategy among the portfolios determine the types of securities
in which each portfolio invests and can be expected to affect the degree of risk
each portfolio is subject to and its performance.
While the portfolios' investment objectives and policies may be similar to those
of other funds managed by the investment advisers, the portfolios' investment
results may be higher or lower than, and may not be comparable to, those of the
other funds.
Appreciation Portfolio
GOAL/APPROACH
The 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 common stocks focusing on "blue chip" companies with total
market values of more than $5 billion at the time of purchase. These established
companies have demonstrated sustained patterns of profitability, strong balance
sheets, an expanding global presence and the potential to achieve predictable,
above-average earnings growth.
In choosing stocks, the portfolio looks primarily for growth companies. 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 typically 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.
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.
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.
While many companies in which the portfolio invests are listed on a domestic
exchange, they have foreign operations that pose special risks such as exposure
to currency fluctuations and changing political climate.
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. During such periods, the portfolio may not achieve its primary
investment objective.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. It
strives to reach its stated goals, 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.
Appreciation Portfolio
<Page 1>
APPRECIATION PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the S& P 500((reg.tm)), a widely recognized, unmanaged index of stock
performance. Of course, past performance is no guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
3.04 33.52 25.56 28.05 30.22 11.46
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +20.77%
WORST QUARTER: Q3 '98 -10.69%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year 5 Years (4/5/93)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO 11.46% 25.52% 20.05%
S&P 500 21.03% 28.54% 21.63%*
</TABLE>
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 3/31/93 IS USED AS THE
BEGINNING VALUE ON 4/5/93.
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses 0.03%
- --------------------------------------------------------------------------------
TOTAL 0.78%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$80 $249 $433 $966
</TABLE>
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.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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 2>
Balanced Portfolio
GOAL/APPROACH
The 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 this
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:
* VALUE, or how a stock is priced relative to its perceived intrinsic
worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities. Dreyfus then manages risk by diversifying across
companies and industries 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 dollar-weighted average maturity of the bond
component normally will not exceed 10 years.
Concepts to understand
S&P 500((reg.tm)): a widely recognized, unmanaged index of 500 common stocks
chosen to reflect the industries of the U.S. economy.
LEHMAN INTERMEDIATE INDEX: a recognized, unmanaged index of U.S. government and
investment grade corporate bonds.
<Page 3>
BALANCED PORTFOLIO (CONTINUED)
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. While the
portfolio' s investments in value stocks may limit the overall downside risk of
the portfolio over time, they may produce smaller gains than riskier stocks.
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, even if earnings do increase.
Growth stocks also typically lack the dividend yield to cushion stock prices in
market downturns.
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 prices, and therefore in the portfolio's
share price as well.
Bond prices also 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 comprehensive 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. During such periods, the portfolio may not achieve its investment
objective.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives 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.
Other potential risks
The portfolio, at times, may invest some of its assets in derivative securities,
such as options and futures. These practices, when employed, are used primarily
to hedge the portfolio but may be used to increase returns; however, such
practices may reduce returns or increase volatility. Derivatives can be
illiquid, and a small investment in certain derivatives could have a potentially
large impact on the portfolio's performance.
The portfolio, at times, may also engage in short-term trading, which could
increase the portfolio's transaction costs and taxable distributions, lowering
its after-tax performance accordingly.
<Page 4>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the S& P 500((reg.tm)), the Lehman Intermediate Index, and the hybrid
index composed of 60% S&P 500((reg.tm)) and 40% Lehman Intermediate Index. Of
course, past performance is no guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
22.34 8.13
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +14.14%
WORST QUARTER: Q3 '98 -1.39%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
Since inception
1 Year (5/1/97)
- --------------------------------------------------------------------------------
PORTFOLIO 8.13% 18.33%
S&P 500 21.03% 27.36%*
LEHMAN
INTERMEDIATE INDEX -2.06% 5.78%*
HYBRID INDEX 12.78% 18.68%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF EACH INDEX ON 4/30/97 IS USED AS THE
BEGINNING VALUE ON 5/1/97.
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses 0.11%
- --------------------------------------------------------------------------------
TOTAL 0.86%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$88 $274 $477 $1,061
</TABLE>
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual return and expenses will be different,
the example is for comparison only.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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.
Balanced Portfolio
<Page 5>
Disciplined Stock Portfolio
GOAL/APPROACH
The 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 this 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((reg.tm)) are primary
goals of the process.
Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:
* VALUE, or how a stock is priced relative to its perceived intrinsic worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, 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.
Concepts to understand
S&P 500((reg.tm)): 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.
<Page 6>
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of a shareholder's investment in the
portfolio will go up and down, which means that shareholders could lose money
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 stocks of 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, even if earnings do increase. 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, either because the market fails to
recognize the stocks' intrinsic worth, or the portfolio manager misgauged that
worth. They also may decline in price even though in theory they are already
underpriced. 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. During such periods, the portfolio may not achieve its investment
objective.
Other potential risks
The portfolio, at times, may invest some assets in derivative securities, such
as options and futures. When employed, 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.
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.
Disciplined Stock Portfolio
<Page 7>
DISCIPLINED STOCK PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the S&P 500((reg.tm)). Of course, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
31.51 26.72 18.45
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +22.71%
WORST QUARTER: Q3 '98 -12.32%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year (5/1/96)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PORTFOLIO 18.45% 26.16%
S&P 500 21.03% 26.75%*
</TABLE>
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 4/30/96 IS USED AS THE
BEGINNING VALUE ON 5/1/96.
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses 0.06%
- --------------------------------------------------------------------------------
TOTAL 0.81%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$83 $259 $450 $1,002
</TABLE>
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.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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 8>
Growth and Income Portfolio
GOAL/APPROACH
The portfolio seeks long-term capital growth, current income and growth of
income consistent with reasonable investment risk. To pursue this goal, it
invests in stocks, bonds and money market instruments of domestic and foreign
issuers. The port-folio's stock investments may include common stocks, preferred
stocks and convertible securities.
The portfolio employs a "bottom-up" approach focusing primarily on low and
moderately priced stocks with market capitalizations of $1 billion or more at
the time of purchase. The portfolio manager uses fundamental analysis to create
a broadly diversified, value-tilted portfolio typically with a weighted average
P/E ratio less than that of the S&P 500, and a long-term projected earnings
growth greater than that of the S&P 500. The manager also considers balance
sheet and income statement items, such as return on equity and debt-to-capital
ratios, as well as projected dividend growth rates. The portfolio looks for
companies with strong positions in their industries that have the potential for
something positive to happen, including above-average earnings growth or
positive changes in company management or the industry.
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 or bond is no longer valid; the company shows deteriorating fundamentals;
or another more attractive opportunity has been identified.
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.
<Page 9>
GROWTH AND INCOME PORTFOLIO (CONTINUED)
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 they
may never reach what the portfolio manager believes is their full market value
either because the market fails to recognize the stocks' intrinsic worth, or the
portfolio manager misgauged that worth. They may also decline in price even
though they are already underpriced. While the portfolio's investments in value
stocks also 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.
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 the portfolio's
share price as well.
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.
Foreign securities involve special risks such as changes in currency exchange
rates, a lack of comprehensive company information, political instability and
potentially less liquidity.
Under adverse market conditions, the portfolio could invest up to 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. During such periods, the portfolio may not achieve its investment
objective.
Other potential risks
The portfolio, at times, may invest some assets in derivative securities, such
as options and futures, and in foreign currencies. It may also sell short. These
practices, when employed, are used primarily to hedge the portfolio but may be
used to increase returns; however, such practices 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.
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.
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 10>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return
over time to that of the S&P 500((reg.tm)), 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. Of course, past performance is no
guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
61.89 20.75 16.21 11.81 16.88
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +18.58%
WORST QUARTER: Q3 '98 -11.45%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year 5 Years (5/2/94)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO 16.88% 24.31% 20.90%
S&P 500 21.03% 28.54% 25.65%*
WILSHIRE LARGE
COMPANY VALUE INDEX -7.11% 18.33% 15.54%*
</TABLE>
* FOR COMPARATIVE PURPOSES, THE VALUE OF EACH INDEX ON 4/30/94 IS USED AS THE
BEGINNING VALUE ON 5/2/94.
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses 0.04%
- --------------------------------------------------------------------------------
TOTAL 0.79%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$81 $252 $439 $978
</TABLE>
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual return and expenses will be different,
the example is for comparison only.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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.
Growth and Income Portfolio
<Page 11>
International Equity Portfolio
GOAL/APPROACH
The portfolio seeks capital growth. To pursue this goal, the portfolio invests
primarily in the stocks of foreign companies. Typically, the portfolio invests
in at least 15 to 25 markets around the world, including emerging markets. The
portfolio' s stock investments may include common stocks, preferred stocks and
convertible securities.
In choosing stocks, the portfolio conducts a "bottom-up" approach, focusing on
individual stock selection rather than on macroeconomic factors. There are no
country allocation models or targets. The portfolio is particularly alert to
companies whose revenue and earnings growth potential are considered by
management to be faster than those of industry peers or 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.
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
GROWTH COMPANY: a company of any capitalization whose earnings are expected to
grow faster than the overall market. Often, growth stocks have relatively high
price-to-earnings and price-to-book ratios, and tend to be more volatile than
value stocks.
<Page 12>
MAIN RISKS
The portfolio's performance will be influenced by political, social and economic
factors affecting companies in foreign countries. Like the stocks of U.S.
companies, the securities of foreign issuers fluctuate in price, often based on
factors unrelated to the issuers' value, and such fluctuations can be
pronounced. Unlike investing in U.S. companies, foreign securities include
special risks such as exposure to currency fluctuations, a lack of comprehensive
company information, political instability, and differing auditing and legal
standards. The value of a shareholder's investment in the portfolio will go up
and down, which means that shareholders could lose money.
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.
Because the stock prices of growth companies are based in part on future
expectations, these stocks may fall sharply if investors believe the prospects
for a stock, industry or the economy in general are weak, even if earnings do
increase. In addition, growth stocks typically lack the dividend yield that
could cushion stock prices in market downturns.
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. During such periods, the
portfolio may not achieve its investment objective.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives 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.
Other potential risks
The portfolio, at times, may invest some assets in derivative securities, such
as options and futures, and in foreign currencies. These practices, when
employed, are used primarily to hedge the portfolio but may be used to increase
returns; however, such practices sometimes may reduce returns or increase
volatility. Derivatives can be illiquid, and a small investment in certain
derivatives could have a potentially large impact on the portfolio's
performance.
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.
International Equity Portfolio
<Page 13>
INTERNATIONAL EQUITY PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the Morgan Stanley Capital International Europe, Australasia, Far East
(EAFE((reg.tm) )) Index, an unmanaged index composed of a representative sample
of companies located in European and Pacific Basin countries and includes net
dividends reinvested. Of course, past performance is no guarantee of future
results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
7.39 11.61 9.61 4.49 59.76
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '99 +41.20%
WORST QUARTER: Q3 '98 -20.29%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year 5 Years (5/2/94)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO 59.76% 17.01% 14.45%
MSCI EAFE((reg.tm))
INDEX 26.96% 12.83% 11.21%*
</TABLE>
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 4/30/94 IS USED AS THE
BEGINNING VALUE ON 5/2/94.
EXPENSES
Investors using the portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses 0.27%
- --------------------------------------------------------------------------------
TOTAL 1.02%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$104 $325 $563 $1,248
</TABLE>
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual return and expenses will be different,
the example is for comparison only.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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 14>
International Value Portfolio
GOAL/APPROACH
The 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. To a limited extent, the
portfolio may invest in debt securities of foreign issuers. Though not
specifically limited, the portfolio ordinarily invests in companies in at least
three foreign countries, and limits its investments in any single company to no
more than 5% of its assets at the time of purchase.
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:
* VALUE, or how a stock is valued relative to its intrinsic worth based on
traditional value measures
* BUSINESS HEALTH, or overall efficiency and profit- ability as measured by
return on assets and return on equity
* 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.
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 15>
INTERNATIONAL VALUE PORTFOLIO (CONTINUED)
MAIN RISKS
The portfolio's performance will be influenced by political, social and economic
factors affecting companies in foreign countries. Like the stocks of U.S.
companies, the securities of foreign issuers fluctuate in price, often based on
factors unrelated to the issuers' value, and such fluctuations can be
pronounced. Unlike investing in U.S. companies, foreign securities include
special risks such as exposure to currency fluctuations, a lack of comprehensive
company information, political instability, and differing auditing and legal
standards. The value of a shareholder's investment in the portfolio will go up
and down, which means that shareholders could lose money.
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 and
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.
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. In addition, 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.
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. During such periods, the
portfolio may not achieve its investment objective.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives 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.
Other potential risks
The portfolio, at times, may invest some assets in derivative securities, such
as options and futures, and in foreign currencies. These practices, when
employed, are used primarily to hedge the portfolio, but may be used to increase
returns; however, such practices 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. When employed, this
could increase the portfolio's transaction costs and taxable distributions,
lowering its after-tax performance accordingly.
<Page 16>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the Morgan Stanley Capital International Europe, Australasia, Far East
Index (" MSCI EAFE Index" ), an unmanaged index composed of a representative
sample of companies located in European and Pacific Basin countries and includes
net dividends reinvested. Of course, past performance is no guarantee of future
results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
8.71 8.74 27.82
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +15.33%
WORST QUARTER: Q3 '98 -16.49%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year (5/1/96)
- --------------------------------------------------------------------------------
PORTFOLIO 27.82% 12.93%
MSCI EAFE INDEX 26.96% 12.74%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 4/30/96 IS USED AS THE
BEGINNING VALUE ON 5/1/96.
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price.
As with the performance information given previously, these figures do not
reflect any fees or charges imposed by participating insurance companies under
their VA contracts or VLI policies. Owners of VA contracts or VLI policies
should refer to the applicable insurance company prospectus for information on
those fees or charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 1.00%
Other expenses 0.35%
- --------------------------------------------------------------------------------
TOTAL 1.35%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$137 $428 $739 $1,624
</TABLE>
This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether investors sold their shares at the end
of a period or kept them. Because actual return and expenses will be different,
the example is for comparison only.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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.
International Value Portfolio
<Page 17>
Limited Term High Income Portfolio
GOAL/APPROACH
The 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.
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 18>
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 portfolio could go up and down, which means that
shareholders could lose money.
Other risk factors could have an effect on the portfolio's performance,
including:
* if 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
* 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
* if the portfolio 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 portfolio's share price,
may fall dramatically.
The portfolio' s investments in investment grade bonds could also reduce the
portfolio's yield and/or return.
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 comprehensive company
information and potentially less liquidity.
Under adverse market conditions, the portfolio could invest some or all of its
assets in money market securities. Although the portfolio would do this to avoid
losses, it could have the effect of reducing the benefit from any upswing in the
market. During such periods, the portfolio may not achieve its investment
objective.
What the portfolio is -- and isn't
The portfolio is a mutual fund: a pooled investment that is professionally
managed and gives 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.
Concepts to understand
The portfolio, at times, may invest some of its assets in derivative securities,
such as options, futures and swaps, and in foreign currencies. The portfolio may
also sell short. These practices, when employed, are used primarily to hedge the
portfolio but may be used to increase returns; however, such practices 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.
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.
At times, the portfolio may engage in short-term trading. When employed, this
could increase the portfolio's transaction costs and taxable distributions,
lowering its after-tax performance accordingly.
Limited Term High Income Portfolio
<Page 19>
LIMITED TERM HIGH INCOME PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the performance of the portfolio's average
annual total return 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, and to a Customized Limited Term High Yield
Index*. Of course, past performance is no guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
0.29 -1.54
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q1 '98 +3.90%
WORST QUARTER: Q3 '98 -5.46%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
Since
inception
1 Year (4/30/97)
- --------------------------------------------------------------------------------
PORTFOLIO -1.54% 3.01%
MERRILL LYNCH HIGH YIELD
MASTER II INDEX 2.51% 6.05%
CUSTOMIZED LIMITED TERM
HIGH YIELD INDEX* 5.23% 6.71%
* THIS INDEX IS COMPOSED OF FOUR SUB-INDEXES OF THE MERRILL LYNCH HIGH YIELD
MASTER II INDEX. THESE SUB-INDEXES, BLENDED AND MARKET WEIGHTED, ARE (I)
BB-RATED 1-3 YEARS, (II) B-RATED 1-3 YEARS, (III) BB-RATED 3-5 YEARS, AND
(IV) B-RATED 3-5 YEARS. UNLIKE THE CUSTOMIZED LIMITED TERM HIGH YIELD
INDEX, WHICH IS COMPOSED OF BONDS RATED NO LOWER THAN "B", THE FUND CAN
INVEST IN BONDS WITH LOWER CREDIT RATINGS THAN "B" AND AS LOW AS "D".
EXPENSES
Investors using the portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.65%
Other expenses 0.19%
- --------------------------------------------------------------------------------
TOTAL 0.84%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$86 $268 $466 $1,037
</TABLE>
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.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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 20>
Money Market Portfolio
GOAL/APPROACH
The 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:
* securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities
* certificates of deposit, time deposits, bankers' acceptances and other
short-term securities issued by U.S. or foreign banks or their subsidiaries
or branches
* repurchase agreements
* asset-backed securities
* domestic and dollar-denominated foreign commercial paper, and other
short-term corporate and bank obligations of U.S. and foreign issuers
* 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 domestic or
dollar-denominated foreign bank obligations.
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:
* maintain an average dollar-weighted portfolio maturity of 90 days or less
* buy individual securities that have remaining maturities of 13 months or
less
* invest only in high-quality dollar-denominated obligations
<Page 21>
MONEY MARKET PORTFOLIO (CONTINUED)
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:
* interest rates could rise sharply, causing the value of the portfolio's
securities, and share price, to drop
* any of the portfolio's holdings could have its credit rating downgraded or
could default
* 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
* 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 interes
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.
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 22>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table shows average annual total return over time. Both tables
assume the reinvestment of dividends and distributions. Of course, past
performance is no guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
5.99 4.15 3.29 4.37 5.66 5.10 5.19 5.12 4.78
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q1 '91 +1.57%
WORST QUARTER: Q2 '93 +0.78%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year 5 Years (8/31/90)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO 4.78% 5.17% 4.94%
</TABLE>
The portfolio' s 7-day yield on 12/31/99 was 5.21%. For the portfolio's current
yield, call toll-free 1-800-645-6561.
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price.
As with the performance information given previously, these figures do not
reflect any fees or charges imposed by participating insurance companies under
their VA contracts or VLI policies. Owners of VA contracts or VLI policies
should refer to the applicable insurance company prospectus for information on
those fees or charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
AS A % OF AVERAGE DAILY NET ASSETS
Management fees 0.50%
Other expenses 0.08%
- --------------------------------------------------------------------------------
TOTAL 0.58%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$59 $186 $324 $726
</TABLE>
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.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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.
Money Market Portfolio
<Page 23>
Quality Bond Portfolio
GOAL/APPROACH
The 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 fixed-income securities,
including mortgage-related securities, collateralized mortgage obligations
(" CMOs" ), and asset-backed 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 also may invest in:
* high grade commercial paper of U.S. issuers
* certificates of deposit, time deposits and bankers' acceptances
* fixed-income securities rated lower than A (but not lower than B) or the
unrated equivalent as determined by Dreyfus
* municipal obligations and zero coupon securities
The portfolio may invest up to 10% of net assets in foreign securities.
Concepts to understand
MORTGAGE-RELATED SECURITIES: pools of residential or commercial mortgages whose
cash flows are "passed through" to the holders of the securities via monthly
payments of interest and principal.
CMOS: multi-class bonds backed by pools of mortgage pass-through securities or
mortgage loans. CMOs may be issued by government agencies or private issuers.
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.
<Page 24>
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 portfolio could go up and down, which means that shareholders
could lose money.
Although the portfolio invests primarily in high quality and other investment
grade 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,
including:
* 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
* if the portfolio' s mortgage-related securities are paid off substantially
earlier or later than expected, the portfolio's share price or yield could
be hurt
* 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
* during unusual market conditions, the portfolio may not be able to sell
certain securities at the time and price it would like
Under adverse market conditions, the portfolio could invest up to 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. During such periods, the portfolio may not achieve its investment
objective.
Other potential risks
Most mortgage-related 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, at times, may be used to leverage the portfolio, meaning that a
small investment could have a potentially large impact on the portfolio.
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.
Quality Bond Portfolio
<Page 25>
QUALITY BOND PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the Lehman Brothers Aggregate Bond Index, an unmanaged index of
corporate, U.S. government and agency debt instruments, and mortgage-backed and
asset-backed securities, and Merrill Lynch Domestic Master Index (Subindex D010)
, an unmanaged index of U.S. government, mortgage and corporate securities rated
A or better. Of course past performance is no guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
14.12 12.08 15.33 -4.59 20.42 3.13 9.42 5.49 0.18
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q3 '92 +7.99%
WORST QUARTER: Q1 '94 -4.57%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year 5 Years (8/31/90)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO 0.18% 7.50% 8.10%
LEHMAN BROTHERS
AGGREGATE BOND INDEX* -0.82% 7.73% 7.94%
MERRILL LYNCH
DOMESTIC MASTER
INDEX (SUBINDEX D010) 0.96% 7.70% 7.96%
* LEHMAN BROTHERS AGGREGATE BOND INDEX IS THE PORTFOLIO'S PRIMARY INDEX
BECAUSE SUCH INDEX PROVIDES MORE FREQUENT STATISTICAL INFORMATION.
</TABLE>
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.65%
Other expenses 0.09%
- --------------------------------------------------------------------------------
TOTAL 0.74%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$76 $237 $411 $918
</TABLE>
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.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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 26>
Small Cap Portfolio
GOAL/APPROACH
The 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 uses a blended approach, investing in growth
stocks, value stocks or stocks that exhibit characteristics of both. The
portfolio seeks companies characterized by new or innovative products or
services which should enhance prospects for 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.
The portfolio managers use a sector management approach, supervising a team of
sector managers who each make buy and sell decisions within their respective
areas of expertise. The fund's sector weightings typically approximate those of
the Russell 2000 Index.
The portfolio typically sells a stock when the reasons for buying it no longer
apply or when the company begins to show deteriorating fundamentals or poor
relative performance.
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.
GROWTH COMPANIES: companies whose earnings are expected to grow faster than the
overall market. Often, growth stocks have relatively high price-to-earnings and
price-to-book ratios, and tend to be more volatile than value stocks.
VALUE COMPANIES: companies that appear underpriced according to certain
financial measurements (such as price-to-earnings or price-to-book ratios).
Because a stock can remain undervalued for years, value investors often look for
factors that could trigger a rise in price.
<Page 27>
SMALL CAP PORTFOLIO (CONTINUED)
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.
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. Investments in growth companies may lack the dividend yield
that can cushion stock prices in market downturns. These companies are expected
to increase their earnings at a certain rate. If expectations are not met,
investors can punish the stocks inordinately, even if earnings do increase.
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 small-company stock funds as a trade-off for this
potentially lower risk.
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 comprehensive company
information and potentially less liquidity.
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.
Other potential risks
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. During such periods, the portfolio may not achieve its investment
objective.
<Page 28>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the Russell 2000 Index, a widely recognized, unmanaged index of smaller
capitalization common stocks. Of course, past performance is no guarantee of
future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
159.73 71.28 68.31 7.75 29.38 16.60 16.75 -3.44 23.15
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q3 '91 +32.09%
WORST QUARTER: Q3 '98 -23.45%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year 5 Years (8/31/90)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO 23.15% 15.93% 35.65%
RUSSELL 2000 INDEX 21.26% 16.69% 16.57%
</TABLE>
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses 0.03%
- --------------------------------------------------------------------------------
TOTAL 0.78%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$80 $249 $433 $966
</TABLE>
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.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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.
Small Cap Portfolio
<Page 29>
Small Company Stock Portfolio
GOAL/APPROACH
The 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 ("Russell 2500"). To pursue this goal, the
portfolio normally invests in a blended portfolio of growth and value stocks of
small and midsize domestic companies, whose market values generally range
between $500 million and $5 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:
* VALUE, or how a stock is priced relative to its perceived intrinsic worth
* GROWTH, in this case the sustainability or growth of earnings
* FINANCIAL PROFILE, which measures the financial health of the company
Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, 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. The portfolio may invest in securities in all
available domestic trading markets, including initial public offerings and the
after-market.
Concepts to understand
COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of over 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 30>
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 portfolio's
investments will rise and fall based on investor perception rather than
economics.
Although the portfolio seeks to manage risk by broadly diversifying among
industries and by maintaining a risk profile 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.
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, even if earnings do increase. 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, either because the market fails to
recognize the stocks' intrinsic worth, or the portfolio manager misgauged that
worth. They also may decline in price even though in theory they are already
underpriced. 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. During such periods, the portfolio may not achieve its investment
objective.
Other potential risks
The portfolio, at times, may invest in derivative securities, such as options
and futures. These practices, when employed, are used primarily to hedge the
portfolio but may be used to increase returns; however, such practices 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.
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.
Small Company Stock Portfolio
<Page 31>
SMALL COMPANY STOCK PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the Russell 2500 Index, a widely recognized, unmanaged index of
small-cap and mid-cap stock performance. Of course, past performance is no
guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
21.77 -5.97 10.60
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +16.44%
WORST QUARTER: Q3 '98 -21.84%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year (5/1/96)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PORTFOLIO 10.60% 9.11%
RUSSELL 2500 24.15% 14.91%*
</TABLE>
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 4/30/96 IS USED AS THE
BEGINNING VALUE ON 5/1/96.
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses 0.22%
- --------------------------------------------------------------------------------
TOTAL 0.97%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$99 $309 $536 $1,190
</TABLE>
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.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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 32>
Special Value Portfolio
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:
* new products or markets
* opportunities for greater market share
* more effective management
* positive changes in corporate structure or market perception
* 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.
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.
<Page 33>
SPECIAL VALUE PORTFOLIO (CONTINUED)
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of a shareholder's investment in the
portfolio will go up and down, which means that shareholders could lose money.
Value stocks involve the risk that they may never reach what the portfolio
manager believes is their full market value, either because the market fails to
recognize the stock' s intrinsic worth or the portfolio manager misgauged that
worth. They also may decline in price, even though in theory they are already
underpriced. Because different types of stocks tend to shift in and out of favor
depending on market and economic conditions, the portfolio's performance may
sometimes be lower or higher than that of other types of funds (such as those
emphasizing growth stocks).
The portfolio may invest in companies of any size. Investments in small and
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. Foreign securities involve special
risks such as changes in currency exchange rates, a lack of comprehensive
company information, political instability, and potentially less liquidity.
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. In addition, 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.
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. During such periods, the portfolio may not achieve its investment
objective.
Other potential risks
The portfolio, at times, may invest some assets in derivative securities, such
as options and futures, and in foreign currencies. It may also sell short. These
practices, when employed, are used primarily to hedge the portfolio but may be
used to increase returns; however, such practices sometimes may reduce returns
or increase volatility. Derivatives can be illiquid, and a small investment in
certain derivatives could have a potentially large impact on the portfolio's
performance.
At times, the portfolio may engage in short-term trading, which could produce
higher brokerage costs 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.
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 34>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the Russell 1000 Value Index, an unmanaged index that measures the
performance of those Russell 1000 companies with lower price-to-book ratios and
lower forecasted growth values, the S&P 500((reg.tm)), a widely recognized,
unmanaged index 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. Of course, past performance
is no guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
10.60 1.07 28.69 -1.56 -0.26 -3.62 23.14 15.69 7.27
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q4 '98 +17.23%
WORST QUARTER: Q3 '99 -10.11%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year 5 Years (8/31/90)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO 7.27% 8.00% 8.37%
RUSSELL 1000
VALUE INDEX* 7.35% 23.07% 18.23%
S&P 500 21.03% 28.54% 20.49%
WILSHIRE MIDCAP
VALUE INDEX -8.53% 13.58% 15.59%
* THE RUSSELL 1000 VALUE INDEX IS THE PORTFOLIO'S PRIMARY INDEX BECAUSE OF
THE PORTFOLIO'S AND THE INDEX'S LARGE-CAP VALUE ORIENTATION.
</TABLE>
EXPENSES
Investors using the portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price. As
with the performance information given previously, these figures do not reflect
any fees or charges imposed by participating insurance companies under their VA
contracts or VLI policies. Owners of VA contracts or VLI policies should refer
to the applicable insurance company prospectus for information on those fees or
charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.75%
Other expenses 0.11%
- --------------------------------------------------------------------------------
TOTAL 0.86%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$88 $274 $477 $1,061
</TABLE>
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.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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.
Special Value Portfolio
<Page 35>
Zero Coupon 2000 Portfolio
GOAL/APPROACH
The portfolio seeks as high an investment return as is consistent with the
preservation of capital. To pursue this goal, the portfolio invests primarily in
debt obligations issued by the U.S. government and its agencies and
instrumentalities that have been stripped of their unmatured interest coupons,
and interest coupons that have been stripped from these debt obligations
("stripped securities").
The portfolio may invest in other zero coupon securities issued by state and
local governments and their agencies, and in investment grade zero coupon
securities issued by domestic corporations.
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.
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.
<Page 36>
MAIN RISKS
Prices of stripped 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 investing in 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.
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.
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.
Other potential risks
The portfolio, at times, may invest some of its assets in derivative securities,
such as options and futures. These practices, when employed, are used primarily
to hedge the portfolio but may be used to increase returns; however, such
practices 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.
Zero Coupon 2000 Portfolio
<Page 37>
ZERO COUPON 2000 PORTFOLIO (CONTINUED)
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the
portfolio. The bar chart shows the changes in the portfolio's performance from
year to year. The table compares the portfolio's average annual total return to
that of the Merrill Lynch U.S. Treasury Coupon 1-Year Strips Index, an unmanaged
zero coupon index with constant maturity and duration. Of course, past
performance is no guarantee of future results.
- --------------------------------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
20.08 8.87 15.19 -3.91 17.95 2.59 7.01 7.27 2.69
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q3 '91 +8.54%
WORST QUARTER: Q1 '92 -3.77%
- --------------------------------------------------------------------------------
Average annual total return AS OF 12/31/99
<TABLE>
<CAPTION>
Since
inception
1 Year 5 Years (8/31/90)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIO 2.69% 7.36% 8.83%
MERRILL LYNCH
U.S. TREASURY COUPON
1-YEAR STRIPS INDEX 4.34% 6.18% 6.05%
</TABLE>
EXPENSES
Investors using this portfolio to fund a VA contract or VLI policy will pay
certain fees and expenses in connection with the portfolio, which are described
in the table below. Annual portfolio operating expenses are paid out of
portfolio assets, so their effect is included in the portfolio's share price.
As with the performance information given previously, these figures do not
reflect any fees or charges imposed by participating insurance companies under
their VA contracts or VLI policies. Owners of VA contracts or VLI policies
should refer to the applicable insurance company prospectus for information on
those fees or charges.
- --------------------------------------------------------------------------------
Fee table
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.45%
Other expenses 0.19%
- --------------------------------------------------------------------------------
TOTAL 0.64%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$65 $205 $357 $798
</TABLE>
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.
Additional costs
Performance information reflects the portfolio's expenses only and does not
reflect the fees and charges imposed by participating insurance companies under
their VA contracts or VLI policies. Because these fees and charges will reduce
total return, VA contract holders and VLI policyholders should consider them
when evaluating and comparing the portfolio's performance. VA contract holders
and VLI policyholders should consult the prospectus for their contract or policy
for more information.
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 38>
MANAGEMENT
The investment adviser for the portfolios 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 $127 billion in over 160
mutual fund portfolios. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.5 trillion of assets under management, administration or custody, including
approximately $485 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
APPRECIATION PORTFOLIO -- During the past fiscal year, the portfolio paid an
aggregate investment advisory fee at the annual rate of 0.75% of the portfolio's
average daily net assets.
BALANCED PORTFOLIO -- During the past fiscal year, the portfolio paid Dreyfus an
investment advisory fee at the annual rate of 0.75% of the portfolio's average
daily net assets.
DISCIPLINED STOCK PORTFOLIO -- During the past fiscal year, the portfolio paid
Dreyfus an investment advisory fee at the annual rate of 0.75% of the
portfolio's average daily net assets.
GROWTH AND INCOME PORTFOLIO -- During the past fiscal year, the portfolio paid
Dreyfus an investment advisory fee at the annual rate of 0.75% of the
portfolio's average daily net assets.
INTERNATIONAL EQUITY PORTFOLIO -- During the past fiscal year, the portfolio
paid Dreyfus an investment advisory fee at the annual rate of 0.75% of the
portfolio's average daily net assets.
INTERNATIONAL VALUE PORTFOLIO -- During the past fiscal year, the portfolio paid
Dreyfus an investment advisory fee at the annual rate of 1.00% of the
portfolio's average daily net assets.
LIMITED TERM HIGH INCOME PORTFOLIO -- During the past fiscal year, the portfolio
paid Dreyfus an investment advisory fee at the annual rate of 0.65% of the
portfolio's average daily net assets.
MONEY MARKET PORTFOLIO -- During the past fiscal year, the portfolio paid
Dreyfus an investment advisory fee at the annual rate of 0.50% of the
portfolio's average daily net assets.
QUALITY BOND PORTFOLIO -- During the past fiscal year, the portfolio paid
Dreyfus an investment advisory fee at the annual rate of 0.65% of the
portfolio's average daily net assets.
SMALL CAP PORTFOLIO -- During the past fiscal year, the portfolio paid Dreyfus
an investment advisory fee at the annual rate of 0.75% of the portfolio's
average daily net assets.
SMALL COMPANY STOCK PORTFOLIO -- During the past fiscal year, the portfolio paid
Dreyfus an investment advisory fee at the annual rate of 0.75% of the
portfolio's average daily net assets.
SPECIAL VALUE PORTFOLIO -- During the past fiscal year, the portfolio paid
Dreyfus an investment advisory fee at the annual rate of 0.75% of the
portfolio's average daily net assets.
ZERO COUPON 2000 PORTFOLIO -- During the past fiscal year, the portfolio paid
Dreyfus an investment advisory fee at the annual rate of 0.45% of the
portfolio's average daily net assets.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, Dreyfus
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.
<Page 39>
MANAGEMENT (CONTINUED)
The fund, Dreyfus, Fayez Sarofim (with respect to Appreciation Portfolio only)
and Dreyfus Service Corporation (the fund's distributor) each have adopted a
code of ethics that permits its personnel, subject to such code, to invest in
securities, including securities that may be purchased or held by the fund. The
Dreyfus code of ethics restricts the personal securities transactions of its
employees, and requires portfolio managers and other investment personnel to
comply with the code' s preclearance and disclosure procedures. Its primary
purpose is to ensure that personal trading by Dreyfus employees does not
disadvantage any Dreyfus-managed fund.
Portfolio managers
The primary portfolio managers of the portfolios are as follows:
APPRECIATION PORTFOLIO -- Fayez Sarofim. Mr. Sarofim has been the portfolio's
primary portfolio 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 $60.3 billion in discretionary separate accounts and
provided investment advisory services for five other investment companies having
aggregate assets of approximately $7.1 billion as of December 31, 1999.
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 at 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.
DISCIPLINED STOCK PORTFOLIO -- Bert Mullins. Mr. Mullins has managed the
portfolio since its inception, and has been employed by Dreyfus since October
1994. In addition to being a portfolio manager with Dreyfus, Mr. Mullins also
has been employed by Laurel Capital Advisors, an affiliate of Dreyfus, since
October 1990. Mr. Mullins also is a vice president, senior security analyst and
portfolio manager at Mellon, where he has been employed since 1966.
GROWTH AND INCOME PORTFOLIO -- Douglas D. Ramos, CFA. Mr. Ramos has been the
portfolio' s primary portfolio 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.
INTERNATIONAL EQUITY PORTFOLIO -- Douglas A. Loeffler. Mr. Loeffler has been the
portfolio' s primary portfolio manager since he joined Dreyfus in February 1999.
He is also employed by Founders Asset Management LLC, an affiliate of Dreyfus,
since 1997 as a vice president of investments and from 1995 to 1997 as a senior
international equities analyst. For seven years prior thereto, he served as an
international equities analyst and a quantitative analyst for Scudder, Stevens &
Clark.
INTERNATIONAL VALUE PORTFOLIO -- Sandor Cseh. Mr. Cseh has been the portfolio's
primary portfolio 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., and was a securities analyst with several
banks.
LIMITED TERM HIGH INCOME PORTFOLIO -- Roger King. Mr. King has been the
portfolio' s primary portfolio 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.
<Page 40>
QUALITY BOND PORTFOLIO -- Investment decisions for the portfolio are made by the
Taxable Fixed-Income Committee of Dreyfus, and no person is primarily
responsible for making recommendations to that committee.
SMALL CAP PORTFOLIO -- Hilary R. Woods and Paul Kandel. Ms. Woods and Mr. Kandel
have been the portfolio' s primary portfolio managers since October 1996. Ms.
Woods and Mr. Kandel have been employed by Dreyfus since 1987 and 1994,
respectively.
SMALL COMPANY STOCK PORTFOLIO -- Anthony Galise and James Wadsworth. Mr. Galise
has been a portfolio manager of the portfolio since its inception. He has been a
portfolio manager with Dreyfus since April 1996 and also is a portfolio manager
at Laurel Capital Advisors, an affiliate of Dreyfus. Mr. Galise is a vice
president and portfolio manager at Mellon. He joined Mellon in 1993 with over 20
years of equity investment experience. Mr. Wadsworth has managed the portfolio
since its inception. In addition to being a portfolio manager with Dreyfus, Mr.
Wadsworth has been employed by Laurel Capital Advisors, an affiliate of Dreyfus,
since October 1990, serving as 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.
SPECIAL VALUE PORTFOLIO -- Timothy M. Ghriskey. Mr. Ghriskey has been the
portfolio' s primary portfolio 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.
ZERO COUPON 2000 PORTFOLIO -- Gerald E. Thunelius. Mr. Thunelius has been the
portfolio' s primary portfolio manager since March 1997 and a portfolio manager
of the portfolio since June 1994. He has been employed by Dreyfus since
September 1989.
Management
FINANCIAL HIGHLIGHTS
The following tables describe each portfolio' s performance for the fiscal
periods indicated. Certain information reflects financial results for a single
portfolio share. "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 Ernst & Young LLP, whose report, along with the
portfolios' financial statements, is included in the annual report, which is
available upon request. Keep in mind that fees and charges imposed by
participating insurance companies, which are not reflected in the tables, would
reduce the investment returns that are shown.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
APPRECIATION PORTFOLIO 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 36.11 27.91 21.98 17.71 13.44
Investment operations: Investment income -- net .25(1) .20 .22 .23 .23
Net realized and unrealized gain (loss)
on investments 3.88 8.21 5.95 4.30 4.27
Total from investment operations 4.13 8.41 6.17 4.53 4.50
Distributions: Dividends from investment income -- net (.22) (.20) (.22) (.23) (.23)
Dividends from net realized gain on investments (.01) (.01) (.02) (.03) --
Dividends in excess of net realized gain
on investments (.14) -- -- -- --
Total distributions (.37) (.21) (.24) (.26) (.23)
Net asset value, end of period 39.87 36.11 27.91 21.98 17.71
Total return (%) 11.46 30.22 28.05 25.56 33.52
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of operating expenses to average net assets (%) .78 .80 .80 .84 .85
Ratio of interest expense and loan commitment fees to
average net assets (%) .00(2) .01 -- -- --
Ratio of net investment income to average net assets (%) .64 .84 1.08 1.46 2.08
Decrease reflected in above expense ratios due to actions
by Dreyfus (%) -- -- -- -- .02
Portfolio turnover rate (%) 3.87 1.34 1.69 2.47 2.81
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,027,797 673,835 247,011 103,745 46,930
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) AMOUNT REPRESENTS LESS THAN .01%.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
BALANCED PORTFOLIO 1999 1998 1997(1)
- -------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C>
Net asset value, beginning of period 15.94 14.04 12.50
Investment operations: Investment income -- net .47(2) .43 .25
Net realized and unrealized gain (loss) on investments .80 2.67 2.06
Total from investment operations 1.27 3.10 2.31
Distributions: Dividends from investment income -- net (.46) (.43) (.25)
Dividends from net realized gain on investments (.73) (.77) (.52)
Total distributions (1.19) (1.20) (.77)
Net asset value, end of period 16.02 15.94 14.04
Total return (%) 8.13 22.34 18.48(3)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .86 .87 .67(3)
Ratio of net investment income to average net assets (%) 2.94 2.98 1.91(3)
Portfolio turnover rate (%) 98.61 111.75 45.78(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 90,130 59,841 41,144
(1) FROM MAY 1, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
<Page 42>
YEAR ENDED DECEMBER 31,
DISCIPLINED STOCK PORTFOLIO 1999 1998 1997 1996(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C>
Net asset value, beginning of period 22.95 18.30 14.79 12.50
Investment operations: Investment income -- net .11(2) .08 .08 .07
Net realized and unrealized gain (loss) on investments 4.12 4.80 4.53 2.29
Total from investment operations 4.23 4.88 4.61 2.36
Distributions: Dividends from investment income -- net (.10) (.09) (.08) (.07)
Dividends from net realized gain on investments (.16) (.14) (1.02) --
Total distributions (.26) (.23) (1.10) (.07)
Net asset value, end of period 26.92 22.95 18.30 14.79
Total return (%) 18.45 26.72 31.51 18.86(3,4)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .81 .88 1.02 .80(3)
Ratio of net investment income to average net assets (%) .45 .53 .68 .72(3)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) -- -- -- .16(3)
Portfolio turnover rate (%) 48.95 56.28 79.74 30.62(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 214,296 140,897 53,317 17,722
(1) FROM APRIL 30, 1996 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
(4) CALCULATED BASED ON NET ASSET VALUE ON THE CLOSE OF BUSINESS ON MAY 1, 1996
(COMMENCEMENT OF INITIAL OFFERING) TO DECEMBER 31, 1996.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
GROWTH AND INCOME PORTFOLIO 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 22.63 20.78 19.55 18.33 11.98
Investment operations: Investment income -- net .16(1) .21 .28 .36 .28
Net realized and unrealized gain (loss)
on investments 3.64 2.23 2.79 3.43 7.07
Total from investment operations 3.80 2.44 3.07 3.79 7.35
Distributions: Dividends from investment income -- net (.15) (.20) (.28) (.35) (.27)
Dividends from net realized gain on investments (.70) (.39) (1.56) (2.22) (.73)
Dividends in excess of net realized gain on investments (.10) -- -- -- --
Total distributions (.95) (.59) (1.84) (2.57) (1.00)
Net asset value, end of period 25.48 22.63 20.78 19.55 18.33
Total return (%) 16.88 11.81 16.21 20.75 61.89
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .79 .78 .80 .83 .92
Ratio of net investment income to average net assets (%) .67 1.00 1.37 1.96 2.21
Decrease reflected in above expense ratios due to actions by Dreyfus (%) -- -- -- -- .03
Portfolio turnover rate (%) 96.26 126.18 180.73 237.44 255.42
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 461,392 430,702 369,832 225,935 71,161
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
</TABLE>
<Page 43>
Financial Highlights
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
INTERNATIONAL EQUITY PORTFOLIO 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 14.50 14.02 13.76 12.82 12.02
Investment operations: Investment income -- net .06(1) .15 .05 .10 .15
Net realized and unrealized gain (loss)
on investments 8.58 .48 1.27 1.16 .74
Total from investment operations 8.64 .63 1.32 1.26 .89
Distributions: Dividends from investment income -- net (.06) (.15) (.07) (.09) (.08)
Dividends in excess of investment income -- net -- -- -- -- (.01)
Dividends from net realized gain on investments (.74) -- (.34) (.39) --
Dividends in excess of net realized gain
on investments -- -- (.65) (.06) --
Total distributions (.80) (.15) (1.06) (.54) (.09)
Capital contribution from an affiliate of the adviser -- -- -- .22 --
Net asset value, end of period 22.34 14.50 14.02 13.76 12.82
Total return (%) 59.76 4.49 9.61 11.61(2) 7.39
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.02 .99 1.06 1.28 1.59
Ratio of net investment income to average net assets (%) .38 1.04 .38 .92 1.13
Decrease reflected in above expense ratios due to actions by Dreyfus (%) -- -- -- -- .45
Portfolio turnover rate (%) 261.64 204.50 165.75 181.13 70.22
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 69,208 45,811 39,388 24,355 7,672
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) HAD THE PORTFOLIO NOT HAD A CAPITAL CONTRIBUTION BY AN AFFILIATE OF THE
ADVISER DURING THE PERIOD, THE TOTAL INVESTMENT RETURN WOULD HAVE BEEN
9.89%.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
INTERNATIONAL VALUE PORTFOLIO 1999 1998 1997 1996(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 13.45 13.45 12.80 12.50
Investment operations: Investment income -- net .13(2) .14 .07 .08
Net realized and unrealized gain (loss) on investments 3.52 1.01 1.03 .34
Total from investment operations 3.65 1.15 1.10 .42
Distributions: Dividends from investment income -- net (.13) (.12) (.07) (.08)
Dividends from net realized gain on investments (1.30) (1.03) (.30) (.04)
Dividends in excess of net realized gain on investments -- -- (.08) --
Total distributions (1.43) (1.15) (.45) (.12)
Net asset value, end of period 15.67 13.45 13.45 12.80
Total return (%) 27.82 8.74 8.71 3.41(3,4)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.35 1.29 1.42 1.01(3)
Ratio of net investment income to average net assets (%) .90 .94 .74 .76(3)
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) -- -- -- .34(3)
Portfolio turnover rate (%) 41.90 42.14 25.67 24.48(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 27,386 20,680 19,016 8,027
(1) FROM APRIL 30, 1996 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT ANNUALIZED.
(4) CALCULATED BASED ON NET ASSET VALUE ON THE CLOSE OF BUSINESS ON MAY 1, 1996
(COMMENCEMENT OF INITIAL OFFERING) TO DECEMBER 31, 1996.
</TABLE>
<Page 44>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
LIMITED TERM HIGH INCOME PORTFOLIO 1999 1998 1997(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 11.80 12.88 12.50
Investment operations: Investment income -- net 1.21 1.14 .78
Net realized and unrealized gain (loss) on investments (1.38) (1.08) .41
Total from investment operations (.17) .06 1.19
Distributions: Dividends from investment income -- net (1.19) (1.14) (.77)
Dividends from net realized gain on investments -- -- (.04)
Total distributions (1.19) (1.14) (.81)
Net asset value, end of period 10.44 11.80 12.88
Total return (%) (1.54) .29 14.27(2)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of operating expenses to average net assets (%) .73 .77 .89(2)
Ratio of interest expense to average net assets (%) .11 .32 .20(2)
Ratio of net investment income to average net assets (%) 10.53 10.10 10.27(2)
Decrease reflected in above expense ratios due to actions by Dreyfus (%) -- -- .05(2)
Portfolio turnover rate (%) 52.08 50.18 37.98(3)
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 66,357 83,418 31,454
(1) FROM APRIL 30, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997.
(2) ANNUALIZED.
(3) NOT ANNUALIZED.
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
MONEY MARKET PORTFOLIO 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations: Investment income -- net .047 .050 .050 .050 .055
Distributions: Dividends from investment income -- net (.047) (.050) (.050) (.050) (.055)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 4.78 5.12 5.19 5.10 5.66
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .58 .56 .61 .62 .62
Ratio of net investment income to average net assets (%) 4.69 5.01 5.08 4.96 5.51
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) -- -- -- -- .03
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 102,727 89,025 64,628 56,186 45,249
</TABLE>
Financial Highlights
<Page 45>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
QUALITY BOND PORTFOLIO 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 11.50 11.73 11.50 11.81 10.53
Investment operations: Investment income -- net .62 .67 .73 .66 .68
Net realized and unrealized gain (loss)
on investments (.61) (.04) .32 (.31) 1.42
Total from investment operations .01 .63 1.05 .35 2.10
Distributions: Dividends from investment income -- net (.62) (.68) (.73) (.66) (.69)
Dividends from net realized gain
on investments -- (.18) (.09) .-- (.13)
Total distributions (.62) (.86) (.82) (.66) (.82)
Net asset value, end of period 10.89 11.50 11.73 11.50 11.81
Total return (%) .18 5.49 9.42 3.13 20.42
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of operating expenses to average net assets (%) .74 73 .75 .79 .81
Ratio of interest expense to average net assets (%) -- -- .02 -- --
Ratio of net investment income to average net assets (%) 5.66 5.74 6.27 5.86 6.13
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) -- -- -- -- .04
Portfolio turnover rate (%) 521.51 244.95 374.76 258.36 263.53
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 135,822 121,461 88,292 60,936 37,447
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SMALL CAP PORTFOLIO 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 53.91 57.14 52.08 46.13 36.52
Investment operations: Investment income -- net .04(1) .04 .07 .10 .16
Net realized and unrealized gain
(loss) on investments 12.43 (2.21) 8.49 7.53 10.54
Total from investment operations 12.47 (2.17) 8.56 7.63 10.70
Distributions: Dividends from investment income -- net (.04) (.00)(2) (.07) (.10) (.18)
Dividends from net realized gain on investments -- (1.06) (3.43) (1.51) (.91)
Dividends in excess of net realized
gain on investments -- -- -- (.07) --
Total distributions (.04) (1.06) (3.50) (1.68) (1.09)
Net asset value, end of period 66.34 53.91 57.14 52.08 46.13
Total return (%) 23.15 (3.44) 16.75 16.60 29.38
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .78 .77 .78 .79 .83
Ratio of net investment income to average net assets (%) .07 .07 .12 .24 .54
Portfolio turnover rate (%) 40.60 75.04 79.00 89.10 99.02
-------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 1,295,698 1,246,804 1,274,292 960,365 543,281
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
</TABLE>
<Page 46>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SMALL COMPANY STOCK PORTFOLIO 1999 1998 1997 1996(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 15.09 16.13 13.52 12.50
Investment operations: Investment income -- net .04(2) .04 .05 .05
Net realized and unrealized gain
(loss) on investments 1.56 (.99) 2.89 1.03
Total from investment operations 1.60 (.95) 2.94 1.08
Distributions: Dividends from investment income -- net -- (.04) (.04) (.05)
Dividends from net realized gain on investments -- (.05) (.29) (.01)
Total distributions -- (.09) (.33) (.06)
Net asset value, end of period 16.69 15.09 16.13 13.52
Total return (%) 10.60 (5.97) 21.77 8.73(3,4)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .97 .98 1.12 .75(3)
Ratio of net investment income to average net assets (%) .24 .26 .53 .39(3)
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) -- -- -- .19(3)
Portfolio turnover rate (%) 47.01 45.09 34.48 35.68(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 32,530 34,857 28,154 8,148
(1) FROM APRIL 30, 1996 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1996.
(2) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(3) NOT
</TABLE>
ANNUALIZED.
(4) CALCULATED BASED ON NET ASSET VALUE ON THE CLOSE OF BUSINESS ON MAY 1, 1996
(COMMENCEMENT OF INITIAL OFFERING) TO DECEMBER 31, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SPECIAL VALUE PORTFOLIO 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 14.93 12.99 10.60 11.70 12.37
Investment operations: Investment income -- net .11(1) .10 .06 .63 .51
Net realized and unrealized gain (loss)
on investments .95 1.94 2.40 (1.05) (.54)
Total from investment operations 1.06 2.04 2.46 (.42) (.03)
Distributions: Dividends from investment income -- net (.10) (.10) (.01) (.56) (.64)
Dividends in excess of investment income -- net -- -- (.00)(2) (.06) --
Dividends from net realized gain on investments (1.25) -- (.06) -- --
Paid-in capital -- -- -- (.06) --
Total distributions (1.35) (.10) (.07) (.68) (.64)
Net asset value, end of period 14.64 14.93 12.99 10.60 11.70
Total return (%) 7.27 15.69 23.14 (3.62) (.26)
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .86 .83 .99 .93 .94
Ratio of dividends on securities sold short to average net assets (%) -- -- .02 -- --
Ratio of net investment income to average net assets (%) .70 .67 .38 4.12 3.56
Portfolio turnover rate (%) 171.41 252.24 188.57 124.19 53.88
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 57,099 63,264 52,981 21,101 25,272
(1) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(2) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
</TABLE>
Financial Highlights
<Page 47>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
ZERO COUPON 2000 PORTFOLIO 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.50 12.30 12.29 12.70 11.39
Investment operations: Investment income -- net .66 .67 .69 .68 .69
Net realized and unrealized gain
(loss) on investments (.33) .20 .14 (.36) 1.31
Total from investment operations .33 .87 .83 .32 2.00
Distributions: Dividends from investment income -- net (.66) (.67) (.69) (.68) (.69)
Dividends from net realized gain on investments -- -- (.13) (.05) --
Total distributions (.66) (.67) (.82) (.73) (.69)
Net asset value, end of period 12.17 12.50 12.30 12.29 12.70
Total return (%) 2.69 7.27 7.01 2.59 17.95
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .64 .59 .61 .66 .68
Ratio of net investment income to average net assets (%) 5.32 5.41 5.65 5.54 5.73
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) -- -- -- -- .03
Portfolio turnover rate (%) 57.23 84.71 200.54 98.28 49.43
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 37,663 38,528 35,106 31,796 22,291
</TABLE>
<Page 48>
Account Information
ACCOUNT POLICIES
Buying/Selling shares
PORTFOLIO SHARES MAY BE PURCHASED or sold (redeemed) by separate accounts of
participating insurance companies. VA contract holders and VLI policyholders
should consult the prospectus of the separate account of the participating
insurance company for more information about buying or selling portfolio shares.
THE PRICE FOR PORTFOLIO SHARES is the 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 and sale orders
from separate accounts received in proper form by the participating insurance
company on a given business day are priced at the NAV calculated on such day,
provided that the orders are received by the portfolio in proper form on the
next business day. The participating insurance company is responsible for
properly transmitting purchase and sale orders.
WIRE PURCHASE PAYMENTS MAY BE MADE if the bank account of the participating
insurance company is in a commercial bank that is a member of the Federal
Reserve System or any other bank having a correspondent bank in New York City.
Immediately available funds may be transmitted by wire to The Bank of New York
(DDA#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.
MONEY MARKET PORTFOLIO -- uses the amortized cost method of valuing its
investments, which does not take into account unrealized gains or losses.
APPRECIATION, DISCIPLINED STOCK, INTERNATIONAL EQUITY, INTERNATIONAL VALUE,
SMALL CAP and SMALL COMPANY STOCK PORTFOLIOS -- generally value investments
based on market value, or where market quotations are not readily available,
based on fair value as determined in good faith by the board of trustees.
Foreign securities held by each of the INTERNATIONAL EQUITY and INTERNATIONAL
VALUE portfolios may trade on days when the portfolio does not calculate its NAV
and thus affect the portfolio's NAV on days when investors have no access to the
portfolio.
BALANCED, GROWTH AND INCOME, LIMITED TERM HIGH INCOME, QUALITY BOND, SPECIAL
VALUE and ZERO COUPON 2000 PORTFOLIOS -- generally value investments based on
market value, or where market quotations are not readily available, based on
fair value as determined in good faith by the board of trustees or by one or
more pricing services approved by the board.
<Page 49>
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.
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 the relevant portfolio unless it is
instructed otherwise by a participating insurance company.
Since each portfolio' s shareholders are the participating insurance companies
and their separate accounts, the tax treatment of dividends and distributions
will depend on the tax status of the participating insurance company.
Accordingly, no discussion is included as to the federal income tax consequences
to VA contract holders and VLI policyholders. For this information, VA contract
holders and VLI policyholders should consult the applicable prospectus of the
separate account of the participating insurance company or their tax advisers.
Participating insurance companies should consult their tax advisers about
federal, state and local tax consequences.
Who the shareholders are
The participating insurance companies and their separate accounts are the
shareholders of the portfolios. From time to time, a shareholder may own a
substantial number of portfolio shares. The sale of a large number of shares
could hurt the portfolio's net asset value per share (NAV).
<Page 50>
NOTES
NOTES
NOTES
For More Information
Dreyfus Variable Investment Fund
- -------------------------------------
SEC file number: 811-5125
More information on the portfolios is available free upon request, including the
following:
Annual/Semiannual Report
Describes each portfolio's performance, lists portfolio holdings and contains a
letter from the portfolio manager discussing recent market conditions, economic
trends and portfolio strategies that significantly affected the portfolio's
performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the portfolios and their policies. A current SAI is
on file with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-554-4611 or 516-338-3300
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Attn: Institutional Servicing
ON THE INTERNET Text-only versions of certain fund documents can be viewed
online or downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by E-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation VIFPO500
