N-30D 1 0001.txt ANNUAL REPORT Dreyfus Investment Portfolios, Core Bond Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 13 Statement of Assets and Liabilities 14 Statement of Operations 15 Statement of Changes in Net Assets 16 Financial Highlights 17 Notes to Financial Statements 23 Report of Independent Auditors FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Bond Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this report for Dreyfus Investment Portfolios, Core Bond Portfolio, covering the period from May 1, 2000 through December 31, 2000. Inside, you' ll find valuable information about how the portfolio was managed during the reporting period, including a discussion with Michael Hoeh, portfolio manager and a member of the Dreyfus Taxable Fixed Income Team that manages the portfolio. Investment-grade U.S. bonds generally provided attractive returns in a highly volatile environment in 2000. In contrast, most lower quality bond and major stock market indices declined sharply in 2000. In our view, this performance disparity provides ample evidence that diversification is an important component of most investment strategies. In 2000, the stock and high yield bond markets provided a stark reminder that overconcentration in any single type of security or asset class carries risks that can be diminished through diversification. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Michael Hoeh, Portfolio Manager Dreyfus Taxable Fixed Income Team How did Dreyfus Investment Portfolios, Core Bond Portfolio perform relative to its benchmark? For the period from May 1, 2000 to December 31, 2000, the portfolio produced a total return of 8.61%.(1) In comparison, the portfolio's benchmark, the Merrill Lynch Domestic Master Index, produced a total return of 9.56% for the same period.(2) The portfolio generated approximate income dividends totaling $0.5020 per share during the reporting period. We attribute the portfolio' s strong absolute performance to our sector allocation and credit quality strategies, which enabled us to avoid the brunt of the declines caused by rising interest rates earlier in the period, as well as the potential effects of deteriorating credit quality when the economy slowed later in the period. What is the portfolio's investment approach? The portfolio seeks to maximize total return through both capital appreciation and current income. The portfolio invests at least 65% of its assets in investment-grade fixed-income securities, which include U.S. Treasury securities, U.S. Government agency securities, corporate bonds, foreign bonds, mortgage- and asset-backed securities, convertible securities and preferred stocks. The portfolio may invest up to 35% of its assets in bonds rated below investment-grade credit quality, also known as "high yield" securities. Our investment approach emphasizes: * FUNDAMENTAL ECONOMIC ANALYSIS. Our review of U.S. economic conditions helps us establish the portfolio's average duration, which is a measure of sensitivity to interest-rate changes. If interest rates appear to be rising, we will generally reduce the portfolio's average duration to keep cash available for the purchase of higher yielding securities as The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) they become available. If interest rates appear to be declining, we will generally increase the portfolio' s average duration to lock in prevailing yields. *SECTOR ALLOCATION. We allocate assets among the various sectors of the fixed-income marketplace according to their relative attractiveness based on prevailing and expected market and economic conditions. * SECURITY SELECTION. We choose individual securities according to factors that include their yields, prices, liquidity and the financial health of the issuers What other factors influenced the portfolio's performance? When the reporting period began, the U.S. economy was growing strongly, raising concerns that long-dormant inflationary pressures might reemerge. In response, the Federal Reserve Board (the "Fed") raised short-term interest rates four times during the first half of 2000. By June, however, signs had emerged that the Fed' s previous rate hikes were having the desired effect of slowing the economy, suggesting that the Fed's restrictive monetary policies could be near an end. Slower economic growth and expectations of short-term interest-rate cuts during the second half of the year benefited interest-rate-sensitive securities such as U.S. Treasury securities. However, it took a toll on the lower quality areas of the credit-sensitive corporate bond market as investors became increasingly concerned about the potential for defaults. We began the year with relatively high levels of cash, which we invested carefully and gradually in the then prevailing rising interest-rate environment. We primarily emphasized high quality securities such as U.S. Treasury bonds, U.S. Government agency bonds, mortgage-backed securities and corporate bonds rated single-A or better. At the same time, we generally avoided high yield corporate securities and foreign government bonds. This strategy proved beneficial as U.S. Treasury securities led the bond market's advance in 2000, which was driven higher by positive supply-and-demand factors as well as a " flight to quality" among investors seeking a safe haven from a declining stock market. What is the portfolio's current strategy? We believe that U.S. Treasury securities and other high quality bonds may have reached levels at which they can be considered overvalued. We believe the slowing economy during the second half of the year may have contributed to the overvaluation of these securities. Differences in yields widened substantially among high quality and lower quality bonds. While market uncertainty caused us to refrain from taking advantage of better values among higher risk securities during 2000, we are prepared to do so if we become convinced that it is a prudent thing to do under current market conditions. We are also carefully watching the new administration in Washington for signs of imminent tax cuts or Social Security privatization, both of which might adversely affect the bond market. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. THE RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH APRIL 30, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MERRILL LYNCH DOMESTIC MASTER INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. TREASURY AND AGENCY, AND MORTGAGE AND INVESTMENT-GRADE CORPORATE SECURITIES WITH MATURITIES GREATER THAN OR EQUAL TO ONE YEAR. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Core Bond Portfolio Initial shares and Merrill Lynch Domestic Master Index -------------------------------------------------------------------------------- Aggregate Total Return AS OF 12/31/00 Inception From Date Inception -------------------------------------------------------------------------------- PORTFOLIO--INITIAL SHARES 5/1/00 8.61% ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, CORE BOND PORTFOLIO ON 5/1/00 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE MERRILL LYNCH DOMESTIC MASTER INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE MERRILL LYNCH DOMESTIC MASTER INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. GOVERNMENT, MORTGAGE AND BBB OR HIGHER RATED CORPORATE SECURITIES WITH MATURITIES GREATER THAN OR EQUAL TO ONE YEAR. U.S. TREASURY SECURITIES IN THE INDEX MUST HAVE PAR AMOUNTS OUTSTANDING GREATER THAN OR EQUAL TO $1 BILLION AND CORPORATE AND GENERIC MORTGAGE-BACKED SECURITIES $100 MILLION PER COUPON. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES.
STATEMENT OF INVESTMENTS December 31, 2000 Principal -------------------------------------------------------------------------------- BONDS AND NOTES--95.8% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AIRCRAFT & AEROSPACE--.9% Northrop-Grumman, Deb., 7.875%, 2026 109,000 107,713 ASSET-BACKED CTFS.--7.4% Advanta Mortgage Loan Trust, Ser. 2000-2, Cl. A6, 7.72%, 2015 95,000 98,563 Conseco Finance Securitizations: Ser. 2000-6, Cl. A1, 6.43%, 2032 300,000 300,000 Ser. 2000-D, Cl. A3, 7.89%, 2018 100,000 103,693 Countrywide, Ser. 2000-4, Cl. AF6, 7.41%, 2031 65,000 66,788 The Money Store Home Equity Trust, Ser. 1998-B, Cl. AF8, 6.11%, 2010 200,000 198,634 Union Acceptance Corp. Securitization Owner Trust, Ser. 2000-D, Cl. A4, 6.89%, 2007 121,000 123,533 891,211 AUTOMOTIVE--.9% American Axle & Manufacturing, Sr. Sub. Notes, 9.75%, 2009 34,000 28,900 Lear, Sr. Notes, Ser. B, 7.96%, 2005 80,000 75,609 104,509 BANKING--1.0% Dime Bancorp, Sr. Notes, 9%, 2002 122,000 122,747 BUILDING MATERIALS--.4% United Rentals, Sr. Sub. Notes, 9.5%, 2008 66,000 51,810 COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--7.6% COMM, Ser. 2000-FL2A, Cl. E, 7.61%, 2003 100,000 (a,b) 99,937 CS First Boston Mortgage Securities: Ser. 1998-C1, Cl. C, 6.78%, 2009 240,000 237,300 Ser. 1999-C1, Cl. F, 7.923%, 2009 100,000 (b) 101,707 First Union National Bank: Ser. 2000-C2, Cl. A2, 7.202%, 2010 165,000 172,941 Ser. 2000-C2, Cl. G, 8.269%, 2010 93,000 96,051 Heller Financial, Ser. 2000-PH1, Cl. A2, 7.75%, 2009 188,000 202,717 910,653 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal -------------------------------------------------------------------------------- BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMPUTERS--.4% Hewlett-Packard, Conv. Liquid Yield Option Notes, 0%, 2017 92,000 49,450 CONSUMER--.8% Sleepmaster, Sr. Sub. Notes, Ser. B, 11%, 2009 121,000 92,565 ELECTRIC POWER--1.8% AES, Sr. Notes, 8.75%, 2002 122,000 123,068 Southern Energy, Sr. Notes, 7.9%, 2009 99,000 (a) 98,402 221,470 FINANCE--1.9% Bear Stearns, Notes, 7.625%, 2009 19,000 19,294 Household Finance, Notes, 8%, 2010 100,000 105,707 Meridian Funding, Notes, Ser. 2000-E, 6.999%, 2005 (Insured by MBIA) 100,000 (a),(b) 100,023 225,024 FOREST PRODUCTS--.7% Georgia-Pacific, Deb., 9.5%, 2011 85,000 84,714 INDUSTRIAL--1.3% NRG Energy, Sr. Notes, 8.25%, 2010 99,000 101,990 Tyco, Conv. Liquid Yield Option Notes, 0%, 2020 61,000 (c) 47,580 149,570 INSURANCE--1.6% AXA, Sub. Notes, 8.6%, 2030 130,000 134,233 MONY Group, Sr. Notes, 8.35%, 2010 59,000 61,511 195,744 OIL AND GAS--1.0% Ocean Energy, Sr. Sub. Notes, Ser. B, 8.875%, 2007 75,000 77,625 Principal -------------------------------------------------------------------------------- BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- OIL AND GAS (CONTINUED) PEMEX Project Funding Master Trust, Medium-Term Notes, 9.125%, 2010 44,000 (a) 43,890 121,515 REAL ESTATE INVESTMENT TRUST--2.8% Crescent Real Estate Equities, Notes, 7%, 2002 100,000 95,943 Federal Realty Investment Trust, Medium-Term Notes, 6.74%, 2004 150,000 147,347 Tanger Properties, Gtd. Notes, 8.75%, 2001 100,000 100,059 343,349 RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--1.9% Chase Mortgage Finance, Ser. 1999-S13, Cl. B4, 6.5%, 2014 214,303 (a) 173,017 GE Capital Mortgage Services, Ser. 2000-8, Cl. B5, 7.5%, 2015 184,407 (a) 53,478 226,495 RETAIL--1.3% Lowe's Cos., Notes, 7.5%, 2005 128,000 130,705 Saks, Gtd. Sr. Notes, 7.375%, 2019 45,000 22,275 152,980 TELECOMMUNICATION--2.8% British Telecommunications, Notes, 8.625%, 2030 45,000 45,178 Cable & Wireless Optus Finance Property, Gtd. Notes, 8%, 2010 113,000 (a) 125,367 Marconi, Bonds, 8.375%, 2030 126,000 118,676 Winstar Communications, Sr. Notes, 12.75%, 2010 74,000 (a) 51,800 341,021 U. S. GOVERNMENT AGENCIES-.5% Tennessee Valley Authority, Valley Indexed Principal Securities, 3.375%, 1/15/2007 57,000 (d) 59,529 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal -------------------------------------------------------------------------------- BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- U. S. GOVERNMENT AGENCIES/MORTGAGE-BACKED--14.4% Federal Home Loan Mortgage Corp.: 7.5% 350,000 (e) 355,029 REMIC Trust, Gtd. Pass-Through Ctfs. (Interest Only Obligations): Ser. 1992, Cl. PG, 7%, 4/15/2014 590,775 (f) 29,539 Ser. 1999, Cl. PW, 7%, 8/15/2026 136,933 (f) 26,376 Ser. 2067, Cl. PI, 6.5%, 1/15/2024 170,000 (f) 46,987 Ser. 2113, Cl. MI, 6.5%, 4/15/2024 692,182 (f) 101,384 Federal National Mortgage Association, 7.5% 75,000 (e) 76,055 Government National Mortgage Association I, 7% 200,000 (e) 200,936 Government National Mortgage Association II: 6%, 7/20/2030 198,127 198,809 6.5%, 7/20/2030 98,968 100,314 7% 212,000 (e) 211,801 7.5% 200,000 (e) 202,500 8%, 2/20/2034 183,612 187,455 1,737,185 U. S. GOVERNMENTS--41.7% U. S. Treasury Bonds: 6.125%, 8/15/2029 602,000 655,801 6.25%, 5/15/2030 671,000 749,312 U. S. Treasury Inflation Protection Securities, 3.625%, 7/15/2002 760,000 (d) 826,749 U. S. Treasury Notes: 5.75%, 11/15/2005 105,000 108,413 5.875%, 11/15/2004 1,000,000 1,026,380 6.25%, 2/15/2007 875,000 924,936 6.375%, 6/30/2002 631,000 640,680 6.875%, 5/15/2006 80,000 86,581 5,018,852 UTILITIES-ELECTRIC POWER--.7% Calpine, Sr. Notes, 8.625%, 2010 90,000 88,650 UTILITIES-TELEPHONE--2.0% AT&T, Notes, 6.5%, 2029 116,000 93,044 Principal ------------------------------------------------------------------------------------------------------------------------------------ BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- UTILITIES-TELEPHONE (CONTINUED) WorldCom, Notes, 7.375%, 2006 148,000 (a) 147,451 240,495 TOTAL BONDS AND NOTES (cost $11,441,974) 11,537,251 ----------------------------------------------------------------------------------------------------------------------------------- OTHER SECURITIES--2.5% ------------------------------------------------------------------------------------------------------------------------------------ BANKING--1.8% Abbey National Capital Trust I, Gtd. Non-Cumulative Trust Preferred Securities, 8.963%, 6/30/2030 27,000 (g,h) 27,951 Bank One Capital III, Gtd. Preferred Securities, 8.75%, 9/1/2030 32,000 31,584 Barclays Bank, Step-Up Callable Perpetual Reserve Capital Instruments, 8.55%, 6/15/2011 72,000 (a,g,h) 75,640 Royal Bank of Scotland Group, Conv. Non-Cumulative Dollar Preference Shares, Ser. 3, 7.816%, 12/31/2005 86,000 (h) 87,800 222,975 FINANCE--.7% ING Capital Funding Trust III, Non-Cumulative Gtd. Trust Preferred Securities, 8.439%, 12/31/2010 79,000 (g,h) 80,533 TOTAL OTHER SECURITIES (cost $299,048) 303,508 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--.2% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ TELECOMMUNICATION; Global Crossing, Cum. Conv., $17.50 (cost $32,003) 160 20,242 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS--11.8% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER: Morgan (J. P.) & Co., 6.55%, 1/2/2001 470,000 469,915 Philip Morris Cos., 6.5%, 1/2/2001 480,000 479,913 UBS Finance, 6.5%, 1/2/2001 475,000 474,914 TOTAL SHORT-TERM INVESTMENTS (cost $1,424,742) 1,424,742 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $13,197,767) 110.3% 13,285,743 LIABILITIES, LESS CASH AND RECEIVABLES (10.3%) (1,237,269) NET ASSETS 100.0% 12,048,474 (A) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT DECEMBER 31, 2000, THESE SECURITIES AMOUNTED TO $969,005 OR 8.0% OF NET ASSETS. (B) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE. (C) DATE SHOWN IS FINAL MATURITY; SECURITY IS PUTABLE BY THE PORTFOLIO ON VARIOUS DATES PRIOR TO MATURITY. (D) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON CHANGES TO THE CONSUMER PRICE INDEX. (E) PURCHASED ON A FORWARD COMMITMENT BASIS. (F) NOTIONAL FACE AMOUNT SHOWN. (G) THE STATED INTEREST RATE IS IN EFFECT UNTIL A SPECIFIED DATE AT WHICH TIME THE INTEREST RATE BECOMES SUBJECT TO PERIODIC CHANGE. (H) DATE SHOWN REPRESENTS EARLIEST DATE THE ISSUER MAY REDEEM THE SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 13,197,767 13,285,743 Cash 711,118 Receivable for investment securities sold 822,911 Interest receivable 161,380 14,981,152 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 1,688 Payable for investment securities purchased 2,900,852 Payable for shares of Beneficial Interest redeemed 45 Accrued expenses and other liabilities 30,093 2,932,678 -------------------------------------------------------------------------------- NET ASSETS ($) 12,048,474 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 11,818,003 Accumulated distributions in excess of investment income--net (1,903) Accumulated net realized gain (loss) on investments 144,398 Accumulated net unrealized appreciation (depreciation) on investments--Note 4 87,976 -------------------------------------------------------------------------------- NET ASSETS ($) 12,048,474 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 12,047,974 500 Shares Outstanding 931,361 38.670 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.94 12.93 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS from May 1, 2000 (commencement of operations) to December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 328,289 Cash dividends 700 TOTAL INCOME 328,989 EXPENSES: Investment advisory fee--Note 3(a) 27,989 Legal fees 27,048 Auditing fees 15,000 Custodian fees--Note 3(b) 7,800 Prospectus and shareholders' reports 4,136 Registration fees 3,120 Trustees' fees and expenses--Note 3(c) 130 Shareholder servicing costs--Note 3(b) 59 Miscellaneous 3,421 TOTAL EXPENSES 88,703 Less--expense reimbursement from The Dreyfus Corporation due to undertaking--Note 3(a) (51,385) NET EXPENSES 37,318 INVESTMENT INCOME--NET 291,671 ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 238,983 Net unrealized appreciation (depreciation) on investments 87,976 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 326,959 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 618,630 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS from May 1, 2000 (commencement of operations) to December 31, 2000(a ------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 291,671 Net realized gain (loss) on investments 238,983 Net unrealized appreciation (depreciation) on investments 87,976 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 618,630 ------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (293,574) Net realized gain on investments: Initial shares (94,585) TOTAL DIVIDENDS (388,159) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 16,414,812 Service shares 500 Dividends reinvested: Initial shares 388,159 Cost of shares redeemed: Initial shares (4,985,468) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 11,818,003 TOTAL INCREASE (DECREASE) IN NET ASSETS 12,048,474 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period -- END OF PERIOD 12,048,474 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 1,291,834 Shares issued for dividends reinvested 30,526 Shares redeemed (390,999) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 931,361 -------------------------------------------------------------------------------- SERVICE SHARES SHARES SOLD 39 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal period indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased or (decreased) during the period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. INITIAL SHARES SERVICE SHARES ---------------------------- Period Ended Period Ended December 31, December 31, 2000(a) 2000(b) ------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 12.50 12.93 Investment Operations: Investment income--net .50 -- Net realized and unrealized gain (loss) on investments .56 -- Total from Investment Operations 1.06 -- Distributions: Dividends from investment income--net (.50) -- Dividends from net realized gain on investments (.12) -- Total Distributions (.62) -- Net asset value, end of period 12.94 12.93 ------------------------------------------------------------------------------- TOTAL RETURN (%) 8.61(c) -- ------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .80(d) -- Ratio of net investment income to average net assets 6.24(d) -- Decrease reflected in above expense ratio due to undertaking by The Dreyfus Corporation 1.10(d) -- Portfolio Turnover Rate 953.66(c) 953.66(c) ------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 12,048 1 (A) FROM MAY 1, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) NOT ANNUALIZED. (D) ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the Core Bond Portfolio (the "portfolio"), which commenced operations on May 1, 2000. The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio' s investment objective is to maximize total return through capital appreciation and current income. The Dreyfus Corporation ("Dreyfus") serves as the portfolio' s investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. (" Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus is the distributor of the portfolio's shares, which are sold without a sales charge. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 420,005 Initial shares and all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (excluding short-term investments, other than U.S. Treasury Bills, and financial futures) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Short-term investments, excluding U.S. Treasury Bills, are carried at amortized cost, which approximates value. Financial futures are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio receives net earnings credits based on available cash balances left on deposit. In November 2000 the American Institute of Certified Public Accountants (AICPA) issued a revised version of the AICPA Audit and Accounting Guide for Investment Companies (the Guide) . The revised version of the Guide is effective for financial statements issued for fiscal years beginning after December 15, 2000. One of the new provisions in the Guide requires investment companies to amortize premiums on fixed income securities which the portfolio does not currently do. Upon adoption, the portfolio will be required to record a cumulative effect adjustment to conform with accounting principles generally accepted in the United States. The effect of this adjustment will be to decrease accumulated net investment income with an offsetting increase to accumulated unrealized appreciation (depreciation) on securities. This adjustment will therefore, have no effect on the net assets of the portfolio. (c) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid monthly. Dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the " Code" ). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (d) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2-Bank Line of Credit: The portfolio may borrow up to $5 million for leveraging purposes under a short-term unsecured line of credit and participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under either line of credit. NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .60 of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from May 1, 2000 through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio' s aggregate annual expenses, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceeded an annual rate of .80 of 1% of the value of the portfolio's average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class (exclusive of certain expenses as described above) exceed an annual rate of .80 of 1% of the value of the average daily net assets of their class. The expense reimbursement, pursuant to the undertaking, amounted to $51,385 during the period ended December 31, 2000. (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $27 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $7,800 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4--Securities Transactions: The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities, during the period ended December 31, 2000, amounted to $75,657,636 and $64,102,547, respectively. At December 31, 2000, accumulated net unrealized appreciation on investments was $87,976, consisting of $159,428 gross unrealized appreciation and $71,452 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Core Bond Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Core Bond Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statements of operations and changes in net assets and financial highlights for the period from May 1, 2000 (commencement of operations) to December 31, 2000. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2000 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Core Bond Portfolio at December 31, 2000, and the results of its operations, the changes in its net assets and the financial highlights for the period from May 1, 2000 to December 31, 2000, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Core Bond Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 165AR0012 Dreyfus Investment Portfolios, Core Value Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 14 Financial Highlights 15 Notes to Financial Statements 20 Report of Independent Auditors 21 Important Tax Information FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Value Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, Core Value Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you' ll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Valerie J. Sill. After five consecutive years of double-digit gains, the U.S. stock market, as measured by the Standard & Poor's 500 Composite Stock Price Index, declined more than 9% in 2000. Most other major stock market indices declined as well. The reasons for the disappointing year varied, ranging from sky-high valuations of technology stocks to slowing economic growth during the second half of the year. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Valerie J. Sill, Portfolio Manager How did Dreyfus Investment Portfolios, Core Value Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, Dreyfus Investment Portfolios, Core Value Portfolio produced a total return of 12.06%.(1) In comparison, the portfolio's benchmark, the Standard & Poor's 500/BARRA Value Index (the "Index") , produced a total return of 6.08% for the same period.(2) We attribute the portfolio's positive performance, both on an absolute basis and relative to the Index, to a stock market environment that generally favored the value style of investing for much of the reporting period. In particular, the portfolio' s emphasis on defense/aerospace, health care, financial services and utilities stocks helped it to outperform its benchmark. What is the portfolio's investment approach? The portfolio invests primarily in large-cap companies that are considered undervalued based on traditional measures such as price-to-earnings ratios. In choosing stocks, we use a "bottom-up" stock selection approach, focusing on individual companies rather than a "top-down" approach that forecasts market trends. We also focus on a company's relative value, financial strength, sales and earnings momentum and likely catalysts that could ignite the stock price. What other factors influenced the portfolio's performance? One of the factors that positively affected the portfolio's performance during the past year has been the portfolio manager's patience and, in some instances, a willingness to go "against the grain." For example, in 1999 the portfolio purchased shares of Boeing, the world's largest manufacturer of airplanes, when the company was generally out of favor and many investors were questioning the value of its stock. The company has recently witnessed a strong increase in business from Asia The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) and its internal cost reduction program has led to a very strong earnings report that exceeded Wall Street analysts' expectations. In a similar sector, the portfolio' s holdings in United Technologies, with its diversified manufacturing interests including aircraft engines, produced strong results for the portfolio. We believe the pharmaceutical industry also appeared to be out of favor with investors during the recent political campaigns, as Congress debated expanding Medicare to include prescription drugs. This could have effectively capped the industry' s revenues and possibly led to a decline in the prices of pharmaceutical stocks. However, the political season came and went, and as of the end of the reporting period such a proposal had not become law. As technology and telecommunications stocks sold off sharply earlier in the year, many investors shifted to pharmaceutical industry stocks for their steady growth potential. In particular, American Home Products and Abbott Laboratories were very strong performers during the reporting period. Selected financial services stocks also achieved strong gains during the reporting period, including insurance companies such as American International Group and Citigroup's insurance arm, Travelers. In addition, electric utilities such as Duke Energy were able to produce strong profits in a deregulated environment, as the demand for power outpaced supply. However, the portfolio's results were hampered by its holdings in the chemical industry, which continued to perform poorly during the reporting period due to rising energy costs. In addition, other economically cyclical companies, such as those in the broadcasting and publishing industries, began 2000 very strongly only to perform poorly in the second half, as the U.S. economy began to slow. What is the portfolio's current strategy? During 1998 and 1999 when growth investing was paramount, the patience of value investors was severely tested. However, in 2000 we believe value investing took center stage due in part to a slowing U.S. economy. Regardless of whether growth or value investing is in favor at any given moment, our strategy remains consistent. We will continue to look for what we believe are undervalued stocks, regardless of industry, that in our view have the potential to provide good stock price performance. Given the sell-off in the stock market during 2000, we believe there currently remains a wide selection of attractively priced companies available to us as investment opportunities. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500/BARRA VALUE INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE STOCKS IN THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500 INDEX") THAT HAVE LOW PRICE-TO-BOOK RATIOS. THE S&P 500 INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Core Value Portfolio Initial shares and the Standard & Poor's 500/BARRA Value Index -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 5/1/98 12.06% 9.26%
((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO ON 5/1/98 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE STANDARD & POOR'S 500/BARRA VALUE INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE STANDARD & POOR'S 500/BARRA VALUE INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE STOCKS IN THE S&P 500 THAT HAVE LOW PRICE-TO-BOOK RATIOS. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--92.9% Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- BANKING--14.4% Chase Manhattan 11,750 533,891 Citigroup 18,800 959,975 Fannie Mae 3,400 294,950 First Union 6,900 191,906 FleetBoston Financial 20,406 766,500 Golden State Bancorp 6,900 216,919 Washington Mutual 5,000 265,313 Wells Fargo 3,900 217,181 3,446,635 BASIC INDUSTRIES--5.9% Air Products & Chemicals 9,600 393,600 Dow Chemical 6,600 241,725 duPont (E.I.) deNemours & Co. 8,451 408,289 Georgia-Pacific 5,700 177,413 International Paper 2,400 97,950 Union Carbide 1,800 96,863 1,415,840 BROKERAGE--5.3% Goldman Sachs Group 2,300 245,956 Morgan Stanley Dean Witter & Co. 7,900 626,075 Stilwell Financial 9,700 382,544 1,254,575 CAPITAL GOODS--8.7% Boeing 5,400 356,400 Deere & Co. 2,400 109,950 Eaton 2,400 180,450 Pitney Bowes 11,700 387,563 Rockwell International 7,900 376,238 TRW 4,300 166,625 United Technologies 6,400 503,200 2,080,426 CONSUMER DURABLES--.6% Ford Motor 6,014 140,953 CONSUMER NON-DURABLES--.9% Kimberly-Clark 3,200 226,208 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- CONSUMER SERVICES--8.0% Albertson's 10,100 267,650 Circuit City Stores--Circuit City Group 8,300 95,450 Disney (Walt) 15,000 434,063 Federated Department Stores 5,300 (a) 185,500 First Data 3,300 173,869 Knight-Ridder 5,000 284,375 Vivendi Universal, ADR 7,120 465,025 1,905,932 ENERGY--12.3% BP Amoco, ADS 10,600 507,475 Conoco, Cl. B 17,184 497,262 Exxon Mobil 9,652 839,121 Halliburton 6,600 239,250 Texaco 8,900 552,913 Williams Cos. 7,500 299,531 2,935,552 HEALTH CARE--6.0% Abbott Laboratories 4,200 203,437 American Home Products 5,900 374,945 Merck & Co. 6,800 636,650 Wellpoint Health Networks 2,000 (a) 230,500 1,445,532 INSURANCE--8.2% Aetna 1,100 (a) 45,167 Allstate 6,200 270,087 American General 3,900 317,850 American International Group 4,796 472,706 CIGNA 1,400 185,220 Marsh & McLennan Cos. 2,100 245,700 MetLife 12,000 420,000 1,956,730 COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- TECHNOLOGY--5.3% Advanced Micro Devices 2,400 (a) 33,150 Apple Computer 10,600 (a) 157,675 Avaya 8,900 91,781 Electronic Data Systems 4,300 248,325 Hewlett-Packard 6,450 203,577 International Business Machines 3,900 331,500 3COM 22,500 (a) 191,250 1,257,258 TELECOMMUNICATIONS--1.3% Cable & Wireless, ADS 4,500 179,437 Sprint (FON Group) 6,600 134,063 313,500 TRANSPORTATION--2.7% Canadian Pacific 18,900 539,831 Southwest Airlines 3,400 114,002 653,833 UTILITIES--13.3% British Telecommunications, ADR 1,900 164,825 CMS Energy 18,300 579,881 Entergy 8,300 351,194 FPL Group 4,500 322,875 GPU 8,900 327,631 NiSource 15,500 476,625 Progress Energy 7,100 349,231 Telephone & Data Systems 1,400 126,000 Verizon Communications 9,550 478,694 3,176,956 TOTAL COMMON STOCKS (cost $19,675,632) 22,209,930 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) PREFERRED STOCKS--2.9% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER SERVICES News Corp, ADR (cost $722,463) 23,450 681,516 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--4.1% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCY DISCOUNT NOTES; Federal Home Loan Banks 5.62%, 1/2/2001 (cost $969,849) 970,000 969,849 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $21,367,944) 99.9% 23,861,295 CASH AND RECEIVABLES (NET) .1% 35,811 NET ASSETS 100.0% 23,897,106 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 21,367,944 23,861,295 Cash 45,229 Dividends receivable 20,345 Prepaid expenses 12,550 23,939,419 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 12,140 Accrued expenses and other liabilities 30,173 42,313 -------------------------------------------------------------------------------- NET ASSETS ($) 23,897,106 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 21,131,943 Accumulated undistributed investment income--net 4,654 Accumulated net realized gain (loss) on investments 267,158 Accumulated net unrealized appreciation (depreciation) on investments--Note 4 2,493,351 -------------------------------------------------------------------------------- NET ASSETS ($) 23,897,106 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 23,896,606 500 Shares Outstanding 1,583,067 33.135 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 15.10 15.09 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $2,385 foreign taxes withheld at source) 353,652 Interest 54,850 TOTAL INCOME 408,502 EXPENSES: Investment advisory fee--Note 3(a) 141,578 Auditing fees 17,733 Prospectus and shareholders' reports 14,418 Custodian fees--Note 3(b) 8,049 Legal fees 4,433 Registration fees 1,729 Trustees' fees and expenses--Note 3(c) 628 Shareholder servicing costs--Note 3(b) 449 Miscellaneous 8,559 TOTAL EXPENSES 197,576 Less--reduction in investment advisory fee due to undertaking--Note 3(a) (13,924) NET EXPENSES 183,652 INVESTMENT INCOME--NET 224,850 ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 801,415 Net unrealized appreciation (depreciation) on investments 1,343,901 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,145,316 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,370,166 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2000(a) 1999 ------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 224,850 60,207 Net realized gain (loss) on investments 801,415 280,590 Net unrealized appreciation (depreciation) on investments 1,343,901 1,104,740 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,370,166 1,445,537 ------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (220,384) (66,069) Net realized gain on investments: Initial shares (510,084) -- TOTAL DIVIDENDS (730,468) (66,069) ------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 14,417,156 11,031,262 Service shares 500 -- Dividends reinvested: Initial shares 730,468 66,069 Cost of shares redeemed: Initial shares (8,233,492) (3,092,776) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 6,914,632 8,004,555 TOTAL INCREASE (DECREASE) IN NET ASSETS 8,554,330 9,384,023 ------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 15,342,776 5,958,753 END OF PERIOD 23,897,106 15,342,776 Undistributed investment income--net 4,654 188 ------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 1,000,641 821,212 Shares issued for dividends reinvested 50,772 4,861 Shares redeemed (566,926) (235,841) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 484,487 590,232 ------------------------------------------------------------------------------- SERVICE SHARES SHARES SOLD 33 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ------------------------------------------------------------- Period Ended Year Ended December 31, December 31, ------------------------------------------------------------- 2000 1999 1998(a) 2000 (b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.97 11.72 12.50 15.09 Investment Operations: Investment income--net .17(c) .07(c) .07 -- Net realized and unrealized gain (loss) on investments 1.50 2.24 (.77) -- Total from Investment Operations 1.67 2.31 (.70) -- Distributions: Dividends from investment income--net (.16) (.06) (.08) -- Dividends from net realized gain on investments (.38) -- -- -- Total Distributions (.54) (.06) (.08) -- Net asset value, end of period 15.10 13.97 11.72 15.09 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 12.06 19.73 (5.59)(d) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .97 1.00 .67(d) -- Ratio of net investment income to average net assets 1.19 .56 .62(d) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .07 .50 .74(d) -- Portfolio Turnover Rate 110.74 97.14 47.37(d) 110.74 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 23,897 15,343 5,959 1 (A) FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering twelve series, including the Core Value Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio' s investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. (" Mellon" ), which is a wholly-owned subsidiary of Mellon Financial Corporation. Effective March 22, 2000, Dreyfus Service Corporation (the " Distributor" ), a wholly-owned subsidiary of Dreyfus became the distributor of the portfolio' s shares, which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $722 during the period ended December 31, 2000 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the line of credit. NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .75 of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000 through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio' s aggregate annual expenses, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceeded an annual rate of 1% of the value of the portfolio's average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class (exclusive of certain expenses as described above) exceed 1% of the value of the average daily net assets of their class. The reduction in investment advisory fee, pursuant to the undertaking, amounted to $13,924 during the period ended December 31, 2000. (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $86 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $8,049 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an "affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2000, amounted to $26,533,758 and $20,149,589, respectively. At December 31, 2000, accumulated net unrealized appreciation on investments was $2,493,351, consisting of $3,367,128 gross unrealized appreciation and $873,777 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Core Value Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Core Value Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2000 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Core Value Portfolio at December 31, 2000, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes, the portfolio hereby designates $.0550 per share as a long-term capital gain distribution of the $.4800 per share paid on December 21, 2000. The portfolio also designates 38.50% of the ordinary dividends paid during the fiscal year ended December 31, 2000 as qualifying for the corporate dividends received deduction. The Portfolio For More Information Dreyfus Investment Portfolios, Core Value Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 172AR0012 Dreyfus Investment Portfolios, Emerging Leaders Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 13 Financial Highlights 14 Notes to Financial Statements 19 Report of Independent Auditors 20 Important Tax Information FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Emerging Leaders Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, Emerging Leaders Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio managers, Paul Kandel and Hilary Woods. The small-cap segment of the stock market, as measured by the Russell 2000 Index, declined more than 3% in 2000. Most other major stock market indices declined as well. The reasons for the disappointing year varied, ranging from sky-high valuations of technology stocks to slowing economic growth during the second half of the year. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Paul Kandel and Hilary Woods, Portfolio Managers How did Dreyfus Investment Portfolios, Emerging Leaders Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, Dreyfus Investment Portfolios, Emerging Leaders Portfolio produced a total return of 31.70%.(1) This compares with a total return of -3.02% for the portfolio's benchmark, the Russell 2000 Index of small-capitalization stocks, during the same period.(2) The portfolio's blended growth and value investment approach served shareholders exceptionally well during the period. We attribute the portfolio's strong performance to our success in employing this blended approach and our ability to identify attractive individual investment opportunities among a wide range of industry groups. The portfolio also succeeded in emphasizing some of the market' s strongest sectors and de-emphasizing some of the market's weakest sectors. What is the portfolio's investment approach? The portfolio seeks capital growth by investing in a diversified group of small-cap companies with total market values of $1.5 billion or less at the time of purchase. We focus primarily on companies we believe are emerging leaders in their respective industries. The companies in which we invest offer products, processes or services that we believe enhance their prospects for future earnings or revenue growth. Using fundamental research, we look for stocks with dominant positions in major product lines, sustained records of achievement and strong balance sheets. We also base investment decisions on the expected impact of changes in a company's management or organizational structure. Our investment approach targets growth-oriented stocks (those companies with earnings or revenues that are expected to grow faster than the overall market), value-oriented stocks (those that appear underpriced according to a number of financial measurements) and stocks that exhibit both growth and value characteristics. We typically sell a stock when the The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) reasons for buying it no longer apply or when the company begins to show deteriorating fundamentals or poor relative performance. What other factors influenced the portfolio's performance? Volatile market conditions prevailed throughout the year. The first quarter of the year was characterized by strong economic growth and rising corporate profits. Technology stocks rose sharply in this environment, while most other industry sectors lagged far behind. In the second half of the year, the stock market began to discount the effects of the Federal Reserve Board' s interest-rate tightenings. As economic growth rates showed signs of slowing, investors focused on companies exhibiting financial stability and profitability, which were selling at reasonable valuations. Technology stocks declined, and market strength shifted toward more traditional, value-oriented sectors. The portfolio took advantage of these conditions on several fronts. We scored our most notable successes in health care, one of the best performing areas of the Russell 2000 Index during the period. The portfolio benefited from exceptionally strong stock selections among innovative drug companies such as CIMA; outpatient and home health care providers such as DaVita and Apria Healthcare Group; and biotech companies such as Cell Therapeutics. In all, our health care holdings returned approximately 221% compared to 46% for the Russell 2000 Index. We capitalized on strength in the financial sector, earning strong returns from investments in reinsurance companies, such as Everest Re Group and RenaissanceRe Holdings, and regional banks, such as Southwest Bancorporation of Texas and Cullen/Frost Bankers. We also outperformed the Russell 2000 Index in utilities, with investments in natural gas pipelines and gatherers such as Kinder Morgan and Western Gas Resources. Of course, not all of our investments performed as well as the stocks mentioned above. However, the portfolio succeeded in roughly equaling or outperforming the Russell 2000 Index in every industry group except the consumer sector, where our broadcasting stocks suffered from falling advertising revenues. Other consumer stocks in the portfolio suffered from company-specific problems. What is the portfolio's current strategy? As of the end of period, we have reduced our holdings in the consumer sector in light of weakening consumer spending. We have also cut back on utility and financial stocks, which have reached price levels that reflect their fundamentals. We hold relatively large positions in health care and energy, where we see continued opportunities for earnings growth, and in transports and materials and processing, where we believe industry fundamentals are likely to benefit from strength in the global economy and the possibility of declining energy prices. We believe the events of the past 12 months illustrate the value of our blended growth and value investment approach in challenging and rapidly changing investment environments. During a year in which growth strongly outperformed value for several months and value strongly outperformed growth during other months, we succeeded in adding to the portfolio's performance through both investment styles. As a result, we delivered strongly positive returns, while our benchmark finished the period in negative territory. We continue to adhere to our blended growth and value investment strategy in seeking to outperform the Russell 2000 Index. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK MARKET PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of a $10,000 investment in Dreyfus Investment Portfolios, Emerging Leaders Portfolio Initial shares and the Russell 2000 Inde -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 12/15/99 31.70% 39.28%
((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, EMERGING LEADERS PORTFOLIO ON 12/15/99 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE RUSSELL 2000 INDEX ON THAT DATE. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/99 IS USED AS THE BEGINNING VALUE ON 12/15/99. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK MARKET PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--96.7% Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES--2.0% Schein (Henry) 3,500 (a) 121,187 CONSUMER NON-DURABLES--4.6% Constellation Brands, Cl. A 1,700 (a) 99,875 Cott 11,900 (a) 90,738 Dean Foods 2,600 79,788 270,401 CONSUMER SERVICES--4.8% Emmis Communications, Cl. A 3,300 (a) 94,669 Entercom Communications 2,600 (a) 89,538 Scholastic 1,100 (a) 97,488 281,695 ELECTRONIC TECHNOLOGY--14.3% Aeroflex 3,200 (a) 92,250 Catapult Communications 6,000 (a) 100,500 DDi 3,200 (a) 87,200 DONCASTERS, A.D.S. 4,300 (a) 86,000 Exar 2,400 (a) 74,362 Harris 3,000 91,875 Loral Space & Communications 27,000 (a) 86,062 Plexus 2,600 (a) 79,016 Robotic Vision Systems 20,600 (a) 56,650 TranSwitch 2,300 (a) 89,988 843,903 ENERGY MINERALS--6.7% Arch Coal 6,500 91,812 Cabot Oil & Gas, Cl. A 2,900 90,444 Meridian Resource 12,000 (a) 103,500 Unit 5,700 (a) 107,944 393,700 FINANCE--19.2% AmeriCredit 3,700 (a) 100,825 Annuity and Life Re Holdings 3,200 102,200 Bank United, Cl. A 1,400 95,463 Brown & Brown 2,500 87,500 Commerce Bancorp 1,300 88,888 Cullen/Frost Bankers 2,200 91,988 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCE (CONTINUED) Everest Re Group 1,500 107,438 First Midwest Bancorp 3,200 92,000 Gallagher (Arthur J.) 1,300 82,713 Horace Mann Educators 5,000 106,875 RenaissanceRe Holdings 1,000 78,313 Southwest Bancorporation of Texas 2,300 (a) 98,753 1,132,956 HEALTH SERVICES--5.7% Bergen Brunswig, Cl. A 6,000 94,980 Beverly Enterprises 15,000 (a) 122,812 DaVita 7,000 (a) 119,875 337,667 HEALTH TECHNOLOGY--4.7% CIMA Labs 1,400 (a) 91,088 Invitrogen 1,100 (a) 95,012 SICOR 6,300 (a) 90,956 277,056 INDUSTRIAL SERVICES--4.4% Carbo Ceramics 2,500 93,594 Jacobs Engineering Group 1,800 (a) 83,137 Marine Drilling 3,100 (a) 82,925 259,656 NON-ENERGY MINERALS--1.5% Meridian Gold 12,700 (a) 87,312 PROCESS INDUSTRIES--7.9% Crown Cork & Seal 16,000 119,000 Fuller (H.B.) 2,100 82,852 Ivex Packaging 8,300 (a) 90,781 Longview Fibre 6,000 81,000 Olin 4,300 95,137 468,770 PRODUCER MANUFACTURING--1.5% SPS Technologies 1,600 (a) 87,700 RETAIL TRADE--2.8% Casey's General Stores 5,300 79,169 Neiman Marcus Group, Cl. A 2,500 (a) 88,906 168,075 COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- TECHNOLOGY SERVICES--8.5% Apria Healthcare Group 4,500 (a) 133,875 AremisSoft 2,000 (a) 85,375 National Data 2,400 87,900 Netegrity 1,300 (a) 70,688 RightCHOICE Managed Care, Cl. A 3,500 (a) 121,844 499,682 TRANSPORTATION--4.6% AirTran Holdings 12,900 (a) 93,525 Atlantic Coast Airlines Holdings 2,100 (a) 85,837 Forward Air 2,500 (a) 93,281 272,643 UTILITIES--3.5% Cleco 1,800 98,550 Western Gas Resources 3,200 107,800 206,350 TOTAL COMMON STOCKS (cost $4,591,603) 5,708,753 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--10.0% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. TREASURY BILLS: 5.87%, 3/8/2001 318,000 314,744 5.41%, 3/22/2001 131,000 129,372 5.11%, 3/29/2001 147,000 144,990 TOTAL SHORT-TERM INVESTMENTS (cost $589,191) 589,106 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $5,180,794) 106.7% 6,297,859 LIABILITIES, LESS CASH AND RECEIVABLES (6.7%) (395,090) NET ASSETS 100.0% 5,902,769 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 5,180,794 6,297,859 Receivable for investment securities sold 94,189 Dividends receivable 1,722 Prepaid expenses 22 6,393,792 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 5,030 Cash overdraft due to Custodian 15,377 Payable for investment securities purchased 449,798 Accrued expenses 20,818 491,023 -------------------------------------------------------------------------------- NET ASSETS ($) 5,902,769 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 5,025,343 Accumulated net realized gain (loss) on investments (239,639) Accumulated net unrealized appreciation (depreciation) on investments--Note 4 1,117,065 -------------------------------------------------------------------------------- NET ASSETS ($) 5,902,769 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 5,902,269 500 Shares Outstanding 346,210 29.326 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 17.05 17.05 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Year Ended December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends 17,091 Interest 13,936 TOTAL INCOME 31,027 EXPENSES: Investment advisory fee--Note 3(a) 30,529 Auditing fees 20,013 Prospectus and shareholders' reports 10,579 Custodian fees--Note 3(b) 5,627 Legal fees 5,456 Registration fees 756 Shareholder servicing costs--Note 3(b) 213 Trustees' fees and expenses--Note 3(c) 132 Miscellaneous 1,249 TOTAL EXPENSES 74,554 Less--reduction in investment advisory fee due to undertaking--Note 3(a) (23,673) NET EXPENSES 50,881 INVESTMENT (LOSS) (19,854) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (24,957) Net unrealized appreciation (depreciation) on investments 964,346 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 939,389 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 919,535 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ------------------------------- 2000(a) 1999(b) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net (19,854) 922 Net realized gain (loss) on investments (24,957) (3,811) Net unrealized appreciation (depreciation) on investments 964,346 152,719 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 919,535 149,830 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (960) -- Net realized gain on investments: Initial shares (190,979) -- TOTAL DIVIDENDS (191,939) -- ------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 4,189,282 2,000,000 Service shares 500 Dividends reinvested: Initial shares 191,939 -- Cost of shares redeemed: Initial shares (1,356,378) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 3,025,343 2,000,000 TOTAL INCREASE (DECREASE) IN NET ASSETS 3,752,939 2,149,830 ------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 2,149,830 -- END OF PERIOD 5,902,769 2,149,830 Undistributed investment income--net -- 922 ------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 258,367 160,000 Shares issued for dividends reinvested 12,391 -- Shares redeemed (84,548) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 186,210 160,000 -------------------------------------------------------------------------------- SERVICE SHARES SHARES SOLD 29 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. (B) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,1999. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ----------------------------------------------- Period Ended Year Ended December 31, December 31, ----------------------------------------------- 2000 1999(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 13.44 12.50 17.05 Investment Operations: Investment income (loss)--net (.09)(c) .01 -- Net realized and unrealized gain (loss) on investments 4.30 .93 -- Total from Investment Operations 4.21 .94 Distributions: Dividends from investment income--net (.01) -- -- Dividends from net realized gain on investments (.59) -- -- Total Distributions (.60) -- -- Net asset value, end of period 17.05 13.44 17.05 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 31.70 7.52(d) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 .07(d) -- Ratio of net investment income (loss) to average net assets (.59) .04(d) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .70 1.25(d) -- Portfolio Turnover Rate 234.94 1.79(d) 234.94 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 5,902 2,150 1 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering twelve series, including Emerging Leaders Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Effective March 22, 2000, Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio's shares, which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 100,506 Initial shares and all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $465 during the period ended December 31, 2000 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gain. (e) Federal income taxes: It is the policy of the fund to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. During the period ended December 31, 2000, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $19,892 and decreased accumulated net realized gain (loss) on investments by the same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the line of credit. NOTE 3-Investment Advisory Fee and Other Transactions with Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .90 of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000 through December 31, 2000 to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio' s aggregate annual expenses, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceed an annual rate of 1.50% of the value of the portfolio's average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, (exclusive of certain expenses as described above), exceed an annual rate of 1.50% of the value of the average daily net assets of their class. The reduction in investment advisory fee, pursuant to the undertaking, amounted to $23,673 during the period ended December 31, 2000. (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $19 pursuant to the transfer agency agreement. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $5,627 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an " affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2000, amounted to $10,432,731 and $7,726,987, respectively. At December 31, 2000, accumulated net unrealized appreciation on investments was $1,117,065, consisting of $1,222,544 gross unrealized appreciation and $105,479 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Emerging Leaders Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Emerging Leaders Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended, and the statement of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2000 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Emerging Leaders Portfolio at December 31, 2000, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 The Portfolio IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes, the portfolio hereby designates 8.66% of the ordinary dividends paid during the fiscal year ended December 31, 2000 as qualifying for the corporate dividends received deduction. For More Information Dreyfus Investment Portfolios, Emerging Leaders Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 192AR0012 Dreyfus Investment Portfolios, Emerging Markets Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 13 Financial Highlights 14 Notes to Financial Statements 20 Report of Independent Auditors FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Emerging Markets Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, Emerging Markets Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you'll find valuable information about how the portfolio was managed during the reporting period. The international stock markets, as measured by the MSCI EAFE Index, declined more than 14% in 2000. Most other major domestic and international stock market indices declined as well. The reasons for the disappointing year varied, including disappointing economic growth and the adverse effects of the value of the U.S. dollar on currency exchange rates for U.S. investors. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE D. Kirk Henry, Portfolio Manager How did Dreyfus Investment Portfolios, Emerging Markets Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, Dreyfus Investment Portfolios, Emerging Markets Portfolio produced a total return of -31.81%.(1) This compares with the -30.61% total return provided by the portfolio's benchmark, the Morgan Stanley Capital International Emerging Markets Free (MSCI EMF) Index, for the same period.(2) We attribute the portfolio' s performance to a stock market environment characterized by high levels of volatility within emerging market countries. In fact, the portfolio suffered declines from most of its investments -- including those in Asia, Latin America and Eastern Europe. On the positive side, however, our holdings in several large oil exporting companies in Mexico and Russia helped modestly offset losses incurred in other areas of the portfolio. What is the portfolio's investment approach? The portfolio seeks long-term capital growth by investing primarily in the stocks of companies organized, or with a majority of their assets or business, in emerging market countries. Normally, the portfolio will not invest more than 25% of its total assets in the securities of companies in any single emerging market country. Effective January 1, 2001, the portfolio employs a value-oriented investment approach. Previously, the portfolio had been managed using a growth-oriented approach. Accordingly, the performance information relating to the reporting period is the result of the portfolio's growth-oriented approach. In selecting stocks under the value-oriented approach, we look to identify potential investments through extensive quantitative and fundamen The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) tal research. This approach emphasizes individual stock selection rather than economic or industry trends and focuses on three key factors: *VALUE -- how a stock is valued relative to its intrinsic worth based on traditional value measures; *BUSINESS HEALTH -- overall efficiency and profitability as measured by return on assets and return on equity; and *BUSINESS MOMENTUM -- the presence of a catalyst that potentially will trigger a price increase near- or mid-term. What other factors influenced the portfolio's performance? Early in the reporting period, the emerging markets experienced high levels of volatility, primarily in response to rising interest rates in the United States. Soon afterward, technology and telecommunications stocks quickly began to fall out of favor. Because these types of stocks comprise a large portion of both the portfolio and the Index, our performance suffered during this time period. For example, several of the portfolio's technology holdings in Taiwan, Korea and, to a lesser degree, telecom companies in Argentina, suffered steep declines. In response, we trimmed our exposure to these areas and held smaller weightings than the MSCI EMF Index throughout the rest of the year. However, in most cases any exposure to these areas would have hindered our returns, so even our lighter weighting held back our performance. Most of the portfolio' s stocks in Latin America also disappointed during the reporting period, with the exception of oil companies in Mexico, which benefited from rising oil prices throughout the calendar year. While rising oil prices helped Mexico, they had an adverse effect on our holdings in Brazil, chiefly because of the country's heavy reliance on oil imports. One exception in Brazil would be our holdings in Caemi, an iron and ore producer and the largest holding in the portfolio. The stock increased 70% during the calendar year, making it the single largest contributor to the portfolio's performance. While Asia and Latin America generally reported poor performance for the portfolio, our Eastern European stocks registered fairly strong returns, led primarily by oil companies in Russia, the world's largest exporter of oil. In Israel, our holdings in Teva Pharmaceutical Industries also contributed positively to our returns, while stocks in Greece posted flat performance. What is the portfolio's current strategy? We continue to maintain our diversification strategy, spreading the portfolio's investments across numerous countries and industry groups in seeking investment opportunities for our shareholders. The portfolio employs a value-oriented approach to stock selection, focusing on further diversification of the portfolio typically to approximately 100 securities in 20-25 emerging markets. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF NET DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF GROSS DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE (MSCI EMF) INDEX IS A MARKET CAPITALIZATION-WEIGHTED INDEX COMPOSED OF COMPANIES REPRESENTATIVE OF THE MARKET STRUCTURE OF 26 EMERGING MARKET COUNTRIES IN EUROPE, LATIN AMERICA AND THE PACIFIC BASIN. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of a $10,000 investment in Dreyfus Investment Portfolios, Emerging Markets Portfolio Initial shares and the Morgan Stanley Capital International Emerging Markets Free Index -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 12/15/99 (31.81)% (24.59)%
((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, EMERGING MARKETS PORTFOLIO ON 12/15/99 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX ON THAT DATE. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/99 IS USED AS THE BEGINNING VALUE ON 12/15/99. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX IS A MARKET CAPITALIZATION-WEIGHTED INDEX COMPOSED OF COMPANIES REPRESENTATIVE OF THE MARKET STRUCTURE OF 26 EMERGING MARKET COUNTRIES IN EUROPE, LATIN AMERICA AND THE PACIFIC BASIN. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--84.3% Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- ARGENTINA--2.2% Telecom Argentina STET--France Telecom, ADR 3,000 47,063 BRAZIL--10.7% Brasil Telecom Participacoes, ADR 400 23,600 Companhia Paranaense de Energia--Copel , ADR 5,000 42,188 Companhia Vale do Rio Doce, ADR 1,000 24,625 Gerdau, ADR 2,700 22,950 Tele Norte Leste Participacoes, ADR 2,000 45,625 Uniao de Bancos Brasileiros, GDR 2,500 73,594 232,582 CHILE--5.0% Compania de Telecomunicaciones de Chile, ADR 5,000 (a) 65,938 Empresa Nacional de Electricidad, ADR 4,000 (a) 43,500 109,438 CHINA--4.0% Huaneng Power International, ADR 3,000 56,625 Sinopac Shanghai Petrochemical, ADR 3,200 30,800 87,425 CZECH REPUBLIC--1.4% Ceske Radiokomunikace, GDR 500 (a) 16,875 Cesky Telecom, GDR 1,000 (a) 13,700 30,575 GREECE--2.9% Hellenic Bottling 1,000 16,215 Hellenic Telecommunications Organization 1,000 14,946 National Bank of Greece 630 24,153 STET Hellas Telecommunications, ADR 800 (a) 8,400 63,714 HONG KONG--4.5% Cheung Kong 3,000 38,367 HSBC 4,074 60,329 98,696 HUNGARY--1.3% MOL Magyar Olaj-es Gazipari, GDR 750 12,488 Magyar Tavkozlesi, ADR 775 15,839 28,327 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- INDIA--6.0% India Fund 3,000 (a) 36,375 Infosys Technologies, ADR 500 46,125 Videsh Sanchar Nigam, ADR 3,750 46,875 129,375 ISRAEL--6.0% Bank Hapoalim 3,350 9,718 Bank Leumi Le-Israel 5,000 11,586 Bezeq Israeli Telecommunication 4,000 21,467 Teva Pharmaceutical Industries, ADR 1,200 87,900 130,671 MEXICO--11.7% Alfa 6,000 8,207 Corporacion Interamericana de Entretenimiento, Cl. B 6,500 (a) 26,606 Fomento Economico Mexicano, ADR 2,000 (a) 59,750 Grupo Financiero BBVA Bancomer, ADR 3,000 (a) 32,906 Panamerican Beverages, Cl. A 3,000 42,563 Telefonos de Mexico, Cl. L, ADR 900 40,613 Tubos de Acero de Mexico, ADR 3,000 42,900 253,545 RUSSIA--2.3% AO Tatneft, ADR 2,000 14,125 OAO Lukoil, ADR 750 27,281 Surgutneftegaz, ADR 750 7,688 49,094 SINGAPORE--3.6% Chartered Semiconductor Manufacturing, ADR 1,500 (a) 39,562 DBS 3,500 39,561 79,123 SOUTH AFRICA--3.2% Anglovaal Industries 20,000 21,047 Anglovaal Mining 2,000 (a) 6,058 DataTec 1,100 (a) 5,215 Profurn 38,017 13,970 Sappi 3,200 22,802 69,092 COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- SOUTH KOREA--10.3% H&CB, ADR 2,405 (a) 27,065 Kookmin Bank, GDR 3,000 (b) 37,575 Korea Electric Power, ADR 2,000 20,500 Korea Telecom, ADR 2,000 62,000 LG Chemical, GDR 800 (b) 7,220 SK Telecom, ADR 2,000 47,125 Samsung Electronics, GDR 300 (b) 21,450 222,935 TAIWAN--7.8% China Steel, GDR 2,040 24,225 Evergreen Marine, GDR 1,620 (a) 12,312 Hon Hai Precision Industry, GDR 2,600 30,876 Siliconware Precision Industries, ADR 10,500 (a) 28,612 United Microelectronics, ADR 6,000 (a) 49,500 Winbond Electronics, GDR 2,439 (a) 22,865 168,390 UNITED KINGDOM--1.4% Dimension Data 4,500 (a) 30,386 TOTAL COMMON STOCKS (cost $2,269,716) 1,830,431 ----------------------------------------------------------------------------------------------------------------------------------- PREFERRED STOCKS--4.9% ----------------------------------------------------------------------------------------------------------------------------------- BRAZIL; Caemi Mineracao e Metalurgica (cost $135,107) 910 107,333 ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (cost $2,404,823) 89.2% 1,937,764 CASH AND RECEIVABLES (NET) 10.8% 234,569 NET ASSETS 100.0% 2,172,333 (A) NON-INCOME PRODUCING. (B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT DECEMBER 31, 2000, THESE SECURITIES AMOUNTED TO $66,245 OR APPROXIMATELY 3.0% OF NET ASSETS. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 2,404,823 1,937,764 Cash 234,899 Receivable for investment securities sold 14,192 Dividends receivable 3,561 Prepaid expenses 1,988 2,192,404 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 147 Accrued expenses 19,924 20,071 -------------------------------------------------------------------------------- NET ASSETS ($) 2,172,333 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 2,814,384 Accumulated net realized gain (loss) on investments and foreign currency transactions (174,997) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4 (467,054) -------------------------------------------------------------------------------- NET ASSETS ($) 2,172,333 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 2,171,833 500 Shares Outstanding 235,408 54.171 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 9.23 9.23 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Year Ended December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $2,985 foreign taxes withheld at source) 46,465 Interest 4,312 TOTAL INCOME 50,777 EXPENSES: Investment advisory fee--Note 3(a) 26,868 Auditing fees 18,754 Prospectus and shareholders' reports 12,519 Custodian fees 12,014 Legal fees 5,326 Shareholder servicing costs--Note 3(b) 210 Registration fees 206 Trustees' fees and expenses--Note 3(c) 74 Miscellaneous 6,989 TOTAL EXPENSES 82,960 Less--expense reimbursement from The Dreyfus Corporation due to undertaking--Note 3(a) (39,972) NET EXPENSES 42,988 INVESTMENT INCOME--NET 7,789 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (174,972) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (642,641) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (817,613) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (809,824) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, --------------------------------- 2000(a) 1999(b) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 7,789 3,777 Net realized gain (loss) on investments (174,972) 1,895 Net unrealized appreciation (depreciation) on investments (642,641) 175,587 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (809,824) 181,259 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (13,002) -- Net realized gain on investments: Initial shares (1,920) -- TOTAL DIVIDENDS (14,922) -- -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 2,060,851 2,000,000 Service shares 500 -- Dividends reinvested: Initial shares 14,922 -- Cost of shares redeemed: Initial shares (1,260,453) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 815,820 2,000,000 TOTAL INCREASE (DECREASE) IN NET ASSETS (8,926) 2,181,259 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 2,181,259 -- END OF PERIOD 2,172,333 2,181,259 Undistributed investment income--net -- 3,777 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 194,080 160,000 Shares issued for dividends reinvested 1,429 -- Shares redeemed (120,101) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 75,408 160,000 -------------------------------------------------------------------------------- SERVICE SHARES SHARES SOLD 54 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. (B) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ----------------------------------------------- Period Ended Year Ended December 31, December 31, ----------------------------------------------- 2000 1999(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.63 12.50 9.23 Investment Operations: Investment income--net .04(c) .02 -- Net realized and unrealized gain (loss) on investments (4.37) 1.11 -- Total from Investment Operations (4.33) 1.13 -- Distributions: Dividends from investment income--net (.06) -- -- Dividends from net realized gain on investments (.01) -- -- Total Distributions (.07) -- -- Net asset value, end of period 9.23 13.63 9.23 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (31.81) 9.04(d) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 2.00 .09(d) -- Ratio of net investment income to average net assets .36 .18(d) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation 1.86 1.51(d) -- Portfolio Turnover Rate 123.49 .43(d) 123.49 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 2,172 2,181 1 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the Emerging Markets Portfolio (the "portfolio" ). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a non-diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation (" Dreyfus" ) serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation. Effective March 22, 2000, Dreyfus Service Corporation (the "Distributor" ), a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio' s shares which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 161,123 Initial shares and all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $4,300 for the period ended December 31, 2000, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The fund has an unused capital loss carryover of approximately $61,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with generally accepted accounting principles. If not applied, the carryover expires in fiscal 2008. During the period ended December 31, 2000, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $1,436 and decreased paid-in capital by that same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the line of credit. NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of 1.25% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000 through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio' s aggregate annual expenses, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceed an annual rate of 2% of the value of the portfolio's average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fee and/or assume the expenses of the portfolio so that the expenses of neither class, (exclusive of certain expenses as described above) exceed an annual rate of 2% of the value of the average daily net assets of their class. The expense reimbursement, pursuant to the undertaking, amounted to $39,972 during the period ended December 31, 2000. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $25 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an " affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2000, amounted to $3,210,299 and $2,561,362, respectively. At December 31, 2000, accumulated net unrealized depreciation on investments was $467,059, consisting of $73,503 gross unrealized appreciation and $540,562 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Emerging Markets Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Emerging Markets Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended and the statement of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2000 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Emerging Markets Portfolio at December 31, 2000, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 For More Information Dreyfus Investment Portfolios, Emerging Markets Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 191AR0012 Dreyfus Investment Portfolios, European Equity Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 13 Financial Highlights 14 Notes to Financial Statements 21 Report of Independent Auditors FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, European Equity Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, European Equity Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Joanna Bowen of Newton Capital Management Limited, the portfolio's sub-investment adviser. The international stock markets, as measured by the MSCI EAFE Index, declined more than 14% in 2000. Most other major domestic and international stock market indices declined as well. The reasons for the disappointing year varied, including disappointing economic growth and the adverse effects of the value of the U.S. dollar on currency exchange rates for U.S. investors. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Joanna Bowen, Portfolio Manager Newton Capital Management Limited, Sub-Investment Adviser How did Dreyfus Investment Portfolios, European Equity Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, the portfolio achieved a total return of -2.00%.(1) In contrast, the Financial Times Eurotop 300 Index, which serves as the portfolio's benchmark, returned -7.72% in U.S. dollar terms for the same period.(2) The portfolio' s performance was primarily affected by the euro's decline relative to the U.S. dollar, which adversely affected our returns until late in 2000, when the euro began to strengthen. However, those declines were offset by our timely shift away from European technology stocks when those stocks began to decline early in the year. What is the portfolio's investment approach? The portfolio seeks to outperform the European stock market in U.S. dollar terms by investing primarily in the 300 largest European companies. We identify investment themes, such as the impact of new technologies, aging populations, and the communications revolution, and invest in companies that we believe are best positioned to benefit from these trends. Within markets and sectors, we seek attractively priced companies that possess a sustainable competitive advantage. In addition, we attempt to identify and forecast key economic variables, such as gross domestic product, inflation and interest rates. What other factors influenced the portfolio's performance? The main factor that adversely influenced our performance during the reporting period was the euro' s weakness relative to the U.S. dollar. The euro, which began the year at about $1.02, fell as low as 82 cents but rallied at year-end to reach 94 cents. To illustrate this point, despite the rally, a U.S. investor who bought a portfolio of European The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) stocks on January 1, 2000 would have lost about 8% in dollar terms for the year -- even if those European stocks remained at the same price, in euro terms. The primary reason for the euro's decline versus the dollar is that the U.S. economy had been growing more rapidly and attracting more investment capital from around the world. However, the euro' s rebound in late 2000 in part reflects an increasing parity between U.S. and European economic growth rates. To be sure, Europe and the U.S. markets are linked in many ways beyond currency. For example, central banks in Europe are always mindful of the U.S. Federal Reserve Board' s activities, specifically the raising of short-term interest rates at the beginning of the reporting period. In addition, the run-up and sell-off in technology and telecommunications stocks took place simultaneously on both continents. After trimming our exposure to both of those areas, we used the proceeds to increase our investments in sectors with less volatile earnings, such as the pharmaceutical industry, where the fund benefited from an overweighted position compared to the benchmark. One of the best- performing stocks in this area was Altana, a German drug company that has carved out a strong market niche in the U.S. The portfolio bought this stock at a very favorable price during a time early in 2000 when pharmaceutical stocks were out of favor. Another area that has performed well for the portfolio is insurance, where we added Irish Life & Permanent, the market leader in life, pensions and investment products in Ireland with a 20% market share. The long-term savings market is set to grow strongly, primarily driven by economic growth, demographic forces and pension reform. By and large, the portfolio's best-performing stocks were "defensive," meaning that historically, they rarely spike upward in a market boom but don't go down much in a market downturn. An example includes Ahold, a Dutch food retailer with more than 3,600 stores that recently purchased a highly profitable food distribution business in the U.S. with higher growth potential. "Cyclical" stocks also began to improve toward the end of 2000 as interest rates fell and investors began to see a resurgence in U.S. economic growth. Here, the portfolio' s best returns stemmed from U.K.-based Imperial Chemical Industries, Bodycote International, a U.K. engineering company and Pechiney SA, a French aluminum manufacturer. What is the portfolio's current strategy? Despite the negative market sentiment, we continue to buy stocks that we believe represent good long-term investments for the portfolio. Recently that has included investing in such out-of-favor industries as advertising and telecommunications, while lightening up on industries that are beginning to appear expensive, such as pharmaceuticals. In today' s difficult global stock market environment, we believe that European stock markets are well paced because the consumer and corporate sectors are not as indebted as they are in the U.S. Furthermore, we are confident that an improving euro, relative to the dollar, will help boost the portfolio's results in the near term. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: BLOOMBERG, L.P. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE FINANCIAL TIMES EUROTOP 300 INDEX (FTSE) IS A MARKET-CAPITALIZATION INDEX OF EUROPE'S 300 LARGEST COMPANIES The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, European Equity Portfolio Initial shares and the Financial Times Eurotop 300 Index -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 4/30/99 (2.00)% 15.08%
((+)) SOURCE: BLOOMBERG L.P. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, EUROPEAN EQUITY PORTFOLIO ON 4/30/99 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE FINANCIAL TIMES EUROTOP 300 INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE FINANCIAL TIMES EUROTOP 300 INDEX MEASURES THE PERFORMANCE OF EUROPE'S LARGEST 300 COMPANIES BY MARKET CAPITALIZATION. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--99.3% Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- AUSTRIA--1.5% Erste Bank der oesterreichischen Sparkassen 10,200 460,224 BELGIUM--.8% Interbrew 7,000 (a) 244,250 Interbrew--VVPR Strips 7,000 (a) 66 244,316 CZECH REPUBLIC--1.5% Cesky Telecom 33,700 (a) 457,675 FINLAND--1.5% Nokia 10,400 464,360 FRANCE--15.6% Axa 4,280 619,573 Business Objects 2,350 (a) 138,725 Elior 48,200 614,376 Lafarge 5,900 495,258 Pechiney 10,800 494,301 Publicis 8,800 297,710 Rexel 6,400 541,440 Total Fina Elf 8,100 1,206,058 Vivendi Environnement 8,800 384,648 4,792,089 GERMANY--7.6% AMB Aachener & Muenchener Beteiligungs 5,700 519,726 Altana 3,100 489,844 Fielmann 10,700 450,598 Gehe 11,800 451,999 Roesch Medizintechnik 3,000 149,460 Techem 8,900 274,405 2,336,032 IRELAND--2.1% Irish Life & Permanent 51,600 640,253 ITALY--2.3% Parmalat Finanziaria 109,000 176,743 Telecom Italia 47,700 528,192 704,935 NETHERLANDS--13.1% Be Semiconductor Industries 35,600 (a) 351,372 Ing Groep 8,800 703,782 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- NETHERLANDS (CONTINUED) Koninklijke Ahold 19,200 620,129 Koninklijke (Royal) Philips Electronics 17,100 627,208 PinkRoccade 5,800 (a) 316,216 Seagull Holding 17,200 (a) 316,084 Unit 4 4,400 (a) 179,709 VNU 12,700 624,954 Wegener 22,600 291,043 4,030,497 PORTUGAL--2.3% Portugal Telecom 40,390 369,795 Telecel-Comunicacoes Pessoais 30,500 (a) 332,572 702,367 SPAIN--9.6% Altadis 31,800 493,218 Aumar-Autopistas del Mare Nostrum 36,000 584,755 Banco Santander Central Hispano 68,300 731,903 Grupo Dragados 46,200 503,765 Telefonica 37,400 (a) 618,746 2,932,387 SWEDEN--5.6% Gambro, Cl. A 64,300 466,633 Skandia Forsakrings 25,600 416,315 Telefonaktiebolaget LM Ericsson 73,900 841,641 1,724,589 SWITZERLAND--3.9% Roche Holding 56 571,881 UBS 3,740 611,882 1,183,763 UNITED KINGDOM--31.9% Bank of Scotland 48,330 505,762 Bodycote International 117,000 450,949 British Telecommunications 56,800 485,362 CGNU 44,600 720,914 COLT Telecom Group 3,900 (a) 83,897 GlaxoSmithKline 34,220 966,214 Imperial Chemical Industries 41,000 338,099 Liberty International 20,277 147,294 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) Northern Rock 63,400 409,161 Pearson 15,162 360,143 Prudential 38,700 622,656 Reuters Group 20,400 345,288 Shell Transport & Trading 182,400 1,495,956 Smith (David S) Holdings 140,000 353,457 Stagecoach Holdings 131,600 129,754 Standard Chartered 58,100 837,143 Taylor Nelson Sofres 91,200 339,247 Vodafone AirTouch 330,000 1,210,283 9,801,579 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $28,998,905) 99.3% 30,475,066 CASH AND RECEIVABLES (NET) .7% 213,997 NET ASSETS 100.0% 30,689,063 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 28,998,905 30,475,066 Cash 908,117 Cash denominated in foreign currencies 259,330 265,984 Receivable for investment securities sold 129,682 Receivable for shares of Beneficial Interest subscribed 46,388 Dividends receivable 44,260 Net unrealized appreciation on forward currency exchange contracts--Note 4(a) 975 Prepaid expenses 58 Due from The Dreyfus Corporation and affiliates 2,215 31,872,745 -------------------------------------------------------------------------------- LIABILITIES ($): Payable for shares of Beneficial Interest redeemed 670,272 Payable for investment securities purchased 482,973 Accrued expenses 30,437 1,183,682 -------------------------------------------------------------------------------- NET ASSETS ($) 30,689,063 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 30,877,124 Accumulated undistributed investment income--net 59,074 Accumulated net realized gain (loss) on investments and foreign currency transactions (1,725,719) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4(b) 1,478,584 -------------------------------------------------------------------------------- NET ASSETS ($) 30,689,063 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 30,688,563 500 Shares Outstanding 2,048,973 33.38 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 14.98 14.98 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Year Ended December 31, 2000 ------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $41,173 foreign taxes withheld at source) 306,808 Interest 73,305 TOTAL INCOME 380,113 EXPENSES: Investment advisory fee--Note 3(a) 201,252 Custodian fees 60,966 Auditing fees 21,379 Prospectus and shareholders' reports 17,775 Registration fees 6,345 Legal fees 2,525 Shareholder servicing costs--Note 3(b) 643 Trustees' fees and expenses--Note 3(c) 507 Loan commitment fees--Note 2 66 Miscellaneous 9,619 TOTAL EXPENSES 321,077 Less--reduction in management fee due to undertakings--Note 3(a) (65,652) NET EXPENSES 255,425 INVESTMENT INCOME--NET 124,688 ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (1,031,430) Net realized gain (loss) on forward currency exchange contracts (95,545) Net realized gain (loss) on financial futures (233,386) NET REALIZED GAIN (LOSS) (1,360,361) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 833,543 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (526,818) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (402,130) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, -------------------------------- 2000(a) 1999(b) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 124,688 8,471 Net realized gain (loss) on investments (1,360,361) 516,578 Net unrealized appreciation (depreciation) on investments 833,543 645,041 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (402,130) 1,170,090 ------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (66,235) (13,354) Net realized gain on investments: Initial shares (813,709) (62,723) TOTAL DIVIDENDS (879,944) (76,077) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 109,246,347 6,149,601 Service shares 500 -- Dividends reinvested: Initial shares 879,944 76,077 Cost of shares redeemed: Initial shares (84,747,748) (727,597) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 25,379,043 5,498,081 TOTAL INCREASE (DECREASE) IN NET ASSETS 24,096,969 6,592,094 ------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 6,592,094 -- END OF PERIOD 30,689,063 6,592,094 Undistributed investment income--net 59,074 621 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 6,963,909 456,730 Shares issued for dividends reinvested 56,000 4,827 Shares redeemed (5,383,878) (48,615) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,636,031 412,942 -------------------------------------------------------------------------------- SERVICE SHARES SHARES SOLD 33 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. (B) FROM APRIL 30, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ----------------------------------------------------- Period Ended Year Ended December 31, December 31, ---------------------------------------------------- 2000 1999(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 15.96 12.50 14.98 Investment Operations: Investment income--net .10(c) .04(c) -- Net realized and unrealized gain (loss) on investments (.37) 3.61 -- Total from Investment Operations (.27) 3.65 -- Distributions: Dividends from investment income--net (.03) (.03) -- Dividends from net realized gain on investments (.68) (.16) -- Total Distributions (.71) (.19) -- Net asset value, end of period 14.98 15.96 14.98 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (2.00) 29.20(d) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.27 1.01(d) -- Ratio of net investment income to average net assets .62 .32(d) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .33 2.38(d) -- Portfolio Turnover Rate 144.74 99.89(d) 144.74 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 30,689 6,592 1 (A) FROM APRIL 30, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering twelve series, including the European Equity Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio' s investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. which is a wholly-owned subsidiary of Mellon Financial Corporation. Newton Capital Management Limited ("Newton"), an affiliate of Dreyfus, serves as the portfolio' s sub-investment adviser. Effective March 22, 2000, Dreyfus Service Corporation (the "Distributor" ), a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio' s shares, which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. As of December 31, 2000, MBC Investments Corp., an indirect subsiduary of Mellon Financial Corporation, held all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $72,432 during the period ended December 31, 2000, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the Facility. NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000 through February 29, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio' s aggregate annual expenses, exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses, exceeded an annual rate of 1.50% of the value of the portfolio's average daily net assets, and thereafter, through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio's aggregate annual expenses (exclusive of certain expenses as described above) exceed an annual rate of 1.25% of the value of the portfolio's average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class (exclusive of certain expenses as described above) exceed an annual rate of 1.25% of the value of the average daily net assets of their classes. The reduction in investment advisory fee, pursuant to the undertakings, amounted to $65,652 during the period ended December 31, 2000. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Newton, the sub-investment fee is payable monthly by Dreyfus, and is based upon the value of the portfolio' s average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million. . . . . . . . . . . . . . . . . .35 of 1% In excess of $100 million to $1 billion. . . . . . .30 of 1% In excess of $1 billion to $1.5 billion. . . . . . .26 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1% The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $154 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an " affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: (a) The aggregate amount of purchases and sales of investment securities, excluding short-term securities, forward currency exchange contracts and financial futures, during the period ended December 31, 2000, amounted to $51,319,460 and $26,866,801, respectively. The portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the portfolio is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counter party nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. The following summarizes open forward currency exchange contracts at December 31, 2000:
Foreign Currency Unrealized Forward Currency Exchange Contracts Amounts Cost ($) Value ($) Appreciation ($) ------------------------------------------------------------------------------------------------------------------------------------ PURCHASES: British Pounds, expiring 1/4/2001 28,301 42,197 42,279 82 Swedish Krona, expiring 1/2/2001 455,522 47,839 48,260 421 Swiss Francs, expiring 1/3/2001 64,761 39,585 40,057 472 TOTAL 975 The Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED) The portfolio may invest in financial futures contracts in order to gain exposure to or protect against changes in the market. The portfolio is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments in financial futures require the portfolio to "mark to market" on a daily basis, which reflects the change in the market value of the contract at the close of each day' s trading. Typically, variation margin payments are received or made to reflect daily unrealized gains or losses. When the contracts are closed, the portfolio recognizes a realized gain or loss. These investments require initial margin deposits with a custodian or broker, which consist of cash or cash equivalents, up to approximately 10% of the contract amount. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. At December 31, 2000, there were no financial futures contracts outstanding. (b) At December 31, 2000, accumulated net unrealized appreciation on investments and forward currency exchange contracts was $1,477,136, consisting of $2,734,549 gross unrealized appreciation and $1,257,413 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, European Equity Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, European Equity Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended and the statement of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2000 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, European Equity Portfolio at December 31, 2000, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 The Portfolio For More Information Dreyfus Investment Portfolios, European Equity Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Newton Capital Management Limited 71 Queen Victoria Street London, EC4V 4DR England Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 181AR0012 Dreyfus Investment Portfolios, Founders Discovery Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 14 Financial Highlights 15 Notes to Financial Statements 21 Report of Independent Auditors 22 Important Tax Information FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Discovery Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Founders Discovery Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you' ll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Robert Ammann, CFA. The small-cap segment of the stock market, as measured by the Russell 2000 Index, declined more than 3% in 2000. Most other major stock market indices declined as well. The reasons for the disappointing year varied, ranging from sky-high valuations of technology stocks to slowing economic growth during the second half of the year. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Robert Ammann, CFA, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders Discovery Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, Dreyfus Investment Portfolios, Founders Discovery Portfolio produced a total return of -13.02%.(1) This compares with the -3.02% total return provided by the Russell 2000 Index, the portfolio's benchmark, for the same period.(2) We attribute the portfolio's negative performance to a stock market environment that favored the value style of investing over the growth style throughout most of the reporting period. Because the portfolio primarily emphasizes small-cap growth stocks, many of its holdings suffered declines, particularly during the second half of the reporting period. In addition, the portfolio's limited exposure to the health care and financial sectors, two areas that performed well during the reporting period, served to lower the portfolio's overall return. What is the portfolio's investment approach? The portfolio invests primarily in equity securities of small and relatively unknown U.S.-based companies that we believe possess high growth potential. Typically, these companies are not listed on national securities exchanges, but instead trade on the over-the-counter market. The portfolio may also invest in larger companies if, in our opinion, they represent better prospects for capital appreciation. Although the portfolio will normally invest in common stocks of U.S.-based companies, it may invest up to 30% of its total assets in foreign securities. Rather than utilizing a "top-down" approach to stock selection, which relies on forecasting stock market trends, we focus on a "bottom-up" approach, in which stocks are chosen according to their own individual merits. Stock selection is made on a company-by-company basis, The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) with particular emphasis on companies that we believe are well managed and well positioned within their industries. What other factors influenced the portfolio's performance? Volatile market conditions adversely affected the prices of equity securities throughout 2000. During the first few months of the reporting period, technology stocks rose sharply while most other industry sectors lagged far behind. In March, however, stronger than expected economic growth and rising interest rates generated investor concerns about inflationary pressures, causing previously high-flying technology stocks to plunge to more realistic valuations. Later in the period, as the economy showed signs of slowing, investors focused on more reasonably priced companies with strong track records of financial stability and profitability. In this environment, technology stocks continued to decline, while market strength shifted to traditionally value-oriented industry groups Within the technology sector, the portfolio's returns were held back by its holdings in two Internet service companies: The Management Network Group (TMNG), a consulting service to the global telecommunications industry; and Braun Consulting, a personnel and labor relations consulting firm. In addition, two of the portfolio' s holdings in PC direct marketing companies, Insight Enterprises and CDW Computer Centers, detracted from the portfolio's performance. However, not all of the portfolio' s technology stocks performed disappointingly. For example, the portfolio' s holdings in Manugistics Group, a supply chain management software company, performed very well and helped boost the portfolio's overall returns. The portfolio also benefited from several holdings in the health care sector. Among the portfolio's best-performing health care stocks were those within what we describe as the "pharmaceutical outsourcing" theme, which included health care services company Albany Molecular Research. In addition, the portfolio's holdings in Patterson Dental, a distributor of dental supplies and equipment, benefited its performance. The portfolio's results were hindered by many of its holdings within the retail sector, especially during the second half of the reporting period. Examples include Linens n' Things, a company that sells housewares and home accessories, Michaels Stores, the specialty arts and crafts retailer, and Rent Way, a rent-to-own furniture and appliance company. What is the portfolio's current strategy? We are maintaining our bottom-up strategy of selecting stocks one at a time based on their individual merits. Accordingly, we have recently added the stocks of several hospital companies to the portfolio because we believe they have strong growth potential. In addition, we have added some new technology holdings as prices of several stocks in this area have come down to levels that we believe make them attractive, even in a slowing economic environment. We also currently believe that selected electric utility companies may have growth potential. In addition, we are currently attempting to identify other investment opportunities that fall within what we describe as the portfolio's " new power technology" theme, by seeking companies offering alternative energy sources, including solar energy cells and fuel cells that distribute power to industrial applications. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. THE RETURN FIGURE PROVIDED REFLECTS THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURN WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK MARKET PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of a $10,000 investment in Dreyfus Investment Portfolios, Founders Discovery Portfolio Initial shares and the Russell 2000 Index -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 12/15/99 (13.02)% (3.19)%
((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS DISCOVERY PORTFOLIO ON 12/15/99 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE RUSSELL 2000 INDEX ON THAT DATE. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/99 IS USED AS THE BEGINNING VALUE ON 12/15/99. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK MARKET PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--88.8% Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- AGRICULTURE--.5% Eden Bioscience 2,080 62,270 BIOTECHNOLOGY--5.3% Alexion Pharmaceuticals 1,010 (a) 65,587 CIMA Labs 2,660 (a) 173,066 Cell Therapeutics 1,400 (a) 63,087 Cephalon 3,820 (a) 241,854 Myriad Genetics 1,150 (a) 95,163 PRAECIS Pharmaceuticals 3,490 102,082 740,839 BUSINESS SERVICES--13.1% Braun Consulting 6,391 (a) 23,567 CDW Computer Centers 3,202 (a) 89,256 Corporate Executive Board 5,116 (a) 203,441 Dycom Industries 6,470 (a) 232,516 Insight Enterprises 13,658 (a) 244,990 Lexent 5,140 88,022 Management Network Group 5,139 (a) 61,026 MasTec 8,820 (a) 176,400 Quanta Services 9,723 (a) 312,959 TeleTech Holdings 7,440 (a) 136,710 WebTrends 6,340 (a) 183,464 Wireless Facilities 2,190 (a) 79,387 1,831,738 COMPUTER PERIPHERALS--.4% Novatel Wireless 3,950 48,881 COMPUTER SOFTWARE/SERVICES--7.0% Documentum 3,240 (a) 160,987 Keynote Systems 8,560 (a) 121,445 Macrovision 4,056 (a) 300,207 Manugistics Group 3,170 (a) 180,690 Mercury Interactive 1,155 (a) 104,239 Saba Software 2,540 40,005 Secure Computing 7,471 (a) 73,776 981,349 CONSUMER SERVICES--2.1% Education Management 4,200 (a) 150,150 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- CONSUMER SERVICES (CONTINUED) Hotel Reservations Network, Cl. A 5,130 145,564 295,714 DISTRIBUTION--1.3% Patterson Dental 2,672 (a) 90,514 Performance Food Group 1,810 (a) 92,791 183,305 ELECTRONICS--2.6% Ixia 2,240 51,240 Methode Electronics, Cl. A 4,532 103,953 Optimal Robotics 3,432 (a) 115,187 Titan 5,800 (a) 94,250 364,630 HEALTHCARE SERVICES--6.0% Accredo Health 3,538 (a) 177,563 Albany Molecular Research 5,348 (a) 329,571 Discovery Partners International 6,820 82,692 Professional Detailing 2,310 (a) 244,319 834,145 HOSPITAL MANAGEMENT--2.3% Community Health Systems 3,350 117,250 LifePoint Hospitals 2,540 (a) 127,317 Province Healthcare 1,760 (a) 69,300 313,867 LEISURE TIME--.8% Garmin 5,670 111,982 MANUFACTURING--7.1% Adept Technology 1,680 (a) 24,360 American Superconductor 2,166 (a) 61,866 AstroPower 2,024 (a) 63,503 Capstone Turbine 1,050 29,400 GSI Lumonics 10,530 (a) 84,240 Insituform Technologies, Cl. A 1,905 (a) 75,962 Proton Energy Systems 2,690 28,245 Shaw Group 9,940 (a) 497,000 TTM Technologies 5,930 84,132 Valence Technology 4,880 (a) 45,445 994,153 COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- MEDICAL SUPPLIES & EQUIPMENT--3.1% Cytyc 4,890 (a) 305,931 Zoll Medical 3,562 (a) 124,893 430,824 OIL & GAS--.4% Syntroleum 3,290 (a) 55,930 OIL SERVICES--8.2% Cal Dive International 8,400 (a) 223,650 Core Laboratories 8,958 (a) 244,665 Helmerich & Payne 2,235 98,061 National-Oilwell 6,884 (a) 266,325 Veritas DGC 9,626 (a) 310,920 1,143,621 PHARMACEUTICALS--.6% Celgene 1,399 (a) 45,467 Regeneron Pharmaceuticals 1,271 (a) 44,823 90,290 PHOTOGRAPHY & IMAGING--1.0% Concord Camera 8,704 (a) 143,616 PUBLISHING & BROADCASTING--.1% Entravision Communications, Cl. A 710 13,046 RESTAURANTS--3.8% CBRL Group 5,830 106,033 CEC Entertainment 8,580 (a) 292,793 Ruby Tuesday 8,400 128,100 526,926 RETAIL--5.5% Cost Plus 2,630 (a) 77,256 Linens'n Things 4,660 (a) 128,732 Men's Wearhouse 4,211 (a) 114,750 Rent-A-Center 7,300 (a) 251,850 Tweeter Home Entertainment Group 4,278 (a) 52,138 Ultimate Electronics 6,428 (a) 141,014 765,740 SEMICONDUCTORS & EQUIPMENT--6.2% AXT 7,331 (a) 242,381 Brooks Automation 4,579 (a) 128,498 Cree 5,214 (a) 185,260 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SEMICONDUCTORS & EQUIPMENT (CONTINUED) EMCORE 4,644 (a) 218,268 Optical Communication Products 460 5,175 Therma-Wave 5,708 79,912 859,494 TELECOMMUNICATION EQUIPMENT--9.4% DMC Stratex Networks 21,152 (a) 317,280 Harris 10,926 334,609 REMEC 12,548 (a) 120,775 SonicWALL 12,390 (a) 201,337 Tekelec 2,764 (a) 82,920 ViaSat 3,632 (a) 47,670 Vyyo 2,550 15,619 WJ Communications 4,440 63,270 WatchGuard Technologies 4,200 (a) 132,825 1,316,305 TELECOMMUNICATION SERVICES--.9% Aether Systems 910 (a) 35,604 Spectrasite Holdings 7,230 (a) 95,798 131,402 TRANSPORTATION--1.1% C.H. Robinson Worldwide 4,908 154,295 TOTAL COMMON STOCKS (cost $13,464,906) 12,394,362 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--15.6% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCY NOTES; Federal Home Loan Mortgage Corporation, 5.10%, 1/2/2001 (cost $2,174,692) 2,175,000 2,174,692 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $15,639,598) 104.4% 14,569,054 LIABILITIES, LESS CASH AND RECEIVABLES (4.4%) (608,370) NET ASSETS 100.0% 13,960,684 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value ------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 15,639,598 14,569,054 Cash 119,072 Receivable for investment securities sold 91,328 Dividends receivable 3,135 Receivable for shares of Beneficial Interest subscribed 500 Prepaid expenses 22 14,783,111 ------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 19,213 Payable for investment securities purchased 780,370 Accrued expenses 22,844 822,427 ------------------------------------------------------------------------------- NET ASSETS ($) 13,960,684 ------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 17,087,272 Accumulated net realized gain (loss) on investments (2,056,044 Accumulated net unrealized appreciation (depreciation) on investments--Note 4 (1,070,544 ------------------------------------------------------------------------------- NET ASSETS ($) 13,960,684 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 13,960,184 500 Shares Outstanding 1,159,941 41.528 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.04 12.04 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 56,523 Cash dividends 2,870 TOTAL INCOME 59,393 EXPENSES: Investment advisory fee--Note 3(a) 66,148 Custodian fees--Note 3(b) 29,339 Auditing fees 20,466 Prospectus and shareholders' reports 15,364 Legal fees 5,723 Registration fees 3,783 Trustees' fees and expenses--Note 3(c) 265 Shareholder servicing costs--Note 3(b) 180 Loan commitment fees--Note 2 33 Miscellaneous 612 TOTAL EXPENSES 141,913 Less--reduction in investment advisory fee due to undertaking--Note 3(a) (38,291) NET EXPENSES 103,622 INVESTMENT (LOSS) (44,229) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (2,053,587) Net unrealized appreciation (depreciation) on investments (1,286,267) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (3,339,854) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (3,384,083) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ------------------------------- 2000(a) 1999(b) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net (44,229) 1,214 Net realized gain (loss) on investments (2,053,587) 5,863 Net unrealized appreciation (depreciation) on investments (1,286,267) 215,723 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (3,384,083) 222,800 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (1,280) -- Net realized gain on investments: Initial shares (8,320) -- TOTAL DIVIDENDS (9,600) -- -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 17,975,727 2,000,000 Service shares 500 -- Dividends reinvested: Initial shares 9,600 -- Cost of shares redeemed: Initial shares (2,854,260) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 15,131,567 2,000,000 TOTAL INCREASE (DECREASE) IN NET ASSETS 11,737,884 2,222,800 ------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 2,222,800 -- END OF PERIOD 13,960,684 2,222,800 Undistributed investment income--net -- 1,214 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 1,230,488 160,000 Shares issued for dividends reinvested 554 -- Shares redeemed (231,101) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 999,941 160,000 -------------------------------------------------------------------------------- SERVICE SHARES SHARES SOLD 42 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. (B) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ------------------------------------------------------ Period Ended Year Ended December 31, December 31, ------------------------------------------------------ 2000 1999(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.89 12.50 12.04 Investment Operations: Investment income (loss)--net (.08)(c) .01 -- Net realized and unrealized gain (loss) on investments (1.71) 1.38 -- Total from Investment Operations (1.79) 1.39 Distributions: Dividends from investment income--net (.01) -- -- Dividends from net realized gain on investments (.05) -- -- Total Distributions (.06) -- -- Net asset value, end of period 12.04 13.89 12.04 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (13.02) 11.12(d) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.41 .07(d) -- Ratio of net investment income (loss) to average net assets (.60) .06(d) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .52 1.45(d) -- Portfolio Turnover Rate 123.96 7.49(d) 123.96 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 13,960 2,223 1 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the Founders Discovery Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is capital appreciation. The Dreyfus Corporation ("Dreyfus") serves as the portfolio' s investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. (" Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Founders Asset Management LLC (" Founders" ) serves as the portfolio' s sub-investment adviser. Founders is a 90% owned subsidiary of Mellon. Effective March 22, 2000, Dreyfus Service Corporation (the " Distributor" ) a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio' s shares, which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) that series' operations, expenses which are applicable to all series are allocated among them on a pro rata basis. As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $5,489 during the period ended December 31, 2000 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $1,025,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. During the period ended December 31, 2000, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $44,295 and decreased paid-in capital by the same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the Facility. NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .90 of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000 through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio's aggregate expenses, exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses, exceeded an annual rate of 1.50% of the value of the portfolio's average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or asssume the expenses of the portfolio so that the expenses of neither class (exclusive of certain expenses as described above) exceed 1.50% of the value of the average daily net assets of their class.The reduction in investment advisory fee, pursuant to the undertaking, amounted to $38,291 during the period ended December 31, 2000. Pursuant to a Sub-Investment Advisory Agreement with Founders, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio' s average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million. . . . . . . . . . . . . . . . . .25 of 1% In excess of $100 million to $1 billion. . . . . . .20 of 1% In excess of $1 billion to $1.5 billion. . . . . . .16 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .10 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $19 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $29,339 pursuant to the custody agreement. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an " affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2000, amounted to $21,779,600 and $8,229,594, respectively. At December 31, 2000, accumulated net unrealized depreciation on investments was $1,070,544, consisting of $1,454,224 gross unrealized appreciation and $2,524,768 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Founders Discovery Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders Discovery Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended and the statement of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2000 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders Discovery Portfolio at December 31, 2000, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 The Portfolio IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes, the portfolio hereby designates .615% of the ordinary dividends paid during the fiscal year ended December 31, 2000 as qualifying for the corporate dividends received deduction. NOTES For More Information Dreyfus Investment Portfolios, Founders Discovery Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 193AR0012 Dreyfus Investment Portfolios, Founders Growth Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 15 Financial Highlights 16 Notes to Financial Statements 22 Report of Independent Auditors 23 Important Tax Information FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Growth Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, Founders Growth Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio managers, Scott Chapman, CFA and Thomas Arrington, CFA. After five consecutive years of double-digit gains, the U.S. stock market, as measured by the Standard & Poor's 500 Composite Stock Price Index, declined more than 9% in 2000. Most other major stock market indices declined as well. The reasons for the disappointing year varied, ranging from sky-high valuations of technology stocks to slowing economic growth during the second half of the year While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Scott Chapman, CFA and Thomas Arrington, CFA, Portfolio Managers Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders Growth Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, Dreyfus Investment Portfolio, Founders Growth Portfolio produced a total return of -25.40%.(1) In comparison, the Standard & Poor' s 500/ BARRA Growth Index (the "Index"), the portfolio's benchmark, produced a total return of -22.08% for the same period.(2) Aggressive growth companies sold off sharply during 2000, which significantly hurt the performance of both the portfolio and the Index. However, relative to the Index, the portfolio generally contained a higher proportion of technology and telecommunications stocks, which were among the worst performers in the growth category. That emphasis on technology and telecommunication stocks caused the portfolio to underperform the Index during the reporting period. What is the portfolio's investment approach? The portfolio invests primarily in large, well-managed growth companies whose performance is not entirely dependent upon the fortunes of the economy. Utilizing a bottom-up approach, we focus on individual stock selection rather than on forecasting stock market trends. We look for high quality, proven companies with an established track record of sustained earnings growth in excess of industry averages. The companies we select must have a sustainable competitive advantage, such as a dominant brand name, a high barrier to entry from competition and/or large untapped market opportunities. Rather than having a short-term focus on next quarter' s profits, we look at a company for its long-term potential and its earning power over the next three to five years. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) What other factors influenced the portfolio's performance? At the beginning of 2000, growth stocks produced strong results, led primarily by the strong performance of technology stocks. Such performance continued the trend established in 1999 when the Nasdaq index rose 86% for the calendar year. However, in March 2000 investor sentiment took a pessimistic turn as the Federal Reserve Board (the "Fed" ) assumed a more aggressive stance toward raising interest rates in an attempt to slow the economy. Concerned that soaring energy prices would lead to inflation, the Fed completed a campaign to raise short-term interest rates from 4.75% in June 1999 to 6.50% in May 2000. By the end of the third quarter, a shift away from high-priced growth stocks took place, as these companies generally reported disappointing profits. Investors tended to flee from the stocks of Internet and other technology-related companies that could not demonstrate a path to profitability. In 2000, the Nasdaq index fell 39%, experiencing its worst year ever. When technology stocks falter, growth investors often turn to health care, an area that produced very strong returns for the portfolio during the reporting period. Several developments helped boost health care stocks during the period. For example, scientists from the National Institutes of Health and private industry announced that they had deciphered the genetic code for human life, a discovery that should make it possible for companies to create more effective drugs to treat diseases. Second, the Congressional debate over the expansion of Medicare to cover prescription drugs -- viewed as a negative for the industry -- lost steam as the national elections came to a close. As a result, pharmaceutical stocks such as Merck & Co. and Pfizer performed well, particularly since these companies reported excellent profits amidst a gloomy general economic forecast. Other sectors also produced positive results for the portfolio during the reporting period, including the financial services and retailing areas. There, the portfolio's holdings in Kohl's Department Stores, an approximately 300-unit chain offering mid-priced no-frills merchandise, produced strong gains amidst welcome news of strong year-end holiday sales. In addition, Citigroup, a financial conglomerate with interests in banking, brokerage services and insurance, contributed positively to the portfolio's performance. One of the portfolio's best performing stocks during the reporting period was Tyco International, a company that is a collection of businesses as diverse as fire security, electronics and medical products. What is the portfolio's current strategy? The portfolio emphasizes stocks of large-capitalization growth companies that have a demonstrated track record of sustainable earnings growth along with what we believe are considerable competitive advantages. Although we tend to focus on a three- to five-year time horizon when valuing companies, the reality is that in the short term, investors' fears of higher interest rates often result in volatile price movements. Yet most of the companies in the portfolio have continued to meet or exceed Wall Street analysts' expectations for earnings. In the final analysis, we believe that the key factor that drives stock performance for the long term is profitability, not short-term market sentiments. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD AND POOR'S 500/BARRA GROWTH INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE STOCKS IN THE STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX ("S&P 500 INDEX") THAT HAVE HIGH PRICE-TO-BOOK RATIOS. THE S&P 500 INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of a $10,000 investment in Dreyfus Investment Portfolios, Founders Growth Portfolio Initial shares and the Standard & Poor's 500/BARRA Growth Index. -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 9/30/98 (25.40)% 13.04%
((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO ON 9/30/98 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE STANDARD AND POOR'S 500/BARRA GROWTH INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE STANDARD AND POOR'S 500/BARRA GROWTH INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE STOCKS IN THE STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX THAT HAVE HIGH PRICE-TO-BOOK RATIOS. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--90.7% Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- BANKING--6.6% Bank of New York 1,582 87,307 Citigroup 10,448 533,501 Fifth Third Bancorp 4,740 283,215 FleetBoston Financial 8,242 309,590 Washington Mutual 6,490 344,375 Wells Fargo 5,687 316,695 1,874,683 BUSINESS SERVICES--.8% Amdocs 1,152 (a) 76,320 Omnicom Group 1,764 146,192 222,512 BIOTECHNOLOGY--2.5% Amgen 5,930 (a) 379,149 Genentech 1,300 (a) 105,950 Gilead Sciences 345 (a) 28,613 Human Genome Sciences 1,498 (a) 103,830 Millennium Pharmaceuticals 1,571 (a) 97,206 714,748 COMPUTER EQUIPMENT--8.7% Cisco Systems 30,019 (a) 1,148,227 EMC 10,080 (a) 670,320 Network Appliance 4,367 (a) 280,512 Palm 1,724 (a) 48,811 Sun Microsystems 12,075 (a) 336,591 2,484,461 COMPUTER SOFTWARE/SERVICES--7.7% Business Objects, ADR 1,012 (a) 57,305 Checkpoint Software Technologies 2,885 (a) 385,327 Concord EFS 1,471 (a) 64,632 Inktomi 3,084 (a) 55,127 Mercury Interactive 1,401 (a) 126,440 Microsoft 5,914 (a) 256,520 Oracle 30,766 (a) 894,137 Rational Software 667 (a) 25,971 Redback Networks 949 (a) 38,909 Siebel Systems 1,033 (a) 69,857 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMPUTER SOFTWARE/SERVICES (CONTINUED) Veritas Software 2,509 (a) 219,537 2,193,762 CONSUMER PRODUCTS--.6% Gillette 4,950 178,819 CONSUMER SERVICES--.8% DeVry 5,970 (a) 225,367 DIVERSIFIED--2.0% Berkshire Hathaway, Cl. B 69 (a) 162,425 Corning 7,897 417,060 579,485 ELECTRONICS--4.8% Applera--Applied Bioystems Group 1,260 118,519 General Electric 18,359 880,085 Sanmina 1,133 (a) 86,815 Solectron 8,913 (a) 302,151 1,387,570 FINANCIAL SERVICES--3.1% American Express 2,589 142,233 Fannie Mae 6,865 595,539 Merrill Lynch 1,214 82,780 Schwab (Charles) 2,136 60,609 881,161 FOOD & BEVERAGE--2.2% Coca-Cola 6,958 424,003 PepsiCo 3,943 195,425 619,428 INSURANCE--1.4% Allstate 3,890 169,458 American International Group 2,243 221,076 390,534 LEISURE & ENTERTAINMENT--.6% Harley-Davidson 1,639 65,150 Viacom, Cl. B 2,202 (a) 102,944 168,094 MANUFACTURING--3.6% Danaher 952 65,093 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ MANUFACTURING (CONTINUED) Tyco International 17,211 955,211 1,020,304 MEDICAL SUPPLIES & EQUIPMENT--2.3% Baxter International 6,363 561,932 Medtronic 1,641 99,075 661,007 OIL & GAS--1.8% Anadarko Petroleum 1,573 111,809 Coastal 3,015 266,262 Enron 1,830 152,119 530,190 OIL SERVICES--2.2% Schlumberger 6,616 528,866 Smith International 1,255 (a) 93,576 622,442 PHARMACEUTICALS--13.5% Abbott Laboratories 4,222 204,503 American Home Products 4,575 290,741 Bristol-Myers Squibb 7,648 565,474 Merck & Co. 11,199 1,048,506 Pfizer 27,367 1,258,882 Pharmacia 7,696 469,456 Vertex Pharmaceuticals 353 (a) 25,240 3,862,802 PUBLISHING & BROADCASTING--3.7% AT&T--Liberty Media Group, Cl. A 10,826 (a) 146,828 Comcast, Cl. A 1,925 (a) 80,369 General Motors, Cl. H 3,500 (a) 80,500 Time Warner 14,665 766,100 1,073,797 RESTAURANTS--.6% McDonald's 5,297 180,098 RETAIL--4.4% Home Depot 13,774 629,300 Kohl's 3,265 (a) 199,165 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ RETAIL (CONTINUED) Wal-Mart Stores 8,450 448,906 1,277,371 SEMICONDUCTORS & EQUIPMENT--6.3% Analog Devices 4,853 (a) 248,413 Broadcom, Cl. A 1,761 (a) 148,805 GlobeSpan 894 (a) 24,585 Intel 9,563 289,281 JDS Uniphase 5,306 (a) 221,194 SDL 886 (a) 131,294 Texas Instruments 11,075 524,678 Vitesse Semiconductor 3,919 (a) 216,770 1,805,020 TELECOMMUNICATION SERVICES--1.3% Juniper Networks 1,142 (a) 143,963 Level 3 Communications 1,642 (a) 53,877 NEXTEL Communications, Cl. A 3,607 (a) 89,273 VoiceStream Wireless 767 (a) 77,179 364,292 TELECOMMUNICATION EQUIPMENT--7.7% ADC Telecommunications 4,185 (a) 75,853 CIENA 1,999 (a) 162,669 Comverse Technology 4,105 (a) 445,906 Motorola 8,073 163,478 Nokia, ADS 11,112 483,372 Nortel Networks 10,534 337,746 QUALCOMM 1,833 (a) 150,650 TyCom 16,556 (a) 370,441 2,190,115 UTILITIES--1.5% AES 1,484 (a) 82,177 Calpine 3,764 (a) 169,615 Dynegy, Cl. A 3,053 171,159 422,951 TOTAL COMMON STOCKS (cost $26,955,843) 25,931,013 Principal SHORT-TERM INVESTMENTS--10.0% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER: Electronic Data Systems, 6.50%, 1/2/2001 1,430,000 1,429,741 Home Depot, 6.50%, 1/2/2001 1,440,000 1,439,740 (cost $2,869,481) 2,869,481 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $29,825,324) 100.7% 28,800,494 LIABILITIES, LESS CASH AND RECEIVABLES (.7%) (217,568) NET ASSETS 100.0% 28,582,926 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 29,825,324 28,800,494 Cash 225,423 Dividends receivable 21,995 Prepaid expenses 1,458 29,049,370 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 23,186 Payable for investment securities purchased 419,500 Accrued expenses 23,758 466,444 -------------------------------------------------------------------------------- NET ASSETS ($) 28,582,926 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 34,910,959 Accumulated undistributed investment income--net 21,916 Accumulated net realized gain (loss) on investments (5,325,119) Accumulated net unrealized appreciation (depreciation) on investments--Note 4 (1,024,830) -------------------------------------------------------------------------------- NET ASSETS ($) 28,582,926 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 28,582,676 250 Shares Outstanding 1,940,413 16.972 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 14.73 14.73 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Year Ended December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 149,014 Cash dividends (net of $255 foreign taxes withheld at source) 61,172 TOTAL INCOME 210,186 EXPENSES: Investment advisory fee--Note 3(a) 145,465 Custodian fees--Note 3(b) 21,634 Professional fees 21,591 Prospectus and shareholders' reports 13,123 Registration fees 7,357 Shareholder servicing costs--Note 3(b) 393 Loan commitment fees--Note 2 108 Miscellaneous 369 TOTAL EXPENSES 210,040 Less--reduction in investment advisory fee due to undertaking--Note 3(a) (21,770) NET EXPENSES 188,270 INVESTMENT INCOME--NET 21,916 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (5,268,122) Net unrealized appreciation (depreciation) on investments (2,998,632) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (8,266,754) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (8,244,838) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, --------------------------------- 2000(a) 1999 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net 21,916 (4,575) Net realized gain (loss) on investments (5,268,122) 96,574 Net unrealized appreciation (depreciation) on investments (2,998,632) 1,692,462 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (8,244,838) 1,784,461 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (1,120) Net realized gain on investments: Initial shares (86,561) (323,640) TOTAL DIVIDENDS (86,561) (324,760) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 34,634,389 4,177,592 Service shares 250 -- Dividends reinvested: Initial shares 86,561 324,760 Cost of shares redeemed: Initial shares (5,291,644) (1,020,907) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 29,429,556 3,481,445 TOTAL INCREASE (DECREASE) IN NET ASSETS 21,098,157 4,941,146 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 7,484,769 2,543,623 END OF PERIOD 28,582,926 7,484,769 Undistributed investment income--net 21,916 -- -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 1,841,798 252,994 Shares issued for dividends reinvested 4,166 19,754 Shares redeemed (282,279) (56,020) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,563,685 216,728 -------------------------------------------------------------------------------- SERVICE SHARES SHARES SOLD 17 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ------------------------------------------------------------- Period Ended Year Ended December 31, December 31, ------------------------------------------------------------- 2000 1999 1998(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 19.87 15.90 12.50 14.73 Investment Operations: Investment income (loss)--net .02(c) (.02)(c) .01 -- Net realized and unrealized gain (loss) on investments (5.03) 5.79 3.39 -- Total from Investment Operations (5.01) 5.77 3.40 -- Distributions: Dividends from investment income--net -- (.01) -- -- Dividends from net realized gain on investments (.13) (1.79) -- -- Total Distributions (.13) (1.80) -- -- Net asset value, end of period 14.73 19.87 15.90 14.73 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (25.40) 39.01 27.20(d) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .97 1.00 .25(d) -- Ratio of net investment income (loss) to average net assets .11 (.11) .05(d) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .11 1.33 .31(d) -- Portfolio Turnover Rate 171.96 115.08 75.65(d) 171.96 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 28,583 7,485 2,544 --(e) (A) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED. (E) AMOUNT REPRESENTS LESS THAN $1,000.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering twelve series, including the Founders Growth Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio' s investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. (" Mellon" ), which is a wholly-owned subsidiary of Mellon Financial Corporation. Founders Asset Management LLC (" Founders" ) serves as the portfolio' s sub-investment adviser. Founders is a 90%-owned subsidiary of Mellon. Effective March 22, 2000, Dreyfus Service Corporation (the " Distributor"), a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio's shares which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, whre the asked price is used for valustion purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $5,954 during the period ended December 31, 2000 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $1,609,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the Facility. NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .75 of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000 through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio' s aggregate annual expenses, exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses, exceeded an annual rate of 1% of the value of the portfolio' s average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class (exclusive of certain expenses as described above) exceed 1% of the value of the average daily net assets of their class. The reduction in investment advisory fee, pursuant to the undertaking, amounted to $21,770 during the period ended December 31, 2000. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) Pursuant to a Sub-Investment Advisory Agreement with Founders, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio' s average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million . . . . . . . . . . . . . . . . .25 of 1% In excess of $100 million to $1 billion. . . . . . .20 of 1% In excess of $1 billion to $1.5 billion. . . . . . .16 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .10 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $27 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $21,634 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an " affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2000, amounted to $56,673,187 and $29,954,861, respectively. At December 31, 2000, accumulated net unrealized depreciation on investments was $1,024,830, consisting of $1,839,172 gross unrealized appreciation and $2,864,002 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Founders Growth Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders Growth Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2000 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders Growth Portfolio at December 31, 2000, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes, the portfolio hereby designates $.0120 per share as a long-term capital gain distribution of the $.1320 per share paid on March 30, 2000. The portfolio also designates 14.59% of the ordinary dividends paid during the fiscal year ended December 31, 2000 as qualifying for the corporate dividends received deduction. The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Founders Growth Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 176AR0012 Dreyfus Investment Portfolios, Founders International Equity Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 14 Financial Highlights 15 Notes to Financial Statements 20 Report of Independent Auditors 21 Important Tax Information FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders International Equity Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, Founders International Equity Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you' ll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, Douglas A. Loeffler, CFA, of Founders Asset Management LLC, the portfolio's sub-investment adviser. The international stock markets, as measured by the MSCI EAFE Index, declined more than 14% in 2000. Most other major domestic and international stock market indices declined as well. The reasons for the disappointing year varied, including disappointing economic growth and the adverse effects of the value of the U.S. dollar on currency exchange rates for U.S. investors. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Douglas A. Loeffler, CFA, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders International Equity Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, the portfolio produced a total return of -17.41%.(1) This compares with a -13.37% total return produced by the portfolio' s benchmark, the Morgan Stanley Capital International (MSCI) World ex U.S. Index, for the same period.(2) We attribute the portfolio' s underperformance to a difficult stock market environment during much of the period, particularly for the growth-oriented stocks in which the portfolio invests. What is the portfolio's investment approach? The portfolio focuses on individual stock selection. We do not attempt to predict interest rates or market movements, nor do we have country allocation models or targets. Rather, we choose investments on a company-by-company basis, searching to find what we believe are well-managed, well-positioned companies, wherever they may be. Starting with roughly 1,000 of the largest companies outside the United States, we perform rigorous stock-by-stock analyses. Our goal is to identify companies that we believe have achieved and can sustain growth through a strong brand name, growing market share, high barriers to entry or untapped market opportunities. In our view, these factors are marks of companies whose growth, in both revenues and earnings, should exceed that of global industry peers as well as that of its local market. Currently, the portfolio holds approximately 60-80 stocks, broadly invested across countries and industries, representing what we believe to be the best growth ideas from around the world. We generally sell a stock when its growth forecast is reduced, its valuation target is reached or when we decide to reduce its specific market weighting. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) What other factors influenced the portfolio's performance? When the reporting period began, the portfolio benefited from a strong global demand for growth stocks, the types of stocks in which the portfolio invests. From mid-March through year-end, however, the portfolio was negatively affected by a global retreat from those same types of stocks. While earnings held relatively steady, investors grew increasingly concerned about the potential effect that a global slowdown coupled with higher interest rates might have on stock prices. Weakness was particularly evident in the technology and telecommunications sectors, in which the portfolio had made a significant commitment. In Japan, a continuing recession and an oversupply of stocks put downward pressure on prices. European markets were weak as well, despite relatively strong underlying economic activity. Towards the end of the reporting period, higher energy prices had dampened consumer confidence and business spending plans, further weakening the performance of both Japanese and European growth stocks. In addition, while European currencies staged a sharp rally in December, the strength of the U.S. dollar over much of the reporting period had a negative effect on portfolio performance. That's because a strong dollar erodes the value of international investments for U.S. residents. For example, if a stock were to rise 10% in euro terms, but the euro were to fall by 20% against the dollar, the investor would actually face a loss in dollar terms. That is precisely the scenario that took place over the reporting period. What is the portfolio's current strategy? As growth stock prices declined, we selectively reduced exposure to certain sectors and increased investments in sectors that we believed represented attractive investment opportunities. Specifically, we trimmed our exposure to the telecommunications and technology areas, particularly in companies that manufacture telecommunications equipment and semiconductors. On the other hand, we increased our exposure to business services, software and selected utility companies. Maintaining a geographic balance remains an important strategy for the portfolio. Japan, which continues to be our largest single country exposure, is a market where, in our view, long-depressed growth stocks are most reasonably priced. We also believe that Continental Europe is an attractive area in terms of its underlying economic strength and positive earnings environment. However, we have limited exposure to the European telecommunications sector and have recently reduced our investment in manufacturers of wireless equipment after some negative earnings surprises. Instead, we have added to investments in media stocks, which in our opinion had become attractively priced for growth-oriented stocks. Finally, our emerging markets exposure has increased incrementally, where we have concentrated our investments in Latin American stocks that are closely tied to the U.S. markets and Asian manufacturers with industry-leading technology. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURN WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD EX U.S. INDEX IS AN UNMANAGED INDEX OF GLOBAL STOCK MARKET PERFORMANCE, EXCLUDING THE U.S., CONSISTING SOLELY OF EQUITY SECURITIES. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Founders International Equity Portfolio Initial shares and the Morgan Stanley Capital International World ex U.S. Index -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 9/30/98 (17.41)% 20.52%
((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO ON 9/30/98 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. INDEX IS AN UNMANAGED INDEX OF GLOBAL STOCK MARKET PERFORMANCE, EXCLUDING THE U.S., CONSISTING SOLELY OF EQUITY SECURITIES AND INCLUDES NET DIVIDENDS REINVESTED. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--90.4% Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- BRAZIL--4.1% Embraer-Empresa Brasileira de Aeronautica, ADR 5,050 200,738 Petroleo Brasileiro, ADR 4,500 (a) 113,625 Tele Norte Leste Participaceos, ADR 7,850 179,078 493,441 CANADA--2.1% Ballard Power Systems 925 (a) 58,420 Nortel Networks 6,100 195,581 254,001 DENMARK--3.3% ISS 3,000 (a) 204,542 Novo Nordisk, Cl. B 1,025 184,078 388,620 FINLAND--3.6% Nokia, ADR 5,000 217,500 Perlos 10,125 209,385 426,885 FRANCE--13.0% Accor 3,675 155,452 Alcatel 4,075 231,745 Altran Technologies 825 186,896 Aventis 2,000 175,780 Business Objects 2,175 (a) 128,395 Dassault Systemes 1,875 128,662 STMicroelectronics 2,975 130,037 TotalFinaElf 1,925 286,625 Vivendi Environnement 2,900 126,759 1,550,351 GERMANY--3.7% Adidas-Salomon 1,000 62,040 Direkt Anlage Bank 2,400 (a) 87,082 Epcos 1,450 126,759 Ergo Versicherungs Gruppe 1,000 167,320 443,201 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- HONG KONG--2.8% China Mobile(Hong Kong) 40,000 (a) 218,470 MTR 65,500 114,629 333,099 ISRAEL--1.1% Check Point Software Technologies 950 (a) 126,884 ITALY--4.8% Alleanza Assicurazioni 18,525 301,097 Saipem 27,225 148,175 San Paolo-IMI 7,375 119,377 568,649 JAPAN--13.1% Ajinomoto 16,000 207,565 FAST RETAILING 700 136,857 Furukawa Electric 8,000 139,425 NEC 11,000 200,839 NIPPON TELEGRAPH & TELEPHONE 23 165,362 PIONEER 5,500 146,545 TOKYO GAS 86,000 253,936 Taiyo Yuden 2,000 66,743 Takeda Chemical Industries 3,000 177,164 Yahoo Japan 1 (a) 58,705 1,553,141 LUXEMBOURG--1.7% Societe Europeenne des Satellites 1,375 206,800 MEXICO--.9% Cemex, ADR 5,880 106,208 NETHERLANDS--9.0% ABN AMRO 5,725 130,340 Heineken 3,525 213,555 Koninklijke (Royal) Philips Electronics, ADR 9,905 359,056 TNT Post 7,225 174,949 VNU 3,800 186,994 1,064,894 SINGAPORE--2.6% Flextronics International 4,850 (a) 138,225 Singapore Press 12,000 177,163 315,388 COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- SOUTH KOREA--.9% Samsung Electronics, GDR 1,450 (b) 103,675 SPAIN--3.6% Altadis 12,525 194,263 Banco Santander Central Hispano 21,725 232,805 427,068 SWEDEN--4.6% Assa Abloy, Cl. B 10,400 203,284 ForeningsSparbanken 12,950 198,249 Nordea 18,550 140,516 542,049 SWITZERLAND--3.7% Swatch 169 211,681 Synthes-Stratec 305 (b) 225,821 437,502 TAIWAN--.7% Taiwan Semiconductor Manufacturing, ADR 4,800 (a) 82,800 UNITED KINGDOM--11.1% Aegis 39,425 81,278 ARM 8,725 (a) 65,953 BP Amoco, ADS 3,500 167,563 Energis 10,500 (a) 70,587 GlaxoSmithKline 7,050 199,055 Matalan 6,600 68,969 Reckitt Benckiser 14,650 201,785 Spirent 7,475 68,118 Vodafone 60,985 223,664 WPP 13,050 170,000 1,316,972 TOTAL COMMON STOCKS (cost $10,448,632) 10,741,628 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--1.2% ------------------------------------------------------------------------------------------------------------------------------------ GERMANY; Henkel KGaA (cost $140,893) 2,250 148,050 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal SHORT-TERM INVESTMENTS--9.2% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER; Federal Home Loan Mortgage Corporation, 5.10%, 1/2/2001 (cost $1,099,844) 1,100,000 1,099,844 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $11,689,369) 100.8% 11,989,522 LIABILITIES, LESS CASH AND RECEIVABLES (.8%) (100,645) NET ASSETS 100.0% 11,888,877 (A) NON-INCOME PRODUCING. (B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT DECEMBER 31, 2000, THESE SECURITIES AMOUNTED TO $329,496 OR APPROXIMATELY 2.8% OF NET ASSETS.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 11,689,369 11,989,522 Cash 225,372 Receivable for investment securities sold 89,091 Dividends receivable 6,044 Prepaid expenses 1,473 12,311,502 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 8,789 Payable for investment securities purchased 385,672 Payable for shares of Beneficial Interest redeemed 1,336 Accrued expenses 26,828 422,625 -------------------------------------------------------------------------------- NET ASSETS ($) 11,888,877 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 12,495,543 Accumulated undistributed investment income--net 1,811 Accumulated net realized gain (loss) on investments and foreign currency transactions (908,667) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4 300,190 -------------------------------------------------------------------------------- NET ASSETS ($) 11,888,877 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 11,888,377 500 Shares Outstanding 699,316 29.412 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 17.00 17.00 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $9,721 foreign taxes withheld at source) 68,891 Interest 63,940 TOTAL INCOME 132,831 EXPENSES: Investment advisory fee--Note 3(a) 87,346 Custodian fees 52,517 Auditing fees 18,919 Prospectus and shareholders' reports 9,444 Registration fees 2,382 Legal fees 1,907 Shareholder servicing costs--Note 3(b) 378 Loan commitment fees--Note 2 47 Trustees' fees and expenses--Note 3(c) 15 Miscellaneous 7,634 TOTAL EXPENSES 180,589 Less--reduction in investment advisory fee due to undertaking--Note 3(a) (49,569) NET EXPENSES 131,020 INVESTMENT INCOME--NET 1,811 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (899,661) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (1,007,466) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1,907,127) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,905,316) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2000(a) 1999 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net 1,811 (2,916) Net realized gain (loss) on investments (899,661) 645,007 Net unrealized appreciation (depreciation) on investments (1,007,466) 980,443 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,905,316) 1,622,534 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Net realized gain on investments: INITIAL SHARES (343,289) (282,839) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 13,293,937 1,317,844 Service shares 500 -- Dividends reinvested: Initial shares 343,289 282,839 Cost of shares redeemed: Initial shares (4,108,009) (629,761) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 9,529,717 970,922 TOTAL INCREASE (DECREASE) IN NET ASSETS 7,281,112 2,310,617 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 4,607,765 2,297,148 END OF PERIOD 11,888,877 4,607,765 Undistributed investment income--net 1,811 -- -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 686,538 67,505 Shares issued for dividends reinvested 16,201 13,155 Shares redeemed (216,289) (27,794) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 486,450 52,866 SERVICE SHARES SHARES SOLD 29 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ------------------------------------------------------------- Period Ended Year Ended December 31, December 31, ------------------------------------------------------------- 2000 1999 1998(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 21.65 14.36 12.50 17.00 Investment Operations: Investment income (loss)--net .00(c,d) (.02)(d) (.01) -- Net realized and unrealized gain (loss) on investments (3.55) 8.73 1.87 -- Total from Investment Operations (3.55) 8.71 1.86 - Distributions: Dividends from net realized gain on investments (1.10) (1.42) -- -- Net asset value, end of period 17.00 21.65 14.36 17.00 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (17.41) 60.69 14.88(e) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 1.50 .38(e) -- Ratio of net investment income (loss) to average net assets .02 (.11) (.08)(e) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .57 2.27 .81(e) -- Portfolio Turnover Rate 171.34 190.80 29.25(e) 171.34 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 11,888 4,608 2,297 1 (A) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (E) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve portfolios, including the Founders International Equity Portfolio (the " portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Founders Asset Management LLC ("Founders") serves as the portfolio's sub-investment adviser. Founders is a 90% -owned subsidiary of Mellon. Effective March 22, 2000, Dreyfus Service Corporation (the "Distributor "), a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio' s shares, which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $5,233 during the period ended December 31, 2000, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $390,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the Facility. NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000 through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio' s aggregate annual expenses, exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses, exceeded an annual rate of 1.50% of the value of the portfolio' s average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class (exclusive of certain expenses as described above) exceed 1.50% of the value of the average daily net assets of their class. The reduction in investment advisory fee, pursuant to the undertaking, amounted to $49,569 during the period ended December 31, 2000. Pursuant to a Sub-Investment Advisory Agreement with Founders, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio' s average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million. . . . . . . . . . . . . . . . . .35 of 1% In excess of $100 million to $1 billion. . . . . . .30 of 1% In excess of $1 billion to $1.5 billion. . . . . . .26 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $29 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an " affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2000, amounted to $21,227,732 and $13,380,900, respectively. At December 31, 2000, accumulated net unrealized appreciation on investments was $300,153, consisting of $962,808 gross unrealized appreciation and $662,655 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Founders International Equity Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders International Equity Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2000 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders International Equity Portfolio at December 31, 2000, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes, the portfolio hereby designates $.4060 per share as a long-term capital gain distribution of the $1.0980 per share paid on March 31, 2000. The Portfolio For More Information Dreyfus Investment Portfolios, Founders International Equity Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 177AR0012 Dreyfus Investment Portfolios, Founders Passport Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 8 Statement of Investments 16 Statement of Assets and Liabilities 17 Statement of Operations 18 Statement of Changes in Net Assets 19 Financial Highlights 20 Notes to Financial Statements 26 Report of Independent Auditors 27 Important Tax Information FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Passport Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, Founders Passport Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Tracy Stouffer of Founders Asset Management LLC, the portfolio's sub-investment adviser. The international stock markets, as measured by the MSCI EAFE Index, declined more than 14% in 2000. Most other major domestic and international stock market indices declined as well. The reasons for the disappointing year varied, including disappointing economic growth and the adverse effects of the value of the U.S. dollar on currency exchange rates for U.S. investors. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Tracy Stouffer, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders Passport Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, Dreyfus Investment Portfolios, Founders Passport Portfolio produced a total return of -25.76% .(1) In comparison, the portfolio's benchmark, the Morgan Stanley Capital International World ex U.S. Index, produced a total return of -13.37%, while the Morgan Stanley Capital International World ex U.S. Small Cap Index produced a total return of -8.84% for the same period. (2,3) We attribute the portfolio's underperformance relative to the indices to sharp price declines in international stocks such as technology, telecommunications and media, which performed in line with similar companies in the United States. Between March and December of 2000, stock prices of these companies generally declined sharply due to concerns regarding their very high valuations as well as concerns about low profitability amidst a slowing economic environment. What is the portfolio's investment approach? The portfolio invests primarily in foreign companies with annual revenues or market capitalizations of $1 billion or less that have demonstrated earnings growth as well as dominance in their market niches. Although our focus in early 2000 was on technology and telecommunications, the portfolio is a broadly diversified portfolio and currently holds more than 100 stocks across many industries. Because of this broad mandate, we believe that it is very important for us to meet with corporate management teams to assess their business strategies. We also believe it is important to travel to the countries in which they are located to assess the local business environment. When it comes to global small-cap stocks, it is especially important to learn as much as we can because there is a limited amount of Wall Street research available on many of these companies. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) What other factors influenced the portfolio's performance? The year 2000 began on a positive note. The much-anticipated global computer breakdown, Y2K, never materialized and international investment managers with high levels of cash reserves resumed their investment programs. In this environment, small-cap stocks flourished, as investors were willing to assume additional risk in exchange for potentially higher returns. However, in early March the U.S. stock market turned volatile when it appeared that the domestic economy was growing too fast to keep inflation at bay. A " flight to quality" ensued during which small-cap stocks were among the hardest hit stocks. International markets, which are typically less developed and may have fewer buyers and sellers in the U.S., fell sharply, partly because of increased difficulties in selling shares on the open market. From mid-March through the end of the reporting period, the growth style of investing -- that is, buying shares of companies with above-average growth prospects -- lagged. Instead, the value style of investing, which seeks to pay modest prices for companies that have slower growth possibilities, generally outperformed the growth style of investing. As a result, companies in such industries as health care, commodities, construction, energy and utilities produced the strongest returns for the market and the portfolio. Although the portfolio' s overall returns were disappointing, a number of our holdings performed very well during the reporting period, including NEG Micon, a Danish manufacturer of wind turbines, HIT Entertainment, a U.K.-based animation company that has programs on Nickelodeon, and Pinquely-Haulotte, a French manufacturer of construction equipment. The Chinese stock market, among the last to recover from the Asian economic crisis of 1997-1998, generally produced strong returns during 2000. Here, the portfolio benefited from its investment in Huaneng Power, a leading Chinese electric utility company. In addition, the portfolio's holdings in a number of property companies in Hong Kong, which have benefited from lower interest rates and improved Asian economies, also benefited the portfolio's performance. What is the portfolio's current strategy? Our current strategy is to continue to focus on finding small, fast-growing companies throughout the world, regardless of industry or location. We have recently increased our holdings in biotechnology stocks and believe that the recent scientific breakthroughs in mapping the human genome may generate global opportunities for companies engaged in genetic research. We are also currently seeing what we believe to be excellent values in Europe, where the strengthening euro is benefiting local companies which import raw materials from weaker currency areas of the world, such as Asia. Should the economy in Europe continue to improve, we believe that companies involved in construction, leisure, retailing and transportation may benefit. In addition, we anticipate that moderate inflation levels are possible in Europe based on what we believe is its improving economic growth. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURN WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD EX U.S. INDEX IS AN UNMANAGED INDEX OF GLOBAL STOCK MARKET PERFORMANCE, EXCLUDING THE U.S., CONSISTING SOLELY OF EQUITY SECURITIES. (3) SOURCE: BLOOMBERG L.P. -- THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD EX U.S. SMALL CAP INDEX IS A WEIGHTED AVERAGE OF THE PERFORMANCE OF SECURITIES IN 21 COUNTRIES THAT INCLUDES COMPANIES WITH MARKET CAPITALIZATIONS BETWEEN U.S. $200 MILLION AND $800 MILLION. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of a $10,000 investment in Dreyfus Investment Portfolios, Founders Passport Portfolio Initial shares with the Morgan Stanley Capital International World ex U.S. Index and the Morgan Stanley Capital International World ex U.S. Small Cap Index ((+)) SOURCE: LIPPER INC. ((+)(+)) BLOOMBERG L.P. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO ON 9/30/98 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. INDEX AND THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. SMALL CAP INDEX ON THAT DATE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. INDEX REFLECTS THE REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. SMALL CAP INDEX DOES NOT REFLECT REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. INDEX IS AN UNMANAGED INDEX OF GLOBAL STOCK MARKET PERFORMANCE, EXCLUDING THE U.S., CONSISTING SOLELY OF EQUITY SECURITIES AND INCLUDES NET DIVIDENDS REINVESTED. THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. SMALL CAP INDEX IS A WEIGHTED AVERAGE OF THE PERFORMANCE OF SECURITIES IN 21 COUNTRIES THAT INCLUDES COMPANIES WITH MARKET CAPITALIZATION BETWEEN U.S. $200 MILLION AND $800 MILLION NEITHER OF THE INDICES TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 9/30/98 (25.76)% 20.12% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The Portfolio
STATEMENT OF INVESTMENTS December 31, 2000 STATEMENT OF INVESTMENTS
COMMON STOCKS--97.9% Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- AUSTRALIA--5.5% Challenger International 35,125 81,721 Cochlear 3,075 62,568 Computershare 17,900 86,147 ERG 40,875 62,449 Energy Developments 12,850 91,002 FH Faulding & Company 20,750 136,682 Lang 27,350 172,650 M.I.M. 396,225 256,377 Mayne Nickless 62,300 202,946 Pacific Hydro 5,150 7,411 Qantas Airways 51,900 102,714 Securenet 7,325 (a) 19,641 Stockford 56,325 61,579 TAB 54,000 95,213 1,439,100 AUSTRIA--.3% Flughafen Wien 1,865 70,650 CANADA--4.6% Cominco 7,850 131,008 Ensign Resource Service 1,825 67,243 Global Thermoelectric 1,300 (a) 17,047 Industrial Alliance Life Insurance 700 18,993 Intrawest 4,100 81,262 Molson, Cl. A 4,750 136,076 Precision Drilling 5,675 (a) 212,671 Sierra Wireless 4,200 (a) 201,466 Stuart Energy Systems 2,175 13,766 Turbo Genset 11,625 (a) 330,139 1,209,671 CHINA--1.1% Beijing Datang Power, Cl. H 708,000 183,815 Yanzhou Coal Mining, Cl. H 366,000 100,888 284,703 CROATIA--.5% Pliva d.d., GDR 10,125 118,969 DENMARK--4.1% A/S Det Ostasiatiske Kompagni 11,425 (a) 247,656 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ DENMARK (CONTINUED) Carli Gry International 6,650 85,484 Carlsberg, Cl. B 3,950 232,974 Genmab 4,025 92,829 NEG Micon 4,100 (a) 242,854 Sophus Berendsen, Cl. B 6,425 178,949 1,080,746 FINLAND--.9% Amer 6,575 173,054 SSH Communications 3,550 51,390 224,444 FRANCE--7.8% Bouygues Offshore 250 11,398 Canal Plus 28,450 102,158 Cerep 500 (a) 42,582 Compagnie Francaise d'Etudes et de Construction 1,000 144,353 Eurotunnel (Units) 116,825 (a) 116,404 Genset 1,325 (a) 54,802 HighWave Optical Technologies 200 27,241 Neopost 3,075 (a) 72,263 Pierre & Vacances 2,425 148,167 Pinguely-Haulotte 8,900 259,346 Remy Cointreau 2,800 118,440 Rodriguez 750 228,984 Royal Canin 550 58,938 Scor 1,575 81,872 Silicon-On-Insulator Technologies 6,850 (a) 167,414 Societe Industrielle D'Aviations Latecoere 900 89,676 Vallourec 2,725 145,749 Zodiac 675 186,543 2,056,330 GERMANY--4.7% ADVA Optical Networking 2,000 (a) 115,620 Babcock Borsig 4,525 (a) 217,354 Buderus 6,200 129,964 COR Insurance Technologies 6,475 (a) 121,730 Centrotec Hochleistungskunststoffe 1,625 (a) 23,206 Douglas 1,750 64,155 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- GERMANY (CONTINUED) Energiekontor 1,925 151,998 Evotec Biosystems 1 (a) 31 Fielmann 2,275 95,805 GPC Biotech 675 19,294 Hoeft & Wessel 4,450 (a) 47,268 Lion Bioscience 275 22,335 Pandatel 650 32,994 QS Communications 9,425 35,261 Technotrans 600 70,500 Zapf Creation 2,165 93,615 1,241,130 GREECE--.2% Forthnet 3,330 41,728 HONG KONG--6.4% China Everbright 148,000 152,749 China Merchants 188,000 136,185 China Resources Enterprise 98,000 125,018 Cosco Pacific 360,000 279,241 Dah Sing Financial 9,200 49,540 First Pacific 270,000 77,022 Guoco 32,000 95,388 HKCB Bank 368,000 127,390 Hong Kong Exchanges & Clearing 62,000 142,288 International Bank of Asia 394,000 104,818 Kerry Properties 41,500 55,867 Shanghai Industrial 127,000 231,214 Wing Hang Bank 26,000 94,004 1,670,724 HUNGARY--1.7% Gedeon Richter 2,850 168,704 OTP Bank 4,800 270,156 438,860 IRELAND--1.1% Anglo Irish Bank 25,125 74,900 Datalex, ADR 14,300 150,150 ITG 10,413 (a) 68,028 293,078 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ISRAEL--2.5% Card-Guard Scientific Survival 4,375 (a) 284,144 Oridion Systems 5,275 211,920 SHL Telemedicine 5,500 163,295 659,359 ITALY--3.0% Bayerische Vita 2,425 29,542 Beni Stabili 147,500 71,266 Buzzi Unicem 5,250 45,136 Credito Emiliano 56,000 244,723 Ferretti 43,000 181,122 Marzotto 7,750 91,791 Tod's 2,850 123,770 787,350 JAPAN--2.9% DENSEI-LAMBDA K.K. 3,600 74,850 DOWA MINING 37,000 160,322 ENESERVE 2,000 71,634 GUNZE 25,000 86,267 JGC 12,000 81,663 KATOKICHI 3,400 89,106 KISSEI PHARMACEUTICAL 3,000 59,229 KURODA ELECTRIC 60 1,111 MIYACHI TECHNOS 40 1,118 MORITEX 500 21,316 Meiji Milk Products 10,000 43,680 Sanrio 1,900 33,197 TOMY 1,600 38,298 761,791 NETHERLANDS--5.7% CSM 4,775 118,496 Heijmans 675 12,214 Internatio-Muller 14,250 328,178 Kempen & Co. 2,700 148,473 Koninklijke Grolsch 2,975 66,557 Koninklijke Wessanen 19,200 237,331 Laurus 5,600 53,167 Nutreco 2,875 152,962 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ NETHERLANDS (CONTINUED) PinkRoccade 2,400 (a) 130,848 Teleplan International 2,450 (a) 81,756 Van der Moolen 1,875 160,740 1,490,722 NORWAY--.3% Petroleum Geo-Services, ADR 2,625 (a) 34,945 ProSafe 50 (a) 774 Smedvig, Cl. B 3,600 29,074 TGS Nopec Geophysical 1,175 (a) 14,047 78,840 PANAMA--.1% Banco Latinoamericano de Exportaciones, Cl. E 1,000 34,616 SINGAPORE--3.1% Keppel Land 139,000 220,444 NatSteel 54,000 90,934 NatSteel Broadway 73,000 120,404 OMNI Industries 70,000 102,941 Overseas Union Enterprise 33,000 129,412 Singapore-Exchange 203,000 152,191 816,326 SOUTH AFRICA--.1% BoE 65,600 38,635 SOUTH KOREA--.7% KMW 10,260 64,885 SK 10,970 120,540 185,425 SPAIN--6.5% ACS 4,100 96,735 Abengoa 5,275 168,539 Aldeasa 2,350 45,285 Aurea Concesiones de Infraestructuras del Estado 5,825 94,617 Corporacion Mapfre, Compania Internacional de Reaseguros 9,875 188,435 Grupo Auxiliar Metalurgico 14,800 356,147 Grupo Dragados 35,050 382,185 Grupo Ferrovial 19,325 247,051 NH Hoteles 10,900 134,223 1,713,217 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SWEDEN--3.4% Castellum 850 9,366 Enea Data 15,850 63,138 HiQ International 4,450 33,001 JM, Cl. B 3,200 70,855 Modern Times, Cl. B 5,050 (a) 133,753 Nobel Biocare 10,450 322,169 Q-Med 3,500 (a) 71,194 Trelleborg, Cl. B 28,400 204,598 908,074 SWITZERLAND--6.4% Actelion 825 375,580 Disetronic 325 290,484 Generics 150 54,341 Huber & Suhner 25 21,494 Jomed 3,100 170,833 Leica Geosystems 625 193,295 Phonak 60 249,026 Sarna Kunststoff 100 122,472 Schaffner 225 72,369 Tecan 125 129,971 1,679,865 UNITED KINGDOM--24.3% AIT 4,100 71,969 AMEC 35,050 180,646 ARC International 15,750 (a) 53,147 Aggregate Industries 95,700 114,730 Aggreko 425 2,622 Amey 7,500 214,449 Arcadia 43,925 51,183 Associated British Ports 9,700 53,326 BPB 13,450 55,256 Babcock International 27,525 43,176 Baltimore Technologies 11,175 (a) 57,595 Barratt Developments 16,150 71,173 Bodycote International 18,100 69,762 British Energy 96,375 371,455 Cattles 23,100 85,928 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) Chloride 79,125 192,674 Croda International 16,575 67,599 DONCASTERS, ADR 3,000 (a) 60,000 De La Rue 10,300 62,972 Debenhams 73,600 318,583 Delta 33,000 74,441 easyJet 33,775 198,672 Enterprise Inns 6,500 45,275 Expro International 8,300 51,147 Eyretel 105,000 130,193 FKI 68,950 226,610 Fibernet 4,025 (a) 45,323 Fibernet (Rights) 1,072 (a) 2,402 Guardian IT 6,450 92,502 HIT Entertainment 53,025 318,044 Halma 12,450 25,667 Hammerson 10,425 72,107 IFX Power 3,225 49,865 Incepta 79,475 131,194 Intec Telecom Systems 27,175 163,199 J.D. Wetherspoon 13,625 67,984 Jardine Lloyd Thompson 8,750 63,103 Kelda 16,825 97,775 Kidde 141,800 152,521 Man 47,325 436,212 nCipher 12,975 53,110 NetStore 12,350 15,110 Northern Foods 69,675 143,641 Orchestream 16,400 66,885 Pennon 7,025 69,265 Phytopharm 8,600 (a) 109,204 Pilkington 167,675 278,043 RiverSoft 104,375 174,637 St. James's Place Capital 6,825 42,619 Saville Gordon Estates 14,400 19,146 Securicor 22,450 52,403 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) Somerfield 95,425 128,300 Taylor Woodrow 68,375 181,819 Telework 21,450 60,884 Tilbury Douglas 4,400 32,208 Volex 11,050 321,898 6,391,653 TOTAL COMMON STOCKS (cost $24,401,319) 25,716,006 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--6.8% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER; Federal Home Loan Mortgage Corporation, 5.10%, 1/2/2001 (cost $1,799,745) 1,800,000 1,799,745 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $26,201,064) 104.7% 27,515,751 LIABILITIES, LESS CASH AND RECEIVABLES (4.7%) (1,234,146) NET ASSETS 100.0% 26,281,605 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 26,201,064 27,515,751 Cash 818,495 Receivable for investment securities sold 487,403 Dividends receivable 33,469 Prepaid expenses 1,592 Due from The Dreyfus Corporation and affliliates 31,295 28,888,005 -------------------------------------------------------------------------------- LIABILITIES ($): Payable for investment securities purchased 2,187,268 Payable for shares of Beneficial Interest redeemed 230,437 Accrued expenses 188,695 2,606,400 -------------------------------------------------------------------------------- NET ASSETS ($) 26,281,605 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 34,867,092 Accumulated net realized gain (loss) on investments and foreign currency transactions (9,901,265) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4 1,315,778 -------------------------------------------------------------------------------- NET ASSETS ($) 26,281,605 NET ASSET VALUE PER SHARE
Initial Shares Service Shares ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 26,281,105 500 Shares Outstanding 1,547,304 29.429 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 16.99 16.99
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Year Ended December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $20,633 foreign taxes withheld at source) 180,735 Interest 101,574 TOTAL INCOME 282,309 EXPENSES: Investment advisory fee--Note 3(a) 275,381 Custodian fees 640,729 Professional fees 22,115 Prospectus and shareholders' reports 12,602 Registration fees 6,359 Shareholder servicing costs--Note 3(b) 450 Trustees' fees and expenses--Note 3(c) 450 Loan commitment fees--Note 2 153 Miscellaneous 30,925 TOTAL EXPENSES 989,164 Less--expense reimbursement from The Dreyfus Corporation due to undertaking--Note 3(a) (576,092) NET EXPENSES 413,072 INVESTMENT (LOSS) (130,763) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (9,871,866) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (2,628,496) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (12,500,362) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (12,631,125) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, -------------------------------- 2000(a) 1999 -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (130,763) (44,299) Net realized gain (loss) on investments (9,871,866) 2,285,760 Net unrealized appreciation (depreciation) on investments (2,628,496) 3,162,746 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (12,631,125) 5,404,207 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Net realized gain on investments: INITIAL SHARES (1,358,339) (913,689) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 46,822,858 5,886,112 Service shares 500 -- Dividends reinvested: -- Initial shares 1,358,339 913,689 Cost of shares redeemed: -- Initial shares (22,746,435) (2,242,808) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 25,435,262 4,556,993 TOTAL INCREASE (DECREASE) IN NET ASSETS 11,445,798 9,047,511 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 14,835,807 5,788,296 END OF PERIOD 26,281,605 14,835,807 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 1,865,969 316,947 Shares issued for dividends reinvested 49,939 39,642 Shares redeemed (991,434) (134,149) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 924,474 222,440 ------------------------------------------------------------------------------- SERVICE SHARES SHARES SOLD 29 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ------------------------------------------------------------- Period Ended Year Ended December 31, December 31, ------------------------------------------------------------- 2000 1999 1998(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 23.82 14.46 12.50 16.99 Investment Operations: Investment income (loss)--net (.11)(c) (.10)(c) .00(d) -- Net realized and unrealized gain (loss) on investments (5.61) 11.04 1.97 -- Total from Investment Operations (5.72) 10.94 1.97 -- Distributions: Dividends from investment income--net -- -- (.00)(d) -- Dividends from net realized gain on investments (1.11) (1.58) (.01) -- Total Distributions (1.11) (1.58) (.01) -- Net asset value, end of period 16.99 23.82 14.46 16.99 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (25.76) 76.05 15.79(e) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 1.50 .38(e) -- Ratio of net investment income (loss) to average net assets (.47) (.60) .02(e) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 2.09 2.14 .30(e) -- Portfolio Turnover Rate 493.10 319.31 3.98(e) 493.10 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 26,281 14,836 5,788 1 (A) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (E) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the Founders Passport Portfolio (the "portfolio" ). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is capital appreciation. The Dreyfus Corporation ("Dreyfus") serves as the portfolio' s investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. (" Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Founders Asset Management LLC (" Founders" ) serves as the portfolio' s sub-investment adviser. Founders is a 90%-owned subsidiary of Mellon. Effective March 22, 2000, Dreyfus Service Corporation (the " Distributor"), a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio' s shares, which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $8,516 during the period ended December 31, 2000 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $6,528,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. During the period ended December 31, 2000, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $130,763 and decreased paid-in capital by the same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the Facility. NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000 through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio' s aggregate annual expenses exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses, exceeded an annual rate of 1.50% of the value of the portfolio' s average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, (exclusive of certain expenses as described above) , exceed an annual rate of 1.50% of the value of the average daily net assets of their class. The expense reimbursement, pursuant to the undertaking, amounted to $576,092 during the period ended December 31, 2000. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) Pursuant to a Sub-Investment Advisory Agreement with Founders, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio' s average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million. . . . . . . . . . . . . . . . . .35 of 1% In excess of $100 million to $1 billion. . . . . . .30 of 1% In excess of $1 billion to $1.5 billion. . . . . . .26 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $31 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an "affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2000, amounted to $148,844,489 and $125,308,036, respectively. At December 31, 2000, accumulated net unrealized appreciation on investments was $1,314,687, consisting of $2,161,470 gross unrealized appreciation and $846,783 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Founders Passport Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders Passport Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2000 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders Passport Portfolio at December 31, 2000, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes, the portfolio hereby designates $.1000 per share as a long-term capital gain distribution of the $1.1110 per share paid on March 31, 2000. The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Founders Passport Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 178AR0012 Dreyfus Investment Portfolios, Japan Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 9 Statement of Assets and Liabilities 10 Statement of Operations 11 Statement of Changes in Net Assets 12 Financial Highlights 13 Notes to Financial Statements 19 Report of Independent Auditors FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Japan Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, Japan Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you' ll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Miki Sugimoto. The international stock markets, as measured by the MSCI EAFE Index, declined more than 14% in 2000. Most other major domestic and international stock market indices declined as well. The reasons for the disappointing year varied, including disappointing economic growth and the adverse effects of the value of the U.S. dollar on currency exchange rates for U.S. investors. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Miki Sugimoto, Portfolio Manager How did the Dreyfus Investment Portfolios, Japan Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000 Dreyfus Investment Portfolios, Japan Portfolio produced a total return of -8.92%.(1) This compares with the -28.16% total return provided by the Morgan Stanley Capital International (MSCI) Japan Index, the portfolio's benchmark, for the same period.(2) We attribute the portfolio' s overall negative performance to a difficult and volatile stock market environment in Japan over the reporting period. However, we are pleased to report that our returns were significantly higher than the benchmark's returns. We attribute the portfolio's relative performance to our decision to move away from stocks with relatively high valuations and instead to favor more sensibly priced stocks that we believe have the ability to achieve reasonable earnings growth. What is the portfolio's investment approach? The portfolio seeks long-term capital growth. To pursue this goal, the portfolio invests primarily in stocks of Japanese companies. Generally, the portfolio invests at least 60% of its assets in Japanese companies with market capitalizations of at least $1.5 billion at the time of investment. The portfolio's investments may include common, preferred and convertible stocks, including those purchased through IPOs. The portfolio manager utilizes a "top-down," theme-driven investment approach to stock selection. The portfolio manager first attempts to identify overall economic trends, and then begins to narrow the search to industry groups that are believed to have the potential to benefit from these trends. The portfolio manager also considers economic variables, such as the relative valuations of equities and bonds, and trends in the currency exchange markets. The investment themes and economic variables provide a framework for the portfolio's stock selection process. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) We consider three primary criteria when selecting stocks for the portfolio. First, we look either for industries with positive long-term outlooks or industries that are undergoing dramatic change. Second, we look for companies with quality management teams and strong franchises. Third, we strive to identify high quality companies with high intrinsic values as measured by fundamental valuation criteria such as earnings outlook, business prospects and asset values. What other factors influenced the portfolio's performance? Over the past year, the portfolio emphasized two investment themes, both of which have positively affected performance. First, we favored stocks with lower valuations and reasonable earnings growth, primarily within the retail and pharmaceutical sectors. We were able to find many attractive retail stocks, including ITO-TOKADO, a supermarket company, or "general merchandising stores" as they are more commonly known in Japan, and LAWSON, a convenience store chain. A new Japanese law effective in January 2001 makes it increasingly more difficult to open new retail stores. That law requires retail companies to factor in environmental and community concerns -- such as pollution levels and changes in traffic patterns that would result from these new structures -- before they are allowed to open new stores. ITO-TOKADO and LAWSON were able to avoid these additional costs by expediting the openings of their new stores last year. Our investments in these companies helped fuel portfolio returns. Within the pharmaceutical sector, we were able to achieve attractive returns from our investments in KISSEI PHARMACEUTICALS, a company whose main product, a drug called Rizaban, is used to prevent blood clotting in patients undergoing heart surgery. We also benefited from our investment in TERUMO, a company that sells products for cardio-thoracic surgery. Our second theme, emphasizing stocks that stand to benefit from the Japanese economy and the improving euro currency, rather than from the weaker yen, led us to stocks within the capital expenditure sector. For example, our holdings in KOMORI, a printing company that exports one-third of its goods to Europe, helped boost the portfolio's performance. Finally, the portfolio benefited from its holdings in OLYMPUS OPTICAL, based on its digital camera sales and its main-selling product, an endoscope, which is a tiny camera used by surgeons to view a patient's interior organs. What is the portfolio's current strategy? In what appears to be a declining economic environment in Japan, we are concentrating our investments on those stocks that have lower valuations and reasonable earnings growth. In addition, we are keenly aware that Japan is heavily dependent on its export business, particularly to the United States. As a result, we are closely monitoring the U.S. economy for any changes that might have an effect on Japan's export business over the near term. Finally, we are also watching for any signs of a major depreciation of the yen. Should that occur, we would be prepared to place a currency hedge on the fund in order to attempt to protect further losses to the portfolio's assets. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) JAPAN INDEX IS A MARKET-CAPITALIZATION INDEX OF JAPANESE COMPANIES BASED ON MSCI-SELECTED CRITERIA. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of a $10,000 investment in Dreyfus Investment Portfolios, Japan Portfolio Initial shares and the Morgan Stanley Capital International Japan Index -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 12/15/99 (8.92)% (6.22)%
((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, JAPAN PORTFOLIO ON 12/15/99 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY CAPITAL INTERNATIONAL JAPAN INDEX ON THAT DATE. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/99 IS USED AS THE BEGINNING VALUE ON 12/15/99. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE MORGAN STANLEY CAPITAL INTERNATIONAL JAPAN INDEX IS A MARKET CAPITALIZATION INDEX OF JAPANESE COMPANIES BASED ON MSCI-SELECTED CRITERIA. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--97.7% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ BANKING--1.1% Sakura Bank 4,000 24,111 COMMUNICATIONS--4.4% NIPPON TELEGRAPH AND TELEPHONE 9 64,707 NTT DoCoMo 2 34,419 99,126 CONSUMER ELECTRONICS--21.7% ALPS ELECTRIC 2,000 30,436 CANON 2,000 69,887 FUJITSU 4,000 58,845 MURATA MANUFACTURING 500 58,531 Matsushita-Kotobuki Electronics Industries 4,000 61,571 OLYMPUS OPTICAL 5,000 86,267 ROHM 300 56,871 TERUMO 3,100 67,703 490,111 FINANCIAL--16.2% ACOM 1,300 95,737 AIFUL 500 40,753 Credit Saison 4,800 102,525 Dai-Tokyo Fire & Marine Insurance 19,000 56,600 Promise 1,000 70,761 366,376 FOODS--2.2% KATOKICHI 1,900 49,795 MACHINERY--9.2% DISCO 1,000 54,163 KOMORI 5,000 82,991 Makita 10,000 69,887 207,041 MINING & METALS--7.8% Hitachi Cable 7,000 63,475 KANEKA 5,000 47,218 Sumitomo Electric Industries 4,000 65,485 176,178 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICAL--10.6% DAIICHI PHARMACEUTICAL 2,000 59,404 HISAMITSU PHARMACEUTICAL 2,000 34,647 KISSEI PHARMACEUTICAL 3,000 59,229 KYORIN Pharmaceutical 1,000 35,293 Nippon Shinyaku 6,000 49,480 238,053 REAL ESTATE--2.4% Mitsubishi Estate 5,000 53,289 RETAIL--13.3% ITO-YOKADO 2,000 99,589 LAWSON 1,600 63,178 Mitsubishi Heavy Industries 16,000 69,608 NISSAN MOTOR 6,000 (a) 34,489 SUNKUS & ASSOCIATES 1,100 33,441 300,305 SERVICES--8.8% ADERANS 1,900 78,012 Aoi Advertising Promotion 300 2,621 BELLSYSTEM24 180 72,333 ITOCHU TECHNO-SCIENCE 100 18,511 TOKYO STYLE 3,000 27,466 198,943 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $2,345,240) 97.7% 2,203,328 CASH AND RECEIVABLES (NET) 2.3% 50,949 NET ASSETS 100.0% 2,254,277 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 2,345,240 2,203,328 Cash 36,545 Cash denominated in foreign currencies 39,921 38,523 Dividends receivable 171 Due from The Dreyfus Corporation and affiliates 502 Prepaid expenses 23 2,279,092 -------------------------------------------------------------------------------- LIABILITIES ($): ACCRUED EXPENSES 24,815 -------------------------------------------------------------------------------- NET ASSETS ($) 2,254,277 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 2,527,090 Accumulated net realized gain (loss) on investments and foreign currency transactions (129,501) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4(b) (143,312) -------------------------------------------------------------------------------- NET ASSETS ($) 2,254,277 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 2,253,777 500 Shares Outstanding 200,858 44.563 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 11.22 11.22 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $2,194 foreign taxes withheld at source) 12,434 Interest 4,187 TOTAL INCOME 16,621 EXPENSES: Investment advisory fee--Note 3(a) 23,612 Auditing fees 23,604 Prospectus and shareholders' reports 12,237 Custodian fees 8,060 Legal fees 6,072 Trustees' fees and expenses--Note 3(c) 237 Shareholder servicing costs--Note 3(b) 232 Registration fees 133 Miscellaneous 6,017 TOTAL EXPENSES 80,204 Less--expense reimbursement from The Dreyfus Corporation due to undertaking--Note 3(a) (44,787) NET EXPENSES 35,417 INVESTMENT (LOSS) (18,796) ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions 32,378 Net realized gain (loss) on forward currency exchange contracts (56,588) NET REALIZED GAIN (LOSS) (24,210) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (199,565) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (223,775) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (242,571) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, --------------------------------- 2000(a) 1999(b) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net (18,796) 505 Net realized gain (loss) on investments (24,210) (2,259) Net unrealized appreciation (depreciation) on investments (199,565) 56,253 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (242,571) 54,499 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (7,520) -- Net realized gain on investments: Intial shares (83,281) -- TOTAL DIVIDENDS (90,801) -- -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 1,650,427 2,000,000 Service shares 500 -- Dividends reinvested: Initial shares 90,801 -- Cost of shares redeemed: Initial shares (1,208,578) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TNSACTIONS 533,150 2,000,000 TOTAL INCREASE (DECREASE) IN NET ASSETS 199,778 2,054,499 ------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 2,054,499 -- END OF PERIOD 2,254,277 2,054,499 Undistributed investment income--net -- 505 ------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 125,595 160,000 Shares issued for dividends reinvested 7,922 -- Shares redeemed (92,659) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 40,858 160,000 SERVICE SHARES SHARES SOLD 45 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. (B) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ----------------------------------------------------------- Period Ended Year Ended December 31, December 31, ---------------------------------------------------------- 2000 1999(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.84 12.50 11.22 Investment Operations: Investment income (loss)--net (.08)(c) .00(d) --( Net realized and unrealized gain (loss) on investments (1.06) .34 -- Total from Investment Operations (1.14) .34 -- Distributions: Dividends from investment income--net (.05) -- -- Dividends from net realized gain on investments (.43) -- -- Total Distributions (.48) -- -- Net asset value, end of period 11.22 12.84 11.22 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (8.92) 2.64(e) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 .07(e) -- Ratio of net investment income (loss) to average net assets (.80) .03(e) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.90 1.35(e) -- Portfolio Turnover Rate 378.54 -- 378.54 ----------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 2,254 2,054 1 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (E) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering twelve series, including the Japan Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. (" Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Newton Capital Management Limited (" Newton" ), serves as the portfolio's sub-investment adviser. Newton is an affiliate of Dreyfus. Effective March 22, 2000, Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio's shares which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 166,639 Initial shares and all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $4,187 during the period December 31, 2000 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. During the period ended December 31, 2000, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $25,811, decreased accumulated net realized gain (loss) on investments by $19,751 and decreased paid-in capital by $6,060. Net assets were not affected by this reclassification. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the line of credit. NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000, through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio' s aggregate annual expenses exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceed an annual rate of 1.50% of the value of the portfolio's average daily net assets. Dreyfus has agreed until December 31, 2001, to waive receipt of its fees and/or assume expenses of the portfolio so that the expenses of neither class (exclusive of certain expenses as described above) exceed an annual rate of 1.50% of the value of the average daily net assets of their class. The expense reimbursement, pursuant to the undertaking, amounted to $44,787 during the period ended December 31, 2000. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Newton, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio' s average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million. . . . . . . . . . . . . . . . . .35 of 1% In excess of $100 million to $1 billion. . . . . . .30 of 1% In excess of $1 billion to $1.5 billion. . . . . . .26 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $27 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an " affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4--Securities Transactions: (a) The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward currency exchange contracts, during the period ended December 31, 2000, amounted to $8,892,987 and $8,507,877, respectively. The portfolio enters into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the portfolio is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counter party nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. At December 31, 2000, there were no forward currency exchange contracts outstanding. (b) At December 31, 2000, accumulated net unrealized depreciation on investments was $141,912, consisting of $79,692 gross unrealized appreciation and $221,604 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Japan Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Japan Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended and the statement of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2000 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Japan Portfolio at December 31, 2000, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Japan Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Newton Capital Management Limited 71 Queen Victoria Street London, EC4V 4DR, England Custodian Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 189AR0012 Dreyfus Investment Portfolios, MidCap Stock Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 7 Statement of Investments 13 Statement of Assets and Liabilities 14 Statement of Operations 15 Statement of Changes in Net Assets 17 Financial Highlights 18 Notes to Financial Statements 23 Report of Independent Auditors 24 Important Tax Information FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, MidCap Stock Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, MidCap Stock Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, John O'Toole. The midcap segment of the stock market, as measured by the Standard & Poor's MidCap 400 Index, gained more than 17% in 2000. In sharp contrast, most other major stock market indices declined substantially. In our view, this performance disparity provides ample evidence that diversification is a critical component of most investment strategies. In 2000, the large- and small-cap sectors of the stock market provided a reminder that overconcentration in any single equity market capitalization sector carries risks that can be diminished through diversification. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial adviser for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE John O'Toole, Portfolio Manager How did Dreyfus Investment Portfolios, MidCap Stock Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, Dreyfus Investment Portfolios, MidCap Stock Portfolio produced a total return of 8.28%.(1) In contrast, the Standard & Poor's MidCap 400 Index (the "S&P MidCap 400 Index"), the portfolio's benchmark, produced a total return of 17.50% for the same period.(2) Although overall stock market results were generally negative in 2000, the portfolio' s positive overall performance was due in part to a strong investor preference for midcap stocks over large- and small-cap stocks. Relative to the S& P MidCap 400 Index, however, the portfolio's performance suffered due to the market' s shifting preference between growth and value stocks during the reporting period, which created very difficult investment challenges for the portfolio. What is the portfolio's investment approach? The portfolio invests primarily in a blend of growth and value stocks of mid-capitalization companies chosen through a disciplined process that combines computer modeling techniques, fundamental analysis and risk management. The quantitatively driven valuation process identifies and ranks approximately 2,500 midcap stocks as an attractive, neutral or unattractive investment, based upon more than a dozen different valuation inputs. Those inputs, which we believe can have an important influence on stock returns, include, among other things, earnings estimates, profit margins and growth in cash flow. We establish weightings for each factor based upon our analysis of which of these factors are being rewarded by investors and make adjustments along the way for the uniqueness of various industries and economic sectors. For example, if the equity markets were rewarding companies with strong growth in cash flow, then we would add more weight to our growth-in-cash-flow factor. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) Next, our investment management team conducts fundamental research on each stock, which ultimately results in the buy-and-sell recommendations. We seek to have the portfolio own the best-performing stocks within each economic sector of the midcap market. By maintaining an economic sector-neutral stance, we allow individual stock selection to drive the portfolio's performance. What other factors influenced the portfolio's performance? The predominant positive factor influencing the portfolio's relative results during the reporting period was the superior performance of midcap stocks compared to stocks of other market-capitalization sizes. To illustrate, the S&P MidCap 400 Index outperformed the Standard & Poor's 500 Composite Stock Price Index, a measure of large-cap market performance, by more than 25% as well as the Russell 2000 Index, a measure of small-cap market performance, by more than 19% in the year 2000.(3) However, while midcap stocks were clear winners during 2000, the growth and value investment styles took turns leading performance. For example, during the first two months of the year, growth stocks overwhelmingly outperformed value stocks, largely due to the strong performance of the technology sector. Beginning in March, however, value stocks staged a dramatic comeback. In June, growth stocks were back on top once again. Then, by September, value stocks took the lead. This seesaw battle continued throughout the year. The portfolio's quantitative model examines a mixture of both growth and value characteristics, without necessarily favoring either. However, the model does not work well in a polarized market such as the one that prevailed during 2000, where one investment style generally dominated another. Another factor that helped drive the portfolio's performance was our focused individual stock selection strategy. For example, several of the portfolio's top performers during the reporting period were health care companies, including Universal Health Services and Waters. Universal Health operates hospitals throughout the country and was able to benefit from improved Medicare reimbursement during the year. Meanwhile, Waters, a company that manufactures equipment used in the pharmaceutical and biotechnology industries, benefited from the booming growth in human genome research. Two of the portfolio's financial services holdings, Golden West Financial and Cullen/Frost Bankers, also had a positive impact on the portfolio' s performance, as both companies benefited from a benign interest-rate environment during the year. Finally, Questar and KeySpan, two of the portfolio' s natural gas holdings, benefited as natural gas prices soared throughout the year. What is the portfolio's current strategy? We continue to fine-tune our quantitatively driven valuation model and our sector- and industry-neutral portfolio construction process. For example, we recently added factors that take into consideration stock price momentum as well as the buying and selling behavior of a company's management team. Another new factor tracks the investment actions of company management and directors. Our model strives to be effective in all market environments. January 16, 2001 (1) EFFECTIVE DECEMBER, 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE INFORMATION PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S MIDCAP 400 INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN INDEX MEASURING THE PERFORMANCE OF THE MIDSIZE COMPANY SEGMENT OF THE U.S. STOCK MARKET. (3) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK MARKET PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, MidCap Stock Portfolio Initial shares and the Standard & Poor's MidCap 400 Index -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 5/1/98 8.28% 6.04%
((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO ON 5/1/98 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE STANDARD & POOR'S MIDCAP 400 INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE STANDARD & POOR'S MIDCAP 400 INDEX IS A BROAD-BASED INDEX OF 400 COMPANIES WITH MARKET CAPITALIZATIONS GENERALLY RANGING FROM $50 MILLION TO $10 BILLION AND IS A WIDELY ACCEPTED, UNMANAGED INDEX OF OVERALL MIDCAP STOCK MARKET PERFORMANCE, WHICH DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--95.1% Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- CONSUMER CYCLICAL--7.6% American Eagle Outfitters 11,900 (a) 502,775 Atlas Air 12,000 (a) 391,500 BJ's Wholesale Club 21,700 (a) 832,738 Brinker International 14,200 (a) 599,950 Brunswick 12,600 207,113 Darden Restaurants 12,400 283,650 Dollar Tree Stores 7,800 (a) 191,100 Harman International Industries 8,100 295,650 Johnson Controls 7,000 364,000 Liz Claiborne 8,200 341,325 MGM Mirage 12,700 357,981 Miller (Herman) 11,500 330,625 Park Place Entertainment 17,800 (a) 212,487 Payless ShoeSource 6,700 (a) 474,025 Zale 14,900 (a) 433,031 5,817,950 CONSUMER STAPLES--3.1% Alberto-Culver, Cl. B 5,500 235,469 Interstate Bakeries 15,300 215,156 McCormick & Co. 10,200 367,837 Pepsi Bottling Group 10,300 411,356 SUPERVALU 17,100 237,263 Suiza Foods 6,900 (a) 331,200 Tyson Foods, Cl. A 28,200 359,550 Wrigley, (Wm.) Jr. 2,600 249,113 2,406,944 ENERGY RELATED--9.2% BJ Services 14,700 (a) 1,012,463 ENSCO International 23,000 783,438 Energen 8,700 280,031 Equitable Resources 5,400 360,450 KeySpan 15,600 661,050 Louis Dreyfus Natural Gas 9,900 (a) 453,544 Murphy Oil 9,200 556,025 Nabors Industries 8,800 (a) 520,520 Noble Affiliates 4,700 216,200 Noble Drilling 12,800 (a) 556,000 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- ENERGY RELATED (CONTINUED) Questar 19,000 571,187 Rowan Cos. 15,700 (a) 423,900 Ultramar Diamond Shamrock 21,000 648,375 7,043,183 HEALTH CARE--13.6% AmeriSource Health, Cl. A 8,200 (a) 414,100 Andrx Group 4,300 (a) 248,862 Biomet 11,400 452,437 Chiron 6,300 (a) 280,350 Cytyc 8,000 (a) 500,500 Forest Laboratories 2,200 (a) 292,325 Genzyme- General Division 9,700 (a) 872,394 Health Net 20,600 (a) 539,462 IDEC Pharmaceuticals 4,900 (a) 928,856 IVAX 18,300 (a) 700,890 King Pharmaceuticals 5,200 (a) 268,775 Millennium Pharmaceuticals 15,200 (a) 940,500 Protein Design Labs 5,000 (a) 434,375 Quest Diagnostics 9,000 (a) 1,278,000 Trigon Healthcare 7,700 (a) 599,156 Universal Health Services, Cl. B 3,800 (a) 424,650 Vertex Pharmaceuticals 2,300 (a) 164,450 Waters 8,800 (a) 734,800 Wellpoint Health Networks 3,200 (a) 368,800 10,443,682 INTEREST SENSITIVE--15.8% Associated Banc-Corp 11,700 355,388 City National 18,300 710,269 Comerica 8,500 504,687 Compass Bancshares 25,900 618,363 Concord EFS 6,200 (a) 272,413 Countrywide Credit Industries 6,800 341,700 Cullen/Frost Bankers 15,200 635,550 Dime Bancorp 19,900 588,294 Edwards (A.G.) 12,700 602,456 Federated Investors, Cl. B 9,200 267,950 Gallagher (Arthur J.) & Co. 7,200 458,100 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ INTEREST SENSITIVE (CONTINUED) Golden West Financial 6,300 425,250 GreenPoint Financial 10,100 413,469 Heller Financial, Cl. A 10,100 309,944 M&T Bank 5,200 353,600 Mercantile Bankshares 19,300 833,519 Metris Cos. 12,100 318,381 Nationwide Financial Services, Cl. A 12,200 579,500 Old Republic International 15,300 489,600 PMI Group 14,700 995,006 Radian Group 11,100 833,194 St. Paul Cos. 5,300 287,856 Silicon Valley Bancshares 10,200 (a) 352,538 Union Planters 16,200 579,150 12,126,177 INTERNET RELATED--.4% Art Technology Group 4,200 (a) 128,363 E.piphany 2,200 (a) 118,662 Efficient Networks 4,400 (a) 58,850 305,875 PRODUCER GOODS--9.3% American Standard Cos. 8,100 (a) 399,431 Bowater 8,000 451,000 C&D Technologies 8,700 375,731 Cymer 8,900 (a) 229,036 Cytec Industries 17,200 (a) 686,925 D.R. Horton 18,300 447,206 EGL 7,200 (a) 172,350 Eastman Chemical 7,500 365,625 Engelhard 20,000 407,500 Helix Technology 7,700 182,273 IMC Global 20,500 319,031 Lennar 10,400 377,000 Lyondell Chemical 21,400 327,688 Parker-Hannifin 10,600 467,725 Precision Castparts 10,900 458,481 Quanta Services 13,300 (a) 428,094 Tidewater 7,700 341,688 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS (CONTINUED) United Parcel Service, Cl. B 7,300 429,331 Westvaco 9,600 280,200 7,146,315 SERVICES--12.3% Administaff 9,300 (a) 252,960 Belo (A.H.), Cl. A 18,200 291,200 Convergys 10,000 (a) 453,125 Cox Radio, Cl. A 12,700 (a) 286,544 DST Systems 13,800 (a) 924,600 Entercom Communications 9,300 (a) 320,269 Fiserv 8,400 (a) 398,475 Hall, Kinion & Associates 6,700 (a) 134,837 Heidrick & Struggles International 5,700 (a) 239,756 Hertz, Cl. A 5,400 184,275 Knight-Ridder 6,900 392,437 Manpower 12,100 459,800 Penton Media 7,100 190,813 Robert Half International 12,300 (a) 325,950 SEI Investments 6,200 694,400 Scholastic 4,700 (a) 416,538 SunGard Data Systems 20,300 (a) 956,638 TMP Worldwide 2,800 (a) 154,000 Telephone & Data Systems 4,300 387,000 U.S. Cellular 2,600 (a) 156,650 United Rentals 11,200 (a) 150,500 Univision Communications, Cl. A 16,100 (a) 659,094 Viad 24,200 556,600 Westwood One 23,500 (a) 453,844 9,440,305 TECHNOLOGY--16.7% Anixter International 15,800 (a) 341,675 AremisSoft 6,400 (a) 273,200 Arrow Electronics 21,100 (a) 603,987 Atmel 28,300 (a) 328,988 Autodesk 12,000 323,250 Avnet 14,700 316,050 COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- TECHNOLOGY (CONTINUED) Black Box 5,300 (a) 256,056 Cabot Microelectronics 8,600 446,662 Cadence Design Systems 19,500 (a) 536,250 Credence Systems 16,200 (a) 372,600 Cypress Semiconductor 12,000 (a) 236,250 Digital Lightwave 4,200 (a) 133,087 Electro Scientific Industries 6,900 (a) 193,200 Henry (Jack) & Associates 6,100 378,963 Integrated Device Technology 8,000 (a) 265,000 International Rectifier 8,400 (a) 252,000 Jabil Circuit 12,200 (a) 309,575 Lattice Semiconductor 15,500 (a) 284,812 M-Systems Flash Disk Pioneers 8,400 (a) 117,075 Macrovision 5,200 (a) 384,881 Mentor Graphics 5,900 (a) 161,881 Mercury Interactive 2,500 (a) 225,625 Microchip Technology 20,500 (a) 449,719 NVIDIA 6,000 (a) 196,594 NetIQ 3,500 (a) 305,812 Novellus Systems 11,900 (a) 427,656 PerkinElmer 2,300 241,500 Polycom 7,700 (a) 247,844 Power-One 4,600 (a) 180,837 Powerwave Technologies 12,900 (a) 754,650 Rational Software 5,100 (a) 198,581 SERENA Software 8,800 (a) 301,262 SanDisk 4,200 (a) 116,550 Sawtek 8,700 (a) 401,831 Semtech 11,700 (a) 258,131 Silicon Storage Technology 8,800 (a) 103,950 Sybase 28,200 (a) 558,713 Symantec 12,400 (a) 413,850 3Com 33,500 (a) 284,750 Tech Data 12,200 (a) 329,972 Vishay Intertechnology 20,700 (a) 313,088 12,826,357 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES--7.1% Allegheny Energy 6,800 327,675 Calpine 13,350 (a) 601,584 Dynegy, Cl. A 9,800 549,413 Entergy 11,300 478,131 IDACORP 13,300 652,531 NRG Energy 12,900 358,781 PPL 15,400 695,888 Pinnacle West Capital 9,200 438,150 Sempra Energy 16,700 388,275 TECO Energy 11,500 372,313 Time Warner Telecom, Cl. A 5,300 (a) 336,219 UtiliCorp United 9,500 294,500 5,493,460 TOTAL COMMON STOCKS (cost $71,064,711) 73,050,248 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--5.2% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT; Greenwich Capital Markets, Tri-Party Repurchase Agreement, 6%, dated 12/29/2000, due 1/2/2001, in the amount of $3,952,633 (fully collateralized by $3,995,000 Federal Home Loan Bank Bonds, 5.195%, 9/11/2001, value $4,033,532) (cost $3,950,000) 3,950,000 3,950,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $75,014,711) 100.3% 77,000,248 LIABILITIES, LESS CASH AND RECEIVABLES (.3%) (215,705) NET ASSETS 100.0% 76,784,543 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments--Note 1(b) 75,014,711 77,000,248 Cash 237,029 Dividends and interest receivable 44,955 Receivable for shares of Beneficial Interest subscribed 500 Prepaid expenses 10,757 77,293,489 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 62,291 Payable for investment securities purchased 401,974 Accrued expenses 44,681 508,946 -------------------------------------------------------------------------------- NET ASSETS ($) 76,784,543 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 75,273,633 Accumulated undistributed investment income--net 8,006 Accumulated distributions in excess of net realized gain on investments (482,633) Accumulated net unrealized appreciation (depreciation) on investments--Note 4 1,985,537 ------------------------------------------------------------------------------- NET ASSETS ($) 76,784,543 NET ASSET VALUE PER SHARE Initial Shares Service Shares ------------------------------------------------------------------------------- Net Assets ($) 76,784,043 500 Shares Outstanding 5,373,554 34.990 ------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 14.29 14.29 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2000 ------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends 374,107 Interest 142,690 TOTAL INCOME 516,797 EXPENSES: Investment advisory fee--Note 3(a) 292,611 Custodian fees--Note 3(b) 51,329 Auditing fees 19,698 Prospectus and shareholders' reports 17,916 Registration fees 15,331 Legal fees 6,362 Shareholder servicing costs--Note 3(b) 1,495 Trustees' fees and expenses--Note 3(c) 182 Miscellaneous 2,293 TOTAL EXPENSES 407,217 Less--reduction in investment advisory fee due to undertaking--Note 3(a) (24,288) NET EXPENSES 382,929 INVESTMENT INCOME--NET 133,868 ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 940,784 Net unrealized appreciation (depreciation) on investments 90,204 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,030,988 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,164,856 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2000(a) 1999 ------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 133,868 32,597 Net realized gain (loss) on investments 940,784 455,052 Net unrealized appreciation (depreciation) on investments 90,204 1,039,391 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,164,856 1,527,040 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS ($): From investment income--net: Initial shares (126,162) (38,834) From net realized gain on investments: Initial shares (659,279) -- In excess of net realized gain on investments: Initial shares (482,633) -- TOTAL DIVIDENDS (1,268,074) (38,834) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 70,330,857 6,399,007 Service shares 500 -- Dividends reinvested: Initial shares 1,268,074 38,834 Cost of shares redeemed: Initial shares (10,274,545) (2,869,302) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 61,324,886 3,568,539 TOTAL INCREASE (DECREASE) IN NET ASSETS 61,221,668 5,056,745 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 15,562,875 10,506,130 END OF PERIOD 76,784,543 15,562,875 Undistributed investment income--net 8,006 300 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended December 31, ----------------------------------- 2000(a) 1999 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 4,850,323 527,232 Shares issued for dividends reinvested 95,332 2,989 Shares redeemed (729,677) (236,335) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 4,215,978 293,886 -------------------------------------------------------------------------------- SERVICE SHARES SHARES SOLD 35 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ----------------------------------------------------------- Period Ended Year Ended December 31, December 31, ---------------------------------------------------------- 2000 1999 1998(a) 2000(b) ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 13.44 12.16 12.50 14.29 Investment Operations: Investment income--net .05(c) .03(c) .02 -- Net realized and unrealized gain (loss) on investments 1.05 1.28 (.34) -- Total from Investment Operations 1.10 1.31 (.32) -- Distributions: Dividends from investment income--net (.03) (.03) (.02) -- Dividends from net realized gain on investments (.13) -- -- -- Dividends in excess of net realized gain on Investments (.09) -- -- -- Total Distributions (.25) (.03) (.02) -- Net asset value, end of period 14.29 13.44 12.16 14.29 ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%) 8.28 10.82 (2.53)(d) -- ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .98 .97 .67(d) -- Ratio of net investment income to average net assets .34 .26 .18(d) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .06 .49 .60(d) -- Portfolio Turnover Rate 102.89 77.73 75.74(d) 102.89 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 76,784 15,563 10,506 1 (A) FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the MidCap Stock Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide investment results that are greater than the total return performance of publicly-traded common stocks of medium-size domestic companies in the aggregate, as represented by the Standard & Poor's MidCap 400 Index. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Effective March 22, 2000, Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio's shares, which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held all of the outstanding Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. (b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $1,790 during the period ended December 31, 2000 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The portfolio may enter into repurchase agreements with financial institutions, deemed to be creditworthy by Dreyfus, subject to the seller's agreement to repurchase and the portfolio's agreement to resell such securities at a mutually agreed upon price. Securities purchased subject to repurchase agreements are deposited with the portfolio' s custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) repurchase price plus accrued interest at all times. If the value of the underlying securities falls below the value of the repurchase price plus accrued interest, the portfolio will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults on its repurchase obligation, the portfolio maintains the right to sell the underlying securities at market value and may claim any resulting loss against the seller. (c) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (d) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the line of credit. NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .75 of 1% of the value of the portfolio's average daily net assets and is payable monthly. Dreyfus had undertaken from January 1, 2000 through December 31, 2000, to reduce the investment advisory fee and reimburse such excess expenses paid by the portfolio, to the extent that the portfolio's aggregate annual expenses, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceeded an annual rate of 1% of the value of the portfolio's average daily net assets. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class (exclusive of certain expenses as described above) exceed 1% of the value of the average daily net assets of their class. The reduction in investment advisory fee, pursuant to the undertaking, amounted to $24,288 during the period ended December 31, 2000. (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $78 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $51,329 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group" ). Effective The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) April 13, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an "affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund' s Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2000, amounted to $96,043,085 and $38,892,761, respectively. At December 31, 2000, accumulated net unrealized appreciation on investments was $1,985,537, consisting of $9,304,051 gross unrealized appreciation and $7,318,514 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, MidCap Stock Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, MidCap Stock Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2000 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, MidCap Stock Portfolio at December 31, 2000, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 The Portfolio IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes, the portfolio hereby designates $.2200 per share as a long-term capital gain distribution of the $.2440 per share paid on December 21, 2000. The portfolio also designates 100% of the ordinary dividends paid during the fiscal year ended December 31, 2000 as qualifying for the corporate dividends received deduction. For More Information Dreyfus Investment Portfolios, MidCap Stock Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 174AR0012 Dreyfus Investment Portfolios, Technology Growth Portfolio ANNUAL REPORT December 31, 2000 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the President 3 Discussion of Performance 6 Portfolio Performance 8 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 14 Financial Highlights 15 Notes to Financial Statements 21 Report of Independent Auditors 22 Important Tax Information FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Technology Growth Portfolio LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Investment Portfolios, Technology Growth Portfolio, covering the 12-month period from January 1, 2000 through December 31, 2000. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Mark Herskovitz. The technology sector of the stock market, as measured by the Nasdaq Composite Index, declined more than 39% in 2000. Most other major stock market indices declined as well. The reasons for the disappointing year varied, ranging from sky-high valuations of technology stocks to slowing economic growth during the second half of the year. While the start of a new year is almost always a good time to review your investment strategies, recent market events may have altered the way your assets are apportioned among various asset classes, market-capitalization ranges and investment styles. You may wish to consider rebalancing your portfolio to help achieve your long-term financial goals. We encourage you to contact your financial advisor for more information about ways to refine your investment strategies for the coming year. To speak with a Dreyfus customer service representative call 1-800-782-6620, or visit our website at www.dreyfus.com. Thank you for your confidence and support in 2000, and we look forward to working with you in 2001. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation January 16, 2001 DISCUSSION OF PERFORMANCE Mark Herskovitz, Primary Portfolio Manager How did Dreyfus Investment Portfolios, Technology Growth Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2000, the portfolio produced a -26.98% total return.(1) In comparison, the fund' s benchmarks, the Morgan Stanley High Technology 35 Index and the Standard & Poor's 500 Composite Stock Price Index, provided total returns of -27.32% and -9.10%, respectively, over the same period.(2,3 )The Nasdaq Composite Index provided a total return of -39.29% for the same period as well.(4) We attribute the portfolio's and market's performance to severe market declines caused by a dramatic shift in investor sentiment away from technology stocks. What is the portfolio's investment approach? The portfolio seeks capital appreciation by investing primarily in growth companies of any size that we believe are leading producers or beneficiaries of technological innovation. These investments may include companies in the computer, semiconductor, electronics, communications, health care, biotechnology, computer software and hardware, electronic components and systems, networking and cable broadcasting, telecommunications, defense and aerospace and environmental sectors. When evaluating investment opportunities, we first assess economic and market conditions in an attempt to identify trends that we believe are likely to drive demand within the various technology-related sectors. Second, we strive to identify the companies that are most likely to benefit from these overall trends. Typically, these companies are leaders in their market segments, and are characterized by rapid earnings or revenue growth and dominant market shares. We conduct extensive fundamental research to understand these companies' competitive advantages and to evaluate their ability to maintain their leadership positions over time. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) This process enables us to seek the stocks of leading technology companies for the portfolio. Many of those stocks are considered core holdings that we believe could lead their industry segments over the long term. We complement these positions with non-core holdings that we believe can provide above-average gains over a shorter time frame. Although the portfolio looks for companies with the potential for strong earnings or revenue growth rates, some of the portfolio's investments may currently be experiencing losses. Moreover, the portfolio may invest in small-, mid- and large-cap securities in all available trading markets, including initial public offerings ("IPOs"). The portfolio's strategy with respect to IPOs is to participate in IPOs of companies that meet the portfolio's investment criteria described above and that we believe have the potential to become full positions within the portfolio. What other factors influenced the portfolio's performance? Between January and March 2000, technology stocks drove the stock market's advance. As a result, some technology companies had appreciated to lofty valuations that may not have been justified by their business fundamentals. Most major measures of technology stock performance fell drastically in March and April. Despite this steep decline, we maintained our conviction that the strong business fundamentals of our technology holdings had not changed. Indeed, many of the stocks in our portfolio began to recover during the summer. However, investors became much more selective, rewarding only stocks with strong business fundamentals and positive earnings reports. Due to the portfolio's emphasis on quality, this shift toward greater selectivity benefited the portfolio's performance. Later in the year, market sentiment resumed its shift away from technology when investors became concerned that an economic slowdown might cause demand for technology to slacken. Communications services companies were particularly hard-hit because of expectations that their business customers might spend less in a slower economy. In this adverse environment, we retained our long-term perspective and continued to invest the portfolio's assets in technology businesses that we believe have bright prospects. In our view, fundamentally sound technology companies have been unfairly punished along with more speculative businesses. Over the long term, especially as the economy improves, we are confident that our holdings will recover. What is the portfolio's current strategy? We continue to focus primarily on companies that we believe are well positioned to prosper from technological advances. These include companies engaged in the development of high-speed telecommunications, including those in the forefront of new optical and wireless technologies. In light of the extreme volatility in 2000 and the overall risks of the technology sector, we caution that investors should adopt a long-term horizon when investing in the portfolio. In the meantime, investors should not be surprised to see periodic market declines such as the one we experienced in 2000. We try to manage these risks by maintaining a broadly diversified technology portfolio and focusing on fundamentally sound companies over the long term. January 16, 2001 (1) EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. THE PERFORMANCE PRESENTED IS FOR INITIAL SHARES. TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. (2) SOURCE: BLOOMBERG L.P. -- REFLECTS THE REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY HIGH TECHNOLOGY 35 INDEX IS AN UNMANAGED, EQUAL DOLLAR-WEIGHTED INDEX OF 35 STOCKS FROM THE ELECTRONICS-BASED SUBSECTORS. (3) SOURCE: LIPPER INC. -- REFLECTS THE REINVESTMENT OF INCOME DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. (4) SOURCE: LIPPER INC. -- THE NASDAQ COMPOSITE INDEX MEASURES THE MARKET VALUE OF ALL THE DOMESTIC AND FOREIGN COMMON STOCKS LISTED ON THE NASDAQ STOCK MARKET. PRICE CHANGES IN EACH SECURITY EFFECT EITHER A RISE OR FALL IN THE INDEX, IN PROPORTION TO THE SECURITY'S MARKET VALUE. THE MARKET VALUE -- THE LAST SALE PRICE MULTIPLIED BY TOTAL SHARES OUTSTANDING -- IS CALCULATED CONTINUALLY THROUGHOUT THE DAY. THE INDEX INCLUDES THE SECURITIES OF MORE THAN 5,300 COMPANIES REPRESENTING A WIDE ARRAY OF INDUSTRIES. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Technology Growth Portfolio Initial shares and the Standard & Poor's 500 Composite Stock Price Index and the Morgan Stanley High Technology 35 Index ((+)) SOURCE: LIPPER INC. ((+)(+)) SOURCE: BLOOMBERG, L.P. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITAL SHARES OF DREYFUS INVESTMENT PORTFOLIOS, TECHNOLOGY GROWTH PORTFOLIO ON 8/31/99 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY HIGH TECHNOLOGY 35 INDEX AND THE STANDARD & POOR'S 500 COMPOSITE PRICE STOCK INDEX ("S&P 500 INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES OF THE PORTFOLIO. THE MORGAN STANLEY HIGH TECHNOLOGY 35 INDEX IS AN UNMANAGED, EQUAL DOLLAR-WEIGHTED INDEX OF 35 STOCKS FROM THE ELECTRONICS-BASED SUBSECTORS. THE S&P 500 INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. NEITHER OF THE FOREGOING INDICES TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. EFFECTIVE DECEMBER 31, 2000, EXISTING PORTFOLIO SHARES WERE DESIGNATED AS INITIAL SHARES AND THE PORTFOLIO BEGAN OFFERING A SECOND CLASS OF SHARES, DESIGNATED AS SERVICE SHARES, WHICH ARE SUBJECT TO A RULE 12B-1 DISTRIBUTION PLAN. PERFORMANCE FOR SERVICE SHARES WILL VARY FROM THE PERFORMANCE OF INITIAL SHARES BECAUSE OF DIFFERENCES IN CHARGES AND EXPENSES. Average Annual Total Returns AS OF 12/31/00
Inception From Date 1 Year Inception ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO--INITIAL SHARES 8/31/99 (26.98)% 10.00% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The Portfolio
STATEMENT OF INVESTMENTS STATEMENT OF INVESTMENTS December 31, 2000
COMMON STOCKS--95.1% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT--1.6% Nortel Networks 68,000 2,180,250 COMPUTER SERVICES--3.7% Automatic Data Processing 81,000 5,128,312 HARDWARE--3.5% Sanmina 30,500 (a) 2,337,063 Sun Microsystems 91,000 (a) 2,536,625 4,873,688 INTERNET--1.8% VeriSign 33,000 (a) 2,448,187 NETWORKING--5.0% Cisco Systems 25,000 (a) 956,250 Juniper Networks 27,000 (a) 3,403,687 Sycamore Networks 72,000 (a) 2,682,000 7,041,937 SEMICONDUCTORS--16.9% Intel 98,000 2,964,500 KLA-Tencor 90,000 (a) 3,031,875 Micrel 117,500 (a) 3,958,281 PMC-Sierra 22,000 (a) 1,729,750 Taiwan Semiconductor Manufacturing, ADR 235,000 (a) 4,053,750 Texas Instruments 100,000 4,737,500 Vitesse Semiconductor 57,000 (a) 3,152,813 23,628,469 SEMICONDUCTOR EQUIPMENT--7.8% Applied Materials 95,000 (a) 3,627,813 Teradyne 102,800 (a) 3,829,300 Xilinx 75,500 (a) 3,482,437 10,939,550 SOFTWARE--16.7% Ariba 45,000 (a) 2,418,750 BEA Systems 63,200 (a) 4,254,150 Microsoft 70,000 (a) 3,036,250 Oracle 100,000 (a) 2,906,250 Rational Software 82,000 (a) 3,192,875 Siebel Systems 54,000 (a) 3,651,750 Veritas Software 44,000 (a) 3,850,000 23,310,025 COMMON STOCKS (CONTINUED) Shares Value ($) ----------------------------------------------------------------------------------------------------------------------------------- STORAGE--8.8% Brocade Communications Systems 50,100 (a) 4,599,806 EMC 70,000 (a) 4,655,000 Network Appliance 47,000 (a) 3,019,016 12,273,822 TELECOMMUNICATION EQUIPMENT--17.0% CIENA 40,000 (a) 3,255,000 GlobeSpan 150,000 (a) 4,125,000 JDS Uniphase 42,500 (a) 1,771,719 Nokia Oyj, ADR 117,000 5,089,500 Qualcomm 40,500 (a) 3,328,594 SDL 14,000 (a) 2,074,625 Tellabs 71,000 (a) 4,011,500 23,655,938 TELECOMMUNICATION SERVICES--12.3% BellSouth 100,500 4,114,219 Metromedia Fiber Network, Cl. A 170,000 (a) 1,721,250 Qwest Communications International 82,000 (a) 3,362,000 SBC Communications 80,500 3,843,875 Verizon Communications 83,500 4,185,437 17,226,781 TOTAL COMMON STOCKS (cost $154,189,150) 132,706,959 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal SHORT-TERM INVESTMENTS--5.4% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. TREASURY BILLS: 6.04%, 1/11/2001 551,000 550,273 6.11%, 1/18/2001 1,127,000 1,124,329 6.15%, 1/25/2001 2,352,000 2,343,745 5.90%, 3/1/2001 421,000 417,147 5.73%, 3/15/2001 1,129,000 1,116,287 5.43%, 3/22/2001 1,590,000 1,570,236 5.61%, 3/29/2001 405,000 399,464 TOTAL SHORT-TERM INVESTMENTS (cost $7,519,306) 7,521,481 ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (cost $161,708,456) 100.5% 140,228,440 LIABILITIES, LESS CASH AND RECEIVABLES (.5%) (681,416) NET ASSETS 100.0% 139,547,024 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2000 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 161,708,456 140,228,440 Cash 36,597 Receivable for investment securities sold 495,103 Dividends receivable 8,303 Prepaid expenses 103 140,768,546 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 99,646 Payable for investment securities purchased 1,013,879 Payable for shares of Beneficial Interest redeemed 42,305 Accrued expenses 65,692 1,221,522 -------------------------------------------------------------------------------- NET ASSETS ($) 139,547,024 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 190,455,983 Accumulated net realized gain (loss) on investments (29,428,943) Accumulated net unrealized appreciation (depreciation) on investments--Note 4(b) (21,480,016) -------------------------------------------------------------------------------- NET ASSETS ($) 139,547,024 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 139,546,524 500 Shares Outstanding 9,833,849 35.236 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 14.19 14.19 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2000 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 765,415 Cash dividends (net of $8,211 foreign taxes withheld at source) 67,635 TOTAL INCOME 833,050 EXPENSES: Investment advisory fee--Note 3(a) 1,151,112 Professional fees 56,209 Registration fees 34,305 Custodian fees--Note 3(b) 25,134 Prospectus and shareholders' reports 16,048 Trustees' fees and expenses--Note 3(c) 5,054 Shareholder servicing costs--Note 3(b) 682 Miscellaneous 921 TOTAL EXPENSES 1,289,465 INVESTMENT (LOSS) (456,415) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments: Long transactions (28,778,642) Short sale transactions (648,848) NET REALIZED GAIN (LOSS) (29,427,490) Net unrealized appreciation (depreciation) on investments (36,217,189) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (65,644,679) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (66,101,094) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ----------------------------------- 2000 (a) 1999 (b) -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (456,415) (30,810) Net realized gain (loss) on investments (29,427,490) 156,245 Net unrealized appreciation (depreciation) on investments (36,217,189) 14,737,173 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (66,101,094) 14,862,608 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Net realized gain on investments: INITIAL SHARES (128,126) -- -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 154,480,771 55,130,348 Service shares 500 -- Dividends reinvested: Initial shares 128,126 -- Cost of shares redeemed: Initial shares (14,540,419) (4,285,690) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 140,068,978 50,844,658 TOTAL INCREASE (DECREASE) IN NET ASSETS 73,839,758 65,707,266 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 65,707,266 -- END OF PERIOD 139,547,024 65,707,266 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 7,217,120 3,639,182 Shares issued for dividends reinvested 5,513 -- Shares redeemed (767,276) (260,690) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 6,455,357 3,378,492 SERVICE SHARES SHARES SOLD 35 -- (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. (B) FROM AUGUST 31, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following table describes the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) 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 derived from the portfolio's financial statements.
INITIAL SHARES SERVICE SHARES ------------------------------------------------------------ Period Ended Year Ended December 31, December 31, ------------------------------------------------------------ 2000 1999 (a) 2000 (b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 19.45 12.50 14.19 Investment Operations: Investment (loss)--net (.06)(c) (.02)(c) -- Net realized and unrealized gain (loss) on investments (5.18) 6.97 -- Total from Investment Operations (5.24) 6.95 -- Distributions: Dividends from net realized gain on investments (.02) -- -- Net asset value, end of period 14.19 19.45 14.19 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (26.98) 55.60(d) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .84 .36(d) -- Ratio of net investment (loss) to average net assets (.30) (.14)(d) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- .09(d) -- Portfolio Turnover Rate 121.88 20.01(d) 121.88 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 139,547 65,707 1 (A) FROM AUGUST 31, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company, currently offering twelve series, including the Technology Growth Portfolio (the "portfolio" ). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation (" Dreyfus" ) serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Effective March 22, 2000, Dreyfus Service Corporation (the "Distributor" ), a wholly-owned subsidiary of Dreyfus, became the distributor of the portfolio' s shares, which are sold without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. On October 30, 2000, the fund's Board of Trustees approved, effective December 31, 2000, the addition of a second class of shares. The Board redesignated the portfolio' s existing shares as Initial shares, authorized the creation of Service shares and adopted a 12b-1 Distribution Plan for the Service shares. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each class of shares. Initial shares are not subject to a distribution fee. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. As of December 31, 2000, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held all of the outstanding Service shares of the portfolio. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (B) FOREIGN CURRENCY TRANSACTIONS: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $3,333 during the period ended December 31, 2000, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $10,860,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. During the period ended December 31, 2000, as a result of permanent book to tax differences, the portfolio reclassed $456,415 from accu The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) mulated undistributed investment income-net and $1,238 from accumulated undistributed net realized gains to paid-in capital. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2000, the portfolio did not borrow under the line of credit. NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (A) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .75 of 1% of the value of the portfolio's average daily net assets and is payable monthly. (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $60 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2000, the portfolio was charged $25,134 pursuant to the custody agreement. (C) Each board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the Fund Group"). Effective April 13, 2000, each board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Prior to April 13, 2000, each Board member who was not an " affiliated person" as defined in the Act received from the fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. (D) During the period ended December 31, 2000, the portfolio incurred total brokerage commissions of $128,528, of which $6,696 was paid to Dreyfus Brokerage Services, a wholly-owned subsidiary of Mellon Financial Corporation. NOTE 4--Securities Transactions: (A) The following summarizes the aggregate amount of purchases and sales of investment securities and securities sold short, excluding short-term securities, during the period ended December 31, 2000: Purchases ($) Sales ($) -------------------------------------------------------------------------------- Long transactions 299,660,442 166,946,323 Short sale transactions 42,918,272 42,269,424 TOTAL 342,578,714 209,215,747 The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) The portfolio is engaged in short-selling which obligates the portfolio to replace the security borrowed by purchasing the security at current market value. The portfolio would incur a loss if the price of the security increases between the date of the short sale and the date on which the portfolio replaces the borrowed security. The portfolio would realize a gain if the price of the security declines between those dates. Until the portfolio replaces the borrowed security, the portfolio will maintain daily a segregated account with a broker or custodian of permissable liquid assets sufficient to cover its short position. At December 31, 2000, there were no securities sold short outstanding (B) At December 31, 2000, accumulated net unrealized depreciation on investments was $21,480,016, consisting of $11,192,062 gross unrealized appreciation and $32,672,078 gross unrealized depreciation. At December 31, 2000, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Technology Growth Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Technology Growth Portfolio (one of the series comprising Dreyfus Investment Portfolios) as of December 31, 2000, and the related statement of operations for the year then ended and the statement of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2000 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Technology Growth Portfolio at December 31, 2000, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 9, 2001 The Portfolio IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes, the portfolio hereby designates 1.44% of the ordinary dividends paid during the fiscal year ended December 31, 2000 as qualifying for the corporate dividends received deduction. NOTES For More Information Dreyfus Investment Portfolios, Technology Growth Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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 (c) 2001 Dreyfus Service Corporation 175AR0012