N-30D 1 lp1-172.txt SEMI-ANNUAL REPORT Dreyfus Investment Portfolios, Core Bond Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 16 Statement of Financial Futures 17 Statement of Assets and Liabilities 18 Statement of Operations 19 Statement of Changes in Net Assets 21 Financial Highlights 23 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Bond Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Core Bond Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. 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. The economy began to recover during the first half of 2002, signaling an end to the U.S. economic recession. As the economy has gained strength, however, bond prices have generally fluctuated widely. Prices of bonds that are more sensitive to interest-rate changes, such as U.S. government securities, first fell and then rallied as investors changed their expectations of the timing of eventual interest-rate hikes. The war on terror, instability in the Middle East and South Asia, and new disclosures of questionable accounting and management practices among certain U.S. corporations generally hurt bonds that are more credit sensitive, such as corporate bonds. As these factors have buffeted the financial markets, the short-term movements of stocks and bonds have been impossible to predict. Indeed, as many professionals can attest, the markets' directions become clearer only when viewed from a perspective measured in years rather than weeks or months. If you have questions or are worried about current market conditions, we encourage you to talk with your financial advisor who can help you view current events from the perspective of long-term market trends. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 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 six-month period ended June 30, 2002, the portfolio's Initial shares achieved a total return of 2.14% and its Service shares achieved a total return of 2.22% .(1) In comparison, the Merrill Lynch Domestic Master Index, the portfolio's benchmark, achieved a total return of 3.65% for the same period.(2) The portfolio achieved positive overall returns in a challenging market environment during the reporting period. However, its relative performance was compromised by its relatively heavy focus on investment-grade and high yield corporate bonds, which were hurt by accounting scandals affecting a handful of large corporations, causing the portfolio to underperform its benchmark. 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 80% of its assets in bonds, including 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 they become available. If interest rates appear to be declining, we The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) 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 their issuers. What other factors influenced the portfolio's performance? When the reporting period began, the economy was in recession and the financial markets were rebounding from the lows established after the September 11 terrorist attacks. By the middle of the reporting period, an economic recovery of uncertain strength and duration seemed to take hold, and the Federal Reserve Board (the "Fed") signaled an end to its rate-cutting campaign. When recessionary pressures and terrorism-related concerns eased, the corporate bond market generally rose. At the time, the portfolio benefited from its relatively heavy exposure to corporate bonds, especially within the high yield segment. The corporate bond rally was soon undermined, however, by the spread of corporate accounting scandals that began with the collapse of Enron Corp. in late 2001. As the accounting practices of more major corporations failed to stand up to intensified scrutiny, investor sentiment turned negative. Accounting-related scandals were exacerbated by headlines charging unethical behavior among senior corporate executives, including allegations of insider trading, tax evasion and misleading investment research. Under normal circumstances, corporate bonds have historically performed relatively well during the early stages of an economic recovery. This time, however, investors shunned corporate securities, driving their prices lower. In fact, June was one of the worst months for high yield corporate bonds in recent history. Particularly hard-hit were bonds from technology, media and telecommunications companies, which together comprise a substantial portion of the high yield bond market. The adverse effects of corporate securities' declines were cushioned by positive contributions from other areas of the bond market. The portfolio benefited from its heavy exposure to asset-backed securities and commercial mortgage-backed securities, primarily because consumer spending and real estate values remained strong. The portfolio's holdings of U.S. government securities also fared well. Although these interest-rate-sensitive bonds comprised a smaller portion of the portfolio than its benchmark, the portfolio's relatively short average duration -- a measure of sensitivity to changing interest rates -- during the reporting period' s first half helped us capture higher yields more quickly. When it later became apparent that the Fed was unlikely to raise interest rates anytime soon, we increased the portfolio's average duration to a point we considered neutral relative to its benchmark. What is the portfolio's current strategy? Despite their recent weakness, we continue to believe that corporate bonds in general -- and high yield bonds in particular -- offer compelling values. As the effects of the accounting controversies fade, the economic recovery progresses and capital generally becomes more available, we expect corporate bond prices to rally. We have already seen early signs of an increase in bank lending activity, which could be a precursor to better high yield bond performance. Of course, we are prepared to change our strategy and the portfolio's composition as market conditions evolve. July 15, 2002 (1) 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, 2002, 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 STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
Principal BONDS AND NOTES--79.5% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AIRCRAFT & AEROSPACE--2.0% American Airlines, Pass-Through Trust Ctfs., Ser. 2001-1, Cl. A2, 6.817%, 2011 275,000 276,900 BE Aerospace, Sr. Sub. Notes, Ser. B, 8.875%, 2011 168,000 157,080 Continental Airlines, Pass-Through Ctfs.: Ser. 1998-1, Cl. A, 6.648%, 2017 270,375 265,585 Ser. 1999-1, Cl. A, 6.545%, 2019 134,843 130,652 Ser. 2001-1, Cl. A1, 6.703%, 2021 342,033 335,318 Goodrich (B.F.), Notes, 7%, 2038 463,000 408,056 U.S. Airways, Enhanced Equipment Notes, Ser. C, 8.93%, 2009 42,614 31,506 1,605,097 ASSET-BACKED CTFS./AUTO LOANS--.2% Union Acceptance Corp. Securitization Owner Trust, Ser. 2000-D, Cl. A4, 6.89%, 2007 121,000 128,461 ASSET-BACKED CTFS./CREDIT CARDS--.7% MBNA Credit Card Master Note Trust, Ser. 2002-C1, Cl. C1, 6.8%, 2014 525,000 536,760 ASSET-BACKED CTFS./EQUIPMENT--2.2% Xerox Equipment Lease Owner Trust, Ser. 2001-1, Cl. A, 3.84%, 2008 1,780,766 (a,b) 1,785,218 ASSET-BACKED CTFS./HOME EQUITY LOANS--3.2% Conseco Finance Home Loan Trust, Ser. 2000-E, Cl. A5, 8.02%, 2031 350,000 381,325 Conseco Finance Securitizations: Ser. 2000-D, Cl. A3, 7.89%, 2018 271,523 278,108 Ser. 2001-A, Cl. IIA2, 6.52%, 2032 470,000 487,837 GE Capital Mortgage Services, Ser. 1999-HE1, Cl. A7, 6.265%, 2029 473,447 493,706 Green Tree Home Improvement Loan Trust, Ser. 1997-A, Cl. HEA6, 7.16%, 2028 72,643 73,581 The Money Store Home Equity Trust, Ser. 1998-B, Cl. AF8, 6.11%, 2010 159,619 166,046 Saxon Asset Securities Trust, Ser. 2001-2, Cl. AF6, 6.312%, 2016 750,000 773,171 2,653,774 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ASSET-BACKED CTFS./MANUFACTURED HOUSING--.1% Conseco Finance Securitizations: Ser. 2000-6, Cl. A1, 6.43%, 2032 46,704 46,913 Ser. 2001-1, Cl. A1B, 5.01%, 2032 66,818 67,278 114,191 AUTOMOTIVE--3.4% American Axle & Manufacturing, Gtd. Sr. Sub. Notes, 9.75%, 2009 134,000 142,710 Collins & Aikman Products, Sr. Notes, 10.75%, 2011 67,000 (a) 67,670 Ford Motor Credit, Global Landmark Securities: 6.5%, 2007 373,000 373,705 7.25%, 2011 525,000 528,402 GMAC: Bonds, 8%, 2031 474,000 486,171 Notes, 6.125%, 2006 956,000 970,421 United Rentals, Gtd. Sr. Notes, 10.75%, 2008 191,000 (a) 203,892 2,772,971 BANKING--.0% Capital One Financial, Notes, 7.25%, 2003 33,000 32,733 BROKERAGE--.4% Goldman Sachs Group, Notes, 6.6%, 2012 310,000 316,324 CABLE/MEDIA--1.9% AOL Time Warner: Bonds, 7.7%, 2032 574,000 510,564 Notes, 6.875%, 2012 306,000 282,696 Adelphia Communications, Sr. Notes, 10.875%, 2010 100,000 (c) 40,000 Charter Communications Holdings/Capital: Sr. Discount Notes, 0/11.75%, 2011 174,000 (d) 61,770 Sr. Notes, 8.625%, 2009 138,000 93,150 Fox Family Worldwide, Sr. Notes, 9.25%, 2007 270,000 286,875 Viacom, Gtd. Sr. Notes, 6.625%, 2011 265,000 272,477 1,547,532 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CHEMICALS--.1% Avecia Group, Gtd. Notes, 11%, 2009 25,000 25,000 Lyondell Chemicals, Gtd. Sr. Secured Notes, Ser. B, 9.875%, 2007 104,000 99,840 124,840 COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--8.6% 1211 Finance, Ser. 2000-1211, Cl. A, 7.745%, 2035 600,000 (a) 669,696 Bear Stearns Commercial Mortgage Securities, Ser. 2001-TOP2, Cl. A1, 6.08%, 2035 743,331 776,424 COMM, Ser. 2000-FL2A, Cl. E, 2.89%, 2011 100,000 (a,b) 99,891 CS First Boston Mortgage Securities: Ser. 1998-C1, Cl. A1A, 6.26%, 2040 464,043 487,417 Ser. 1998-C1, Cl. C, 6.78%, 2009 441,000 461,089 Ser. 2001-CF2, Cl. A4, 6.505%, 2034 558,000 591,268 Ser. 2001-SPGA, Cl. A2, 6.515%, 2018 1,000,000 (a) 1,036,592 Chase Commercial Mortgage Securities, Ser. 2001-245, Cl. A1, 6.173%, 2016 240,000 (a,b) 247,826 Chase Manhattan Bank-First Union National Bank, Ser. 1999-1, Cl. A1, 7.134%, 2031 436,507 468,827 GGP Mall Properties Trust, Ser. 2001-C1-A, Cl. C2, 5.558%, 2011 702,420 (a) 703,106 GS Mortgage Securities II, Ser. 2001-LIBA, Cl. C, 6.733%, 2011 269,000 (a) 266,823 Morgan Stanley Dean Witter Capital I, Ser. 2001-XLF, Cl. F, 3.784%, 2013 244,865 (a,b) 242,684 Prudential Securities Secured Financing, Ser. 1999-C2, Cl. A1, 6.955%, 2031 246,546 264,006 TIAA CMBS I Trust, Ser. 1999-1, Cl. A, 7.17%, 2032 303,557 (a) 322,881 TrizecHahn Office Properties Trust, Ser. 2001-TZH, Cl. A2, 6.093%, 2016 369,000 (a) 383,832 7,022,362 ENVIRONMENTAL--.5% Allied Waste N.A., Gtd. Sr. Sub. Notes, Ser. B, 10%, 2009 302,000 298,249 Synagro Technologies, Sr. Sub. Notes, 9.5%, 2009 136,000 (a) 140,080 438,329 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL SERVICES--2.1% Credit-Backed Steers Trust 2001, Trust Ctfs., Ser. VZ-1, 5.565%, 2005 400,000 (a) 391,000 Farmers Exchange Capital, Notes, 7.05%, 2028 305,000 (a) 226,786 Household Finance, Notes, 6.75%, 2011 460,000 453,487 International Lease Finance, Notes, 6.375%, 2009 475,000 491,740 Qwest Capital Funding, Notes, 7.9%, 2010 215,000 120,400 1,683,413 FOOD & BEVERAGES--1.3% Dole Foods, Sr. Notes, 7.25%, 2009 375,000 (a) 383,942 Land O' Lakes, Sr. Notes, 8.75%, 2011 230,000 (a) 217,350 Tyson Foods, Notes, 8.25%, 2011 410,000 453,078 1,054,370 FOREIGN--1.3% United Mexican States: Bonds, Ser. B, 6.25%, 2019 500,000 473,750 Medium-Term Notes, 8.3%, 2031 640,000 624,000 1,097,750 HEALTH CARE--.5% Medtronic, Sr. Conv. Deb., 1.25%, 2021 373,000 378,595 HOTELS--.6% Hilton Hotels, Notes, 7.625%, 2008 343,000 350,421 Resorts International Hotel and Casino, First Mortgage, 11.5%, 2009 160,000 (a) 146,400 496,821 INDUSTRIAL--.6% Tyco International Group: Gtd. Notes, 5.8%, 2006 571,000 451,176 Gtd. Notes, 6.75%, 2011 25,000 19,449 470,625 INSURANCE--1.9% Ace Capital Trust II, Gtd. Capital Securities, 9.7%, 2030 744,000 898,458 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE (CONTINUED) American International Group, Sr. Conv. Deb., 0%, 2031 782,000 (d) 479,953 Conseco: Gtd. Notes, 6.8%, 2007 127,000 (a) 57,150 Gtd. Notes, 9%, 2008 16,000 7,280 Mercury General, Sr. Notes, 7.25%, 2011 125,000 133,889 1,576,730 METALS & MINING--2.1% Alcoa, Notes, 6%, 2012 391,000 401,986 Barrick Gold Finance, Gtd. Deb., 7.5%, 2007 205,000 222,290 Falconbridge, Notes, 7.35%, 2012 380,000 391,696 INCO, Notes, 7.75%, 2012 490,000 506,811 Owens-Brockway Glass Container, Sr. Secured Notes, 8.875%, 2009 207,000 (a) 208,035 1,730,818 OIL & GAS--.8% Pemex Project Funding Master Trust, Gtd. Notes, 8.5%, 2008 575,000 598,000 Vintage Petroleum, Sr. Notes, 8.25%, 2012 75,000 (a) 74,062 672,062 PAPER/PLASTIC PRODUCTS--1.0% Bowater Canada Finance, Gtd. Notes, 7.95%, 2011 440,000 454,733 Sealed Air, Gtd. Sr. Notes, 8.75%, 2008 377,000 (a) 389,591 844,324 REAL ESTATE INVESTMENT TRUSTS--1.9% Crescent Real Estate Equities: Notes, 7%, 2002 345,000 344,218 Sr. Notes, 9.25%, 2009 120,000 (a) 123,887 iStar Financial, Sr. Notes, 8.75%, 2008 312,000 309,775 Nationwide Health Properties, Notes, 8.25%, 2012 462,000 460,291 New Plan Excel Realty Trust, Sr. Notes, 6.875%, 2004 175,000 181,938 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUSTS (CONTINUED) Ventas Realty, Sr. Notes, 9%, 2012 125,000 (a) 128,750 1,548,859 RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--2.2% Bank of America Large Loan, Ser. 2001-1166, Cl. C, 4.833%, 2005 250,000 248,828 Chase Mortgage Finance, Ser. 1999-S13, Cl. B4, 6.5%, 2014 197,589 (a) 185,082 Countrywide Home Loans, Ser. 2001-9, Cl. B3, 6.75%, 2031 619,049 (a) 561,304 GE Capital Mortgage Services, Ser. 2000-8, Cl. B5, 7.5%, 2015 172,861 (a) 78,796 Residential Funding Mortgage Securities I, Ser. 1999-S11, Cl. M3, 6.5%, 2029 723,622 731,165 1,805,175 RETAIL--1.1% Sears Roebuck Acceptance, Notes, 6.75%, 2011 562,000 577,215 Toys "R" Us, Notes, 7.625%, 2011 305,000 298,166 875,381 STRUCTURED INDEX--9.5% HYDI-100, Linked Ctf. of Deposit, 8.75%, 2007 7,000,000 (e) 6,527,500 Morgan Stanley Tracers, Notes, 7.22%, 2011 800,000 (a,e) 827,478 Passive High Yield Return Securities Trusts 2001, Ctfs., 9.24%, 2011 438,000 (a,e) 392,276 7,747,254 TECHNOLOGY--.4% Amkor Technology, Sr. Notes, 9.25%, 2006 35,000 28,875 Thomson, Notes, 6.2%, 2012 295,000 296,153 325,028 TELECOMMUNICATION--4.5% AT&T, Sr. Notes, 7.3%, 2011 420,000 349,252 AT&T Wireless Services, Notes, 8.125%, 2012 395,000 (a) 322,704 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ TELECOMMUNICATION (CONTINUED) Alltel, Notes, 7%, 2012 250,000 249,888 American Tower, Sr. Notes, 9.375%, 2009 60,000 33,300 British Telecommunications, Notes, 8.375%, 2010 419,000 456,792 Citizens Communications, Notes, 9.25%, 2011 403,000 383,264 France Telecom, Notes, 8.25%, 2011 806,000 737,218 Marconi, Bonds, 8.375%, 2030 260,000 67,600 Nextel Communications: Conv. Sr. Deb., 5.25%, 2010 30,000 12,563 Sr. Serial Redeemable Notes, 9.375%, 2009 769,000 392,190 Qwest, Notes, 7.2%, 2004 100,000 88,000 TCI Communication Financing III, Gtd. Capital Securities, 9.65%, 2027 309,000 309,162 TeleCorp PCS, Gtd. Sr. Discount Notes, 0/11.625%, 2009 55,000 (d) 42,075 Tritel PCS: Gtd. Sr. Discount Notes, 0/12.75%, 2009 124,000 (d) 97,960 Gtd. Sr. Sub. Notes, 10.375%, 2011 128,000 117,760 3,659,728 TEXTILES--.5% Mohawk Industries, Notes, 7.2%, 2012 365,000 388,243 TOBACCO--.6% Philip Morris Cos.: Deb., 7.75%, 2027 133,000 141,442 Notes, 7.65%, 2008 325,000 356,854 498,296 U.S. GOVERNMENT--.5% U.S. Treasury Inflation Protection Security, 3.875%, 1/15/2009 364,000 (f) 423,885 U.S. GOVERNMENT AGENCIES--2.3% Tennessee Valley Authority, Valley Indexed Principal Securities, 3.375%, 1/15/2007 1,664,000 (f) 1,923,208 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCIES/ MORTGAGE-BACKED--17.9% Federal Home Loan Mortgage Corp.: 6.5% 4,685,000 (g) 4,778,700 REMIC Trust, Gtd. Pass-Through Ctfs. Ser. 2399, Cl. XQ, 6.5%, 12/15/2027 1,022,000 1,054,985 (Interest Only Obligation): Ser. 1999, Cl. PW, 7%, 8/15/2026 79,868 (h) 8,723 Ser. 2067, Cl. PI, 6.5%, 1/15/2024 170,000 (h) 29,050 Ser. 2113, Cl. MI, 6.5%, 4/15/2024 485,452 (h) 42,638 Ser. 2322, Cl. KI, 6.5%, 10/15/2020 1,100,000 (h) 101,146 Federal National Mortgage Association: 6% 1,080,000 (g) 1,100,920 6.5% 3,467,000 (g) 3,534,156 REMIC Trust, Gtd. Pass-Through Ctfs. Ser. 2001-50, Cl. LI, 6.5%, 7/25/2021 (Interest Only Obligation) 1,148,767 (h) 130,493 Government National Mortgage Association I: 6.5% 130,000 (g) 132,600 7% 181,000 (g) 187,900 Government National Mortgage Association II: 5%, 7/20/2030 116,473 (b) 117,128 6.5%, 5/20/2031-9/20/2031 2,267,679 2,309,473 7%, 7/20/2031 183,389 190,208 7.5%, 5/20/2031-8/20/2031 842,392 886,879 8%, 2/20/2034 55,836 59,256 14,664,255 UTILITIES/GAS & ELECTRIC--2.6% Cinergy, Deb., 6.25%, 2004 111,000 112,822 Marketspan, Deb., 8.2%, 2023 131,000 136,821 Mission Energy Holding, Sr. Secured Notes, 13.5%, 2008 263,000 265,630 NRG Energy, Sr. Notes, 8.625%, 2031 380,000 269,800 Nisource Finance, Gtd. Sr. Notes, 7.875%, 2010 723,000 748,363 PSEG Energy Holdings, Sr. Notes, 8.5%, 2011 641,000 599,409 2,132,845 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- UTILITIES/WATER--.0% Marlin Water Trust II, Sr. Secured Notes, 6.31%, 2003 164,000 (a,c) 27,880 TOTAL BONDS AND NOTES (cost $65,916,049) 65,104,137 ------------------------------------------------------------------------------------------------------------------------------------ OTHER SECURITIES--4.3% ------------------------------------------------------------------------------------------------------------------------------------ BANKING--3.4% Abbey National Capital Trust I, Gtd. Non-Cumulative Trust Preferred Securities, 6.7%, 6/15/2008 954,000 (i,j) 992,814 IBJ Preferred Capital, Non-Cumulative Preferred Securities, Ser. A, 8.79%, 2008 388,000 (a,i,j) 320,788 Royal Bank of Scotland Group, Conv. Non-Cumulative Dollar Preference Shares, Ser. 1, 9.118%, 2010 946,000 (i,j) 1,114,501 UBS Preferred Funding Trust I, Gtd. Non-Cumulative Capital Trust Preferred Securities, 8.622%, 10/1/2010 354,000 (i,j) 406,297 2,834,400 INSURANCE--.9% Sun Life of Canada Capital Trust I, Gtd. Capital Securities, 8.526%, 5/6/2007 695,000 (a,i) 728,216 TOTAL OTHER SECURITIES (cost $3,502,742) 3,562,616 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--.5% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AIRCRAFT & AEROSPACE- .2% Raytheon, Cum. Conv., $4.125 2,354 156,835 FINANCIAL SERVICES--.0% Equity Securities Trust I, Cum. Conv., $2.34325 1,601 23,535 OIL & GAS--.1% Exco Resources, Cum. Conv., $1.05 6,043 95,177 PREFERRED STOCKS (CONTINUED) Shares Value ($) --------------------------------------------------------------------------------------------------------------------------------- TELECOMMUNICATION--.2% Motorola, Cum. Conv., $3.50 (units) 3,253 (k) 149,215 TOTAL PREFERRED STOCKS (cost $517,504) 424,762 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--11.8% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER--3.3% San Paolo IMI, 1.9%, 7/1/2002 2,700,000 2,700,000 FLOATING RATE NOTES--.7% MBNA America Bank, 3.645%, 12/18/2002 600,000 (b) 600,000 U.S. GOVERNMENT--7.8% U.S. Treasury Bills: 1.65%, 7/5/2002 405,000 404,923 1.67%, 9/5/2002 2,685,000 (l) 2,677,052 1.69%, 7/18/2002 780,000 779,400 1.77%, 11/29/2002 2,500,000 2,482,675 6,344,050 TOTAL SHORT-TERM INVESTMENTS (cost $9,641,883) 9,644,050 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $79,578,178) 96.1% 78,735,565 CASH AND RECEIVABLES (NET) 3.9% 3,163,558 NET ASSETS 100.0% 81,899,123 (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 JUNE 30, 2002, THESE SECURITIES AMOUNTED TO $11,961,668 OR 14.6% OF NET ASSETS. (B) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE. (C) NON-INCOME PRODUCING--SECURITY IN DEFAULT. (D) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON BECOMES EFFECTIVE. (E) SECURITY LINKED TO A PORTFOLIO OF DEBT SECURITIES. (F) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON CHANGES IN THE CONSUMER PRICE INDEX. (G) PURCHASED ON A FORWARD COMMITMENT BASIS. (H) NOTIONAL FACE AMOUNT SHOWN. (I) DATE SHOWN REPRESENTS EARLIEST DATE THE ISSUER MAY REDEEM THE SECURITY. (J) THE STATED INTEREST RATE IS IN EFFECT UNTIL A SPECIFIED DATE AT WHICH TIME THE INTEREST RATE BECOMES SUBJECT TO PERIODIC CHANGE. (K) UNITS REPRESENTS A CONTRACT TO PURCHASE SHARES OF COMMON STOCK FOR $50 AND A SENIOR NOTE WITH A PRINCIPAL AMOUNT OF $50. (L) PARTIALLY HELD BY A BROKER AS COLLATERAL FOR OPEN FINANCIAL FUTURES POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF FINANCIAL FUTURES June 30, 2002 (Unaudited)
Market Value Unrealized Covered by (Depreciation) Contracts Contracts Expiration at 6/30/2002 ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL FUTURES SHORT U.S. Treasury 10 Year Notes 108 11,581,313 September 2002 (13,500)
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 79,578,178 78,735,565 Cash 613,761 Receivable for investment securities sold 14,830,600 Dividends and interest receivable 822,693 Paydowns recceivable 963 Prepaid expenses 3,286 95,006,868 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 49,842 Payable for investment securities purchased 13,006,801 Payable for futures variation margin--Note 4 15,350 Accrued expenses 35,752 13,107,745 -------------------------------------------------------------------------------- NET ASSETS ($) 81,899,123 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 83,233,903 Accumulated undistributed investment income--net 236,606 Accumulated net realized gain (loss) on investments and foreign currency transactions (715,273) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions [including ($13,500) net unrealized (depreciation) on financial futures] (856,113) -------------------------------------------------------------------------------- NET ASSETS ($) 81,899,123 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 27,886,513 54,012,610 Shares Outstanding 2,199,932 4,263,023 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.68 12.67 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 1,948,621 Cash dividends 11,476 TOTAL INCOME 1,960,097 EXPENSES: Investment advisory fee--Note 3(a) 205,575 Distribution fees--Note 3(b) 51,607 Prospectus and shareholders' reports 18,400 Custodian fees--Note 3(b) 18,357 Professional fees 15,875 Registration fees 2,279 Shareholder servicing costs--Note 3(b) 855 Trustees' fees and expenses--Note 3(c) 433 Miscellaneous 8,582 TOTAL EXPENSES 321,963 Less--waiver of fees due to undertaking--Note 3(a) (47,899) NET EXPENSES 274,064 INVESTMENT INCOME--NET 1,686,033 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions: Long transactions 278,987 Short sale transactions (533) Net realized gain (loss) on financial futures (196,617) NET REALIZED GAIN (LOSS) 81,837 Net unrealized appreciation (depreciation) on investments, securities sold short and foreign currency transactions [including ($13,500) net unrealized (depreciation) on financial futures] (341,302) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (259,465) NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,426,568 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 1,686,033 1,873,414 Net realized gain (loss) on investments 81,837 (404,725) Net unrealized appreciation (depreciation) on investments (341,302) (603,909) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,426,568 864,780 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (581,821) (1,279,630) Service shares (879,718) (645,875) Net realized gain on investments: Initial shares -- (280,228) Service shares -- (245,864) TOTAL DIVIDENDS (1,461,539) (2,451,597) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 4,607,271 30,429,561 Service shares 24,351,137 31,321,932 Dividends reinvested: Initial shares 581,821 1,559,858 Service shares 879,718 891,739 Cost of shares redeemed: Initial shares (4,056,263) (16,497,691) Service shares (1,589,241) (1,007,405) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 24,774,443 46,697,994 TOTAL INCREASE (DECREASE) IN NET ASSETS 24,739,472 45,111,177 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 57,159,651 12,048,474 END OF PERIOD 81,899,123 57,159,651 Undistributed investment income--net 236,606 12,112 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 361,855 2,328,741 Shares issued for dividends reinvested 45,886 120,525 Shares redeemed (319,090) (1,269,346) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 88,651 1,179,920 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 1,916,344 2,410,677 Shares issued for dividends reinvested 69,401 69,290 Shares redeemed (124,953) (77,775) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,860,792 2,402,192 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended June 30, 2002 Year Ended December 31, ------------------------------- INITIAL SHARES (Unaudited) 2001(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.67 12.94 12.50 Investment Operations: Investment income--net .31(c) .75(c) .50 Net realized and unrealized gain (loss) on investments (.03) (.18) .56 Total from Investment Operations .28 .57 1.06 Distributions: Dividends from investment income--net (.27) (.72) (.50) Dividends from net realized gain on investments -- (.12) (.12) Total Distributions (.27) (.84) (.62) Net asset value, end of period 12.68 12.67 12.94 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 2.14(d) 4.55 8.61(d) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .80(e) .80 .80(e) Ratio of net investment income to average net assets 4.92(e) 5.71 6.24(e) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- .17 1.10(e) Portfolio Turnover Rate 289.75(d) 654.39 953.66(d) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 27,887 26,744 12,048 (A) AS REQUIRED, EFFECTIVE JANUARY 1, 2001, THE PORTFOLIO HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON FIXED INCOME SECURITIES ON A SCIENTIFIC BASIS AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME. THE EFFECT OF THESE CHANGES FOR THE PERIOD ENDED DECEMBER 31, 2001 WAS TO DECREASE NET INVESTMENT INCOME PER SHARE BY $.04, INCREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY $.04 AND DECREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 6.04% TO 5.71%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THESE CHANGES IN PRESENTATION. (B) FROM MAY 1, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED. (E) ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) Six Months Ended June 30, 2002 Year Ended December 31, --------------------------------- SERVICE SHARES (Unaudited) 2001(a) 2000(b) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.66 12.93 12.93 Investment Operations: Investment income--net .31(c) .70(c) -- Net realized and unrealized gain (loss) on investments (.03) (.13) -- Total from Investment Operations .28 .57 -- Distributions: Dividends from investment income--net (.27) (.72) -- Dividends from net realized gain on investments -- (.12) -- Total Distributions (.27) (.84) -- Net asset value, end of period 12.67 12.66 12.93 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 2.22(d) 4.46 -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .80(e) .80 -- Ratio of net investment income to average net assets 4.92(e) 5.77 -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .23(e) .35 -- Portfolio Turnover Rate 289.75(d) 654.39 953.66(d) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 54,013 30,416 1 (A) AS REQUIRED, EFFECTIVE JANUARY 1, 2001, THE PORTFOLIO HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON FIXED INCOME SECURITIES ON A SCIENTIFIC BASIS AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME. THE EFFECT OF THESE CHANGES FOR THE PERIOD ENDED DECEMBER 31, 2001 WAS TO DECREASE NET INVESTMENT INCOME PER SHARE BY $.04, INCREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY $.04 AND DECREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 6.10% TO 5.77%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THESE CHANGES IN PRESENTATION. (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) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen series, including the Core Bond 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 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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'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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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. 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 the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amount of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, 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 and premium 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. (D) 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, 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. On June 28, 2002, the Board of Trustees declared a cash dividend of $.054 and $.054 per share for Initial shares and Service shares, respectively, from undistributed investment income-net, payable on July 1, 2002 (ex-dividend date), to shareholders of record as of the close of business on June 28, 2002. (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 tax character of distributions paid to shareholders during the fiscal year ended December 31, 2001 was as follows: ordinary income $2,451,597. The tax character of current year distributions will be determined at the end of the current fiscal year. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) NOTE 2--Bank Lines 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 June 30, 2002, 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 has agreed, from January 1, 2002 to December 31, 2002, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceed an annual rate of .80 of 1% of the value of the average daily net assets of their class. During the period ended June 30, 2002, Dreyfus waived receipt of fees of $47,899, pursuant to the undertaking. (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. During the period ended June 30, 2002, Service shares were charged $51,607 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $116 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 June 30, 2002, the portfolio was charged $18,357 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 $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The following summarizes the aggregate amount of purchases and sales (including paydowns) of investment securities and securities sold short, excluding short-term securities and financial futures during the period ended June 30, 2002: Purchases ($) Sales ($) -------------------------------------------------------------------------------- Long transactions 200,173,850 184,652,537 Short sale transactions 2,329,156 2,328,623 TOTAL 202,503,006 186,981,160 The fund is engaged in short-selling which obligates the fund to replace the security borrowed by purchasing the security at current market value. The fund would incur a loss if the price of the security increases between the date of the short sale and the date on which the The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) fund replaces the borrowed security. The fund would realize a gain if the price of the security declines between those dates. The fund's long security positions serve as collateral for the open short positions. At June 30, 2002, there were no securities sold short outstanding. 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 market value of the contracts at the close of each day's trading. Accordingly, 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 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. Contracts open at June 30, 2002, are set forth in the Statement of Financial Futures. At June 30, 2002, accumulated net unrealized depreciation on investments was $842,613, consisting of $1,000,256 gross unrealized appreciation and $1,842,869 gross unrealized depreciation. At June 30, 2002, 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). 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 165SA0602 Dreyfus Investment Portfolios, Core Value Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 14 Financial Highlights 16 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Value Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Core Value Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. 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. The U.S. stock market confronted a number of formidable challenges during the first half of 2002. In addition to lackluster corporate earnings and the ongoing war on terrorism, investors have recently contended with questions regarding the accuracy of certain companies' financial statements. These and other influences drove the Standard & Poor's 500 Composite Stock Price Index, a widely accepted benchmark of domestic large-cap stock performance, down during the first six months of the year. Nonetheless, we are generally optimistic about the future. The economy has begun to recover, showing signs of sustained growth that should have a positive effect on corporate earnings. Recent market declines may have created attractive values in some stocks. At the same time, we believe that today's accounting scandals will likely lead to higher standards and stronger oversight of corporate behavior, which should give investors greater confidence in the future. During turbulent times like these it is important to have an investment horizon that is measured in years, not weeks or months. Remember that over the long term, stocks have historically produced higher returns than other types of investments. For investors with a long-term perspective, stocks should continue to provide considerable potential for growth. As always, we urge you to talk with your financial advisor if you have questions or concerns about the markets or your investment portfolio. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE Valerie J. Sill, Portfolio Manager How did Dreyfus Investment Portfolios, Core Value Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2002, the portfolio produced total returns of -11.56% for its Initial shares and -11.64% for its Service shares.(1) In comparison, the portfolio's benchmark, the S&P 500/BARRA Value Index, produced a total return of -9.46% for the same period.(2) We attribute the portfolio's returns, which fell short of its benchmark, to increased scrutiny of the accounting practices of large companies throughout the reporting period. A secondary reason for the portfolio's shortfall was a lack of ownership in regional banks, which performed well in the low interest-rate environment. 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? Absolute stock market returns remained negative during the reporting period as investors became concerned about terrorism, overseas conflicts, mixed signals on the economy and the integrity of financial statements. Companies such as Enron, WorldCom and Xerox made headlines. Computer Associates International, a portfolio holding, came under scrutiny during the reporting period as well. However, we eliminated the stock from the portfolio soon after allegations of possible wrongdoing surfaced. Even in the best of investment environments, a The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) challenge to a company' s accounting practices often sours investors on the stock, and it can take years to reestablish confidence in management. Although concerns about accounting transgressions continued throughout the reporting period, the portfolio's performance rebounded in the second quarter because of strong returns from consumer services and transportation companies. In the consumer services group, retailer Sears, Roebuck & Co. gained value during a period that featured its acquisition of Lands' End, the popular apparel catalog company that is expected to help Sears improve profit margins. In addition, Canadian Pacific Railway, which provides freight transportation throughout Canada and the U.S., performed well after an unexpected rise in manufacturing activity, which fueled investor optimism regarding an economic rebound. The portfolio also benefited from having few holdings in telecommunications companies, where investors have lost confidence in the industry's viability. Other strong performers in the portfolio included companies in the health care and aerospace industries such as Rockwell Collins, which provides aviation electronics and other communications products to the U.S. military and may see demand increase in the current wartime environment. WellPoint Health Networks, a managed health care company, has benefited from improved Medicare reimbursement rates. Value investing generally outperformed the growth style during the first half of 2002, and since value-oriented companies offer modest earnings and relatively low stock prices, they typically do not fall as dramatically during downturns as growth companies, where investors have much higher expectations, and typically sell at higher valuations. What is the portfolio's current strategy? We currently see opportunity in searching for value in traditional growth sectors. For example, many pharmaceutical stocks may be attractive because they are currently selling below their normal prices relative to earnings, primarily because their profits recently declined when patents on existing products expired. As an investment style, we currently believe that it is likely that the value-oriented approach will continue to produce higher returns than the growth style. During the bull market of the late 1990s, growth sectors had very strong performance. The valuation of growth stocks reached unsustainable levels, and the market is still working those levels downward. Even though there are signs that the economy is improving, and interest rates remain very low, the current crisis of investor confidence may take some time to fade. While there is no guarantee, history suggests that value investors are typically better equipped to weather such storms. July 15, 2002 (1) 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, 2002, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. Part of the portfolio's recent performance is attributable to its initial public offering (IPO) investments. There can be no guarantee that IPOs will have or continue to have a positive effect on the portfolio's performance. (2) SOURCE: LIPPER INC. -- REFLECTS THE 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 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 STATEMENT OF INVESTMENTS
June 30, 2002 (Unaudited) COMMON STOCKS--91.0% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ BANKING--9.3% American Express 40,000 1,452,800 Citigroup 52,800 2,046,000 Fannie Mae 17,900 1,320,125 FleetBoston Financial 28,006 905,994 Wells Fargo 14,400 720,864 6,445,783 BASIC INDUSTRIES--3.1% Air Products & Chemicals 8,800 444,136 International Paper 21,700 945,686 Praxair 12,800 729,216 2,119,038 BEVERAGES & TOBACCO--1.0% Philip Morris Cos. 16,000 698,880 BROADCASTING & PUBLISHING--1.0% McGraw-Hill Cos. 11,600 692,520 BROKERAGE--5.6% Goldman Sachs Group 18,100 1,327,635 Lehman Brothers Holdings 14,200 887,784 Morgan Stanley Dean Witter & Co. 19,700 848,676 Stilwell Financial 44,100 802,620 3,866,715 BUSINESS SERVICES--.7% Tenet Healthcare 6,400 (a) 457,920 CAPITAL GOODS--5.4% Corning 111,000 394,050 Emerson Electric 12,300 658,173 Pitney Bowes 25,000 993,000 Rockwell Collins 15,500 425,010 United Technologies 19,000 1,290,100 3,760,333 CONSUMER DURABLES--4.4% Ford Motor 62,800 1,004,800 Koninklijke (Royal) Philips Electronics (New York Shares) 72,800 2,009,280 3,014,080 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER NON-DURABLES--4.0% Clorox 15,200 628,520 J. M. Smucker 188 6,416 Nestle, ADR 10,200 594,150 Pepsi Bottling Group 26,600 819,280 Procter & Gamble 7,600 678,680 2,727,046 CONSUMER SERVICES--14.1% Federated Department Stores 29,600 (a) 1,175,120 Knight-Ridder 10,100 635,795 Liberty Media, Cl. A 162,600 (a) 1,544,700 McDonald's 64,500 1,835,025 Office Depot 46,400 (a) 779,520 RadioShack 27,800 835,668 Sears, Roebuck & Co. 25,500 1,384,650 Walt Disney 33,100 625,590 Winn-Dixie Stores 59,600 929,164 9,745,232 ENERGY--9.4% BP, ADR 25,600 1,292,544 Conoco 43,084 1,197,735 Encana 24,794 758,696 Exxon Mobil 65,104 2,664,056 Fording 4,615 87,731 Sunoco 13,700 488,131 6,488,893 FINANCIAL SERVICES--1.1% H&R Block 16,400 756,860 HEALTH CARE--7.0% Bristol-Myers Squibb 23,600 606,520 C.R. Bard 19,000 1,075,020 Guidant 18,300 (a) 553,209 Merck & Co. 17,600 891,264 Pharmacia 16,300 610,435 WellPoint Health Networks 14,100 (a) 1,097,121 4,833,569 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HOUSEHOLD APPLIANCES--1.7% Sony, ADR 22,100 1,173,510 INSURANCE--12.6% Allstate 22,000 813,560 American International Group 32,796 2,237,671 CIGNA 10,700 1,042,394 Chubb 10,500 743,400 John Hancock Financial Services 13,700 482,240 Lincoln National 25,600 1,075,200 Marsh & McLennan Cos. 7,500 724,500 Principal Financial Group 26,600 (a) 824,600 Radian Group 14,500 708,325 8,651,890 TECHNOLOGY--4.8% Agere Systems, Cl. A 1,285 (a) 1,799 BMC Software 20,800 (a) 345,280 Intel 38,300 699,741 International Business Machines 7,800 561,600 KPMG Consulting 13,200 (a) 196,152 Lucent Technologies 119,300 198,038 Motorola 92,200 1,329,524 3,332,134 TELECOMMUNICATIONS--.9% Sprint (FON Group) 55,500 588,855 TRANSPORTATION--.8% CP Railway 18,200 446,264 CP Ships 6,950 70,890 517,154 UTILITIES--4.1% Edison International 20,600 (a) 350,200 Entergy 17,700 751,188 PG&E 61,200 (a) 1,094,868 Verizon Communications 15,050 604,258 2,800,514 TOTAL COMMON STOCKS (cost $64,993,045) 62,670,926 PREFERRED STOCKS--1.8% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER SERVICES; News Corp, ADR (cost $1,555,297) 62,550 1,235,363 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--9.9% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTES; Federal Farm Credit Bank, 1.87%, 7/1/2002 (cost $6,826,000) 6,826,000 6,826,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $73,374,342) 102.7% 70,732,289 LIABILITIES, LESS CASH AND RECEIVABLES (2.7%) (1,845,607) NET ASSETS 100.0% 68,886,682 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 73,374,342 70,732,289 Cash 76,596 Receivable for investment securities sold 795,720 Dividends receivable 45,196 Prepaid expenses 5,733 71,655,534 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 49,421 Payable for investment securities purchased 2,694,388 Accrued expenses and other liabilities 25,043 2,768,852 -------------------------------------------------------------------------------- NET ASSETS ($) 68,886,682 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 75,330,879 Accumulated undistributed investment income--net 125,132 Accumulated net realized gain (loss) on investments (3,927,276) Accumulated net unrealized appreciation (depreciation) on investments (2,642,053) -------------------------------------------------------------------------------- NET ASSETS ($) 68,886,682 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 34,499,907 34,386,775 Shares Outstanding 2,695,699 2,687,633 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.80 12.79 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $6,436 foreign taxes witheld at source) 388,422 Interest 39,659 TOTAL INCOME 428,081 EXPENSES: Investment advisory fee--Note 3(a) 246,159 Distribution fees--Note 3(b) 36,546 Professional fees 12,866 Prospectus and shareholders' reports 11,580 Custodian fees--Note 3(b) 6,606 Shareholder servicing costs--Note 3(b) 270 Trustees' fees and expenses--Note 3(c) 16 Miscellaneous 3,185 TOTAL EXPENSES 317,228 Less--waiver of fees due to undertaking--Note 3(a) (14,652) NET EXPENSES 302,576 INVESTMENT INCOME--NET 125,505 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (2,784,479) Net unrealized appreciation (depreciation) on investments (5,648,444) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (8,432,923) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (8,307,418) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 125,505 308,514 Net realized gain (loss) on investments (2,784,479) (946,878) Net unrealized appreciation (depreciation) on investments (5,648,444) 513,040 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (8,307,418) (125,324) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (175,330) (11,915) Service shares (136,913) (873) Net realized gain on investments: Initial shares -- (432,914) Service shares -- (31,706) TOTAL DIVIDENDS (312,243) (477,408) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 4,663,099 18,191,167 Service shares 17,315,312 21,350,074 Dividends reinvested: Initial shares 175,330 444,829 Service shares 136,913 32,579 Cost of shares redeemed: Initial shares (3,279,433) (3,875,822) Service shares (568,817) (373,262) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 18,442,404 35,769,565 TOTAL INCREASE (DECREASE) IN NET ASSETS 9,822,743 35,166,833 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 59,063,939 23,897,106 END OF PERIOD 68,886,682 59,063,939 Undistributed investment income--net 125,132 311,870 Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 334,935 1,248,972 Shares issued for dividends reinvested 12,269 32,257 Shares redeemed (237,527) (278,274) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 109,677 1,002,955 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 1,243,464 1,499,786 Shares issued for dividends reinvested 9,581 2,363 Shares redeemed (41,763) (25,831) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,211,282 1,476,318 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe 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.
Six Months Ended June 30, 2002 Year Ended December 31, --------------------------------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999 1998(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.54 15.10 13.97 11.72 12.50 Investment Operations: Investment income--net .03(b) .12(b) .17(b) .07(b) .07 Net realized and unrealized gain (loss) on investments (1.70) (.45) 1.50 2.24 (.77) Total from Investment Operations (1.67) (.33) 1.67 2.31 (.70) Distributions: Dividends from investment income--net (.07) (.01) (.16) (.06) (.08) Dividends from net realized gain on investments -- (.22) (.38) -- -- Total Distributions (.07) (.23) (.54) (.06) (.08) Net asset value, end of period 12.80 14.54 15.10 13.97 11.72 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (11.56)(c) (2.08) 12.06 19.73 (5.59)(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .43(c) .96 .97 1.00 .67(c) Ratio of net investment income to average net assets .22(c) .83 1.19 .56 .62(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- .02 .07 .50 .74(c) Portfolio Turnover Rate 23.71(c) 65.13 110.74 97.14 47.37(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 34,500 37,595 23,897 15,343 5,959 (A) FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2002 Year Ended December 31 -------------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.54 15.09 15.09 Investment Operations: Investment income--net .02(b) .08(b) -- Net realized and unrealized gain (loss) on investments (1.71) (.40) -- Total from Investment Operations (1.69) (.32) -- Distributions: Dividends from investment income--net (.06) (.01) -- Dividends from net realized gain on investments -- (.22) -- Total Distributions (.06) (.23) -- Net asset value, end of period 12.79 14.54 15.09 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (11.64)(c) (2.08) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .50(c) 1.00 -- Ratio of net investment income to average net assets .14(c) .61 -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .05(c) .27 -- Portfolio Turnover Rate 23.71(c) 65.13 110.74 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 34,387 21,469 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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'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 and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $282 during the period ended June 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (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, 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 $512,304 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2001 was as follows: ordinary income $387,894 and long-term capital gains $89,514. The tax character of current year distributions will be determined at the end of the current fiscal year. 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 June 30, 2002, 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 has agreed from January 1, 2002 to December 31, 2002, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceed 1% of the value of the average daily net assets of their class. During the period ended June 30, 2002, Dreyfus waived receipt of fees of $14,652, pursuant to the undertaking. (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. During the period ended June 30, 2002, Service shares were charged $36,546 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $76 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 June 30, 2002, the portfolio was charged $6,606 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 Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 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 June 30, 2002, amounted to $30,188,044 and $14,647,660, respectively. At June 30, 2002, accumulated net unrealized depreciation on investments was $2,642,053, consisting of $3,213,687 gross unrealized appreciation and $5,855,740 gross unrealized depreciation. At June 30, 2002, 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). 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 172SA0602 Dreyfus Investment Portfolios, Emerging Leaders Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 14 Financial Highlights 16 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Emerging Leaders Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Emerging Leaders Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. 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 U.S. stock market confronted a number of formidable challenges during the first half of 2002. In addition to lackluster corporate earnings and the ongoing war on terrorism, investors have recently contended with questions regarding the accuracy of certain companies' financial statements. These and other influences drove the Russell 2000 Index, a widely accepted benchmark of domestic small-cap stock performance, down during the first six months of the year. Nonetheless, we are generally optimistic about the future. The economy has begun to recover, showing signs of sustained growth that should have a positive effect on corporate earnings. Recent market declines may have created attractive values in some stocks. At the same time, we believe that today's accounting scandals will likely lead to higher standards and stronger oversight of corporate behavior, which should give investors greater confidence in the future. During turbulent times like these it is important to have an investment horizon that is measured in years, not weeks or months. Remember that over the long term, stocks have historically produced higher returns than other types of investments. For investors with a long-term perspective, stocks should continue to provide considerable potential for growth. As always, we urge you to talk with your financial advisor if you have questions or concerns about the markets or your investment portfolio. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 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 six-month period ended June 30, 2002, Dreyfus Investment Portfolios, Emerging Leaders Portfolio produced a total return of -6.69% for its Initial shares and -6.81% for its Service shares.(1) This compares with a total return of -4.70% for the portfolio's benchmark, the Russell 2000 Index (the "Index"), for the same period.(2) We attribute the portfolio's performance primarily to an exceptionally challenging economic environment. The portfolio posted lower returns than those of its benchmark because of relatively weak returns in a few industry sectors. However, strong performance in health care, utilities, and materials and processing counterbalanced most of these losses. What is the portfolio's investment approach? The portfolio seeks capital growth by investing in a diversified group of companies that 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 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 reasons for buying it no longer apply or when the company begins to show deteriorating fundamentals or poor relative performance. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) What other factors influenced the portfolio's performance? The U.S. economy showed signs of recovery during the first half of 2002. However, the unexpectedly slow pace of the recovery, combined with uncertainties surrounding the war on terrorism and questions regarding the credibility of various companies' financial statements, forced most equity prices lower. In this troubled environment, small-cap stocks generally maintained their value to a greater degree than most of their mid- to large-cap counterparts. Most small-cap stocks offered investors greater prospects for growth at lower valuations than did the majority of larger company stocks. While the portfolio benefited from the trend toward small-cap stocks to a degree, several unexpected developments hurt performance compared to the Index. For example, in light of increasing evidence of an economic recovery the portfolio held a relatively small percentage of financial stocks, as we thought this sector would become vulnerable if interest rates were to rise. However, financial stocks generally provided strong returns throughout reporting period, supported by little evidence the Federal Reserve Board would consider raising interest rates anytime soon. Performance also suffered because of the portfolio's relatively larger position in technology stocks, which we believed were attractively priced at the beginning of the reporting period. Unfortunately, most areas within the technology group declined sharply when earnings failed to rise as rapidly as some analysts predicted. Finally, in autos and transports the portfolio emphasized airline stocks, which were hurt by weakening customer demand. On the other hand, the portfolio performed significantly more strongly than the Index in several key industry sectors, making up for most of the weakness cited above. In health care, our decision to avoid biotech investments enabled the portfolio to break even, in contrast to the Index's losses in that sector. In particular, the portfolio achieved good returns from HMOs such as Humana, product and service providers such as United Surgical Partners International, and generic drug makers such as Inspire Pharmaceuticals. In the materials and pro- cessing area, the portfolio took advantage of various trends such as strength in the housing industry (Century Aluminum), rising gold prices (Agnico-Eagle Mines) and steady fundamental demand for packaging products (Silgan Holdings). Among utilities, the portfolio avoided companies that depend on speculative trading or hedging operations. Strong returns were powered by investments in steady service providers such as Western Gas Resources. What is the portfolio's current strategy? As of the end of the reporting period, with the pace of economic recovery still in doubt, the portfolio holds relatively large positions in several defensive and cyclical areas, including energy, health care and producer durables. The portfolio holds a smaller percentage of technology, financial and consumer stocks than the Index. Within all investment areas, we continue to employ our disciplined investment approach in the search for tomorrow's emerging leaders. July 15, 2002 (1) 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. Part of the portfolio's recent performance is attributable to its initial public offering (IPO) investments. There can be no guarantee that IPOs will have or continue to have a positive effect on the portfolio's performance. (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 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 STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
COMMON STOCKS--97.2% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER NON-DURABLES--5.8% Alberto-Culver, Cl. A 7,000 316,260 Boston Beer, Cl. A 27,500 (a) 437,250 Dean Foods 8,000 (a) 298,400 Smithfield Foods 21,500 (a) 398,825 1,450,735 CONSUMER SERVICES--8.4% Education Management 8,500 (a) 346,205 Emmis Communications, Cl. A 12,500 (a) 264,875 Entercom Communications 6,000 (a) 275,400 Hot Topic 14,000 (a) 373,940 Joy Global 26,000 (a) 461,240 Station Casinos 21,000 (a) 374,850 2,096,510 ELECTRONIC TECHNOLOGY--3.3% Adaptec 25,000 (a) 197,250 Aeroflex 23,500 (a) 163,325 Loral Space & Communications 189,500 (a) 187,605 Plexus 15,000 (a) 271,500 819,680 ENERGY MINERALS--5.5% NOVA Chemicals 15,000 338,100 Pride International 19,500 (a) 305,370 Ultra Petroleum 48,500 (a) 368,115 XTO Energy 17,000 350,200 1,361,785 FINANCE--15.8% Annuity and Life Re Holdings 9,000 162,810 Arch Capital Group 12,500 (a) 351,875 Bank United (CPR) 1,400 (a) 126 Brown & Brown 10,500 330,750 Chittenden 12,500 362,250 Commerce Bancorp 6,500 287,300 Cullen/Frost Bankers 9,000 323,550 First Midwest Bancorp 10,000 277,800 Horace Mann Educators 13,500 252,045 Max Re Capital 18,500 249,750 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCE (CONTINUED) Protective Life 10,000 331,000 Texas Regional Bancshares, Cl. A 7,800 386,950 Westamerica Bancorporation 7,500 296,700 Whitney Holding 10,500 322,770 3,935,676 HEALTH SERVICES--5.2% Beverly Enterprises 51,500 (a) 391,915 Humana 21,000 (a) 328,230 ICN Pharmaceuticals 10,500 254,205 Renal Care Group 10,500 (a) 327,075 1,301,425 HEALTH TECHNOLOGY--7.7% Axcan Pharma 22,500 (a) 336,150 Inspire Pharmaceuticals 100,000 (a) 385,000 K-V Pharmaceutical, Cl. A 11,500 (a) 310,500 SICOR 21,000 (a) 389,340 United Surgical Partners International 16,000 (a) 488,160 1,909,150 INDUSTRIAL SERVICES--3.9% Hanover Compressor 20,000 (a) 270,000 Rowan Cos. 14,500 311,025 Shaw Group 12,500 (a) 383,750 964,775 NON-ENERGY MINERALS--1.5% Agnico-Eagle Mines 25,000 364,250 PROCESS INDUSTRIES--5.0% Airgas 23,500 (a) 406,550 Ivex Packaging 16,500 (a) 375,705 Pope & Talbot 24,500 458,885 1,241,140 PRODUCER MANUFACTURING--12.8% American Axle & Manufacturing Holdings 14,000 (a) 416,360 CIRCOR International 15,000 257,250 MagneTek 29,000 (a) 287,100 Mettler-Toledo International 9,500 (a) 350,265 National-Oilwell 13,000 (a) 273,650 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER MANUFACTURING (CONTINUED) Silgan Holdings 11,000 (a) 444,840 Terex 16,500 (a) 371,085 Triumph Group 9,000 (a) 401,400 United Defense Industries 16,000 (a) 368,000 3,169,950 RETAIL TRADE--4.0% J. Jill Group 10,500 (a) 398,475 99 Cents Only Stores 8,666 (a) 222,283 Talbots 11,000 385,000 1,005,758 TECHNOLOGY SERVICES--10.4% Global Payments 12,000 357,000 Integrated Circuit Systems 20,000 (a) 403,800 J.D. Edwards & Co. 32,500 (a) 394,875 NDCHealth 15,000 418,500 NetFlix 22,500 314,775 NetIQ 16,500 (a) 373,395 Network Associates 17,000 (a) 327,590 2,589,935 TRANSPORTATION--4.1% EGL 22,500 (a) 381,600 Frontline 30,000 286,200 Knight Transportation 15,500 (a) 359,445 1,027,245 UTILITIES--3.8% Black Hills 5,200 179,972 Cleco 9,000 197,100 Vectren 9,000 225,900 Western Gas Resources 9,000 336,600 939,572 TOTAL COMMON STOCKS (cost $22,477,790) 24,177,586 SHORT-TERM INVESTMENTS--3.5% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ REGULATED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 286,471 (b) 286,471 Dreyfus Institutional Cash Advantage Plus Fund 286,472 (b) 286,472 Dreyfus Institutional Preferred Plus Money Market Fund 286,472 (b) 286,472 TOTAL SHORT-TERM INVESTMENTS (cost $859,415) 859,415 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $23,337,205) 100.7% 25,037,001 LIABILITIES, LESS CASH AND RECEIVABLES (.7%) (173,599) NET ASSETS 100.0% 24,863,402 (A) NON-INCOME PRODUCING. (B) INVESTMENTS IN AFFILIATED MONEY MARKET FUNDS (SEE NOTE 3(D) IN THE PORTFOLIO'S NOTES TO FINANCIAL STATEMENTS).
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 23,337,205 25,037,001 Cash 29,254 Receivable for investment securities sold 40,341 Dividends and interest receivable 6,138 Prepaid expenses 1,098 25,113,832 -------------------------------------------------------------------------------- LIABILITES ($): Due to The Dreyfus Corporation and affiliates 22,215 Payable for investment securities purchased 128,785 Payable for shares of Beneficial Interest redeemed 80,217 Accrued expenses 19,213 250,430 -------------------------------------------------------------------------------- NET ASSETS ($) 24,863,402 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 24,739,353 Accumulated investment (loss) (57,144) Accumulated net realized gain (loss) on investments (1,518,603) Accumulated net unrealized appreciation (depreciation) on investments 1,699,796 -------------------------------------------------------------------------------- NET ASSETS ($) 24,863,402 NET ASSET VALUE PER SHARE Shares Initial Shares Service -------------------------------------------------------------------------------- Net Assets ($) 15,756,359 9,107,043 Shares Outstanding 911,528 527,987 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 17.29 17.25 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $219 foreign taxes withheld at source) 69,669 Interest 11,902 TOTAL INCOME 81,571 EXPENSES: Investment advisory fee--Note 3(a) 103,679 Auditing fees 11,820 Distribution fees--Note 3(b) 9,089 Prospectus and shareholders' reports 8,045 Custodian fees--Note 3(b) 3,823 Legal fees 1,670 Shareholder servicing costs --Note 3(b) 276 Trustees' fees and expenses--Note 3(c) 235 Miscellaneous 78 TOTAL EXPENSES 138,715 INVESTMENT (LOSS) (57,144) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (430,951) Net unrealized appreciation (depreciation) on investments (1,377,871) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1,808,822) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,865,966) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (57,144) (44,865) Net realized gain (loss) on investments (430,951) (844,848) Net unrealized appreciation (depreciation) on investments (1,377,871) 1,960,602 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,865,966) 1,070,889 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Net realized gain on investments: Initial shares -- (3,153) Service shares -- (82) TOTAL DIVIDENDS -- (3,235) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 5,466,444 11,258,210 Service shares 5,285,386 4,665,119 Dividends reinvested: Initial shares -- 3,153 Service shares -- 82 Cost of shares redeemed: Initial shares (1,824,248) (4,608,821) Service shares (236,314) (250,066) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 8,691,268 11,067,677 TOTAL INCREASE (DECREASE) IN NET ASSETS 6,825,302 12,135,331 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 18,038,100 5,902,769 END OF PERIOD 24,863,402 18,038,100 Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 292,673 648,465 Shares issued for dividends reinvested -- 196 Shares redeemed (99,431) (276,585) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 193,242 372,076 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 285,560 271,017 Shares issued for dividends reinvested -- 5 Shares redeemed (13,091) (15,533) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 272,469 255,489 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe 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.
Six Months Ended June 30, 2002 Year Ended December 31, -------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 18.53 17.05 13.44 12.50 Investment Operations: Investment income (loss)--net (.04)(b) (.08)(b) (.09)(b) .01 Net realized and unrealized gain (loss) on investments (1.20) 1.57 4.30 .93 Total from Investment Operations (1.24) 1.49 4.21 .94 Distributions: Dividends from investment income--net -- -- (.01) -- Dividends from net realized gain on investments -- (.01) (.59) -- Total Distributions -- (.01) (.60) -- Net asset value, end of period 17.29 18.53 17.05 13.44 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (6.69)(c) 8.74 31.70 7.52(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .56(c) 1.46 1.50 .07(c) Ratio of net investment income (loss) to average net assets (.21)(c) (.44) (.59) .04(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- .16 .70 1.25(c) Portfolio Turnover Rate 55.86(c) 175.21 234.94 1.79(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 15,756 13,308 5,902 2,150 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2002 Year Ended December 31, -------------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 18.51 17.05 17.05 Investment Operations: Investment (loss) (.06)(b) (.08)(b) -- Net realized and unrealized gain (loss) on investments (1.20) 1.55 -- Total from Investment Operations (1.26) 1.47 -- Distributions: Dividends from net realized gain on investments -- (.01) -- Net asset value, end of period 17.25 18.51 17.05 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (6.81)(c) 8.62 -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .68(c) 1.50 -- Ratio of investment (loss) to average net assets (.33)(c) (.49) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation -- .30 -- Portfolio Turnover Rate 55.86(c) 175.21 234.94 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 9,107 4,730 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen series, including the 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. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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'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 and premium on investments is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $151 during the period ended June 30, 2002 based on avail- The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) able 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, it is the policy of the fund not to distribute such gain. (E) FEDERAL INCOME TAXES: It is the policy of the fund 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 $928,554 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2001 was as follows: ordinary income $3,235. The tax character of current year distributions, if any, will be determined at the end of the current fiscal year. 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 June 30, 2002, 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 has agreed from January 1, 2002 to December 31, 2002, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceed an annual rate of 1.50% of the value of average daily net assets of their class. During the period ended June 30, 2002, there was no expense reimbursement pursuant to the undertaking. (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. During the period ended June 30, 2002, Service shares were charged $9,089 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $43 pursuant to the transfer agency agreement. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended June 30, 2002, the portfolio was charged $3,823 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 annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. (D) Commencing June 13, 2002, pursuant to an exemptive order from the Securities and Exchange Commission, the portfolio invests its available cash balances in affiliated money market funds as shown in the portfolio's Statement of Investments. Management fees are not charged to these accounts. The portfolio derived $1,856 in income from these investments, which is included as interest income in the portfolio's Statement of Operations. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2002, amounted to $20,374,329 and $12,247,228, respectively. At June 30, 2002, accumulated net unrealized appreciation on investments was $1,699,796, consisting of $2,790,613 gross unrealized appreciation and $1,090,817 gross unrealized depreciation. At June 30, 2002, 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). 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 192SA0602 Dreyfus Investment Portfolios, Emerging Markets Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 15 Financial Highlights 17 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Emerging Markets Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Emerging Markets Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, D. Kirk Henry. Although market conditions have remained volatile, U.S. and international economies have recently begun to show signs of renewed growth, and investors appear to be taking a fresh look at the opportunities a global economic rebound could create. In particular, following two tumultuous years for equities in the U.S. and overseas, some investors are turning their attention to the long-term appreciation potential of international stocks. After all, stocks have historically produced higher long-term returns than bonds or money market funds. For investors with appropriate time horizons and attitudes toward risk, international stocks may provide considerable potential for pursuing growth over time. Indeed, as many professionals can attest, the benefits of equity investments become clearer when viewed from a perspective measured in years rather than weeks or months. If you have questions or are worried about current market conditions, we encourage you to talk with your financial advisor who can help you balance near-term risks with potential long-term rewards. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE D. Kirk Henry, Portfolio Manager How did Dreyfus Investment Portfolios, Emerging Markets Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2002, the portfolio produced total returns of 6.43% for its Initial shares and 6.43% for its Service shares.(1) This compares with the -2.07% total return provided by the portfolio's benchmark, the Morgan Stanley Capital International Emerging Markets Free Index ("MSCI EMF Index"), for the same period.(2) We attribute the portfolio's performance to an improving investment environment during the reporting period, during which stocks in the emerging markets generally produced better returns than those in the developed markets. We are pleased that our individual stock selection strategy enabled the portfolio to produce higher returns than the MSCI EMF Index. What is the portfolio's investment approach? The portfolio seeks long-term capital growth by investing at least 80% of its assets 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. When selecting stocks, we seek to identify potential investments through extensive quantitative and fundamental research, using a value-oriented, research-driven approach. 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 measures, * BUSINESS HEALTH -- overall efficiency and profitability as measured by return on assets and return on equity, and The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) * BUSINESS MOMENTUM -- the presence of a catalyst that potentially will trigger a price increase near- or midterm. What other factors influenced the portfolio's performance? The past six months have been very positive for the emerging markets, largely because of the improved economic environment in the United States. Emerging market countries rely heavily on exports to the U.S. and other industrialized nations and when global demand increases, the stocks of many emerging market companies perform well. When the reporting period began, many U.S. electronics companies had begun to rebuild their inventories, which created a need for increased production from emerging market manufacturers. In this environment, the portfolio's holdings in Taiwanese semiconductor companies and South Korean electronics firms performed well. Both were areas in which the portfolio was heavily concentrated. After our holdings in these types of companies rose, we trimmed our exposure and took profits, which benefited the portfolio during the second half of the reporting period. Greater economic autonomy of many emerging market nations was another major factor contributing to the portfolio's performance. Many but not all emerging market countries have developed strong local economies, and have also gradually de-linked their currencies to the U.S. dollar. In the process of supporting their floating rate currencies, some emerging market governments have implemented long-awaited reforms in their financial systems and fiscal policies, including privatization of state-owned industries, improvements in regulatory and legal processes and a greater focus on shareholder value. In our view, all of these are positive developments. Argentina's ongoing financial and currency problems represent a clear example of how greater economic autonomy has helped insulate neighboring countries from what we believe would most certainly have been a more contagious problem several years ago. The portfolio benefited most from its holdings in India, Eastern Europe and Africa during the reporting period. In India, the portfolio's best returns stemmed from its holdings in a major gas authority, an engineering company, and a state-owned bank. In Russia, an oil and gas company benefited from rising oil prices, and several South African consumer products holdings, including food and beverage companies, reported strong returns. On the other hand, Latin American countries generally performed poorly during the reporting period. We helped the fund avoid the brunt of the region's problems by focusing on relatively defensive companies in Mexico and limiting the portfolio's exposure to Argentina and Brazil. We remain concerned that upcoming elections in Brazil might threaten the current pace of the country's fiscal reforms. What is the portfolio's current strategy? We believe that economic reforms in many emerging market countries have unearthed a number of compelling investment opportunities. As of the end of the reporting period, we have continued to favor relatively defensive companies, including an Indian aluminum manufacturer, a steel company in Taiwan and a cement firm in Mexico. We believe these companies illustrate our current desire to maintain a fairly cautious approach, at least until we have more confidence in the growth of the global economy. July 15, 2002 (1) 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, 2002, 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 EMERGING MARKET COUNTRIES IN EUROPE, LATIN AMERICA AND THE PACIFIC BASIN. The Portfolio STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
COMMON STOCKS--95.2% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ARGENTINA--.5% Perez Companc, ADR 7,821 (a) 44,580 BRAZIL--8.8% Banco Itau, ADR 3,780 105,840 Companhia de Saneamento Basico do Estado de Sao Paulo 2,960 104,590 Empresa Brasileira de Aeronautica, ADR 2,300 49,220 Petroleo Brasileiro, ADR 12,040 227,074 Tele Celular Sul Participacoes, ADR 4,400 48,488 Tele Norte Leste Participacoes, ADR 7,100 70,645 Telecomunicacoes Brasileiras, ADR 4,800 108,864 Ultrapar Participacoes, ADR 6,400 46,400 Unibanco, GDR 6,650 109,725 870,846 CHILE--.5% Quinenco, ADR 11,000 53,625 CHINA--4.0% Aluminum Corporation of China 210,000 38,769 PetroChina, Cl. H 326,000 69,379 PetroChina, ADR 1,500 32,940 Quingling Motors, Cl. H 447,000 61,892 Shangdong International Power Development, Cl. H 284,000 76,462 Sinopec Shanghai Petrochemical 315,000 (a) 46,846 Sinopec Yizheng Chemical Fibre, Cl. H 425,000 65,929 392,217 CROATIA--.7% Pliva d.d., GDR 4,900 (b) 72,226 CZECH REPUBLIC--.9% CEZ 29,700 88,561 EGYPT--2.1% Commercial International Bank, GDR 13,700 (b) 71,651 Misr International Bank, GDR 7,500 (b) 12,563 Orascom Construction Industries 4,860 30,818 Suez Cement, GDR 13,032 (b) 89,921 204,953 HONG KONG--2.7% Brilliance China Automotive 323,000 43,895 China Mobil (Hong Kong) 27,500 (a) 81,442 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HONG KONG (CONTINUED) China Mobil (Hong Kong), ADR 7,400 (a) 108,188 Shanghai Industrial Holdings 20,000 38,590 272,115 HUNGARY--2.9% EGIS 670 39,085 Gedeon Richter 600 34,515 MOL Magyar Olaj-es Gazipari 4,400 83,597 Magyar Tavkozlesi 26,200 84,167 OTP Bank 6,200 48,977 290,341 INDIA--12.0% BSES, GDR 5,150 (b) 79,310 Bajaj Auto, GDR 7,800 (b) 79,560 Gas Authority of India, GDR 8,800 (b) 80,256 Grasim Industries, GDR 9,300 (b) 61,612 Hindalco Indusries, GDR 7,000 (b) 112,000 ICICI Bank, ADR 7,750 54,250 ITC, GDR 5,700 (b) 75,753 Indian Hotels, GDR 11,650 (b) 50,678 Mahanagar Telephone Nigam, ADR 23,050 (a) 135,534 Mahindra & Mahindra, GDR 25,050 (b) 56,362 Reliance Industries, GDR 17,750 (a,b) 213,000 State Bank of India, GDR 9,800 (b) 112,700 Tata Engineering & Locomotive, GDR 25,600 (a,b) 79,360 1,190,375 INDONESIA--1.9% PT Indofood Sukses Makmur 575,000 70,943 PT Indonesian Satellite 41,000 51,526 PT Telekomunikasi Indonesia 158,000 68,002 190,471 ISRAEL--3.6% AudioCodes 8,800 (a) 21,208 Bank Hapoalim 114,450 179,798 Check Point Software Technologies 5,500 (a) 74,580 ECI Telecom 11,200 (a) 33,600 Taro Pharmaceutical Industries 2,000 (a) 49,040 358,226 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ MALAYSIA--2.8% Genting 6,000 23,052 Malaysia International Shipping 55,500 104,428 Sime Darby 110,500 145,395 272,875 MEXICO--11.5% Alfa, Ser. A 30,300 (a) 51,103 Apasco 14,300 83,983 Cemex 13,039 68,985 Coca-Cola Femsa, ADR 2,000 48,000 Consorcio ARA 42,000 (a) 61,138 Controladora Comercial Mexicana 161,500 95,496 Desc, Ser. B 157,600 87,810 Grupo Aeroportuario del Sureste, ADR 3,000 38,700 Grupo Continental 40,200 55,290 Grupo Financiero BBVA Bancomer 60,000 (a) 48,971 Kimberly-Clark de Mexico, Cl. A 93,100 247,681 Telefonos de Mexico, Ser. L, ADR 7,900 (a) 253,432 1,140,589 PANAMA--.3% Banco Latinoamericano de Exportaciones, Cl. E 2,500 31,375 PHILIPPINES--2.8% ABS-CBN Broadcasting 61,200 (a) 27,362 Bank of the Philippine Islands 24,960 23,807 Manila Electric, Cl. B 222,000 (a) 130,134 Philippine Long Distance Telephone 8,000 (a) 58,818 Philippine Long Distance Telephone, ADR 5,100 (a) 38,046 Universal Robina 44,000 3,978 282,145 POLAND--2.9% Bank Przemyslowo-Handlowy PBK 675 40,390 KGHM Polska Miedz 37,341 121,375 Polski Koncern Naftowy Orlen 13,000 (a) 57,301 Telekomunikacja Polska 24,201 (a) 65,851 284,917 RUSSIA--1.2% LUKOIL, ADR 1,850 120,250 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SOUTH AFRICA--7.1% ABSA 42,600 134,751 Aveng 49,500 38,578 Bidvest 14,100 63,186 Foschini 57,900 49,073 Metro Cash and Carry 147,222 35,855 Nampak 78,162 104,317 Nedcor 15,639 178,253 Steinhoff International 27,000 21,700 Tiger Brands 12,400 84,559 710,272 SOUTH KOREA--10.1% Hyundai Motor, GDR 15,200 (b) 87,400 KT, ADR 6,300 136,395 Kookmin Bank, ADR 4,685 230,268 Korea Electric Power, ADR 25,100 262,797 POSCO, ADR 3,200 87,264 Samsung Electronics, GDR 880 (b) 120,824 Samsung SDI, GDR 4,000 77,200 1,002,148 TAIWAN--9.2% Advanced Semiconductor Engineering 71,190 (a) 47,304 Advanced Semiconductor Engineering, ADR 2,818 (a) 9,158 Asustek Computer 39,000 117,315 China Steel 86,240 44,398 Compal Electronics 99,000 (a) 95,118 Compal Electronics, GDR 3,204 12,464 Elan Microelectronics 41,600 43,953 Nan Ya Plastic 65,740 61,588 Nien Hsing Textile 52,000 44,825 Powerchip Semiconductor, GDR 12,900 (a,b) 59,985 Sinopac Holdings 267,128 116,734 Taiwan Cellular 54,000 69,015 United Microelectronics 99,000 (a) 118,824 Yageo 166,000 (a) 73,535 914,216 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ THAILAND--3.1% Hana Microelectronics 14,000 23,769 PTT Exploration and Production 35,200 100,874 Siam Commercial Bank 108,000 (a) 76,075 Thai Farmers Bank 130,000 (a) 104,094 304,812 TURKEY--1.3% Akcansa Cimento 7,719,800 38,538 Tupras-Turkiye Petrol Rafinerileri 17,760,000 72,948 Yapi ve Kredi Bankasi 22,229,100 (a) 22,124 133,610 UNITED KINGDOM--2.3% Dimension Data 107,400 (a) 67,447 Old Mutual 114,900 164,113 231,560 TOTAL COMMON STOCKS (cost $9,531,374) 9,457,305 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--1.3% ------------------------------------------------------------------------------------------------------------------------------------ BRAZIL; Companhia Energetica de Minas Gerais (cost $135,602) 11,046 125,132 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS--20.1% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ REGULATED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 666,666 (c) 666,666 Dreyfus Institutional Cash Advantage Plus Fund 666,667 (c) 666,667 Dreyfus Institutional Preferred Plus Money Market Fund 666,667 (c) 666,667 TOTAL SHORT-TERM INVESTMENTS (cost $2,000,000) 2,000,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $11,666,976) 116.6% 11,582,437 LIABILITIES, LESS CASH AND RECEIVABLES (16.6%) (1,644,303) NET ASSETS 100.0% 9,938,134 (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 JUNE 30, 2002, THESE SECURITIES AMOUNTED TO $1,515,161 OR 15.2% OF NET ASSETS. (C) INVESTMENTS IN AFFILIATED MONEY MARKET FUNDS (SEE NOTE 3(D) IN THE PORTFOLIO'S NOTES TO FINANCIAL STATEMENTS).\
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 11,666,976 11,582,437 Cash 204,734 Cash denominated in foreign currencies 324,103 328,143 Receivable for investment securities sold 205,082 Dividends and interest receivable 37,530 Prepaid expenses 975 12,358,901 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 6,654 Payable for shares of Beneficial Interest redeemed 2,209,303 Payable for investment securities purchased 157,967 Net unrealized depreciation on forward currency exchange contracts--Note 4 83 Accrued expenses 46,760 2,420,767 -------------------------------------------------------------------------------- NET ASSETS ($) 9,938,134 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 10,183,099 Accumulated undistributed investment income--net 79,359 Accumulated net realized gain (loss) on investments and foreign currency transactions (242,312) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions (82,012) -------------------------------------------------------------------------------- NET ASSETS ($) 9,938,134 NET ASSET VALUE PER SHARE Shares Initial Shares Service -------------------------------------------------------------------------------- Net Assets ($) 9,184,133 754,001 Shares Outstanding 910,120 74,688 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 10.09 10.10 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $8,424 foreign taxes withheld at source) 157,758 Interest 5,818 TOTAL INCOME 163,576 EXPENSES: Investment advisory fee--Note 3(a) 52,636 Custodian fees 52,869 Prospectus and shareholders' reports 13,602 Auditing fees 9,681 Legal fees 687 Distribution fees--Note 3(b) 600 Shareholder servicing costs--Note 3(b) 334 Trustees' fees and expenses--Note 3(c) 249 Miscellaneous 6,339 TOTAL EXPENSES 136,997 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertaking--Note 3(a) (52,780) NET EXPENSES 84,217 INVESTMENT INCOME--NET 79,359 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions 181,417 Net realized gain (loss) on forward currency exchange contracts (7,304) NET REALIZED GAIN (LOSS) 174,113 Net unrealized appreciation (depreciation) on investments and foreign currency transactions (50,239) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 123,874 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 203,233 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 79,359 52,443 Net realized gain (loss) on investments 174,113 (265,200) Net unrealized appreciation (depreciation) on investments (50,239) 435,281 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 203,233 222,524 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (30,371) Service shares -- (1,201) TOTAL DIVIDENDS -- (31,572) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 32,051,920 13,118,634 Service shares 838,167 231,982 Dividends reinvested: Initial shares -- 30,371 Service shares -- 1,201 Cost of shares redeemed: Initial shares (28,771,698) (9,824,770) Service shares (280,567) (23,624) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 3,837,822 3,533,794 TOTAL INCREASE (DECREASE) IN NET ASSETS 4,041,055 3,724,746 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 5,897,079 2,172,333 END OF PERIOD 9,938,134 5,897,079 Undistributed investment income--net 79,359 -- The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 3,064,345 1,448,094 Shares issued for dividends reinvested -- 3,283 Shares redeemed (2,752,498) (1,088,512) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 311,847 362,865 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 78,918 25,920 Shares issued for dividends reinvested -- 130 Shares redeemed (27,691) (2,643) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 51,227 23,407 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe 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.
Six Months Ended June 30, 2002 Year Ended December 31, ------------------------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.48 9.23 13.63 12.50 Investment Operations: Investment income--net .10(b) .15(b) .04(b) .02 Net realized and unrealized gain (loss) on investments .51 .16 (4.37) 1.11 Total from Investment Operations .61 .31 (4.33) 1.13 Distributions: Dividends from investment income--net -- (.06) (.06) -- Dividends from net realized gain on investments -- -- (.01) -- Total Distributions -- (.06) (.07) -- Net asset value, end of period 10.09 9.48 9.23 13.63 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 6.43(c) 3.32 (31.81) 9.04(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .99(c) 2.00 2.00 .09(c) Ratio of net investment income to average net assets .94(c) 1.70 .36 .18(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .62(c) 3.40 1.86 1.51(c) Portfolio Turnover Rate 49.44(c) 119.06 123.49 .43(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 9,184 5,675 2,172 2,181 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended June 30, 2002 Year Ended December 31, ----------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.49 9.23 9.23 Investment Operations: Investment income--net .08(b) .16(b) -- Net realized and unrealized gain (loss) on investments .53 .16 -- Total from Investment Operations .61 .32 -- Distributions: Dividends from investment income--net -- (.06) -- Net asset value, end of period 10.10 9.49 9.23 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 6.43(c) 3.43 -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .99(c) 2.00 -- Ratio of net investment income to average net assets .80(c) 1.74 -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .73(c) 3.64 -- Portfolio Turnover Rate 49.44(c) 119.06 123.49 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 754 223 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Initial and Service. 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'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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 and premium 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. (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, 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 $340,500 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, $60,888 of the carryover expires in fiscal 2008 and $279,612 expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2001 was as follows: ordinary income $31,572. The tax character of current year distributions, if any, will be determined at the end of the current fiscal year. 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 June 30, 2002, the portfolio did not borrow under the line of credit. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 has agreed from January 1, 2002 to December 31, 2002, to waive receipt of its fee and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceed an annual rate of 2% of the value of the average daily net assets of their class. During the period ended June 30, 2002, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $52,780, pursuant to the undertaking. (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. During the period ended June 30, 2002, Service shares were charged $600 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $129 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"). 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. (d) Commencing June 13, 2002, pursuant to an exemptive order from the Securities and Exchange Commission, the portfolio invests its available cash balances in affiliated money market funds as shown in the portfolio's Statement of Investments. Management fees are not charged to these accounts. The portfolio derived $1,232 in income from these investments, which is included as interest income in the portfolio's Statement of Operations. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward currency exchange contracts, during the period ended June 30, 2002, amounted to $8,063,220 and $3,703,162, respectively. The portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the portfolio is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counter party nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain oneach open contract. The following summarizes open forward currency exchange contracts at June 30, 2002:
Foreign Forward Currency Currency Unrealized Exchange Contracts Amounts Proceeds ($) Value ($) (Depreciation) ($) ------------------------------------------------------------------------------------------------------------------------------------ SALES: Israeli Shekel, expiring 7/1/2002 293,473 61,654 61,719 (65) Mexican Peso, Expiring 7/1/2002 201,347 20,195 20,213 (18) TOTAL (83)
At June 30, 2002, accumulated net unrealized depreciation on investments was $84,539, consisting of $817,842 gross unrealized appreciation and $902,381 gross unrealized depreciation. At June 30, 2002, 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). NOTES 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 191SA0602 Dreyfus Investment Portfolios, European Equity Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 9 Statement of Assets and Liabilities 10 Statement of Operations 11 Statement of Changes in Net Assets 13 Financial Highlights 15 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, European Equity Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, European Equity Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Aaron Barnfather. Although market conditions have remained volatile, U.S. and international economies have recently begun to show signs of renewed growth, and investors appear to be taking a fresh look at the opportunities a global economic rebound could create. In particular, following two tumultuous years for equities in the U.S. and overseas, some investors are turning their attention to the long-term appreciation potential of international stocks. After all, stocks have historically produced higher long-term returns than bonds or money market funds. For investors with appropriate time horizons and attitudes toward risk, international stocks may provide considerable potential for pursuing growth over time. Indeed, as many professionals can attest, the benefits of equity investments become clearer when viewed from a perspective measured in years rather than weeks or months. If you have questions or are worried about current market conditions, we encourage you to talk with your financial advisor who can help you balance near-term risks with potential long-term rewards. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE Aaron Barnfather, Portfolio Manager How did Dreyfus Investment Portfolios, European Equity Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2002, the portfolio produced total returns of -8.04% for Initial shares and -7.98% for Service shares.(1) For the same period, the Financial Times Eurotop 300 Index ("FTSE 300 Index"), the portfolio's benchmark, produced a total return of -3.53%.(2) The portfolio and market's performance was hurt during the reporting period by negative investor sentiment caused by several factors, including accounting scandals among a number of multinational corporations, the uncertain pace of the global economic recovery and corporate earnings that failed to meet analysts' expectations. Factors that contributed to the portfolio's relative underperformance were a slight underweighting for part of the reporting period in non-cyclical goods such as beverages and tobacco, along with considerable daily cash flow movements throughout the reporting period. As of July 11, 2002, the portfolio was closed to new investors as a result of the Board of Trustees' of Dreyfus Investment Portfolios approving a proposal to liquidate European Equity Portfolio. It is anticipated that the liquidation of the portfolio will take place on or about October 21, 2002. What is the portfolio's investment approach? The portfolio seeks long-term capital growth. The portfolio's investments generally are selected from the universe of the 300 largest European companies. In choosing stocks, the portfolio establishes a global framework within which to select investments. This involves identifying and forecasting: key trends in global economic variables such as gross domestic product, inflation and interest rates; investment themes such as the impact of new technologies and the globalization of industries and brands; relative values of equity securities, bonds and cash; and long-term trends in currency movements. Within the markets and sectors determined to be relatively attractive, the portfolio seeks what it believes to be attractively priced companies that possess sustainable competitive advantages in their market or sec- The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) tor. The portfolio generally will sell securities when themes or strategies change or when the portfolio manager determines that the company's prospects have changed or its stock is fully valued by the market. What other factors influenced the portfolio's performance? The portfolio was influenced by heightened market volatility caused by negative investor sentiment. Economically, the early stages of global expansion were relatively slow and uncertain, constrained by the adverse effects of a strengthening euro on exports to the United States. In addition, the slow-growth economy limited companies' abilities to improve their profitability, which lagged substantially behind many analysts' expectations. Investors across the world were further discouraged by accounting scandals that began with the collapse of energy giant Enron Corp. and spread to a number of other multinational corporations. In this environment, we maintained a generally defensive posture, focusing on reasonably valued stocks of companies that have been able to maintain positive levels of earnings growth. This focus led us primarily to economically sensitive companies, such as services and basic industries. Our defensive stance generally led us to avoid what we believed to be relatively highly valued companies, including those in the technology hardware, pharmaceuticals and retail food industries. We also favored companies that, in our view, enjoyed strong balance sheets, and we avoided those that we considered highly leveraged. This investment theme caused us to reduce the portfolio's exposure to telecommunications companies, and increase holdings in the industrials and basic industries groups. Our security selection strategy in these sectors focused on individual companies, such as paper and forest products manufacturer Stora Enso and industrial gases business L' Air Liquide, that we believed would benefit from strong competitive positions in their markets and the ability to control prices for their products and services. Within the financial services group, we favored financially strong banks with high dividend yields and stock buy-back programs such as Danske Bank. We tended to avoid insurance companies whose earnings were hurt by declining stock prices. Another investment theme that we focused on during the reporting period was our "outsourcing" theme, in which providers of specialized corporate services are expected to benefit from a trend in which large corporations entrust non-core activities to vendors such as Vivendi Environnement. Although Vivendi Environnement was recently hurt by concerns regarding its parent company, we continue to believe that the business has excellent growth potential. What is the portfolio's current strategy? In our opinion, certain investment themes are likely to drive the market over the long term. Among them is a change in the inflation cycle, which we believe has reached a low point and has prompted a revaluation of many stocks and industry groups. We hope to benefit from this trend by avoiding the most highly valued stocks and focusing on those with lower valuations, strong business fundamentals, positive cash flows and sustained earnings growth. In the meantime, we are watchful for opportunities to take advantage of market weakness and add to our best stock ideas. In our view, our disciplined, stock-by-stock security selection strategy is the right approach to help us identify investment opportunities in today's low-inflation and low-growth environment. After October 16, 2002, shares in the European Equity Portfolio will be exchanged for shares in the Dreyfus Variable Investment Fund, Money Market Portfolio. Prior to that date, shares may be transferred into another subaccount of your variable annuity contract, which offers several investment options that you may consider as attractive alternatives. If you have questions about your account or other investment options, please consult your financial representative. July 15, 2002 (1) 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, 2002, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. Part of the portfolio's recent performance is attributable to its initial public offering (IPO) investments. There can be no guarantee that IPOs will have or continue to have a positive effect on the portfolio's performance. (2) SOURCE: BLOOMBERG L.P. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE FINANCIAL TIMES EUROTOP 300 INDEX IS A MARKET CAPITALIZATION INDEX OF EUROPE'S 300 LARGEST COMPANIES. The Portfolio STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
COMMON STOCKS--96.5% Shares Value ($) ---------------------------------------------------------------------------------------------------------------------------------- AUSTRIA--1.3% Erste Bank der oesterreichischen Sparkassen 3,680 264,145 BELGIUM--1.3% Omega Pharma 5,790 260,502 DENMARK--4.3% Danske Bank 14,120 260,916 ISS 5,520 (a) 292,379 Novo Nordisk, Cl. B 8,970 297,995 851,290 FINLAND--6.1% Fortum 41,500 239,622 Metso 20,950 276,642 Nokia 26,440 388,745 Stora Enso, Cl. R 22,780 314,140 1,219,149 FRANCE--17.2% Aventis 7,810 555,941 Business Objects 5,350 (a) 157,374 Credit Agricole 8,110 181,033 L'Air Liquide 2,245 347,008 Lafarge 3,500 350,707 Pechiney, Cl. A 2,100 96,358 Schneider Electric 6,610 357,071 Societe Generale 5,540 366,599 TotalFinaElf 3,840 626,309 Vivendi Environnement 12,710 394,050 3,432,450 GERMANY--4.5% Deutsche Bank 2,500 174,486 Deutsche Boerse 5,240 222,240 Muenchener Rueckversicherungs-Gesellschaft 1,220 289,882 Volkswagen 4,390 214,282 900,890 IRELAND--2.6% DePfa Bank 3,680 200,801 Irish Life & Permanent 14,800 215,107 Riverdeep 39,200 (a) 104,615 520,523 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ITALY--7.4% Amplifon 7,090 167,409 Assicurazioni Generali 13,570 322,703 ENI 24,260 388,102 IntesaBci 89,330 275,001 Telecom Italia 41,950 332,658 1,485,873 NETHERLANDS--4.6% Koninklijke (Royal) KPN 57,700 (a) 271,337 Koninklijke (Royal) Philips Electronics 4,810 134,905 VNU 9,860 275,268 Vedior 16,350 227,092 908,602 SPAIN--1.8% Aldeasa 3,954 63,706 Aurea Concesiones de Infraestructuras del Estado 5,870 135,399 Endesa 10,390 151,629 350,734 SWEDEN--2.0% Alfa Laval 20,030 201,441 Nordea 36,950 201,959 403,400 SWITZERLAND--10.2% Converium 4,410 228,878 Kuoni Reisen 450 (a) 127,556 Nestle 2,080 (a) 487,116 Novartis 11,850 (a) 523,441 STMicroelectronics 6,990 175,103 UBS 9,600 (a) 484,957 2,027,051 UNITED KINGDOM--33.2% Abbey National 5,600 66,218 BAE SYSTEMS 59,700 306,332 Barclays 49,900 421,904 Compass Group 52,200 318,220 EMAP 14,100 171,966 Enterprise Inns 13,225 104,322 GlaxoSmithKline 20,000 434,390 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) HBOS 13,800 150,076 HSBC Holdings 54,700 632,150 Imperial Chemical Industries 48,500 236,977 Matalan 44,400 212,183 Millennium & Copthorne Hotels 46,200 212,294 Minerva 41,900 172,467 mm02 167,710 (a) 107,890 Pearson 17,400 173,902 Prudential 36,300 333,604 Serco Group 18,500 56,390 Shell Transport & Trading 192,600 1,460,277 Standard Chartered 27,600 295,924 Vodafone Group 413,900 570,574 William Hill 9,000 36,531 Xstrata 11,600 (a) 150,937 6,625,528 TOTAL COMMON STOCKS (cost $18,691,536) 19,250,137 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--1.8% ------------------------------------------------------------------------------------------------------------------------------------ GERMANY; Henkel (cost $323,154) 5,170 356,989 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $19,014,690) 98.3% 19,607,126 CASH AND RECEIVABLES (NET) 1.7% 344,686 NET ASSETS 100.0% 19,951,812 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 19,014,690 19,607,126 Cash 650,074 Receivable for investment securities sold 180,279 Dividends receivable 53,149 Receivable for shares of Beneficial Interest subscribed 414 Prepaid expenses 784 20,491,826 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 4,621 Payable for shares of Beneficial Interest redeemed 381,213 Payable for investment securities purchased 103,586 Accrued expenses 50,594 540,014 -------------------------------------------------------------------------------- NET ASSETS ($) 19,951,812 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 29,452,064 Accumulated undistributed investment income--net 171,776 Accumulated net realized gain (loss) on investments and foreign currency transactions (10,268,867) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions 596,839 -------------------------------------------------------------------------------- NET ASSETS ($) 19,951,812 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 19,590,128 361,684 Shares Outstanding 1,992,033 36,474 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 9.83 9.92 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $35,652 foreign taxes withheld at source) 322,973 Interest 2,675 TOTAL INCOME 325,648 EXPENSES: Investment advisory fee--Note 3(a) 123,098 Custodian fees 52,905 Prospectus and shareholders' reports 16,807 Auditing fees 14,875 Legal fees 2,561 Shareholder servicing costs--Note 3(b) 473 Distribution fees--Note 3(b) 447 Loan commitment fees--Note 2 150 Miscellaneous 4,138 TOTAL EXPENSES 215,454 Less--waiver of fees due to undetaking--Note 3(a) (61,582) NET EXPENSES 153,872 INVESTMENT INCOME--NET 171,776 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (2,564,224) Net realized gain (loss) on forward currency exchange contracts 5,705 Net realized gain (loss) on financial futures (22,987) NET REALIZED GAIN (LOSS) (2,581,506) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 1,317,965 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1,263,541) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,091,765) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 171,776 240,448 Net realized gain (loss) on investments (2,581,506) (6,070,796) Net unrealized appreciation (depreciation) on investments 1,317,965 2,199,710) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,091,765) (8,030,058) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (195,597) Service shares -- (1,737) TOTAL DIVIDENDS -- (197,334) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 149,045,685 269,610,379 Service shares 1,923,528 3,816,564 Dividends reinvested: Initial shares -- 195,597 Service shares -- 1,737 Cost of shares redeemed: Initial shares (151,781,390) (268,856,682) Service shares (1,858,311) (3,515,201) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (2,670,488) 1,252,394 TOTAL INCREASE (DECREASE) IN NET ASSETS (3,762,253) (6,974,998) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 23,714,065 30,689,063 END OF PERIOD 19,951,812 23,714,065 Undistributed investment income--net 171,776 -- The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 14,860,270 23,289,192 Shares issued for dividends reinvested -- 17,926 Shares redeemed (15,058,676) (23,165,652) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (198,406) 141,466 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 193,980 334,787 Shares issued for dividends reinvested -- 162 Shares redeemed (184,950) (307,538) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 9,030 27,411 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe 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.
Six Months Ended June 30, 2002 Year Ended December 31, ------------------------------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 10.69 14.98 15.96 12.50 Investment Operations: Investment income--net .07(b) .10(b) .10(b) .04(b) Net realized and unrealized gain (loss) on investments (.93) (4.31) (.37) 3.61 Total from Investment Operations (.86) (4.21) (.27) 3.65 Distributions: Dividends from investment income--net -- (.08) (.03) (.03) Dividends from net realized gain on investments -- -- (.68) (.16) Total Distributions -- (.08) (.71) (.19) Net asset value, end of period 9.83 10.69 14.98 15.96 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (8.04)(c) (28.13) (2.00) 29.20(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .62(c) 1.25 1.27 1.01(c) Ratio of net investment income to average net assets .69(c) .81 .62 .32(c) Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .25(c) .19 .33 2.38(c) Portfolio Turnover Rate 63.15(c) 146.49 144.74 99.89(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 19,590 23,418 30,689 6,592 (A) FROM APRIL 30, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended June 30, 2002 Year Ended December 31, ------------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 10.77 14.98 14.98 Investment Operations: Investment income--net .06(b) .05(b) -- Net realized and unrealized gain (loss) on investments (.91) (4.18) -- Total from Investment Operations (.85) (4.13) -- Distributions: Dividends from investment income--net -- (.08) -- Net asset value, end of period 9.92 10.77 14.98 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (7.98)(c) (27.59) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .61(c) 1.25 -- Ratio of net investment income to average net assets .64(c) .43 -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .41(c) .52 -- Portfolio Turnover Rate 63.15(c) 146.49 144.74 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 362 296 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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. ("Mellon") which is a wholly-owned subsidiary of Mellon Financial Corporation. Newton Capital Management Limited ("Newton"), an affiliate of Mellon, serves as the portfolio's sub-investment adviser. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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'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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (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 and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $1,034 during the period ended June 30, 2002 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, 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 $5,720,638 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2001 was as follows: ordinary income $197,334. The tax character of current year distributions, if any, will be determined at the end of the current fiscal year. 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2002, 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 has agreed, from January 1, 2002 to December 31, 2002 to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses exceed an annual rate of 1.25% of the value of the average daily net assets of their classes. During the period ended June 30, 2002, Dreyfus waived receipt of fees of $61,582, pursuant to the undertaking. 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 or more. . . . . . . . . .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 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. During the period ended June 30, 2002, Service shares were charged $447 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $127 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"). 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 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 June 30, 2002, amounted to $14,621,087 and $20,180,188, 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 Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 June 30, 2002, there were no forward currency exchange contracts outstanding. 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 June 30, 2002, there were no financial futures contracts outstanding. At June 30, 2002, accumulated net unrealized appreciation on investments was $592,436, consisting of $1,773,152 gross unrealized appreciation and $1,180,716 gross unrealized depreciation. At June 30, 2002, 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). NOTE 5--Subsequent Event: At a meeting of the Board of Trustees of Dreyfus Investment Portfolios held on July 11, 2002, the Board approved a proposal to liquidate the European Equity Portfolio (the "Portfolio"), distribute the Portfolio's assets to Portfolio shareholders and close out Portfolio shareholder accounts. The liquidation is expected to occur on or about October 21, 2002. In anticipation of the Portfolio's liquidation, effective immediately, the Portfolio will be closed to any investments for new accounts. 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 181SA0602 Dreyfus Investment Portfolios, Founders Discovery Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 15 Financial Highlights 17 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Discovery Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Founders Discovery Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. 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, of Founders Asset Management LLC, the portfolio's sub-investment adviser. The U.S. stock market confronted a number of formidable challenges during the first half of 2002. In addition to lackluster corporate earnings and the ongoing war on terrorism, investors have recently contended with questions regarding the accuracy of certain companies' financial statements. These and other influences drove the Russell 2000 Index, a widely accepted benchmark of domestic small-cap stock performance, down during the first six months of the year. Nonetheless, we are generally optimistic about the future. The economy has begun to recover, showing signs of sustained growth that should have a positive effect on corporate earnings. Recent market declines may have created attractive values in some stocks. At the same time, we believe that today's accounting scandals will likely lead to higher standards and stronger oversight of corporate behavior, which should give investors greater confidence in the future. During turbulent times like these it is important to have an investment horizon that is measured in years, not weeks or months. Remember that over the long term, stocks have historically produced higher returns than other types of investments. For investors with a long-term perspective, stocks should continue to provide considerable potential for growth. As always, we urge you to talk with your financial advisor if you have questions or concerns about the markets or your investment portfolio. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 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 six-month period ended June 30, 2002, the portfolio produced total returns of -17.53% for its Initial shares and -17.48% for its Service shares.(1) In comparison, the Russell 2000 Index, the portfolio's benchmark, and the Russell 2000 Growth Index produced total returns of -4.70% and -17.35%, respectively, for the same period.(2,3 )Because the portfolio currently focuses primarily on small-cap growth stocks, we believe that the Russell 2000 Growth Index is also an accurate measure of the portfolio's performance for comparison purposes. We attribute the portfolio and market's disappointing performance to investor uncertainty over an economic recovery, negative investor sentiment amid high-profile accounting scandals and the lingering bear market in technology stocks, which began in mid-2000 and has adversely affected growth stocks in a number of industry groups. 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, with particular emphasis on companies that we believe are well managed and well positioned within their industries. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) What other factors influenced the portfolio's performance? The portfolio' s performance was primarily affected by continued weakness among growth-oriented stocks during the reporting period. Since mid-2000, returns from growth stocks have generally trailed those of value-oriented stocks by a substantial margin. We attribute this disappointing performance primarily to excessive valuations reached during the technology stock boom of the late 1990s. Compared to "old economy" value stocks, "new economy" growth stocks had much farther to fall when the economy began to weaken in 2000. Technology and telecommunications stocks were particularly hard-hit when customer demand fell steeply and remained low, leaving these companies with bloated inventories, too much capacity and heavy debt loads. Capital became much more difficult to obtain as equity investors and lenders pulled back financing. As a result, revenues and earnings declined, leaving some growth companies, including many with otherwise promising business models, unable to service their debts. Small-cap growth stocks were also adversely affected by the terrorist attacks of 2001 and the accounting scandals of 2002, which created a "flight to quality" among investors who flocked to stocks of companies with more predictable and typically slower growth in earnings. Although the accounting scandals were found mainly among large-cap companies, small-cap stocks were also affected by negative investor sentiment. In this environment, the portfolio's performance was especially hurt by its holdings of technology and telecommunications equipment stocks. Even though the portfolio's exposure to technology stocks was less than that of the Russell 2000 Growth Index, the sector contributed negatively to performance because of our focus on security-oriented technology providers, which we expected to benefit from greater vigilance among corporations, and semiconductor stocks, which retreated after posting healthy gains in late 2001. While health care was one of the weaker performing sectors for the Russell 2000 Growth Index during the reporting period, we were able to find some strong performers in the sector, and generally avoided biotechnology, the worst-performing industry within the sector. Our investment process has helped to steer us away from tak- ing large positions in "concept stocks," which are those stocks that tend to trade on news and psychology rather than on earnings and fundamentals. We currently believe that many biotechnology stocks fall under this "concept stock" classification. The portfolio's performance has benefited from being underweighted in the poor-performing biotech area during the reporting period. What is the portfolio's current strategy? Although the economy is recovering, the strength and sustainability of the rebound remains uncertain. As a result, in our view, many investors have continued to sit on the sidelines. We believe that capital spending is unlikely to improve substantially until the outlook for an economic recovery becomes clearer. Accordingly, we have recently focused on companies that we believe can boost their earnings through greater operating efficiency and lower costs. We have found a number of such opportunities among both consumer and industrial companies, leading us to emphasize both areas. On the other hand, we have continued to de-emphasize technology stocks because of the unpredictability of their earnings. Of course, we are prepared to change our strategy and the portfolio's composition as market conditions evolve. July 15, 2002 (1) 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, 2002, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. Part of the portfolio's recent performance is attributable to its initial public offering (IPO) investments. There can be no guarantee that IPOs will have or continue to have a positive effect on the portfolio's performance. (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. (3) SOURCE: LIPPER INC. -- THE RUSSELL 2000 GROWTH INDEX IS AN UNMANAGED INDEX, WHICH MEASURES THE PERFORMANCE OF THOSE RUSSELL 2000 COMPANIES WITH HIGHER PRICE-TO-BOOK RATIOS AND HIGHER FORECASTED GROWTH VALUES. The Portfolio STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
STATEMENT OF INVESTMENTS COMMON STOCKS--90.5% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AEROSPACE & DEFENSE--.6% Alliant Techsystems 1,230 (a) 78,474 AIR FREIGHT & LOGISTICS--1.9% C.H. Robinson Worldwide 1,858 62,299 Forward Air 1,670 (a) 54,743 Pacer International 8,440 (a) 145,506 262,548 APPAREL, ACCESSORIES & LUXURY GOODS--.8% Columbia Sportswear 3,270 (a) 104,637 AUTO PARTS & EQUIPMENT--.9% Tower Automotive 9,010 (a) 125,690 BANKS--.7% Southwest Bancorporation of Texas 2,770 (a) 100,329 BIOTECHNOLOGY--.9% Celgene 2,349 (a) 35,940 Cephalon 1,020 (a) 46,104 Myriad Genetics 2,320 (a) 47,189 129,233 BROADCASTING & CABLE TV--.3% Radio One, Cl. D 3,290 (a) 48,922 CASINOS & GAMING--.7% Penn National Gaming 5,040 (a) 91,476 COMMERCIAL SERVICES--6.9% Career Education 2,840 (a) 127,800 Corinthian Colleges 6,290 (a) 213,168 Education Management 4,590 (a) 186,951 FTI Consulting 1,580 (a) 55,316 ITT Educational Services 12,020 (a) 262,036 Strayer Education 570 36,252 TeleTech Holdings 7,240 (a) 69,070 950,593 CONSTRUCTION & ENGINEERING--1.7% Jacobs Engineering Group 4,520 (a) 157,206 Quanta Services 7,613 (a) 75,140 232,346 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER ELECTRONICS--1.0% Harman International 2,820 138,885 CONSUMER FINANCE--.5% AmeriCredit 2,280 (a) 63,954 DATA PROCESSING SERVICES--.7% Investors Financial Services 2,740 91,900 ELECTRICAL COMPONENTS & EQUIPMENT--1.2% AMETEK 3,000 111,750 AstroPower 2,676 (a) 52,557 164,307 ELECTRONIC EQUIPMENT & INSTRUMENTS--1.5% Aeroflex 9,060 (a) 62,967 Arrow Electronics 2,570 (a) 53,327 Tech Data 2,250 (a) 85,162 201,456 ENVIRONMENTAL SERVICES--2.2% Stericycle 5,640 (a) 199,712 Waste Connections 3,090 (a) 96,532 296,244 HEALTH CARE--12.2% AMN Healthcare Services 2,780 97,328 Accredo Health 5,837 (a) 269,319 AmeriPath 4,100 (a) 98,400 Charles River Laboratories International 6,160 (a) 215,908 Community Health Systems 8,250 (a) 221,100 Cross Country 2,190 82,782 DIANON Systems 1,280 (a) 68,378 Integra LifeSciences Holdings 6,700 (a) 145,725 Medical Staffing Network Holdings 4,690 114,905 Omnicare 3,420 89,809 Patterson Dental 1,942 (a) 97,741 Schein (Henry) 2,460 (a) 109,470 United Surgical Partners International 1,920 (a) 58,579 1,669,444 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HOME FURNISHINGS--1.2% Furniture Brands International 5,310 (a) 160,627 HOTELS, RESORTS & CRUISE LINES--1.8% Fairmont Hotels & Resorts 6,020 155,196 Hotels.com, Cl. A 2,190 (a) 92,484 247,680 INDUSTRIAL--2.1% Pentair 5,270 253,382 Roper Industries 1,050 39,165 292,547 INFORMATION TECHNOLOGY CONSULTING & SERVICES--.7% Braun Consulting 8,441 (a) 29,459 Keane 3,620 (a) 46,155 Management Network Group 7,259 (a) 16,841 92,455 INSURANCE BROKERS--.5% Gallagher (Arthur J.) & Co. 2,170 75,190 INTERNET SOFTWARE & SERVICES--1.0% WebEx Communications 8,590 (a) 136,581 LEISURE PRODUCTS--2.0% Brunswick 5,430 152,040 Nautilus Group 4,000 (a) 122,400 274,440 MERCHANDISE STORES--.5% Tuesday Morning 3,360 (a) 62,362 METAL & GLASS CONTAINERS--.4% Crown Cork & Seal 7,610 (a) 52,128 MOVIES & ENTERTAINMENT--1.0% Macrovision 10,246 (a) 134,325 NETWORKING EQUIPMENT--.3% NetScreen Technologies 4,500 41,310 OIL & GAS--2.1% National-Oilwell 6,014 (a) 126,595 Pioneer Natural Resources 3,760 (a) 97,948 Spinnaker Exploration 1,780 (a) 64,116 288,659 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICALS--3.9% First Horizon Pharmaceutical 7,470 (a) 154,554 Medicis Pharmaceutical, Cl. A 4,530 (a) 193,703 SICOR 9,946 (a) 184,399 532,656 REAL ESTATE INVESTMENT TRUSTS--.9% La Quinta 17,740 (a) 128,615 RESTAURANTS--1.3% Ruby Tuesday 9,450 183,330 RETAIL--10.4% Alloy 15,350 (a) 221,654 CDW Computer Centers 1,922 (a) 89,969 Children's Place Retail Stores 2,370 (a) 62,807 Duane Reade 6,610 (a) 225,070 Electronics Boutique Holdings 4,170 (a) 122,181 GameStop 4,860 102,011 Genesco 6,650 (a) 161,927 Insight Enterprises 9,248 (a) 232,957 Tweeter Home Entertainment Group 658 (a) 10,752 Ultimate Electronics 4,328 (a) 112,138 Whole Foods Market 1,550 (a) 74,741 1,416,207 SEMICONDUCTORS & EQUIPMENT--6.0% AXT 7,701 (a) 61,454 Brooks-PRI Automation 4,879 (a) 124,707 Cymer 1,670 (a) 58,517 Electro Scientific Industries 4,340 (a) 105,462 Entegris 8,260 (a) 120,596 FEI 1,750 (a) 42,892 Helix Technology 4,520 93,112 Microtune 13,630 (a) 121,443 Silicon Laboratories 3,550 (a) 96,063 824,246 SOFTWARE--4.8% Activision 3,600 (a) 104,616 Documentum 10,830 (a) 129,960 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SOFTWARE (CONTINUED) NetIQ 3,350 (a) 75,810 Retek 3,910 (a) 95,013 Secure Computing 8,671 (a) 65,466 THQ 6,180 (a) 184,288 655,153 SPECIALTY CHEMICALS--.8% RPM 7,050 107,512 SPECIALTY STORES--7.3% Cost Plus 4,210 (a) 128,232 Foot Locker 15,750 (a) 227,587 Hollywood Entertainment 7,780 (a) 160,890 Linens 'n Things 3,490 (a) 114,507 Movie Gallery 7,090 (a) 149,741 Rent-A-Center 3,820 (a) 221,598 1,002,555 TELECOMMUNICATIONS EQUIPMENT--3.6% Centillium Communications 10,500 (a) 91,560 DMC Stratex Networks 33,082 (a) 66,495 Harris 2,156 78,133 Powerwave Technologies 14,960 (a) 137,034 REMEC 20,318 (a) 113,984 487,206 TRADING COMPANIES & DISTRIBUTORS--1.3% Fastenal 4,460 171,755 TRUCKING--1.9% Werner Enterprises 8,360 178,152 Yellow 2,400 (a) 77,760 255,912 TOTAL COMMON STOCKS (cost $13,363,725) 12,373,889 Principal SHORT-TERM INVESTMENTS--8.0% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTES; Federal Home Loan Mortgage Corp., 1.88%, 7/1/2002 (cost $1,100,000) 1,100,000 1,100,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $14,463,725) 98.5% 13,473,889 CASH AND RECEIVABLES (NET) 1.5% 203,925 NET ASSETS 100.0% 13,677,814 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 14,463,725 13,473,889 Receivable for investment securities sold 249,212 Receivable for shares of Beneficial Interest subscribed 24,011 Dividends receivable 725 Prepaid expenses 2,515 13,750,352 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 15,714 Payable for shares of Beneficial Interest redeemed 22,858 Cash overdraft due to Custodian 7,833 Payable for investment securities purchased 6,369 Accrued expenses 19,764 72,538 -------------------------------------------------------------------------------- NET ASSETS ($) 13,677,814 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 22,631,114 Accumulated investment (loss) (83,118) Accumulated net realized gain (loss) on investments (7,880,346) Accumulated net unrealized appreciation (depreciation) on investments (989,836) -------------------------------------------------------------------------------- NET ASSETS ($) 13,677,814 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 10,740,208 2,937,606 Shares Outstanding 1,326,940 364,001 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 8.09 8.07 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 12,585 Cash dividends 6,116 TOTAL INCOME 18,701 EXPENSES: Investment advisory fee--Note 3(a) 71,406 Auditing fees 11,774 Custodian fees--Note 3(b) 9,199 Prospectus and shareholders' reports 4,740 Distribution fees--Note 3(b) 3,649 Legal fees 1,173 Shareholder servicing costs--Note 3(b) 343 Trustees' fees and expenses--Note 3(c) 239 Loan commitment fees--Note 2 83 Miscellaneous 418 TOTAL EXPENSES 103,024 Less--waiver of fees due to undertaking--Note 3(a) (1,205) NET EXPENSES 101,819 INVESTMENT (LOSS) (83,118) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (1,289,173) Net unrealized appreciation (depreciation) on investments (1,599,061) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (2,888,234) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,971,352) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (83,118) (119,640) Net realized gain (loss) on investments (1,289,173) (4,535,106) Net unrealized appreciation (depreciation) on investments (1,599,061) 1,679,769 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,971,352) (2,974,977) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 1,134,747 6,101,009 Service shares 1,251,669 2,745,217 Cost of shares redeemed: Initial shares (2,740,005) (2,337,131) Service shares (351,249) (140,798) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (704,838) 6,368,297 TOTAL INCREASE (DECREASE) IN NET ASSETS (3,676,190) 3,393,320 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 17,354,004 13,960,684 END OF PERIOD 13,677,814 17,354,004 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 121,609 592,255 Shares redeemed (299,459) (247,406) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (177,850) 344,849 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 138,473 279,296 Shares redeemed (40,127) (13,683) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 98,346 265,613 SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2002 Year Ended December 31, -------------------------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999(a) --------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 9.81 12.04 13.89 12.50 Investment Operations: Investment income (loss)--net (.05)(b) (.08)(b) (.08)(b) .01 Net realized and unrealized gain (loss) on investments (1.67) (2.15) (1.71) 1.38 Total from Investment Operations (1.72) (2.23) (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 8.09 9.81 12.04 13.89 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%) (17.53)(c) (18.52) (13.02) 11.12(c) --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .62(c) 1.39 1.41 .07(c) Ratio of net investment income (loss) to average net assets (.51)(c) (.77) (.60) .06(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- .11 .52 1.45(c) Portfolio Turnover Rate 66.80(c) 106.00 123.96 7.49(c) --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 10,740 14,755 13,960 2,223 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) Six Months Ended June 30, 2002 Year Ended December 31, -------------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.78 12.04 12.04 Investment Operations: Investment (loss) (.05)(b) (.09)(b) -- Net realized and unrealized gain (loss) on investments (1.66) (2.17) -- Total from Investment Operations (1.71) (2.26) -- Net asset value, end of period 8.07 9.78 12.04 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (17.48)(c) (18.77) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .69(c) 1.49 -- Ratio of investment (loss) to average net assets (.57)(c) (1.02) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .04(c) .28 -- Portfolio Turnover Rate 66.80(c) 106.00 123.96 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 2,938 2,599 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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'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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $180 during the period ended June 30, 2002 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, 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 $5,942,508 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, $1,024,575 of the carryover expires in fiscal 2008 and $4,917,933 expires in fiscal 2009. 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 June 30, 2002, 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) Dreyfus has agreed from January 1, 2002 to December 31, 2002, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses, exceed 1.50% of the value of the average daily net assets of their class. During the period ended June 30, 2002, Dreyfus waived receipt of fees of $1,205, pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and 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. During the period ended June 30, 2002, Service shares were charged $3,649 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $87 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 June 30, 2002, the portfolio was charged $9,199 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 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 June 30, 2002, amounted to $9,667,318 and $9,747,517, respectively. At June 30, 2002, accumulated net unrealized depreciation on investments was $989,836, consisting of $1,465,586 gross unrealized appreciation and $2,455,422 gross unrealized depreciation. At June 30, 2002, 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 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 193SA0602 Dreyfus Investment Portfolios, Founders Growth Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 14 Financial Highlights 16 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Growth Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Founders Growth Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, John Jares, CFA, of Founders Asset Management LLC, the portfolio's sub-investment adviser. The U.S. stock market confronted a number of formidable challenges during the first half of 2002. In addition to lackluster corporate earnings and the ongoing war on terrorism, investors have recently contended with questions regarding the accuracy of certain companies' financial statements. These and other influences drove the Standard & Poor's 500 Composite Stock Price Index, a widely accepted benchmark of domestic large-cap stock performance, down during the first six months of the year. Nonetheless, we are generally optimistic about the future. The economy has begun to recover, showing signs of sustained growth that should have a positive effect on corporate earnings. Recent market declines may have created attractive values in some stocks. At the same time, we believe that today's accounting scandals will likely lead to higher standards and stronger oversight of corporate behavior, which should give investors greater confidence in the future. During turbulent times like these it is important to have an investment horizon that is measured in years, not weeks or months. Remember that over the long term, stocks have historically produced higher returns than other types of investments. For investors with a long-term perspective, stocks should continue to provide considerable potential for growth. As always, we urge you to talk with your financial advisor if you have questions or concerns about the markets or your investment portfolio. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE John Jares, CFA, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders Growth Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2002, the portfolio's Initial shares produced a total return of -18.47% and its Service shares produced a total return of -18.42%.(1) In contrast, the Standard & Poor's 500/BARRA Growth Index (the "Index"), the portfolio's benchmark, produced a total return of -16.92% for the same period.(2) We believe that the primary reason for the stock market' s weakness is deteriorating investor confidence in the integrity of published financial statements. A second reason is the concern over global tensions and terrorism. These factors have had a particularly harsh impact on growth stocks, which tend to have higher stock prices in relation to corporate earnings than other investments and often have farther to fall in a bear market. The portfolio underperformed the Index due to an underweighted position in consumer staples, which performed relatively well throughout the reporting period. In addition, poor performance in the portfolio's technology holdings also hindered performance as well. 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 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? During the reporting period, a number of major companies announced that their financial statements were rife with accounting errors, requiring restatements of past results. Investor confidence has been eroded by apparent ethical lapses and, in some cases, allegations of outright fraud by corporate management. The potential conflicts of interest among accounting firms and corporate boards of directors added to these concerns. Furthermore, the increase in global tensions arising from the September 11 terrorist attacks and the Middle East conflict has weighed heavily on the markets. For example, we believe that oil prices are significantly higher than they otherwise would be due to the fear of terrorism. Higher energy costs translate into lower profits for many companies, as well as slower overall economic growth. Because growth companies tend to sell at higher valuations than slower growing businesses, they tend to get punished more in down markets. Technology stocks have been particularly hard-hit during the reporting period because many of them depend on business spending, which remained anemic during the first half of 2002. Pharmaceuticals stocks also declined sharply, partly because drug patents are expiring without a plentiful infusion of replacements in the pipeline. In addition, some high-profile drug companies were in the headlines with alleged accounting problems. Fortunately, some of the portfolio' s holdings were able to shrug off the recently gloomy market environment. One example is Royal Caribbean Cruises Ltd., the world's second largest cruise company, which bounced back from the September 11 attacks by posting better than expected earnings. Another strong performer was Union Pacific, a railroad company that, under more normal circumstances, may seem an unlikely candidate for a growth fund. However, the company has posted double-digit earnings growth during a period in which most traditional growth companies fell on hard times. A case in point is AOL Time Warner, where subscriber growth and advertising revenues failed to rebound significantly during the first half of 2002. What is the portfolio's current strategy? While our growth strategy hasn't changed, opportunities in the marketplace are constantly shifting. For example, biotechnology stocks have recently done very poorly, which is typical in a down market in which investors seek to shun risk. However, we believe biotechnology companies have continued to offer exciting possibilities in terms of scientific discoveries that, potentially, can improve earnings for those companies. We believe the financial services industry group remains attractive, because the Federal Reserve Board is unlikely to raise interest rates until the sluggish economic recovery gains momentum. That should benefit credit card companies and others that stand to benefit from the relatively wide difference between lending rates and the cost of funds. Finally, we believe that companies in economically sensitive industries, such as technology, may do well as the economy recovers. In the meantime, the growth style of investing -- and the stock market as a whole -- would benefit from an absence of headlines concerning misstated earnings and terrorist activities. July 15, 2002 (1) 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, 2002, 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 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 STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
STATEMENT OF INVESTMENTS COMMON STOCKS--86.5% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AEROSPACE & DEFENSE--1.0% Lockheed Martin 3,306 229,767 ALUMINUM--1.0% Alcoa 6,844 226,879 APPLICATION SOFTWARE--1.5% Retek 4,631 (a) 112,533 Siebel Systems 16,642 (a) 236,649 349,182 BANKS--1.3% Bank of America 4,259 299,663 BIOTECHNOLOGY--4.2% Amgen 9,526 (a) 398,949 MedImmune 6,517 (a) 172,049 Serono, ADR 25,323 412,765 983,763 BROADCASTING & CABLE TV--2.3% Clear Channel Communications 10,364 (a) 331,855 Comcast, Cl. A 9,270 (a) 217,196 549,051 CASINOS & GAMING--.8% Mandalay Resort 6,577 (a) 181,328 COMPUTERS & ELECTRONICS RETAIL--1.1% Best Buy 7,317 (a) 265,607 COMPUTER HARDWARE--.8% Dell Computer 7,066 (a) 184,705 CONSUMER FINANCE--1.4% MBNA 9,762 322,829 DEPARTMENT STORES--1.4% Kohl's 4,680 (a) 327,974 DIVERSIFIED COMMERCIAL SERVICES--2.1% Cendant 30,802 (a) 489,136 DIVERSIFIED FINANCIAL SERVICES--5.0% Citigroup 16,904 655,030 Goldman Sachs Group 4,586 336,383 Morgan Stanley 4,351 187,441 1,178,854 DRUG RETAIL--1.6% Walgreen 9,846 380,351 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ FOOD RETAIL--.8% Kroger 9,974 (a) 198,483 FOREST PRODUCTS--.7% Weyerhaeuser 2,714 173,289 GENERAL MERCHANDISING STORES--2.1% Costco Wholesale 6,017 (a) 232,377 Wal-Mart Stores 4,912 270,209 502,586 HEALTHCARE DISTRIBUTORS & SERVICES--.9% Express Scripts 3,667 (a) 183,753 Omnicare 1,082 28,413 212,166 HEALTHCARE EQUIPMENT--.7% Medtronic 3,923 168,101 HOME IMPROVEMENT RETAIL--2.7% Home Depot 7,157 262,877 Lowe's Cos. 8,277 375,776 638,653 HOUSEHOLD PRODUCTS--1.7% Procter & Gamble 4,594 410,244 IT CONSULTING SERVICES--.9% Accenture, Cl. A 11,605 220,495 INDUSTRIAL CONGLOMERATES--3.6% General Electric 17,034 494,838 3M 2,895 356,085 850,923 INDUSTRIAL GASES--.9% Praxair 3,571 203,440 INDUSTRIAL MACHINERY--1.1% Illinois Tool Works 3,640 248,612 INSURANCE BROKERS--1.8% American International Group 3,177 216,767 Marsh & McLennan Cos. 2,070 199,962 416,729 LEISURE FACILITIES--3.3% Royal Caribbean Cruises 40,367 787,156 MOTORCYCLE MANUFACTURERS--1.3% Harley-Davidson 5,898 302,390 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ MOVIES & ENTERTAINMENT--4.6% AOL Time Warner 15,921 (a) 234,198 Viacom, Cl. B 13,237 (a) 587,326 Walt Disney 14,321 270,667 1,092,191 NETWORKING EQUIPMENT--2.3% Brocade Communications Systems 14,072 (a) 245,979 Cisco Systems 21,861 (a) 304,961 550,940 PERSONAL PRODUCTS--3.3% Estee Lauder Cos., Cl. A 21,854 769,261 PHARMACEUTICALS--5.5% Abbott Laboratories 2,371 89,268 Allergan 5,362 357,914 Johnson & Johnson 8,528 445,673 Pfizer 7,618 266,630 Wyeth 2,405 123,136 1,282,621 PUBLISHING--.9% Tribune 4,937 214,760 RAILROADS--3.3% CSX 4,589 160,844 Union Pacific 9,765 617,929 778,773 RESTAURANTS--1.0% McDonald's 8,472 241,028 SEMICONDUCTOR EQUIPMENT--1.6% Novellus Systems 7,547 (a) 256,598 KLA-Tencor 2,673 (a) 117,585 374,183 SEMICONDUCTORS--6.9% Intel 27,117 495,428 Maxim Integrated Products 8,186 (a) 313,769 Micron Technology 5,955 (a) 120,410 STMicroelectronics 10,367 252,229 Taiwan Semiconductor Manufacturing, ADR 9,037 (a) 117,493 Texas Instruments 13,446 318,670 1,617,999 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SOFT DRINKS--2.6% Coca-Cola 4,704 263,424 PepsiCo 7,432 358,222 621,646 SYSTEMS SOFTWARE--6.2% Adobe Systems 6,844 195,054 Microsoft 19,158 (a) 1,036,831 VERITAS Software 10,934 (a) 216,384 1,448,269 TOBACCO--.3% Philip Morris Cos. 1,656 72,334 TOTAL COMMON STOCKS (cost $22,429,870) 20,366,361 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--12.8% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTES; Federal Home Loan Mortgage Corp., 1.88%, 7/1/2002 (cost $3,020,000) 3,020,000 3,020,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $25,449,870) 99.3% 23,386,361 CASH AND RECEIVABLES (NET) .7% 157,643 NET ASSETS 100.0% 23,544,004 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 25,449,870 23,386,361 Cash 9,389 Receivable for investment securities sold 956,456 Dividends receivable 14,014 Prepaid expenses 2,056 24,368,276 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 21,857 Payable for investment securities purchased 764,246 Payable for shares of Beneficial Interest redeemed 10,640 Accrued expenses 27,529 824,272 -------------------------------------------------------------------------------- NET ASSETS ($) 23,544,004 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 41,848,480 Accumulated investment (loss) (15,575) Accumulated net realized gain (loss) on investments (16,225,392) Accumulated net unrealized appreciation (depreciation) on investments (2,063,509) -------------------------------------------------------------------------------- NET ASSETS ($) 23,544,004 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 18,729,021 4,814,983 Shares Outstanding 1,952,195 502,435 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 9.59 9.58 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $339 foreign taxes withheld at source) 86,875 Interest 38,199 TOTAL INCOME 125,074 EXPENSES: Investment advisory fee--Note 3(a) 105,693 Auditing fees 21,984 Prospectus and shareholders' reports 10,283 Custodian fees--Note 3(b) 7,037 Distribution fees--Note 3(b) 6,165 Shareholder servicing costs--Note 3(b) 465 Trustees' fees and expenses--Note 3(c) 316 Loan commitment fees--Note 2 180 Legal fees 100 Miscellaneous 535 TOTAL EXPENSES 152,758 Less--waiver of fees due to undertaking--Note 3(a) (12,138) NET EXPENSES 140,620 INVESTMENT (LOSS) (15,546) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (1,528,946) Net unrealized appreciation (depreciation) on investments (3,873,041) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (5,401,987) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,417,533) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net (15,546) 20,936 Net realized gain (loss) on investments (1,528,946) (9,372,347) Net unrealized appreciation (depreciation) on investments (3,873,041) 2,834,362 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,417,533) (6,517,049) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (15,843) (21,791) Service shares (3,789) (438) TOTAL DIVIDENDS (19,632) (22,229) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 407,455 6,773,264 Service shares 2,615,629 4,274,009 Dividends reinvested: Initial shares 15,843 21,791 Service shares 3,789 438 Cost of shares redeemed: Initial shares (2,903,070) (3,263,377) Service shares (912,312) (95,938) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (772,666) 7,710,187 TOTAL INCREASE (DECREASE) IN NET ASSETS (6,209,831) 1,170,909 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 29,753,835 28,582,926 END OF PERIOD 23,544,004 29,753,835 Undistributed investment income (loss)--net (15,575) 19,603 Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 35,110 519,383 Shares issued for dividends reinvested 1,334 1,834 Shares redeemed (260,257) (285,622) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (223,813) 235,595 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 228,791 360,893 Shares issued for dividends reinvested 319 37 Shares redeemed (79,477) (8,145) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 149,633 352,785 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
FINANCIAL HIGHLIGHTS The following tables describe 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. Six Months Ended June 30, 2002 Year Ended December 31, ------------------------------------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999 1998(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.77 14.73 19.87 15.90 12.50 Investment Operations: Investment income (loss)--net (.01)(b) .01(b) .02(b) (.02)(b) .01 Net realized and unrealized gain (loss) on investments (2.16) (2.96) (5.03) 5.79 3.39 Total from Investment Operations (2.17) (2.95) (5.01) 5.77 3.40 Distributions: Dividends from investment income--net (.01) (.01) -- (.01) -- Dividends from net realized gain on investments -- -- (.13) (1.79) -- Total Distributions (.01) (.01) (.13) (1.80) -- Net asset value, end of period 9.59 11.77 14.73 19.87 15.90 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (18.47)(c) (20.03) (25.40) 39.01 27.20(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .49(c) .99 .97 1.00 .25(c) Ratio of net investment income (loss) to average net assets (.06)(c) .08 .11 (.11) .05(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .02(c) .10 .11 1.33 .31(c) Portfolio Turnover Rate 70.42(c) 180.84 171.96 115.08 75.65(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 18,729 25,607 28,583 7,485 2,544 (A) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. Six Months Ended June 30, 2002 Year Ended December 31, -------------------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.76 14.73 14.73 Investment Operations: Investment (loss) (.01)(b) .00(b,c) -- Net realized and unrealized gain (loss) on investments (2.16) (2.96) -- Total from Investment Operations (2.17) (2.96) -- Distributions: Dividends from investment income--net (.01) (.01) -- Net asset value, end of period 9.58 11.76 14.73 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (18.42)(d) (20.16) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .50(d) 1.00 -- Ratio of investment (loss) to average net assets (.05)(d) (.01) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .13(d) .40 -- Portfolio Turnover Rate 70.42(d) 180.84 171.96 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 4,815 4,147 --(e) (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED. (E) AMOUNT REPRESENTS LESS THAN $1,000. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Initial and Service. 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 portfolio 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'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 and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) credits of $138 during the period ended June 30, 2002 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, 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 $13,171,106 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, $1,609,264 of the carryover expires in fiscal 2008 and $11,561,842 expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2001 was as follows: ordinary income $22,229. The tax character of current year distributions will be determined at the end of the current fiscal year. 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 June 30, 2002, 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 has agreed from January 1, 2002 to December 31, 2002, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses, exceed 1% of the value of the average daily net assets of their class. During the period ended June 30, 2002, Dreyfus waived receipt of fees of $12,138, pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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. During the period ended June 30, 2002, Service shares were charged $6,165 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $70 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 June 30, 2002, the portfolio was charged $7,037 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. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2002, amounted to $17,498,134 and $16,364,778, respectively. At June 30, 2002, accumulated net unrealized depreciation on investments was $2,063,509, consisting of $787,054 gross unrealized appreciation and $2,850,563 gross unrealized depreciation. At June 30, 2002, 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 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 176SA0602 Dreyfus Investment Portfolios, Founders International Equity Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 9 Statement of Assets and Liabilities 10 Statement of Operations 11 Statement of Changes in Net Assets 13 Financial Highlights 15 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders International Equity Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Founders International Equity Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, A. Edward Allinson, CFA, of Founders Asset Management LLC, the portfolio's sub-investment adviser. Although market conditions have remained volatile, U.S. and international economies have recently begun to show signs of renewed growth, and investors appear to be taking a fresh look at the opportunities a global economic rebound could create. In particular, following two tumultuous years for equities in the U.S. and overseas, some investors are turning their attention to the long-term appreciation potential of international stocks. After all, stocks have historically produced higher long-term returns than bonds or money market funds. For investors with appropriate time horizons and attitudes toward risk, international stocks may provide considerable potential for pursuing growth over time. Indeed, as many professionals can attest, the benefits of equity investments become clearer when viewed from a perspective measured in years rather than weeks or months. If you have questions or are worried about current market conditions, we encourage you to talk with your financial advisor who can help you balance near-term risks with potential long-term rewards. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE A. Edward Allinson, 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 six-month period ended June 30, 2002, the portfolio produced a total return of -12.70% for its Initial shares and -12.77% for its Service shares.(1) This compares with a -1.68% total return produced by the portfolio's benchmark, the Morgan Stanley Capital International World ex U.S. Index (the "Index"), for the same period.(2) The portfolio's performance lagged the Index primarily because the growth-oriented stocks in which the portfolio invested remained out of favor among investors. Shares of technology, telecommunications and health care companies, in which the portfolio concentrated its investments, performed substantially worse than the market averages during the reporting period. 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 dominant brand name, growing market share, high barriers to entry or untapped market opportunities. In our view, these factors are the hallmarks of companies whose growth, in both revenues and earnings, will exceed that of global industry peers, as well as that of their local markets. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) The portfolio will typically hold 50-90 stocks, broadly invested across countries and industries, representing what we believe to be the best growth investment ideas in the world. We generally sell a stock when it reaches its target price or when we determine that circumstances have changed and it will not likely reach the previously set target price. What other factors influenced the portfolio's performance? Overall, international stock markets struggled throughout the reporting period. While the global economy continued to produce better than expected growth, the disconnection between that growth and the stock markets continued. Concern over the strength and sustainability of corporate profit recovery, disclosures of accounting scandals in the U.S. and elsewhere and continued geopolitical worries weighed on investor confidence. As a result, stocks around the globe produced disappointing results during the reporting period, and the portfolio' s performance was also hurt. Most international stock markets, with the exception of Japan, fell. The rise in the value of the euro and the yen aided the portfolio's U.S. dollar returns. Because we generally do not hedge our non-U.S. dollar-denominated investments, these changes in currency values positively affected the portfolio's performance when viewed in U.S. dollar terms. Against this uncertain backdrop, investors tended to look more favorably on relatively conservative and defensive holdings. Consumer staples, utilities and basic materials ranked among the strongest industry groups during the reporting period, while telecommunications, technology and health care stocks languished. The portfolio' s holdings in some of the poorly performing sectors hurt its performance during the reporting period. Stocks such as Vodafone, Flextronics International and Telefonaktiebolaget LM Ericsson were affected by an economic environment characterized by anemic capital spending and growing market saturation. On the other hand, a number of the portfolio's investments performed well and benefited the portfolio' s performance during the reporting period. Among these were Porsche, reflecting the trend towards luxury consumption; CANON, a beneficiary of the trend towards digitalization; and SONY, helped by a strong movie lineup and new product introductions. What is the portfolio's current strategy? Since taking over management of the portfolio in April, the investment team has made some changes to the portfolio's strategy. Overall, we continue to believe that stocks generally offer significant value and that growth stocks in particular have declined to unreasonably low levels. The most significant values, we believe, can now be found in growth stocks with strong business fundamentals, seasoned management teams and solid brand positions. We have positioned the portfolio to benefit from a recovery in earnings, an increase in capital expenditures and an improvement in investor sentiment. We believe that steadily improving economic data should translate into increased demand, and that increased demand should drive an improvement in corporate profits. Accordingly, the portfolio has currently increased its holdings in high quality firms that, in our view, are well positioned to benefit from a global economic rebound. July 15, 2002 (1) 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, 2002, 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) 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 STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
STATEMENT OF INVESTMENTS COMMON STOCKS--93.9% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CANADA--3.4% Abitibi 23,175 214,337 Encana 3,350 103,203 317,540 FRANCE--10.5% Axa 10,325 189,708 BNP Paribas 4,500 250,009 LVMH Moet Hennessy Louis Vuitton 3,075 155,586 Suez 7,825 209,606 TotalFinaElf 1,050 171,256 976,165 GERMANY--2.2% Muenchener Rueckversicherungs-Gesellschaft 850 201,967 HONG KONG--1.1% Hutchison Whampoa 14,000 104,551 INDIA--1.0% Satyam Computer Services, ADR 8,700 91,089 ISRAEL--.9% Check Point Software 6,000 (a) 81,360 JAPAN--19.8% CANON 5,000 189,508 FAST RETAILING 5,700 123,996 HONDA MOTOR 3,600 146,386 Matsushita Electric Industrial 16,000 218,876 Mitsubishi Tokyo Financial 19 128,447 NTT DoCoMo 86 212,266 Nikko Cordial 56,000 283,467 Nintendo 1,900 280,581 SONY 4,900 259,513 1,843,040 NETHERLANDS--11.3% ASML 6,600 (a) 104,962 ING Groep 8,725 225,058 Koninklijke (Royal) Philips Electronics 5,825 163,372 Royal Dutch Petroleum 3,450 193,043 Schlumberger 3,600 167,400 Unilever 3,025 198,973 1,052,808 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SINGAPORE--2.0% Flextronics International 25,825 (a) 184,132 SPAIN--3.4% Banco Santander Central Hispano 16,925 135,002 Endesa 6,675 97,414 Telefonica 10,100 (a) 85,172 317,588 SWEDEN--1.5% Telefonaktiebolaget LM Ericsson 90,600 (a) 137,664 SWITZERLAND--7.8% Converium 3,900 202,409 Novartis 5,925 261,720 UBS 5,250 265,211 729,340 TAIWAN--1.1% AU Optronics, ADR 12,483 (a) 103,734 UNITED KINGDOM--27.9% Amvescap 17,900 146,546 BP 32,975 278,298 Barclays 24,800 209,684 CRH 11,900 198,931 Diageo 16,925 220,873 Exel 7,900 101,099 GlaxoSmithKline 11,525 250,317 HSBC 17,325 200,219 Hays 56,600 133,509 Lloyds TSB 15,425 154,281 Pearson 18,875 188,643 Reed Elsevier 15,800 150,893 Standard Chartered 16,775 179,860 Vodafone 133,875 184,550 2,597,703 TOTAL COMMON STOCKS (cost $9,309,324) 8,738,681 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) PREFERRED STOCKS--1.8% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ GERMANY; Porsche (cost $156,778) 350 166,673 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--2.1% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTES; Becton Dickinson & Co. 1.97%, 7/1/2002 (cost $200,000) 200,000 200,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $9,666,102) 97.8% 9,105,354 CASH AND RECEIVABLES (NET) 2.2% 201,682 NET ASSETS 100.0% 9,307,036 (A) NON-INCOME PRODUCING. SEE NOTES TO STATEMENT OF INVESTMENTS.
STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 9,666,102 9,105,354 Cash 331,831 Dividends receivable 12,323 Prepaid expenses 832 9,450,340 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 5,799 Payable for investment securities purchased 101,006 Payable for shares of Beneficial Interest redeemed 47 Accrued expenses 36,452 143,304 -------------------------------------------------------------------------------- NET ASSETS ($) 9,307,036 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 15,293,991 Accumulated undistributed investment income--net 4,390 Accumulated net realized gain (loss) on investments and foreign currency transcations (5,431,430) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions (559,915) -------------------------------------------------------------------------------- NET ASSETS ($) 9,307,036 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 7,473,200 1,833,836 Shares Outstanding 715,246 175,472 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 10.45 10.45 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $7,883 foreign taxes withheld at source) 73,207 Interest 6,064 TOTAL INCOME 79,271 EXPENSES: Investment advisory fee--Note 3(a) 49,884 Custodian fees 21,468 Prospectus and shareholders' reports 10,026 Auditing fees 9,838 Distribution fees--Note 3(b) 2,225 Trustees' fees and expenses--Note 3(c) 1,725 Legal fees 733 Shareholder servicing costs--Note 3(b) 439 Loan commitment fees--Note 2 56 Miscellaneous 3,299 TOTAL EXPENSES 99,693 Less--waiver of fees due to undertaking--Note 3(a) (24,812) NET EXPENSES 74,881 INVESTMENT INCOME 4,390 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (318,658) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (1,026,704) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1,345,362) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,340,972) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net 4,390 (16,365) Net realized gain (loss) on investments (318,658) (4,203,196) Net unrealized appreciation (depreciation) on investments (1,026,704) 166,599 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,340,972) (4,052,962) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (3,830) Service shares -- (111) TOTAL DIVIDENDS -- (3,941) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 713,526 3,190,890 Service shares 740,116 3,448,933 Dividends reinvested: Initial shares -- 3,830 Service shares -- 111 Cost of shares redeemed: Initial shares (1,240,804) (2,091,434) Service shares (168,229) (1,780,905) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 44,609 2,771,425 TOTAL INCREASE (DECREASE) IN NET ASSETS (1,296,363) (1,285,478) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 10,603,399 11,888,877 END OF PERIOD 9,307,036 10,603,399 Undistributed investment income--net 4,390 -- The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 66,677 223,519 Shares issued for dividends reinvested -- 266 Shares redeemed (111,325) (163,207) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (44,648) 60,578 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 65,255 265,143 Shares issued for dividends reinvested -- 8 Shares redeemed (15,365) (139,598) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 49,890 125,553 SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS The following tables describe 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. Six Months Ended June 30, 2002 Year Ended December 31, ------------------------------------------------ INITIAL SHARES (Unaudited) 2001 2000 1999 1998(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.97 17.00 21.65 14.36 12.50 Investment Operations: Investment income (loss)--net .00(b,c) (.02)(b) .00(b,c) (.02)(b) (.01) Net realized and unrealized gain (loss) on investments (1.52) (5.00) (3.55) 8.73 1.87 Total from Investment Operations (1.52) (5.02) (3.55) 8.71 1.86 Distributions: Dividends from investment income--net -- (.01) -- -- -- Dividends from net realized gain on investments -- -- (1.10) (1.42) -- Total Distributions -- (.01) (1.10) (1.42) -- Net asset value, end of period 10.45 11.97 17.00 21.65 14.36 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (12.70)(d) (29.56) (17.41) 60.69 14.88(d) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(d) 1.50 1.50 1.50 .38(d) Ratio of net investment income (loss) to average net assets .04(d) (.13) .02 (.11) (.08)(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .23(d) .72 .57 2.27 .81(d) Portfolio Turnover Rate 168.99(d) 201.61 171.34 190.80 29.25(d) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 7,473 9,099 11,888 4,608 2,297 (A) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) Six Months Ended June 30, 2002 Year Ended December 31, ---------------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.98 17.00 17.00 Investment Operations: Investment income (loss)--net .01(b) (.06)(b) -- Net realized and unrealized gain (loss) on investments (1.54) (4.95) -- Total from Investment Operations (1.53) (5.01) -- Distributions: Dividends from investment income--net -- (.01) -- Net asset value, end of period 10.45 11.98 17.00 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (12.77)(c) (29.50) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(c) 1.50 -- Ratio of net investment income (loss) to average net assets .06(c) (.46) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .33(c) 1.05 -- Portfolio Turnover Rate 168.99(c) 201.61 171.34 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 1,834 1,504 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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 growth of capital. 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. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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'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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (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 and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $424 during the period ended June 30, 2002, 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, 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 $4,516,184 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, $390,202 of the carryover expires in fiscal 2008 and $4,125,982 expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2001 was as follows: ordinary income $3,941. The tax character of current year distributions, if any, will be determined at the end of the current fiscal year. 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2002, 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 agreed, from January 1, 2002 to December 31, 2002, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses, exceed 1.50% of the value of the average daily net assets of their class. During the period ended June 30, 2002, Dreyfus waived receipt of fees of $24,812, pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and 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. During the period ended June 30, 2002, Service shares were charged $2,225 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $76 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"). 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 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 June 30, 2002, amounted to $16,804,324 and $16,159,560, respectively. At June 30, 2002, accumulated net unrealized depreciation on investments was $560,748, consisting of $248,214 gross unrealized appreciation and $808,962 gross unrealized depreciation. At June 30, 2002, 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 NOTES 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 177SA0602 Dreyfus Investment Portfolios, Founders Passport Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 14 Statement of Assets and Liabilities 15 Statement of Operations 16 Statement of Changes in Net Assets 18 Financial Highlights 20 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Passport Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Founders Passport Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. 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, CFA, of Founders Asset Management LLC, the portfolio's sub-investment adviser. Although market conditions have remained volatile, U.S. and international economies have recently begun to show signs of renewed growth, and investors appear to be taking a fresh look at the opportunities a global economic rebound could create. In particular, following two tumultuous years for equities in the U.S. and overseas, some investors are turning their attention to the long-term appreciation potential of international stocks. After all, stocks have historically produced higher long-term returns than bonds or money market funds. For investors with appropriate time horizons and attitudes toward risk, international stocks may provide considerable potential for pursuing growth over time. Indeed, as many professionals can attest, the benefits of equity investments become clearer when viewed from a perspective measured in years rather than weeks or months. If you have questions or are worried about current market conditions, we encourage you to talk with your financial advisor who can help you balance near-term risks with potential long-term rewards. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE Tracy Stouffer, CFA, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders Passport Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2002, the portfolio produced a total return of 4.32% for both its Initial shares and its Service shares.(1) In comparison, the portfolio's benchmark, the Morgan Stanley Capital International World ex U.S. Index, produced a total return of -1.68% for the same period.(2) The portfolio produced higher returns than its benchmark primarily because of its focus on shares of international small-cap companies, which generally do not rely on exports to the U.S. for profits. In addition, the portfolio's strong emphasis on emerging markets in Asia also benefited performance. Moreover, international small-cap stocks generally do not present the complicated, and in some cases, inaccurate financial statements that recently have plagued many U.S. companies. What is the portfolio's investment approach? The portfolio invests primarily in foreign companies with annual revenues or market capitalizations of $1.5 billion or less that have demonstrated earnings growth as well as dominance in their market niches. The portfolio is a broadly diversified portfolio and currently holds more than 100 stocks across many industries. Because of this broad mandate, we believe 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? International small-cap stocks tend to operate within a given domestic economy and therefore do not have exposure to the risks of fluctuating currency values relative to the U.S. dollar, which declined significantly during the reporting period. For example, Merloni, an Italian maker of such household appliances as washers, dryers and refrigerators, has successfully capitalized on strong domestic demand from Russian households. German-based Puma has performed well by focusing on the "lifetsyle" clothing and athletic shoes niche, rather than competing head to head with Nike. Ebookers, a London-based online travel reservation service with a domestic focus, has seen its share price increase in 2002. Another U.K. Internet company, lastminute.com, has prospered by selling unused hotel rooms, airline tickets and entertainment shows, allowing companies to shed unused capacity. Another factor in the portfolio's relative success was our emphasis on Asian emerging markets, where stock prices had become attractive relative to earnings. The economies of South Korea and Thailand have been particularly strong during the reporting period. Interest rates have been low in these countries and many companies have reported double-digit earnings growth. In addition, China has begun to benefit from its new status as a member of the World Trade Organization as more U.S. and European companies outsource manufacturing there, particularly in the apparel industry. The portfolio's performance benefited from its holdings in Bank Central Asia, an Indonesian bank, which has been very successful and reflects the bright prospects of the region. In addition, the portfolio has benefited by avoiding Asian technology and telecommunications companies, which have suffered from a lack of customer demand. On the other hand, our decision to de-emphasize holdings in Japan was not helpful to the portfolio's performance during the first half of 2002, when Japan's stock market performed well, particularly when the yen is translated into weakened U.S. dollars. What is the portfolio's current strategy? One of our current strategies is to increase our focus on domestic Japanese companies, which have benefited from what appears to be a long overdue improvement in the Japanese economy. Many Japanese companies are eliminating automatic wage increases associated with seniority, which is significant in a country that is rapidly aging. In addition, the portfolio is currently shifting away from Europe, since so much of the region's economy depends on exports, which have been hurt recently by a weaker U.S. dollar. We also have continued to de-emphasize technology, media and telecommunications stocks throughout the world, primarily because we believe that earnings growth is likely to remain disappointing. Finally, we believe that gold mining stocks represent a good potential hedge against further weakening of the U.S. dollar. In summary, we have continued to look for attractive small companies outside of the United States that operate domestically within their markets -- and that present clear and non-controversial financial statements. We believe that these companies are likely to attract more attention, now that investors apparently can no longer point to the U.S. as a model for financial reporting integrity. July 15, 2002 (1) 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, 2002, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. Part of the portfolio's recent performance is attributable to its initial public offering (IPO) investments. There can be no guarantee that IPOs will have or continue to have a positive effect on the portfolio's performance. (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 STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
COMMON STOCKS--91.6% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AUSTRALIA--.8% Flight Centre 3,175 48,771 Newcrest Mining 12,100 51,701 Transurban 16,875 (a) 39,952 140,424 AUSTRIA--.0% Wolford 300 (a) 4,435 CANADA--8.8% Agnico-Eagle Mines 4,775 69,614 Angiotech Pharmaceuticals 1,550 (a) 57,965 Aur Resources 12,775 (a) 39,440 CHC Heilcoptor, Cl. A 7,475 (a) 170,121 Canadian 88 Energy 43,950 (a) 79,152 Compton Petroleum 11,850 (a) 30,878 CoolBrands International 8,600 (a) 40,563 Cott 4,675 (a) 88,695 Dorel Industries 5,400 (a) 134,474 Eldorado Gold 110,575 (a) 88,262 Gildan Activewear 3,025 (a) 68,087 Kinross Gold 30,625 (a) 68,689 Mega Blocks 1,250 (a) 16,203 Mega Blocks 9,350 (a,b) 121,200 Meridian Gold 7,700 (a) 125,463 Norske Skog Canada 19,450 94,947 Open Text 2,100 (a) 41,181 Tesco 4,350 (a) 48,352 Wheaton River Minerals 74,350 (a) 72,099 1,455,385 CHINA--2.2% AsiaInfo 2,100 (a) 27,825 China Eastern Airlines, Cl. H 488,000 81,959 People's Food 103,000 73,426 Shangdong International Power Development, Cl. H 430,000 115,769 United Food 163,000 63,171 362,150 CROATIA--.1% Pliva d.d., GDR 1,475 (b) 21,742 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ DENMARK--1.3% Auriga Industries, Cl. B 6,600 66,923 Carlsberg, Cl. B 2,800 147,187 214,110 FINLAND--1.3% Huhtamaki 1,150 51,341 M-real, Cl. B 17,500 169,104 220,445 FRANCE--1.3% Bonduelle 175 12,153 Buffalo Grill 1,425 22,846 Norbert Dentressangle 1,850 49,831 Remy Cointreau 4,000 128,973 213,803 GERMANY--1.3% Evotec OAI 1 (a) 6 Jenoptik 1,150 21,849 Leoni 3,625 120,838 Puma 1,100 80,320 223,013 GREECE--2.4% Hellenic Petroleum 9,110 55,674 Hyatt Regency Hotels and Tourism 16,450 105,754 Intralot 4,900 96,837 Technical Olympic 33,700 148,446 406,711 HONG KONG--10.1% Bossini International 534,000 (a) 38,339 COFCO International 208,000 63,333 Cosco Pacific 238,000 189,180 Dah Sing Financial 24,000 116,923 Dream International 286,000 64,533 Far East Pharmaceutical Technology 148,000 45,064 First Pacific 584,000 (a) 109,313 Global Green Tech 306,000 76,892 Hongkong and Shanghai Hotels 161,000 74,824 Hopewell 52,000 35,333 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HONG KONG (CONTINUED) Kerry Properties 44,500 46,782 Kin Yat 130,000 32,500 Kingmaker Footwear 148,000 48,385 Mainland Headwear 106,000 36,692 Midland Realty 254,000 23,772 Next Media 226,000 (a) 60,846 Ngai Lik Industrial 298,000 106,974 Proview International 276,000 (a) 24,062 Shanghai Industrial 22,000 42,449 Shanghai Real Estates 544,000 86,482 Shangri-La Asia 70,000 58,333 Tack Fat 728,000 51,333 Texwinca 56,000 48,103 Tingyi (Cayman Islands) 368,000 112,051 Water Oasis 184,000 22,410 Wing Lung Bank 13,900 61,124 1,676,032 INDONESIA--2.4% PT Aneka Tambang 349,500 45,126 PT Astra Otoparts 273,000 62,665 PT Citr Marga Nusaphala Persada 500,500 22,115 PT Indofood Sukses Makmur 420,500 51,881 PT Kalbe Farma 1,045,000 (a) 49,174 PT Semen Gresik (Persero) 100,000 96,408 PT United Tractors 1,013,000 (a) 63,945 391,314 IRELAND--1.5% First Active 21,700 103,337 Paddy Power 27,775 146,045 249,382 ITALY--4.6% Cassa di Risparmio di Firenze 54,325 72,220 Davide Campari--Milano 4,100 135,696 De'Longhi 13,325 72,100 GranitiFiandre 11,950 91,644 Merloni Elettrodomestici 14,250 156,501 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ITALY (CONTINUED) Mondadori (Arnoldo) Editore 16,275 109,166 SABAF 2,775 41,021 Saeco International 30,000 (a) 93,396 771,744 JAPAN--18.1% ASICS 59,000 (a) 59,731 BELLUNA 1,100 43,072 C & S 4,300 102,895 C TWO-NETWORK 1,500 47,440 CAWACHI 800 70,950 CHIYODA 5,800 58,427 COCA-COLA WEST JAPAN 3,200 59,973 DOSHISHA 8,300 130,208 Diamond Lease 5,200 107,898 Don Quijote 1,000 96,553 ENESERVE 1,967 88,706 ENPLAS 1,000 29,953 Goodwill Group 26 88,973 HOKUETSU PAPER MILLS 19,000 120,340 HOKUTO 3,720 97,108 INTELLIGENT WAVE 15 37,902 IZUMI 3,000 46,135 JAPAN CASH MACHINE 2,200 36,630 Japan Smaller Capitalization Fund 13,850 (a) 110,662 KENWOOD 83,000 (a) 82,639 KOKUYO 5,000 52,836 KOMERI 1,000 29,200 KUBOTEK 28 83,869 KURODA ELECTRIC 60 1,348 Kawasaki Heavy Industries 53,000 (a) 67,846 LEOPALACE21 8,000 (a) 56,894 MINISTOP 4,300 65,011 Mars Engineering 1,500 46,436 NEC Soft 400 43,173 N.I.C. 6,200 86,111 NIPPON SHOKUBAI 19,000 95,699 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ JAPAN (CONTINUED) NIPRO 5,000 81,953 NISHIMATSUYA CHAIN 3,000 97,892 NITTO ELECTRIC WORKS 9,000 71,536 Nissen 2,800 51,071 Nitori 1,900 76,782 PARCO 9,000 44,879 ROUND ONE 29 (a) 43,189 RYOHIN KEIKAKU 3,900 97,892 SANYO SHOKAI 11,000 61,203 SEIKO GIKEN 1,000 28,698 SHIMA SEIKI MANUFACTURING 1,900 43,240 SHOWA 7,000 58,568 TOSHIBA TUNGALOY 10,000 25,602 Taisei Lamick 3,000 91,616 3,018,739 MALAYSIA--3.1% APM Automotive 95,000 82,000 Arab-Malaysian 235,000 (a) 81,013 MBM Resources 32,000 43,790 Malaysian Mining 80,000 63,158 Rashid Hussain 262,000 (a) 162,026 Road Builder (M) 36,000 51,158 TA Enterprise 187,000 38,384 521,529 MEXICO--.5% Organizacion Soriana, Cl. B 17,000 (a) 42,325 TV Azteca, ADR 6,325 43,073 85,398 NETHERLANDS--1.0% CSM 4,150 100,172 Nutreco 1,750 59,863 160,035 NORWAY--1.2% Ekornes 3,200 40,356 Golar LNG 13,400 (a) 82,259 Hydralift 9,575 71,556 194,171 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PHILIPPINES--.0% Bank of the Philippine Islands 4,080 3,892 SINGAPORE--.7% Cycle & Carriage 45,000 120,679 SOUTH AFRICA--.5% Randgold & Exploration, ADR 14,000 (a) 77,840 SOUTH KOREA--4.2% Hankuk Electric Glass 660 37,910 Hanyil 1,036 18,515 Kook Soon Dang Brewery 1,830 65,868 Korean Air 6,820 (a) 90,140 LG Home Shopping 360 39,501 Lotte Chilsung Beverage 80 55,195 Pantech 8,610 (a) 73,003 Plenus Entertainment 5,270 46,655 Pulmuone 1,820 47,656 Shinmoorim Paper Manufacturing 15,530 (a) 82,362 Sindo Ricoh 870 42,524 Woongjin Coway 4,120 32,535 You Eal Electronics 3,014 63,512 695,376 SPAIN--.6% Enagas 7,475 47,314 Viscofan, Industria Navarra De Envolturas Celulosicas 6,950 53,782 101,096 SWEDEN--4.0% Capio 15,200 (a) 129,603 Elekta, Cl. B 17,000 (a) 191,410 Getinge, Cl. B 2,400 47,224 Nobel Biocare 1,450 97,640 Swedish Match 25,000 207,698 673,575 SWITZERLAND--2.5% Logitech International 1,150 53,709 Rieter 150 35,432 SEZ 750 27,587 SGS Societe Generale de Surveillance 525 168,303 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SWITZERLAND (CONTINUED) Saurer 4,625 (a) 137,342 422,373 THAILAND--4.8% Asian Property Development 206,650 (a) 225,187 BEC World 9,550 55,196 Ch. Karnchang 24,625 (a) 13,284 Hemaraj Land and Development 348,425 (a) 53,281 Italian-Thai Development 151,650 (a) 111,386 Kiatnakin Finance 85,300 80,627 Shin 220,150 (a) 74,223 Supalai 84,950 (a) 38,869 TISCO Finance 164,500 (a) 98,244 Thai Film Industries 315,650 (a) 45,609 795,906 UNITED KINGDOM--12.3% Arena Leisure 80,925 (a) 34,707 Autonomy 20,850 (a) 84,630 Avon Rubber 16,100 41,282 Babcock International 14,950 27,479 Berkeley 3,075 34,147 Cranswick 7,475 114,380 De Vere 16,000 86,265 ebookers 24,900 (a) 108,697 Enterprise Inns 7,325 57,781 Eyretel 43,850 (a) 28,545 First Choice Holidays 45,750 72,528 HIT Entertainment 51,200 208,605 ICAP 14,050 180,018 Kelda 13,925 91,075 lastminute.com 109,900 (a) 158,604 Marylebone Warwick Balfour 21,825 30,755 Matalan 13,225 63,201 NHP 110,584 (a) 128,307 SFI 59,675 179,152 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) Sygen International 13,500 (a) 10,442 Warthog 21,325 (a) 9,962 Wireless Group 24,775 (a) 28,461 Wood (John) 54,600 175,625 Yule Catto & Co. 20,175 93,788 2,048,436 TOTAL COMMON STOCKS (cost $15,160,536) 15,269,735 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--.5% ------------------------------------------------------------------------------------------------------------------------------------ GERMANY; Escada (cost $85,717) 4,000 73,415 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--7.2% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTE; Federal Home Loan Mortgage Corp., 1.88%, 7/1/2002 (cost $1,200,000) 1,200,000 1,200,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $16,446,253) 99.3% 16,543,150 CASH AND RECEIVABLE (NET) .7% 122,584 NET ASSETS 100.0% 16,665,734
(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 JUNE 30, 2002, THESE SECURITIES AMOUNTED TO $142,942 OR .9% OF NET ASSETS. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 16,446,253 16,543,150 Cash 362,204 Receivable for investment securities sold 580,194 Dividends receivable 26,477 Prepaid expenses 939 Due from The Dreyfus Corporation and affiliates 10,742 17,523,706 -------------------------------------------------------------------------------- LIABILITIES ($): Payable for investment securities purchased 558,527 Payable for shares of Beneficial Interest redeemed 166,024 Accrued expenses 133,421 857,972 -------------------------------------------------------------------------------- NET ASSETS ($) 16,665,734 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 32,635,279 Accumulated investment (loss) (723) Accumulated net realized gain (loss) on investments and foreign currency transactions (16,066,806) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions 97,984 -------------------------------------------------------------------------------- NET ASSETS ($) 16,665,734 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 15,828,779 836,955 Shares Outstanding 1,290,986 68,251 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.26 12.26 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $21,479 foreign taxes withheld at source) 155,402 Interest 8,134 TOTAL INCOME 163,536 EXPENSES: Investment advisory fee--Note 3(a) 86,130 Custodian fees 196,556 Auditing fees 20,633 Prospectus and shareholders' reports 17,893 Legal fees 2,498 Distribution fees--Note 3(b) 989 Trustees' fees and expenses--Note 3(c) 317 Shareholder servicing costs--Note 3(b) 317 Loan commitment fees--Note 2 90 Miscellaneous 12,307 TOTAL EXPENSES 337,730 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertaking--Note 3(a) (173,516) NET EXPENSES 164,214 INVESTMENT INCOME (LOSS) (678) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions 517,895 Net unrealized appreciation (depreciation) on investments and foreign currency transactions 305,664 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 823,559 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 822,881 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net (678) 48,468 Net realized gain (loss) on investments 517,895 (6,673,599) Net unrealized appreciation (depreciation) on investments 305,664 (1,523,458) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 822,881 (8,148,589) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (40,280) -- Service shares (1,860) -- TOTAL DIVIDENDS (42,140) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 11,637,897 16,132,702 Service shares 143,786 1,838,982 Dividends reinvested: Initial shares 40,280 -- Service shares 1,860 -- Cost of shares redeemed: Initial shares (13,088,660) (17,840,283) Service shares (94,047) (1,020,540) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (1,358,884) (889,139) TOTAL INCREASE (DECREASE) IN NET ASSETS (578,143) (9,037,728) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 17,243,877 26,281,605 END OF PERIOD 16,665,734 17,243,877 Undistributed investment income (loss)--net (723) 42,095 Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 959,575 1,219,921 Shares issued for dividends reinvested 3,269 -- Shares redeemed (1,071,720) (1,367,363) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (108,876) (147,442) -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 11,715 146,100 Shares issued for dividends reinvested 151 -- Shares redeemed (7,827) (81,917) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 4,039 64,183 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe 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.
Six Months Ended June 30, 2002 Year Ended December 31, ---------------------------------------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999 1998(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.78 16.99 23.82 14.46 12.50 Investment Operations: Investment income (loss)--net (.00)(b,c) .03(b) (.11)(b) (.10)(b) .00(c) Net realized and unrealized gain (loss) on investments .51 (5.24) (5.61) 11.04 1.97 Total from Investment Operations .51 (5.21) (5.72) 10.94 1.97 Distributions: Dividends from investment income--net (.03) -- -- -- (.00)(c) Dividends from net realized gain on investments -- -- (1.11) (1.58) (.01) Total Distributions (.03) -- (1.11) (1.58) (.01) Net asset value, end of period 12.26 11.78 16.99 23.82 14.46 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 4.32(d) (30.66) (25.76) 76.05 15.79(d) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .94(d) 1.50 1.50 1.50 .38(d) Ratio of net investment income (loss) to average net assets (.00)(d,e) .24 (.47) (.60) .02(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.00(d) 2.01 2.09 2.14 .30(d) Portfolio Turnover Rate 245.33(d) 729.40 493.10 319.31 3.98(d) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 15,829 16,487 26,281 14,836 5,788
(A) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED. (E) AMOUNT REPRESENTS LESS THAN .01%. SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2002 Year Ended December 31, --------------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.78 16.99 16.99 Investment Operations: Investment (loss) (.00)(b,c) (.01)(b) -- Net realized and unrealized gain (loss) on investments .51 (5.20) -- Total from Investment Operations .51 (5.21) -- Distributions: Dividends from investment income--net (.03) -- -- Net asset value, end of period 12.26 11.78 16.99 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 4.32(d) (30.66) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .96(d) 1.50 -- Ratio of investment (loss) to average net assets (.01)(d) (.12) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation 1.08(d) 2.56 Portfolio Turnover Rate 245.33(d) 729.40 493.10 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 837 757 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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'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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (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 and premium 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. (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, 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 $16,488,752 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, $6,528,027 of the carryover expires in fiscal 2008 and $9,960,725 expires in fiscal 2009. The portfolio paid no distributions to shareholders during the fiscal year ended December 31, 2001. The tax character of current year distributions, if any, will be determined at the end of the current fiscal year. 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 June 30, 2002, 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 agreed from February 1, 2002, to December 31, 2002, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings, commitment fees and extraordinary expenses, exceed an annual rate of 1.50% of the value of the average daily net assets of their class. During the period ended June 30, 2002, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $173,516 pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) .25 of 1% of the value of the Service shares's 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. During the period ended June 30, 2002, Service shares were charged $989 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $77 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"). 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 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 June 30, 2002, amounted to $40,047,086 and $42,954,645, respectively. At June 30, 2002, accumulated net unrealized appreciation on investments was $96,897, consisting of $929,519 gross unrealized appreciation and $832,622 gross unrealized depreciation. At June 30, 2002, 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 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 178SA0602 Dreyfus Investment Portfolios, Japan Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 9 Statement of Assets and Liabilities 10 Statement of Operations 11 Statement of Changes in Net Assets 13 Financial Highlights 15 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Japan Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Japan Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. 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. Although market conditions have remained volatile, U.S. and international economies have recently begun to show signs of renewed growth, and investors appear to be taking a fresh look at the opportunities a global economic rebound could create. In particular, following two tumultuous years for equities in the U.S. and overseas, some investors are turning their attention to the long-term appreciation potential of international stocks. After all, stocks have historically produced higher long-term returns than bonds or money market funds. For investors with appropriate time horizons and attitudes toward risk, international stocks may provide considerable potential for pursuing growth over time. Indeed, as many professionals can attest, the benefits of equity investments become clearer when viewed from a perspective measured in years rather than weeks or months. If you have questions or are worried about current market conditions, we encourage you to talk with your financial advisor who can help you balance near-term risks with potential long-term rewards. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE Miki Sugimoto, Portfolio Manager How did Dreyfus Investment Portfolios, Japan Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2002, the portfolio's total return was 5.16% for both its Initial and Service shares.(1) The total return of the Morgan Stanley Capital International Japan Index ("MSCI Japan Index"), the portfolio's benchmark, was 8.16% for the reporting period.(2) We attribute the portfolio's positive overall performance to gradually improving economic conditions within Japan and to the increasing strength of Japanese currency relative to the U.S. dollar. The portfolio underperformed its benchmark primarily because of disappointing results in the retail, real estate and financials industry areas during the first three months of 2002. What is the portfolio's investment approach? The portfolio seeks long-term capital growth. To pursue this goal, the portfolio invests at least 80% of its assets in stocks of Japanese companies. The portfolio's stock investments may include common, preferred and convertible stocks, including those purchased through IPOs. We utilize a "top-down," theme-driven investment approach to stock selection. We first attempt to identify overall economic trends, and then begin to narrow the search to industry groups that are believed to have the potential to benefit from these trends. We also consider 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. 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 The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) 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? After several years of steady declines, the Japanese economy experienced gradual improvement during the reporting period. In response, Japan's stock market rose modestly after dipping to its lowest levels in more than 15 years. During the first few months of the reporting period, most of the market's gains were concentrated in the export area, which responded positively to evidence of renewed global economic growth. The portfolio benefited from this trend through its holdings of machinery-producing and exporting concerns, such as Makita and MORI SEIKI. However, the portfolio de-emphasized stocks in certain other export-oriented areas, such as basic materials, because we believed them to be priced at relatively high multiples of earnings. As a result, the portfolio's performance lagged the benchmark during the first half of the reporting period. From April through June 2002, as domestic Japanese consumption began to show signs of rebounding, retail stocks gained ground. The portfolio's retail holdings, such as ITO-YOKADO and UNY, helped narrow the performance gap with the benchmark. Investments in Diamond Lease contributed positively to performance as well, although to a lesser degree. Midcap stocks characterized by attractive valuations and relatively little exposure to global economic volatility proved to be another fruitful area of investment. For example, the portfolio enjoyed gains as a result of its holdings of DOSHISHA, a well-established importer of goods from China, and NICHII GAKKAN, a Japanese health care service provider. Performance also benefited from our decision to increase the portfolio's exposure to the value of the Japanese yen by reducing currency hedging positions. The yen increased in value from roughly $0.75 in January to nearly $0.85 by the end of June. What is the portfolio's current strategy? As of June 30, 2002, Japanese economic indicators continued to show signs of improvement. At the same time, stock prices remained subject to high levels of volatility due to global and domestic uncertainties. In light of these conditions, we have emphasized investments in midcap companies, particularly in the services sector. We believe such stocks offer good growth potential while providing a welcome degree of insulation from the market's volatility. We are also actively looking for opportunities to increase the portfolio's exposure to areas such as technology, which we believe are strongly positioned to benefit from increasing economic growth. July 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2002, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) JAPAN INDEX IS A MARKET CAPITALIZATION INDEX OF JAPANESE COMPANIES BASED ON MSCI-SELECTED CRITERIA. The Portfolio STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited) COMMON STOCKS--97.7% Shares Value ($) -------------------------------------------------------------------------------- BASIC MATERIALS--8.5% JSR 3,000 25,427 KANEKA 3,000 20,959 Kao 2,000 46,185 Shin-Etsu Chemical 800 34,471 Shiseido 2,000 26,740 153,782 COMMUNICATIONS--6.3% JAPAN TELECOM 8 22,959 NIPPON TELEGRAPH AND TELEPHONE 13 53,623 NTT DoCoMo 15 37,023 113,605 CONSTRUCTION/PROPERTY--7.5% JGC 4,000 28,447 Japan Real Estate Investment 10 43,256 Japan Retail Fund Investment 6 23,444 KINDEN 5,000 23,846 Mitsubishi Estate 2,000 16,399 135,392 CONSUMER STAPLES--20.3% C TWO-NETWORK 900 28,464 HANKYU DEPARTMENT STORES 4,000 30,522 HONDA MOTOR 600 24,398 ITO-YOKADO 1,000 50,201 KATOKICHI 1,700 29,869 NICHIREI 7,000 22,549 NIPPON MEAT PACKERS 3,000 37,701 NISSAN MOTOR 3,000 20,833 OTSUKA KAGU 700 26,941 TOYO SUISAN KAISHA 3,000 28,313 UNY 3,000 34,086 WORLD 1,100 32,672 366,549 FINANCIAL--11.0% ACOM 500 34,262 Bank of Yokohama 8,000 34,136 Daiwa Securities Group 3,000 19,503 COMMON STOCKS (CONTINUED) Shares Value ($) -------------------------------------------------------------------------------- FINANCIAL (CONTINUED) Diamond Lease 1,100 22,825 Mitsubishi Tokyo Financial Group 4 27,041 NIF Ventures 13 26,431 Promise 700 35,375 199,573 PHARMACEUTICAL--4.4% KOBAYASHI PHARMACEUTICAL 900 36,521 ROHTO PHARMACEUTICAL 2,000 15,897 TERUMO 2,100 28,148 80,566 SERVICES--23.3% Aoi Advertising Promotion 300 1,682 CAPCOM 900 23,343 CSK 800 28,581 DAIICHIKOSHO 2,000 32,965 DOSHISHA 1,800 28,238 Drake Beam Morin-Japan 800 25,435 Goodwill Group 8 27,376 MEITIC 800 26,506 MITSUI & CO. 5,000 33,551 Mitsubishi 4,000 29,016 NAMCO 600 11,471 NICHII GAKKAN 350 22,256 OBIC 100 21,754 ORACLE CORPORATION JAPAN 600 25,653 RESORTTRUST 1,300 23,603 SUMITOMO 5,000 30,371 ServiceWare 1,000 30,120 421,921 TECHNOLOGY--13.4% ADVANTEST 300 18,725 CANON 1,000 37,902 FUJITSU 3,000 20,984 Hitachi 4,000 25,937 KYOCERA 400 29,284 Matsushita Electric Industrial 2,000 27,359 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) -------------------------------------------------------------------------------- TECHNOLOGY (CONTINUED) NIDEC 300 21,812 OLYMPUS OPTICAL 2,000 28,012 SONY 600 31,777 241,792 TRANSPORTATION--3.0% East Japan Railway 7 32,856 Nippon Yusen Kabushiki Kaisha 6,000 20,733 53,589 -------------------------------------------------------------------------------- TOTAL INVESTMENTS (cost $1,775,027) 97.7% 1,766,769 CASH AND RECEIVABLES (NET) 2.3% 41,332 NET ASSETS 100.0% 1,808,101 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 1,775,027 1,766,769 Cash 65,400 Cash denominated in foreign currencies 4,796 4,957 Receivable for investment securities sold 85,507 Dividends receivable 89 Prepaid expenses 866 1,923,588 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 1,690 Payable for investment securities purchased 93,434 Payable for shares of Beneficial Interest redeemed 3 Accrued expenses 20,360 115,487 -------------------------------------------------------------------------------- NET ASSETS ($) 1,808,101 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 2,711,418 Accumulated investment (loss) (38,951) Accumulated net realized gain (loss) on investments and foreign currency transactions (856,304) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions (8,062) -------------------------------------------------------------------------------- NET ASSETS ($) 1,808,101 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 1,762,502 45,599 Shares Outstanding 214,486 5,547 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 8.22 8.22 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: CASH DIVIDENDS (net of $1,145 foreign taxes withheld at source) 6,566 EXPENSES: Investment advisory fee--Note 3(a) 8,487 Auditing fees 10,631 Custodian fees 3,538 Prospectus and shareholders' reports 2,114 Shareholder servicing costs--Note 3(b) 250 Legal fees 197 Trustees' fees and expenses--Note 3(c) 190 Distribution fees--Note 3(b) 16 Miscellaneous 2,912 TOTAL EXPENSES 28,335 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertaking--Note 3(a) (15,604) NET EXPENSES 12,731 INVESTMENT (LOSS) (6,165) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (304,566) Net realized gain (loss) on forward currency exchange contracts 20,190 NET REALIZED GAIN (LOSS) (284,376) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 371,793 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 87,417 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 81,252 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (6,165) (15,006) Net realized gain (loss) on investments (284,376) (403,424) Net unrealized appreciation (depreciation) on investments 371,793 (236,543) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 81,252 (654,973) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (56,580) -- Service shares (228) -- TOTAL DIVIDENDS (56,808) -- -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 481,787 1,454,950 Service shares 40,508 10,628 Dividends reinvested: Initial shares 56,580 -- Service shares 228 -- Cost of shares redeemed: Initial shares (502,003) (1,353,826) Service shares (772) (3,727) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 76,328 108,025 TOTAL INCREASE (DECREASE) IN NET ASSETS 100,772 (546,948) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 1,707,329 2,254,277 END OF PERIOD 1,808,101 1,707,329 Undistributed investment income (loss)--net (38,951) 24,022 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 58,749 142,811 Shares issued for dividends reinvested 7,282 -- Shares redeemed (61,803) (133,411) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 4,228 9,400 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 4,864 1,073 Shares issued for dividends reinvested 29 -- Shares redeemed (96) (368) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 4,797 705 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe 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.
Six Months Ended June 30, 2002 Year Ended December 31, ----------------------------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 8.09 11.22 12.84 12.50 Investment Operations: Investment income (loss)--net (.03)(b) (.07)(b) (.08)(b) .00(b,c) Net realized and unrealized gain (loss) on investments .43 (3.06) (1.06) .34 Total from Investment Operations .40 (3.13) (1.14) .34 Distributions: Dividends from investment income--net (.27) -- (.05) -- Dividends from net realized gain on investments -- -- (.43) -- Total Distributions (.27) -- (.48) -- Net asset value, end of period 8.22 8.09 11.22 12.84 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 5.16(d) (27.90) (8.92) 2.64(d) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(d) 1.50 1.50 .07(d) Ratio of net investment income (loss) to average net assets (.36)(d) (.74) (.80) .03(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .91(d) 2.88 1.90 1.35(d) Portfolio Turnover Rate 151.80(d) 160.78 378.54 -- ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 1,763 1,701 2,254 2,054 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) Six Months Ended June 30, 2002 Year Ended December 31, --------------------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 8.09 11.22 11.22 Investment Operations: Investment (loss) (.04)(b) (.07)(b) -- Net realized and unrealized gain (loss) on investments .44 (3.06) -- Total from Investment Operations .40 (3.13) -- Distributions: Dividends from investment income--net (.27) -- -- Net asset value, end of period 8.22 8.09 11.22 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 5.16(c) (27.90) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .75(c) 1.50 -- Ratio of investment (loss) to average net assets (.54)(c) (.78) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .73(c) 3.29 -- Portfolio Turnover Rate 151.80(c) 160.78 378.54 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 46 6 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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 Mellon. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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 June 30, 2002, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 172,468 Initial 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (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 and pre- mium 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. (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, 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 $470,154 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, the carryover expires in fiscal 2009. The portfolio had no distributions paid to shareholders during the fiscal year ended December 31, 2001. The tax character of current year distributions will be determined at the end of the current fiscal year. 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 June 30, 2002, the portfolio did not borrow under the line of credit. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 has agreed from January 1, 2002 to December 31, 2002, to waive receipt of its fees and/or assume expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceed an annual rate of 1.50% of the value of the average daily net assets of their class. During the period ended June 30, 2002, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $15,604, pursuant to the undertaking. 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 or more. . . . . . . . . .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. During the period ended June 30, 2002, Service shares were charged $16 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $124 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"). 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 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 and forward currency exchange contracts, during the period ended June 30, 2002, amounted to $2,559,603 and $2,518,492, 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 June 30, 2002, there were no open forward currency exchange contracts outstanding. At June 30, 2002, accumulated net unrealized depreciation on investments was $8,258, consisting of $99,469 gross unrealized appreciation and $107,727 gross unrealized depreciation. At June 30, 2002, 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). 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 189SA0602 Dreyfus Investment Portfolios, MidCap Stock Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 16 Financial Highlights 18 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, MidCap Stock Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, MidCap Stock Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. 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 U.S. stock market confronted a number of formidable challenges during the first half of 2002. In addition to lackluster corporate earnings and the ongoing war on terrorism, investors have recently contended with questions regarding the accuracy of certain companies' financial statements. These and other influences drove the Standard & Poor's MidCap 400 Index, a widely accepted benchmark of domestic midcap stock performance, down during the first six months of the year Nonetheless, we are generally optimistic about the future. The economy has begun to recover, showing signs of sustained growth that should have a positive effect on corporate earnings. Recent market declines may have created attractive values in some stocks. At the same time, we believe that today's accounting scandals will likely lead to higher standards and stronger oversight of corporate behavior, which should give investors greater confidence in the future. During turbulent times like these it is important to have an investment horizon that is measured in years, not weeks or months. Remember that over the long term, stocks have historically produced higher returns than other types of investments. For investors with a long-term perspective, stocks should continue to provide considerable potential for growth. As always, we urge you to talk with your financial advisor if you have questions or concerns about the markets or your investment portfolio. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE John O'Toole, Portfolio Manager How did Dreyfus Investment Portfolios, MidCap Stock Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2002, the portfolio's Initial shares produced a -0.87% total return and its Service shares produced a -1.01% total return.(1) In comparison, the Standard & Poor's MidCap 400 Index (the "S&P 400 Index"), the portfolio's benchmark, returned -3.21% for the same period.(2) Stocks produced generally negative returns during the first half of 2002, partly due to investor concerns over accounting irregularities at larger companies, such as Enron, WorldCom and Xerox. As a group, however, midcap stocks produced higher returns than large-cap stocks, partly because investors have viewed midcap stocks as less complicated businesses with more reliable accounting practices. 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 attractive, neutral or unattractive investments, 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 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? While large-cap stocks produced double-digit negative returns during the reporting period, the performance of midcap stocks was only slightly negative. A major reason is that the accounting irregularities in the headlines have involved mostly large-cap companies. Many large companies are conglomerates composed of dozens of businesses. In contrast, midcap companies tend to have fewer lines of business and less complicated structures. In addition, the portfolio's performance relative to its benchmark benefited from its flexibility to favor one investment style over another, whenever we believe it is appropriate. Since March 2000, value-oriented stocks have posted substantially higher returns than growth stocks, and, for much of that time, we have focused the portfolio's investments on value companies. In contrast, our benchmark contains a blend of value and growth stocks. We avoided growth stocks such as biotechnology companies because we believed that investors would favor companies with current earnings, not those that promise earnings in the future. Accordingly, we purchased shares of currently profitable health care management companies, such as PacifiCare Health Systems, Trigon Healthcare and Oxford Health Plans, which have benefited from higher levels of government reimbursement for health care expenses. Another area that performed well related to consumer spending, a bright spot in the economy during the first half of 2002. Consumer-oriented holdings that have done well include Lennar, a homebuilder company; Williams-Sonoma, a home-oriented retailer that owns Pottery Barn; and American Axle & Manufacturing Holdings, an auto supplier that makes steering components, transmission parts and other products. In the consumer staples category, one of the top performers during the reporting period was Fresh Del Monte Produce, a producer and marketer of bananas, apples and other fruits. The company has benefited from the worldwide trend toward free trade and the end of tariffs and import restrictions in large markets such as Europe. On the other hand, the portfolio's performance during the reporting period was hurt by the performance of Metris Companies, which provides credit card services to consumers with less than spotless credit histories. The company sustained a higher than expected number of credit card losses during the reporting period. What is the portfolio's current strategy? We have continued to search for companies in which we have a high degree of confidence that they can reach their stated earnings goals. We prefer not to own companies that have to "stretch" to make their numbers. Generally, that means we have continued to favor value stocks over growth stocks. However, many areas of the market that were formerly considered a part of the growth style became value-oriented investments after their stock prices declined sharply. That's particularly the case in the technology group, where many fundamentally sound companies can be found at what we believe are bargain prices. July 15, 2002 (1) 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, 2002, 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. MARKET. The Portfolio STATEMENT OF INVESTMENTS
June 30, 2002 (Unaudited) COMMON STOCKS--95.8% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ALCOHOL & TOBACCO--.7% R.J. Reynolds Tobacco Holdings 34,800 1,870,500 CONSUMER CYCLICAL--11.1% American Axle & Manufacturing Holdings 46,500 (a) 1,382,910 American Eagle Outfitters 47,300 (a) 999,922 ArvinMeritor 34,800 835,200 Aztar 39,700 (a) 825,760 Bob Evans Farms 46,500 1,463,820 Borders Group 66,400 (a) 1,221,760 Brinker International 51,500 (a) 1,635,125 Children's Place Retail Stores 23,300 (a) 617,473 Furniture Brands International 31,500 (a) 952,875 GTECH Holdings 30,600 (a) 781,524 Hollywood Entertainment 41,400 (a) 856,152 Jones Apparel Group 34,800 (a) 1,305,000 Lear 43,100 (a) 1,993,375 Magna International, Cl. A 14,900 1,025,865 Mohawk Industries 34,800 (a) 2,141,244 Nautilus Group 21,600 (a,b) 660,960 Neiman Marcus Group, Cl. A 26,500 (a) 919,550 Polaris Industries 21,600 1,404,000 REX Stores 34,800 (a) 476,760 Racing Champions Ertl 81,400 (a) 1,503,458 Ross Stores 34,800 1,418,100 Sonic Automotive 53,200 (a) 1,369,900 Williams-Sonoma 55,400 (a) 1,698,564 Zale 30,800 (a) 1,116,500 28,605,797 CONSUMER STAPLES--3.4% Alberto-Culver, Cl. B 21,600 1,032,480 Dole Food 43,100 1,243,435 Fleming Cos. 69,700 1,265,055 Fresh Del Monte Produce 66,600 1,665,000 Smithfield Foods 59,700 (a) 1,107,435 Tyson Foods, Cl. A 159,400 2,472,294 8,785,699 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ENERGY RELATED--7.6% AGL Resources 46,500 1,078,800 BJ Services 58,400 (a) 1,978,592 Black Hills 31,500 1,090,215 ENSCO International 55,700 1,518,382 Energen 31,500 866,250 Equitable Resources 39,800 1,365,140 Helmerich & Payne 46,300 1,653,836 Houston Exploration 43,000 (a) 1,247,000 MDU Resources Group 23,300 612,557 Murphy Oil 18,100 1,493,250 Patina Oil & Gas 44,625 1,224,064 Pride International 42,000 (a) 657,720 Questar 59,700 1,474,590 Tidewater 51,500 1,695,380 Valero Energy 41,400 1,549,188 19,504,964 HEALTH CARE--11.7% Apogent Technologies 71,400 (a) 1,468,698 Barr Laboratories 22,900 (a) 1,454,837 Beckman Coulter 28,200 1,407,180 Edwards Lifesciences 44,800 (a) 1,039,360 Express Scripts 25,500 (a) 1,277,805 Gilead Sciences 37,500 (a) 1,233,000 Health Net 78,000 (a) 2,088,060 Henry Schein 33,200 (a) 1,477,400 Hillenbrand Industries 21,600 1,212,840 ICN Pharmaceuticals 41,400 1,002,294 IVAX 43,100 (a) 465,480 Millipore 25,400 812,292 Mylan Laboratories 111,200 3,486,120 Oxford Health Plans 71,400 (a) 3,317,244 PacifiCare Health Systems 76,300 (a) 2,075,360 Quest Diagnostics 21,600 (a) 1,858,680 STERIS 36,400 (a) 695,604 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE (CONTINUED) Sunrise Assisted Living 31,500 (a,b) 844,200 Trigon Healthcare 28,200 (a) 2,836,356 30,052,810 INTEREST SENSITIVE--19.6% AmeriCredit 82,400 (a) 2,311,320 Associated Banc-Corp 62,100 2,341,791 Astoria Financial 63,100 2,022,355 Banknorth Group 76,300 1,985,326 Bear Stearns Cos. 29,400 1,799,280 City National 46,500 2,499,375 Compass Bancshares 92,900 3,121,440 Dime Bancorp (Warrants) 19,900 (a) 1,990 Doral Financial 46,500 1,552,635 Downey Financial 18,100 856,130 Dun & Bradstreet 49,800 (a) 1,645,890 Everest Re Group 9,900 553,905 First Tennessee National 64,700 (b) 2,478,010 Flagstar Bancorp 68,300 1,577,730 GreenPoint Financial 54,800 2,690,680 Hudson United Bancorp 50,700 1,447,992 IPC Holdings 43,800 1,337,652 M&T Bank 13,300 1,140,608 Marshall & Ilsley 79,600 2,462,028 Nationwide Financial Services, Cl. A 34,800 1,374,600 North Fork Bancorporation 74,600 2,969,826 Old Republic International 68,000 2,142,000 PMI Group 59,800 2,284,360 R&G Financial, Cl. B 63,100 1,496,101 Radian Group 49,800 2,432,730 RenaissanceRe Holdings 35,200 1,288,320 StanCorp Financial Group 26,500 1,470,750 Wintrust Financial 28,700 992,159 50,276,983 INTERNET RELATED--1.0% Check Point Software Technologies 33,200 (a) 450,192 E*TRADE Group 89,600 (a) 489,216 Expedia, Cl. A 16,900 (a) 1,002,001 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ INTERNET RELATED (CONTINUED) Overture Services 24,900 (a) 622,002 2,563,411 PRODUCER GOODS--11.6% Alexander & Baldwin 36,400 929,292 American Standard Cos. 23,300 (a) 1,749,830 Ashland 34,800 1,409,400 Beazer Homes USA 9,900 (a) 792,000 Bemis 23,300 1,106,750 CONSOL Energy 38,200 811,750 Cabot 36,400 1,042,860 Cooper Industries, Cl. A 23,600 927,480 D. R. Horton 81,400 2,118,842 Foamex International 82,100 (a) 912,131 Harsco 33,200 1,245,000 Hughes Supply 24,700 1,109,030 Lennar 63,100 3,861,720 M.D.C. Holdings 21,900 1,138,800 Minerals Technologies 25,000 1,233,000 Moog, Cl. A 21,600 (a) 926,208 Precision Castparts 51,400 1,696,200 Sonoco Products 71,400 2,022,048 Teekay Shipping 36,400 1,343,524 Teleflex 26,500 1,514,475 York International 54,800 1,851,692 29,742,032 SERVICES--10.1% Affiliated Computer Services, Cl. A 56,500 (a) 2,682,620 Apollo Group, Cl. A 39,700 (a,b) 1,564,577 DST Systems 36,400 (a) 1,663,844 Education Management 21,600 (a) 879,768 eFunds 73,000 (a) 692,697 Harland (John H.) 23,300 657,060 Henry (Jack) & Associates 43,100 719,339 Lee Enterprises 20,200 707,000 Moody's 14,000 696,500 Navigant International 46,700 (a) 722,449 Pharmaceutical Product Development 36,400 (a) 958,776 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SERVICES (CONTINUED) Rent-A-Center 16,600 (a) 962,966 Republic Services 66,400 (a) 1,266,248 Right Management Consultants 69,700 (a) 1,833,040 Scholastic 24,900 (a) 943,710 SunGard Data Systems 117,900 (a) 3,121,992 United Rentals 39,800 (a) 867,640 Valassis Communications 33,200 (a) 1,211,800 Washington Post, Cl. B 3,300 1,798,500 Westwood One 58,100 (a) 1,941,702 25,892,228 TECHNOLOGY--14.4% Black Box 18,300 (a) 745,359 Cabot Microelectronics 26,500 (a) 1,143,740 Cadence Design Systems 92,900 (a) 1,497,548 Diebold 33,200 1,236,368 ESS Technology 80,000 (a,b) 1,403,200 Electronic Arts 53,200 (a) 3,513,860 FEI 26,500 (a) 649,515 FLIR Systems 24,900 (a) 1,045,053 Garmin 61,500 (a) 1,356,075 HPL Technologies 64,700 974,382 Harris 28,200 1,021,968 IKON Office Solutions 97,900 920,260 Integrated Circuit Systems 38,200 (a) 771,258 Intersil, Cl. A 31,500 (a) 673,470 L-3 Communications Holdings 36,400 (a) 1,965,600 Mentor Graphics 68,000 (a) 966,960 Microchip Technology 124,400 (a) 3,412,292 National Semiconductor 32,500 (a) 948,025 Overland Storage 47,200 (a) 777,856 Plantronics 28,200 (a) 536,082 QLogic 18,300 (a) 697,230 Reynolds & Reynolds, Cl. A 64,700 1,808,365 SPX 19,900 (a) 2,338,250 Semtech 44,800 (a) 1,196,160 Storage Technology 63,100 (a) 1,007,707 Sybase 66,400 (a) 700,520 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) Symantec 28,200 (a) 926,370 THQ 42,300 (a) 1,261,386 Vishay Intertechnology 38,200 (a) 840,400 VitalWorks 68,500 (a) 561,700 36,896,959 UTILITIES--4.6% Alliant Energy 48,200 1,238,740 Conectiv 51,500 1,310,675 Energy East 65,800 1,487,080 IDACORP 41,400 1,138,914 PNM Resources 38,200 924,440 Pinnacle West Capital 16,600 655,700 SCANA 59,700 1,842,939 TECO Energy 39,800 985,050 Westar Energy 34,800 534,180 Wisconsin Energy 63,100 1,594,537 11,712,255 TOTAL COMMON STOCKS (cost $235,876,035) 245,903,638 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--3.9% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT; Greenwich Capital Markets, Tri-Party Repurchase Agreement, 1.93%, dated 6/28/2002, due 7/1/2002, in the amount of $10,071,620 (fully collateralized by $10,350,000 U.S.Treasury Bills, 11/29/2002, value $10,275,170) (cost $10,070,000) 10,070,000 10,070,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $245,946,035) 99.7% 255,973,638 CASH AND RECEIVABLES (NET) .3% 820,978 NET ASSETS 100.0% 256,794,616 (A) NON-INCOME PRODUCING. (B) ALL OR A PORTION OF THESE SECURITIES ARE ON LOAN. AT JUNE 30, 2002, THE TOTAL MARKET VALUE OF THE PORTFOLIO'S SECURITIES ON LOAN IS $6,378,362 AND THE TOTAL MARKET VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS $6,639,550.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities-- See Statement of Investments--Note 1(b) 245,946,035 255,973,638 Cash 409,344 Collateral for securities loaned--Note 1(b) 6,639,550 Receivable for investment securities sold 453,215 Dividends and interest receivable 144,618 Prepaid expenses 37,847 263,658,212 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 175,861 Liability for securities loaned--Note 1(b) 6,639,550 Payable for shares of Beneficial Interest redeemed 15,877 Accrued expenses 32,308 6,863,596 -------------------------------------------------------------------------------- NET ASSETS ($) 256,794,616 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 260,779,145 Accumulated undistributed investment income--net 247,827 Accumulated net realized gain (loss) on investments (14,259,959) Accumulated net unrealized appreciation (depreciation) on investments 10,027,603 -------------------------------------------------------------------------------- NET ASSETS ($) 256,794,616 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 240,465,754 16,328,862 Shares Outstanding 17,582,283 1,196,043 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 13.68 13.65 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $1,885 foreign taxes withheld at source) 1,111,138 Interest 111,797 TOTAL INCOME 1,222,935 EXPENSES: Investment advisory fee--Note 3(a) 860,895 Professional fees 39,904 Custodian fees--Note 3(b) 32,404 Prospectus and shareholders' reports 26,073 Distribution fees--Note 3(b) 17,632 Shareholder servicing costs--Note 3(b) 902 Trustees' fees and expenses--Note 3(c) 229 Miscellaneous 3,138 TOTAL EXPENSES 981,177 Less--waiver of fees due to undertaking--Note 3(a) (7,534) NET EXPENSES 973,643 INVESTMENT INCOME--NET 249,292 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (4,660,011) Net unrealized appreciation (depreciation) on investments (664,233) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (5,324,244) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,074,952) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 249,292 294,464 Net realized gain (loss) on investments (4,660,011) (9,119,810) Net unrealized appreciation (depreciation) on investments (664,233) 8,706,299 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,074,952) (119,047) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (4,500) (291,394) Service shares (206) (11,519) TOTAL DIVIDENDS (4,706) (302,913) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 74,657,422 116,445,355 Service shares 8,598,847 11,203,275 Dividends reinvested: Initial shares 4,500 291,394 Service shares 206 11,519 Cost of shares redeemed: Initial shares (10,471,389) (11,777,128) Service shares (1,707,651) (1,744,659) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 71,081,935 114,429,756 TOTAL INCREASE (DECREASE) IN NET ASSETS 66,002,277 114,007,796 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 190,792,339 76,784,543 END OF PERIOD 256,794,616 190,792,339 Undistributed investment income--net 247,827 3,241 Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 5,205,252 8,633,138 Shares issued for dividends reinvested 306 21,652 Shares redeemed (741,605) (910,014) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 4,463,953 7,744,776 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 608,245 842,364 Shares issued for dividends reinvested 14 856 Shares redeemed (120,581) (134,890) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 487,678 708,330 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe 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.
Six Months Ended June 30, 2002 Year Ended December 31, --------------------------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999 1998(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.80 14.29 13.44 12.16 12.50 Investment Operations: Investment income--net .02(b) .03(b) .05(b) .03(b) .02 Net realized and unrealized gain (loss) on investments (.14) (.50) 1.05 1.28 (.34) Total from Investment Operations (.12) (.47) 1.10 1.31 (.32) Distributions: Dividends from investment income--net (.00)(c) (.02) (.03) (.03) (.02) Dividends from net realized gain on investments -- -- (.13) -- -- Dividends in excess of net realized gain on investments -- -- (.09) -- -- Total Distributions (.00)(c) (.02) (.25) (.03) (.02) Net asset value, end of period 13.68 13.80 14.29 13.44 12.16 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (.87)(d) (3.26) 8.28 10.82 (2.53)(d) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .42(d) .89 .98 .97 .67(d) Ratio of net investment income to average net assets .11(d) .24 .34 .26 .18(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- .06 .49 .60(d) Portfolio Turnover Rate 25.81(d) 76.37 102.89 77.73 75.74(d) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 240,466 181,028 76,784 15,563 10,506 (A) FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2002 Year Ended December 31, ----------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.78 14.29 14.29 Investment Operations: Investment income--net .00(b,c) .01(b) -- Net realized and unrealized gain (loss) on investments (.13) (.50) -- Total from Investment Operations (.13) (.49) -- Distributions: Dividends from investment income--net (.00)(c) (.02) -- Net asset value, end of period 13.65 13.78 14.29 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (1.01)(d) (3.36) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .48(d) 1.00 -- Ratio of net investment income to average net assets .03(d) .07 -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .05(d) .17 -- Portfolio Turnover Rate 25.81(d) 76.37 102.89 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 16,329 9,764 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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'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 and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $378 during the period ended June 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The portfolio may lend securities to qualified institutions. At origination, all loans are secured by cash collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan will be maintained at all times. Cash collateral is invested in certain money market mutual funds managed by Dreyfus. The portfolio will be entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction. Such income earned is included in interest income. Although each security loaned is fully collateralized, the portfolio would bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner. 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 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, 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, 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. The portfolio has an unused capital loss carryover of $7,978,482 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2001 was as follows: ordinary income $302,913. The tax character of current year distributions will be determined at the end of the current fiscal year. 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 June 30, 2002, 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 has agreed from January 1, 2002 to December 31, 2002, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings and extraordinary expenses, exceed 1% of the value of the average daily net assets of their class. During the period ended June 30, 2002, Dreyfus waived receipt of fees of $7,534, pursuant to the undertaking. (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. During the period ended June 30, 2002, Service shares were charged $17,632 pursuant to the Plan. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 June 30, 2002, the portfolio was charged $178 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 June 30, 2002, the portfolio was charged $32,404 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 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 June 30, 2002, amounted to $125,136,320 and $57,339,789, respectively. At June 30, 2002, accumulated net unrealized appreciation on investments was $10,027,603, consisting of $25,257,562 gross unrealized appreciation and $15,229,959 gross unrealized depreciation. At June 30, 2002, 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). NOTES 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 174SA0602 Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 24 Statement of Assets and Liabilities 25 Statement of Operations 26 Statement of Changes in Net Assets 27 Financial Highlights 28 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio, from the portfolio's inception on May 1, 2002 through June 30, 2002. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio managers, Steven Falci and Thomas Durante. The U.S. stock market confronted a number of formidable challenges during the first half of 2002. In addition to lackluster corporate earnings and the ongoing war on terrorism, investors have recently contended with questions regarding the accuracy of certain companies' financial statements. These and other influences drove the Russell 2000 Index, a widely accepted benchmark of domestic small-cap stock performance, down during the first six months of the year. Nonetheless, we are generally optimistic about the future. The economy has begun to recover, showing signs of sustained growth that should have a positive effect on corporate earnings. Recent market declines may have created attractive values in some stocks. At the same time, we believe that today's accounting scandals will likely lead to higher standards and stronger oversight of corporate behavior, which should give investors greater confidence in the future. During turbulent times like these it is important to have an investment horizon that is measured in years, not weeks or months. Remember that over the long term, stocks have historically produced higher returns than other types of investments. For investors with a long-term perspective, stocks should continue to provide considerable potential for growth. As always, we urge you to talk with your financial advisor if you have questions or concerns about the markets or your investment portfolio. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE Steven Falci and Thomas Durante, Portfolio Managers How did Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio perform relative to its benchmark? From the portfolio's inception date of May 1, 2002 through the end of its semiannual reporting period on June 30, 2002, the portfolio's Service shares produced a total return of -9.20% .(1) In comparison, the Standard & Poor's Smallcap 600 Index ("S& P 600 Index") produced a -9.10% return for the same period.(2) The difference in returns was primarily due to transaction costs and other fund operating expenses. We attribute the market and fund's performance to the uneven pace of U.S. economic recovery and the deterioration of investor sentiment amid spreading corporate accounting and oversight scandals. However, the portfolio has been in operation for just two months, which we believe is too brief a time to assess accurately the performance of any long-term investment. What is the portfolio's investment approach? The portfolio seeks to match the performance of the S&P 600 Index. To pursue this goal, the portfolio invests in a representative sample of stocks included in the S&P 600 Index, and in futures whose performance is related to the S&P 600 Index. The portfolio's investments are selected by a "sampling" process based on market capitalization, industry representation and other means. By using this sampling process, the portfolio typically will not invest in all 600 stocks in the S&P 600 Index. However, at times, the portfolio may be fully invested in all of the stocks that comprise the S&P 600 Index. Under these circumstances, the portfolio maintains approximately the same weighting for each stock as the S&P 600 Index does. The S&P 600 Index is composed of 600 domestic stocks with market capitalizations ranging between approximately $40 million and $3 billion, depending on index composition. Each stock is weighted by The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) its market capitalization, which means larger companies have a greater representation in the S&P 600 Index than smaller ones. The portfolio may also invest in stock index futures as a substitute for the sale or purchase of securities. What other factors influenced the portfolio's performance? Although the portfolio had not yet begun operations, small-cap stocks posted very strong gains during the first three months of 2002 -- much higher than large- or midcap stocks since small-cap stocks typically perform best during an economic recovery. As the economy and stock market bounced back quickly during the first calendar quarter, many small-cap stocks enjoyed a strong rebound However, that rebound was short-lived. By the second calendar quarter, stocks across all market capitalization ranges fell sharply in response to faltering investor sentiment toward the stock market. By the time of the portfolio's inception on May 1, 2002, investors had grown concerned about stalled corporate earnings and a wave of questionable corporate accounting practices. While most of the accounting-related concerns were targeted at well-known large-cap companies, the repercussions were felt across all market-capitalization ranges. Most industry groups within the small-cap arena posted negative returns for the two-month reporting period. Hardest hit were technology and pharmaceuticals stocks. Within technology, electronic equipment makers and semiconductor companies were the worst performers, primarily because they manufacture parts for larger technology companies that were facing lackluster demand for their finished products. As for health care, an industry-wide decline took place among small-cap biotechnology names as well as medical services providers, chiefly because many of these stock prices had been unnecessarily inflated over the past several years. On a more positive note, individual holdings within a handful of industry groups reported positive returns. For example, insurance brokerage firms performed well, as did specialty retail firms, most notably within women's apparel. By far the best performing area within the small-cap marketplace was transportation, where trucking and airfreight companies flourished due to the improved economy during the first three months of the year, which increased the amount of tonnage shipped. What is the portfolio's current strategy? The portfolio's strategy is to replicate the return of the S&P 600 Index by investing in most of the 600 small-cap stocks in proportion to their weight in the S&P 600 Index. We are encouraged that small-cap stocks have recently performed better than their larger cap counterparts. We believe that's because they have greater exposure to the economic cycle, which helps these stocks perform better when the economy is moving from a recession to the early stages of the next business cycle. July 15, 2002 (1) 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. (2) SOURCE: LIPPER INC. -- REFLECTS THE REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S SMALLCAP 600 INDEX IS A BROAD-BASED INDEX AND A WIDELY ACCEPTED, UNMANAGED INDEX OF OVERALL SMALL-CAP STOCK MARKET PERFORMANCE. The Portfolio June 30, 2002 (Unaudited)
STATEMENT OF INVESTMENTS COMMON STOCKS--99.3% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ALCOHOL & TOBACCO--.1% DIMON 1,700 11,764 CONSUMER CYCLICAL--19.7% A.T. Cross, Cl. A 400 (a) 3,000 Action Performance Cos. 700 (a) 22,120 Advanced Marketing Services 700 12,810 Angelica 300 5,160 AnnTaylor Stores 1,550 (a) 39,354 Apogee Enterprises 1,000 14,360 Applebee's International 2,100 48,195 Applica 700 (a) 8,680 Arctic Cat 900 15,650 Argosy Gaming 1,200 (a) 34,080 Ashworth 300 (a) 2,703 Atlantic Coast Airlines Holdings 1,600 (a) 34,720 Aztar 1,400 (a) 29,120 Bally Total Fitness Holdings 1,200 (a) 22,452 Bassett Furniture 500 9,750 Brown Shoe 600 16,860 Burlington Coat Factory Warehouse 1,600 34,000 CEC Entertainment 1,000 (a) 41,300 CPI 200 3,898 Casey's General Stores 1,700 20,468 Cato, Cl. A 1,000 22,300 Chico's FAS 1,500 (a) 54,480 Children's Place Retail Stores 1,000 (a) 26,501 Christopher & Banks 900 (a) 38,070 Coachmen Industries 500 7,250 Concord Camera 600 (a) 3,061 Cost Plus 800 (a) 24,367 Department 56 500 (a) 8,140 Dress Barn 1,300 (a) 20,111 Duane Reade 800 (a) 27,240 Enesco Group 300 (a) 2,622 Ethan Allen Interiors 1,400 48,790 Fedders 800 2,136 Footstar 800 (a) 19,576 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL (CONTINUED) Fossil 1,600 (a) 32,896 Fred's 900 33,102 Frontier Airlines 900 (a) 7,317 Genesco 800 (a) 19,480 Goody's Family Clothing 1,000 (a) 11,440 Great Atlantic & Pacific 1,400 (a) 26,166 Group 1 Automotive 900 (a) 34,335 Gymboree 1,000 (a) 16,020 Haggar 200 3,210 Hancock Fabrics 900 16,713 Harman International 1,100 54,175 Haverty Furniture 800 15,800 Hot Topic 1,100 (a) 29,381 Huffy 200 (a) 1,726 IHOP 800 (a) 23,560 Insight Enterprises 1,500 (a) 37,785 Interface, Cl. A 1,300 10,452 Intermet 900 9,666 J. Jill Group 400 (a) 15,180 JAKKS Pacific 900 (a) 15,939 Jack in the Box 1,400 (a) 44,520 Jo-Ann Stores, Cl. A 700 (a) 20,440 K-Swiss 700 18,186 K2 500 (a) 5,125 Kellwood 900 29,250 La-Z Boy 2,200 55,484 Landry's Restaurants 1,000 25,510 Linens 'n Things 1,500 (a) 49,215 Lone Star Steakhouse/Saloon 800 18,872 Luby's 300 (a) 1,974 Men's Wearhouse 1,500 (a) 38,250 Mesa Air Group 1,200 (a) 11,040 Midas 600 (a) 7,506 Midwest Express Holdings 400 (a) 5,280 Monaco Coach 1,000 (a) 21,300 National Presto Industries 300 9,600 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL (CONTINUED) Nautica Enterprises 1,200 (a) 15,588 O'Charleys 600 (a) 15,180 O'Reilly Automotive 1,900 (a) 52,364 OshKosh B'Gosh 400 17,396 Oshkosh Truck 600 35,466 Oxford Industries 300 8,400 P.F. Chang's China Bistro 800 (a) 25,136 Pacific Sunwear of California 1,100 (a) 24,387 Panera Bread, Cl. A 1,000 (a) 34,750 Pep Boys-Manny, Moe & Jack 1,900 32,015 Phillips-Van Heusen 900 14,040 Pier 1 Imports 3,500 73,500 Pinnacle Entertainment 500 (a) 5,315 Polaris Industries 900 58,500 Prime Hospitality 1,400 (a) 18,186 Quicksilver 800 (a) 19,840 RARE Hospitality International 800 (a) 21,536 Royal Appliance Manufacturing 300 (a) 1,935 Ruby Tuesday 2,400 46,560 Russ Berrie & Co. 800 28,320 Russell 1,300 25,025 Ryan's Family Steak House 1,600 (a) 21,136 SCP Pool 1,000 (a) 27,760 Salton 400 (a) 5,740 School Specialty 700 (a) 18,592 ShopKo Stores 1,000 (a) 20,200 Shuffle Master 700 (a) 12,859 SkyWest 2,000 46,780 Sonic 1,500 (a) 47,115 Steak n Shake 1,000 (a) 15,650 Stein Mart 1,500 (a) 17,805 Stride Rite 1,500 12,000 Sturm Ruger 1,000 14,150 TBC 800 (a) 12,704 Thor Industries 500 35,630 Too 1,300 (a) 40,040 Toro 500 28,420 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL (CONTINUED) Tower Automotive 2,400 (a) 33,480 Triarc 600 (a) 16,560 Ultimate Electronics 500 (a) 12,955 WMS Industries 800 (a) 9,800 Wet Seal, Cl. A 1,050 (a) 25,515 Winnebago Industries 700 30,800 Wolverine World Wide 1,600 (a) 27,920 Zale 1,200 (a) 43,500 2,649,769 COMSUMER STAPLES--2.8% American Italian Pasta, Cl. A 600 (a) 30,594 Coca-Cola Bottling Consolidated 300 12,900 Corn Products International 1,300 40,456 Delta and Pine Land 1,400 28,140 Fleming Cos. 2,100 38,115 Hain Celestial Group 1,000 (a) 18,500 International Multifoods 700 (a) 18,200 J & J Snack Foods 300 (a) 13,488 Lance 1,100 16,038 Libbey 600 20,460 Nash Finch 500 15,980 Nature's Sunshine Products 500 5,655 Performance Food Group 1,500 (a) 50,790 Ralcorp Holdings 1,200 (a) 37,500 United Natural Foods 600 (a) 11,700 WD-40 600 16,656 375,172 ENERGY--7.9% American States Water 550 14,575 Atmos Energy 1,500 35,160 Atwood Oceanics 500 (a) 18,750 Cabot Oil & Gas, Cl. A 1,200 27,420 Cal Dive International 1,300 (a) 28,600 Carbo Ceramics 600 22,170 Cascade Natural Gas 400 8,360 Dril-Quip 500 (a) 12,475 Energen 1,200 33,000 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ENERGY (CONTINUED) Evergreen Resources 600 (a) 25,500 Frontier Oil 1,000 17,600 Key Production 500 (a) 9,750 Laclede Group 600 14,088 NUI 600 16,500 New Jersey Resources 1,000 29,850 Newfield Exploration 1,500 (a) 55,755 Northwest Natural Gas 900 25,875 NorthWestern 1,100 18,645 Nuevo Energy 500 (a) 7,900 Oceaneering International 800 (a) 21,600 Patina Oil & Gas 1,175 32,230 Philadelphia Suburban 2,300 46,460 Piedmont Natural Gas 1,100 40,678 Plains Resources 800 (a) 21,400 Pogo Producing 1,900 61,978 Prima Energy 500 (a) 11,395 Remington Oil & Gas 900 (a) 17,928 St. Mary Land & Exploration 1,100 26,322 Southern Union 1,985 (a) 33,745 Southwest Gas 1,200 29,700 Southwestern Energy 900 (a) 13,671 Stone Energy 1,000 (a) 40,250 Swift Energy 800 (a) 12,632 TETRA Technologies 500 (a) 13,275 Tom Brown 1,300 (a) 36,855 UGI 1,000 31,940 Unit 1,300 (a) 22,555 Veritas DGC 1,100 (a) 13,860 Vintage Petroleum 2,200 26,180 XTO Energy 4,500 92,700 1,069,327 HEALTH CARE--10.5% Accredo Health 1,100 (a) 50,754 Advanced Medical Optics 1,000 11,030 Alpharma, Cl. A 1,800 30,564 AmeriPath 1,100 (a) 26,400 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE (CONTINUED) Analogic 500 24,585 ArQule 500 (a) 3,375 ArthroCare 600 (a) 7,716 Bio-Technology General 2,000 (a) 12,020 Biosite 500 (a) 14,075 CONMED 1,000 (a) 22,330 Cephalon 1,900 (a) 85,880 Cooper Cos. 600 28,260 Coventry Health Care 2,000 (a) 56,840 CryoLife 600 (a) 9,636 Curative Health Services 400 (a) 6,712 Cygnus 1,100 (a) 2,222 Datascope 600 16,584 Diagnostic Products 1,100 (a) 40,700 Dianon Systems 400 (a) 21,368 Enzo Biochem 1,100 (a) 15,763 Haemonetics 1,000 (a) 29,200 Hologic 800 (a) 12,392 Hooper Holmes 2,200 17,600 ICU Medical 500 (a) 15,450 IDEXX Laboratories 1,300 (a) 33,527 IMPATH 600 (a) 10,770 INAMED 800 (a) 21,376 Invacare 1,100 40,700 MGI Pharma 700 (a) 4,942 Medicis Pharmaceutical, Cl. A 1,100 (a) 47,036 Mentor 900 33,038 Mid Atlantic Medical Services 1,700 (a) 53,295 NBTY 2,400 (a) 37,152 Noven Pharmaceuticals 800 (a) 20,400 Orthodontic Centers of America 1,800 (a) 41,490 Osteotech 800 (a) 5,912 Owens & Minor 1,200 23,712 Pediatrix Medical Group 1,100 (a) 27,500 PolyMedica 500 (a) 12,770 Priority Healthcare, Cl. B 1,500 (a) 35,250 Province Healthcare 1,700 (a) 38,012 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE (CONTINUED) Regeneron Pharmaceuticals 1,300 (a) 18,863 Renal Care Group 1,800 (a) 56,070 ResMed 1,100 (a) 32,340 Respironics 1,100 (a) 37,455 Sierra Health Services 1,000 (a) 22,350 Sola International 900 (a) 10,350 Spacelabs Medical 300 (a) 4,260 Sunrise Assisted Living 800 (a) 21,440 Sybron Dental Specialties 1,500 (a) 27,750 Syncor International 900 (a) 28,350 Techne 1,400 (a) 39,508 Theragenics 900 (a) 7,587 US Oncology 3,300 (a) 27,489 Viasys Healthcare 1,000 (a) 17,450 Vital Signs 500 18,075 1,417,675 INTEREST SENSITIVE--11.9% American Financial Holdings 800 23,936 Anchor Bancorp Wisconsin 800 19,288 Boston Private Financial Holdings 800 19,792 Cash America International 800 7,360 Chittenden 1,100 31,878 Colonial Properties Trust 800 31,160 Commercial Federal 1,600 46,400 Community First Bankshares 1,500 39,135 Cullen/Frost Bankers 1,900 68,305 Delphi Financial Group, Cl. A 800 34,680 Dime Community Bancshares 1,000 22,690 Downey Financial 1,000 47,300 East West Bancorp 900 31,068 Essex Property Trust 600 32,820 Financial Federal 600 (a) 19,860 First American Financial 2,700 62,100 First Bancorp 900 33,930 First Midwest Bancorp 1,700 47,226 First Republic Bank 500 (a) 13,750 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ INTEREST SENSITIVE (CONTINUED) FirstFed Financial 600 (a) 17,400 Fremont General 2,800 11,704 GBC Bancorp 400 11,580 Hilb, Rogal & Hamilton 1,100 49,775 Hudson United Bancorp 1,700 48,552 Jefferies Group 1,000 42,100 Kilroy Realty 1,100 29,425 LandAmerica Financial Group 700 22,050 MAF Bancorp 900 33,840 Philadelphia Consolidated Holding 700 (a) 31,738 Presidential Life 900 18,243 Provident Bankshares 900 21,321 RLI 400 20,400 Raymond James Financial 1,700 48,399 Riggs National 900 13,419 SCPIE Holdings 200 1,216 SWS Group 600 11,772 Seacoast Financial Services 800 20,056 Selective Insurance Group 900 25,497 Shurgard Storage Centers, Cl. A 1,200 41,640 South Financial Group 1,500 33,614 Southwest Bancorporation of Texas 1,100 (a) 39,842 Staten Island Bancorp 2,200 42,240 Sterling Bancshares 1,600 23,632 Stewart Information Services 700 (a) 14,385 Susquehanna Bancshares 1,400 31,794 Trenwick Group 1,100 8,250 Trustco Bank 2,400 31,608 UCBH Holdings 700 26,607 UICI 1,700 (a) 34,340 United Bankshares 1,500 44,070 Washington Federal 2,300 58,098 Whitney Holding 1,400 43,036 Zenith National Insurance 600 19,110 1,603,431 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ INTERNET--.2% Netegrity 1,600 (a) 9,856 PC-Tel 500 (a) 3,384 Verity 1,400 (a) 15,526 28,766 PRODUCER GOODS & SERVICES--22.3% A.M.Castle 800 9,984 A.O.Smith 1,000 31,210 AAR 700 7,140 Acuity Brands 1,500 27,300 Alliant Techsystems 1,300 (a) 82,940 Applied Industrial Technologies 600 11,700 AptarGroup 1,200 36,900 Arch Chemicals 800 19,760 Arkansas Best 800 (a) 20,384 Astec Industries 600 (a) 9,654 BE Aerospace 1,100 (a) 14,498 Baldor Electric 1,200 30,240 Barnes Group 800 18,320 Belden 800 16,672 Brady, Cl. A 900 31,500 Briggs & Stratton 800 30,672 Brooks-PRI Automation 1,000 (a) 25,560 Brush Engineered Materials 200 2,480 Buckeye Technologies 1,000 (a) 9,800 Building Materials Holding 500 (a) 7,185 Butler Manufacturing 200 5,490 C&D Technologies 900 16,218 CUNO 600 (a) 21,708 Cable Design Technologies 1,400 (a) 14,350 Cambrex 900 36,090 Caraustar Industries 800 9,984 Century Aluminum 500 7,445 Champion Enterprises 1,200 (a) 6,744 ChemFirst 500 14,325 Chesapeake 600 15,798 Clarcor 900 28,485 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) Commercial Metals 500 23,470 Commonweath Industries 400 2,876 Curtiss-Wright 400 32,000 Cymer 1,200 (a) 42,048 DRS Technologies 600 (a) 25,650 Deltic Timber 400 13,792 EDO 600 17,100 Elcor 700 19,145 Emcor Group 500 (a) 29,350 Fleetwood Enterprises 1,100 9,570 Florida Rock Industries 1,100 39,391 Forward Air 700 (a) 22,946 Gardner Denver 600 (a) 12,000 GenCorp 1,500 21,450 Georgia Gulf 1,200 31,728 Graco 1,750 43,995 Griffon 1,200 (a) 21,720 Heartland Express 1,800 (a) 43,074 Hughes Supply 900 40,410 IDEX 1,200 40,200 IMCO Recycling 500 (a) 4,925 Insituform Technologies, Cl. A 900 (a) 19,062 Intermagnetics General 500 (a) 10,100 Ionics 500 (a) 12,125 JLG Industries 1,300 18,239 Kaman, Cl. A 1,000 16,760 Kansas City Southern Industries 2,100 (a) 35,700 Kirby 900 (a) 22,005 Landstar Systems 300 (a) 32,055 Lawson Products 400 12,324 Lennox International 2,100 37,779 Lindsay Manufacturing 400 9,260 Lone Star Technologies 800 (a) 18,320 Lydall 500 (a) 7,625 M.D.C. Holdings 1,000 52,000 MacDermid 1,300 27,950 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) Manitowoc 900 31,941 Massey Energy 2,500 31,750 Milacron 1,000 10,150 Mueller Industries 1,300 (a) 41,275 Myers Industries 1,000 17,140 NVR 300 (a) 96,900 OM Group 1,000 62,000 Offshore Logistics 800 (a) 19,112 Omnova Solutions 1,500 12,600 Penford 200 3,620 PolyOne 3,100 34,875 Pope & Talbot 500 9,365 Quaker Chemical 400 9,800 Quanex 600 26,220 RTI International Metals 800 (a) 9,720 Regal Beloit 900 21,879 Reliance Steel & Aluminum 1,200 36,600 Roadway Express 700 25,151 Robins & Myers 400 10,420 Rogers 500 (a) 13,655 Ryerson Tull 800 9,304 Ryland Group 1,000 49,750 SPS Technologies 400 (a) 15,268 Schweitzer-Mauduit International 600 14,760 Scotts, Cl. A 1,100 (a) 49,940 Seacor Smit 800 (a) 37,880 Shaw Group 1,500 (a) 46,050 Simpson Manufacturing 500 (a) 28,565 Skyline 300 9,900 Standard Motor Products 400 6,780 Standard Pacific 1,200 42,096 Standex International 500 12,550 Steel Dynamics 1,800 (a) 29,646 Steel Technologies 500 6,590 Stillwater Mining 1,600 (a) 26,048 SurModics 500 (a) 12,995 Technitrol 1,400 32,620 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) Teledyne Technologies 1,200 (a) 24,732 Texas Industries 900 28,341 Thomas Industries 600 17,280 Timken 2,000 44,660 Titan International 500 2,075 Toll Brothers 2,600 (a) 76,180 Tredegar 1,400 33,810 Triumph Group 600 (a) 26,760 URS 700 (a) 19,600 USFreightways 900 34,083 United Stationers 1,300 (a) 39,520 Universal Forest Products 800 18,736 Valmont Industries 1,000 20,330 Watsco 1,100 20,075 Watts Industries, Cl. A 1,000 19,850 Wellman 1,200 20,100 Werner Enterprises 2,300 49,013 Wolverine Tube 600 4,530 Woodward Governor 500 29,560 Yellow 1,100 (a) 35,640 3,008,470 SERVICES--9.3% ABM Industries 1,800 31,248 ADVO 700 (a) 26,649 Aaron Rents 700 16,765 Administaff 800 (a) 8,000 American Management Systems 1,500 (a) 28,665 Analysts International 600 2,550 Arbitron 1,200 (a) 37,440 Armor Holdings 1,100 (a) 28,050 BARRA 800 (a) 29,744 Boston Communications Group 600 (a) 4,824 Bowne & Co. 1,300 19,162 CACI International, Cl. A 1,100 (a) 42,009 CDI 600 (a) 19,530 Central Parking 1,300 29,705 Chemed 300 11,307 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SERVICES (CONTINUED) Ciber 2,000 (a) 14,500 Computer Task Group 500 (a) 2,485 Consolidated Graphics 500 (a) 9,385 Corinthian Colleges 1,600 (a) 54,224 eFunds 1,900 (a) 18,029 4Kids Entertainment 600 (a) 12,138 FactSet Research Systems 1,300 38,701 Fair Isaac & Co. 1,300 42,731 Franklin Covey 500 (a) 1,450 G & K Services, Cl. A 800 27,392 Global Payments 1,400 41,650 Heidrick & Struggles International 500 (a) 9,985 ITT Educational Services 1,600 (a) 34,880 Information Holdings 700 (a) 17,080 Information Resources 900 (a) 8,450 Insurance Auto Auction 400 (a) 7,800 John H. Harland 1,200 33,840 Kroll 1,100 (a) 23,078 Labor Ready 1,300 (a) 7,605 MAXIMUS 900 (a) 28,530 MICROS Systems 700 (a) 19,397 Marcus 1,100 18,315 MemberWorks 400 (a) 7,412 Mobile Mini 500 (a) 8,550 NDCHealth 1,300 36,270 New England Business Service 500 12,570 On Assignment 900 (a) 16,020 PAREXEL International 900 (a) 12,519 Paxar 1,500 (a) 25,125 Pegasus Solutions 500 (a) 8,750 Pharmaceutical Product Development 2,000 (a) 52,680 Pre-Paid Legal Services 800 (a) 15,920 PRG-Schultz International 2,300 (a) 28,313 QRS 400 (a) 3,116 Regis 1,700 45,932 RehabCare Group 600 (a) 14,418 Sourcecorp 600 (a) 15,900 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SERVICES (CONTINUED) Spherion 2,000 (a) 23,800 Standard Register 1,000 34,190 StarTek 500 (a) 13,370 Tetra Tech 1,800 (a) 26,460 Thomas Nelson 500 5,280 Volt Information Sciences 500 (a) 12,245 Waste Connections 1,000 (a) 31,240 1,257,373 TECHNOLOGY--13.4% ANSYS 600 (a) 12,060 ATMI 1,000 (a) 22,370 AXT 700 (a) 5,586 Actel 900 (a) 18,918 Adaptec 3,400 (a) 26,826 Advanced Energy Industries 1,000 (a) 22,180 Aeroflex 2,200 (a) 15,290 Allen Telecom 900 (a) 3,825 Alliance Semiconductor 800 (a) 5,680 Anixter International 1,300 (a) 30,212 Artesyn Technologies 1,200 (a) 7,777 Aspect Communications 1,700 (a) 5,440 Aspen Technology 1,300 (a) 10,842 AstroPower 800 (a) 15,712 Audiovox, Cl. A 800 (a) 6,360 Avid Technology 800 (a) 7,408 Aware 300 (a) 1,140 Axcelis Technologies 3,300 (a) 37,884 BEI Technologies 600 6,870 Bel Fuse, Cl. B 400 10,820 Bell Microproducts 600 (a) 4,830 Benchmark Electronics 900 (a) 26,100 Black Box 800 (a) 32,584 C-COR.net 1,100 (a) 7,700 CTS 1,200 14,448 Captaris 800 (a) 2,360 Carreker 900 (a) 10,188 Catapult Communications 500 (a) 10,936 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) Cerner 1,300 (a) 62,179 Checkpoint Systems 1,200 (a) 14,040 Cognex 1,400 (a) 28,070 Coherent 1,100 (a) 32,493 Cohu 700 12,096 Concerto Software 300 (a) 1,890 Concord 700 (a) 11,536 DMC Stratex Networks 1,500 (a) 3,015 DSP Group 1,000 (a) 19,600 Dendrite International 1,400 (a) 13,538 Digi Inernational 800 (a) 2,641 Dionex 900 (a) 24,111 DuPont Photomasks 700 (a) 22,736 ESS Technology 1,800 (a) 31,572 Electro Scientific Industries 1,000 (a) 24,300 Electroglas 500 (a) 5,000 Esterline Technologies 800 (a) 18,160 Exar 1,300 (a) 25,636 FLIR Systems 600 (a) 25,182 FileNet 1,300 (a) 18,850 Gerber Scientific 500 (a) 1,755 HNC Software 100 (a) 18,370 Harmonic 2,600 (a) 9,513 Helix Technology 900 18,540 Hutchinson Technology 1,000 (a) 15,640 Hyperion Solutions 1,300 (a) 23,708 Imagistics International 800 (a) 17,176 Input/Output 1,600 (a) 14,400 Inter-Tel 1,000 17,110 InterVoice-Brite 1,200 (a) 1,716 Itron 900 (a) 23,607 JDA Software Group 1,000 (a) 28,260 Keithley Instruments 500 7,220 Kopin 2,000 (a) 13,200 Kronos 700 (a) 21,342 Kulicke & Soffa Industries 1,600 (a) 19,824 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) MRO Software 900 (a) 10,242 Manhattan Associates 1,200 (a) 38,592 MapInfo 400 (a) 3,640 Meade Instruments 400 (a) 2,268 Mercury Computer Systems 900 (a) 19,503 Methode Electronics, Cl. A 1,300 16,601 Microsemi 1,100 (a) 7,260 Midway Games 1,900 (a) 16,150 NYFIX 1,400 (a) 11,900 Network Equipment Technologies 300 (a) 1,290 Park Electrochemical 700 18,550 Pericom Semiconductor 700 (a) 8,113 Phoenix Technologies 1,100 (a) 11,000 Photon Dynamics 600 (a) 18,000 Photronics 1,200 (a) 22,728 Pinnacle Systems 2,100 (a) 23,077 Pioneer-Standard Electronics 1,300 13,507 Planar Systems 500 (a) 9,625 Power Integrations 1,100 (a) 19,689 Progress Software 1,400 (a) 20,663 Radiant Systems 1,000 (a) 13,030 Radisys 500 (a) 5,815 Rainbow Technologies 800 (a) 3,936 Roper Industries 1,100 41,030 Roxio 700 (a) 5,040 Rudolph Technologies 500 (a) 12,465 SBS Technologies 400 (a) 4,900 SCM Microsystems 600 (a) 8,028 SPSS 600 (a) 9,324 Serena Software 1,400 (a) 19,176 Skyworks Solutions 3,900 (a) 21,645 Standard Microsystems 700 (a) 16,527 Supertex 600 (a) 10,572 Symmetricom 500 (a) 1,825 Systems & Computer Technology 1,300 (a) 17,563 TALX 700 13,272 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) THQ 1,400 (a) 41,748 Take-Two Interactive Software 1,300 (a) 26,767 Therma-Wave 600 (a) 6,834 Three-Five Systems 400 (a) 4,560 Tollgrade Communications 600 (a) 8,802 Trimble Navigation 1,100 (a) 17,050 Ultratech Stepper 700 (a) 11,333 Varian Semiconductor Equipment Associates 1,300 (a) 44,109 Veeco Instruments 1,100 (a) 25,421 ViaSat 1,000 (a) 8,430 Vicor 1,300 (a) 9,087 X-Rite 800 6,880 Zebra Technologies, Cl. A 1,200 (a) 57,864 ZixIt 400 (a) 2,192 1,797,995 UTILITIES--1.2% Avista 1,600 22,080 CH Energy Group 600 29,550 Central Vermont Public Service 500 8,800 El Paso Electric 1,800 (a) 24,930 General Communication, Cl. A 1,700 (a) 11,339 Green Mountain Power 200 3,632 Metro One Telecommunications 700 (a) 9,772 UIL Holdings 500 27,230 UniSource Energy 1,200 22,320 159,653 TOTAL COMMON STOCKS (cost $14,417,818) 13,379,395 Principal SHORT-TERM INVESTMENTS--2.6% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTES--2.2% Federal National Mortgage Association, 1.88%, 7/1/2002 300,000 300,000 U.S. TREASURY BILLS--.4% 1.74%, 7/18/2002 50,000 49,962 TOTAL SHORT-TERM INVESTMENTS (cost $349,960) 349,962 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $14,767,778) 101.9% 13,729,357 LIABILITIES, LESS CASH AND RECEIVABLES (1.9%) (252,265) NET ASSETS 100.0% 13,477,092
(A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 14,767,778 13,729,357 Cash 253,316 Receivable for shares of Beneficial Interest subscribed 161,907 Receivable for investment securities sold 52,119 Dividends receivable 6,908 14,203,607 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 6,081 Payable for investment securities purchased 650,882 Payable for shares of Beneficial Interest redeemed 69,552 726,515 -------------------------------------------------------------------------------- NET ASSETS ($) 13,477,092 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 14,722,951 Accumulated undistributed investment income--net 7,623 Accumulated net realized gain (loss) on investments (215,061) Accumulated net unrealized appreciation (depreciation) on investments (1,038,421) -------------------------------------------------------------------------------- NET ASSETS ($) 13,477,092 -------------------------------------------------------------------------------- SHARES OUTSTANDING (unlimited number of $.001 par value shares Beneficial Interest authorized) 1,187,224 NET ASSET VALUE, offering and redemption price per share ($) 11.35 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS from May 1, 2002 (commencement of operations) to June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends 16,168 Interest 3,623 TOTAL INCOME 19,791 EXPENSES: Investment advisory fee--Note 3(a) 7,098 Distribution fees--Note 3(b) 5,070 TOTAL EXPENSES 12,168 INVESTMENT INCOME--NET 7,623 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (220,859) Net realized gain (loss) on financial futures 5,798 NET REALIZED GAIN (LOSS) (215,061) Net unrealized appreciation (depreciation) on investments (1,038,421) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1,253,482) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,245,859) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS from May 1, 2002 (commencement of operations) to June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 7,623 Net realized gain (loss) on investments (215,061) Net unrealized appreciation (depreciation) on investments (1,038,421) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,245,859) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold 21,107,610 Cost of shares redeemed (6,384,659) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 14,722,951 TOTAL INCREASE (DECREASE) IN NET ASSETS 13,477,092 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period -- END OF PERIOD 13,477,092 Undistributed investment income--net 7,623 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): Shares sold 1,719,935 Shares redeemed (532,711) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,187,224 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS (Unaudited) The following table describes the performance for the period from May 1, 2002 (commencement of operations) to June 30, 2002. Total return shows how much your investment in the portfolio would have increased (or decreased) during the period, assuming you had reinvested all dividends and distributions.These figures have been derived from the portfolio's financial statements. -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 12.50 Investment Operations: Investment income--net .01(a) Net realized and unrealized gain (loss) on investments (1.16) Total from Investment Operations (1.15) Net asset value, end of period 11.35 -------------------------------------------------------------------------------- TOTAL RETURN (%) (9.20)(b) -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .10(b) Ratio of net investment income to average net assets .06(b) Portfolio Turnover Rate 44.47(b) -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 13,477 (A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (B) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen series, including the Small Cap Stock Index Portfolio (the "portfolio"), which commenced operations on May 1, 2002. 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 match the performance of the Standard & Poor's SmallCap 600 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. 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. The fiscal year end of the portfolio is December 31. As of June 30, 2002, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 800,000 shares of the portfolio. 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'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 and premium on investments, is recognized on the accrual basis. (c) 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. (d) Federal income taxes: It is the policy of the portfolio 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 June 30, 2002, the portfolio did not borrow under the line of credit. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement ("Agreement") with Dreyfus, the investment advisory fee is computed at the annual rate of .35 of 1% of the value of the portfolio's average daily net assets and is payable monthly. Under the terms of the Agreement, Dreyfus has agreed to pay all of the expenses of the portfolio except management fees, Distribution Plan fees, taxes, interest expenses, brokerage commisions, fees and expenses of independent counsel to the portfolio and the non-interested Board members, and extraordinary expenses. In addition, Dreyfus has also agreed to reduce its fee in an amount equal to the portfolio's allocated portion of the accrued fees and expenses of non-interested Board members and fees and expenses of independent counsel to the portfolio. (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, the portfolio pays the Distributor for distributing their shares, for servicing and/or maintaining shareholder accounts and for advertising and marketing. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the portfolio's 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. During the period ended June 30, 2002, the portfolio was charged $5,070 pursuant to the Plan. (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 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 and financial futures, during the period ended June 30, 2002, amounted to $18,495,418 and $3,856,741, respectively. The fund may invest in financial futures contracts in order to gain exposure to or protect against changes in the market. The fund is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments in financial futures require the fund to "mark to market" on a daily basis, which reflects the change in the market value of the contracts at the close of each day's trading. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses. When the contracts are closed, the fund recognizes a realized gain or loss. These investments require initial margin deposits with a 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 June 30, 2002, there were no financial futures contracts oustanding. At June 30, 2002, accumulated net unrealized depreciation on investments was $1,038,421, consisting of $235,072 gross unrealized appreciation and $1,273,493 gross unrealized depreciation. At June 30, 2002, 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 NOTES For More Information Dreyfus Investment Portfolios, Small Cap Stock Index 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 410SA0602 Dreyfus Investment Portfolios, Technology Growth Portfolio SEMIANNUAL REPORT June 30, 2002 YOU, YOUR ADVISOR AND DREYFUS, A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 8 Statement of Assets and Liabilities 9 Statement of Operations 10 Statement of Changes in Net Assets 11 Financial Highlights 13 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Technology Growth Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Technology Growth Portfolio, covering the six-month period from January 1, 2002 through June 30, 2002. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the primary portfolio manager, Mark Herskovitz. The U.S. stock market confronted a number of formidable challenges during the first half of 2002. In addition to lackluster corporate earnings and the ongoing war on terrorism, investors have recently contended with questions regarding the accuracy of certain companies' financial statements. These and other influences drove the Standard & Poor's 500 Composite Stock Price Index, a widely accepted benchmark of domestic large-cap stock performance, down during the first six months of the year. Nonetheless, we are generally optimistic about the future. The economy has begun to recover, showing signs of sustained growth that should have a positive effect on corporate earnings. Recent market declines may have created attractive values in some stocks. At the same time, we believe that today's accounting scandals will likely lead to higher standards and stronger oversight of corporate behavior, which should give investors greater confidence in the future. During turbulent times like these it is important to have an investment horizon that is measured in years, not weeks or months. Remember that over the long term, stocks have historically produced higher returns than other types of investments. For investors with a long-term perspective, stocks should continue to provide considerable potential for growth. As always, we urge you to talk with your financial advisor if you have questions or concerns about the markets or your investment portfolio. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF PERFORMANCE Mark Herskovitz, Primary Portfolio Manager How did Dreyfus Investment Portfolios, Technology Growth Portfolio perform relative to its benchmarks? For the six-month period ended June 30, 2002, the portfolio's Initial shares produced a -28.56% total return and its Service shares produced a -28.57% total return.(1) The portfolio's benchmarks, the Morgan Stanley High Technology 35 Index and the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"), produced total returns of -34.40% and -13.15%, respectively, over the same period.(2, 3) The ongoing decline of technology stock valuations was intensified by several factors, including a dearth of new corporate capital spending and growing concerns regarding accounting-related scandals affecting a handful of major U.S. corporations. 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"). What other factors influenced the portfolio's performance? Since mid-2000, business fundamentals of most technology companies have deteriorated and valuations for technology stocks have fallen to much lower levels. This market adjustment continued to hurt the portfolio's performance during the reporting period. Software companies were particularly hard-hit, primarily because of a lack of demand from corporate customers. Although it is impossible to predict exactly when technology stocks will stabilize, we believe that several factors have extended the sector's decline. First, many investors have been disappointed in the uneven pace of economic recovery, and they have avoided economically-sensitive stocks, such as technology, in favor of more defensive groups. Second, the corporate accounting scandals that began with the collapse of Enron Corp. have adversely affected stock prices of many companies, even those whose accounting practices remain unquestioned. In this environment, we attempted to focus on long-term business fundamentals and look beyond near-term psychological factors. This analysis led us to a number of well-established, currently growing technology companies, which are reflected in the portfolio's four largest holdings. Taiwan Semiconductor has benefited from an industry-wide trend toward outsourcing the manufacture of microprocessors, a business with very high barriers to entry. Microsoft continues to dominate its markets and generate enormously positive cash flows. Dell Computer has maintained its cost advantages, taking market share from weaker competitors. Finally, eBay has grown rapidly after establishing itself as the dominant force in online auction markets. What is the portfolio's current strategy? We have continued to focus on currently growing technology companies. In addition, we have expanded our search to include companies that we expect to benefit from industry consolidation in today's highly challenging market environment. We have also begun to identify special situations in companies that have declined to valuations that, in our view, have fallen too far relative to their business fundamentals. Although the technology sector's decline has lasted longer than many expected, we do not believe that technological innovation stops just because business is bad. We believe that business fundamentals will eventually rebound. What's required, in our opinion, is an objective view of the forces that will drive the U.S. economy in the future. When viewed from this long-term perspective, we believe that many beaten-down technology stocks may begin to look quite attractive. July 15, 2002 (1) 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 REINVESTMENT OF 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 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 Portfolio STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
COMMON STOCKS--83.5% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ BIOTECHNOLOGY--1.1% Genentech 25,000 (a) 837,500 COMPUTER SERVICES--5.0% Automatic Data Processing 40,500 1,763,775 Concord EFS 62,000 (a) 1,868,680 3,632,455 DATE STORAGE--5.7% Brocade Communications Systems 60,000 (a,b) 1,048,800 EMC 153,500 (a) 1,158,925 Emulex 49,000 (a) 1,102,990 QLogic 23,500 (a) 895,350 4,206,065 HARDWARE--7.9% Dell Computer 121,500 (a) 3,176,010 International Business Machines 13,500 972,000 Lexmark International 30,500 (a) 1,659,200 5,807,210 INTERNET--3.6% eBay 43,000 (a) 2,649,660 NETWORKING--2.8% Cisco Systems 149,500 (a) 2,085,525 SEMICONDUCTORS--23.6% ATI Technologies 103,000 (a) 711,730 Intel 110,000 2,009,700 Linear Technology 66,000 2,074,380 Microchip Technology 47,500 (a) 1,302,925 Micron Technology 52,500 (a) 1,061,550 Taiwan Semiconductor 2,006,290 (a) 4,083,440 Texas Instruments 61,500 1,457,550 United Microelectronics, ADR 280,000 (a) 2,058,000 Zoran 112,500 (a) 2,577,375 17,336,650 SEMICONDUCTOR EQUIPMENT--9.0% Applied Materials 125,000 (a) 2,377,500 KLA-Tencor 40,000 (a) 1,759,600 Novellus Systems 30,000 (a) 1,020,000 Teradyne 60,000 (a) 1,410,000 6,567,100 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SOFTWARE--18.5% Adobe Systems 52,000 1,482,000 BEA Systems 115,000 (a) 1,082,150 Microsoft 66,000 (a) 3,571,920 Oracle 149,500 (a) 1,415,765 PeopleSoft 62,800 (a) 934,464 Rational Software 270,000 (a) 2,216,700 Siebel Systems 95,800 (a) 1,362,276 Symantec 35,000 (a) 1,149,750 VERITAS Software 19,000 (a) 376,010 13,591,035 TELECOMMUNICATION EQUIPMENT--6.3% Qualcomm 48,500 (a) 1,333,265 Scientific-Atlanta 55,000 (b) 904,750 UTStarcom 117,500 (a) 2,369,975 4,607,990 TOTAL COMMON STOCKS (cost $81,222,264) 61,321,190 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS--17.9% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ REGULATED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 4,368,906 (c) 4,368,906 Dreyfus Institutional Cash Advantage Plus Fund 4,368,906 (c) 4,368,906 Dreyfus Institutional Preferred Plus Money Market Fund 4,368,906 (c) 4,368,906 TOTAL SHORT-TERM INVESTMENTS (cost $13,106,718) 13,106,718 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $94,328,982) 101.4% 74,427,908 LIABILITIES, LESS CASH AND RECEIVABLES (1.4%) (1,048,967) NET ASSETS 100.0% 73,378,941 (A) NON-INCOME PRODUCING. (B) ALL OR A PORTION OF THESE SECURITIES ARE ON LOAN. AT JUNE 30, 2002, THE TOTAL MARKET VALUE OF THE PORTFOLIO'S SECURITIES ON LOAN IS $74,329 AND THE TOTAL MARKET VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS $80,616. (C) INVESTMENTS IN AFFILIATED MONEY MARKET FUNDS (SEE NOTE 3(D) IN THE PORTFOLIO'S NOTES TO FINANCIAL STATEMENTS).
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 94,328,982 74,427,908 Cash 44,240 Cash denominated in foreign currencies 10,212 10,561 Receivable for investment securities sold 785,618 Collateral for securities loaned--Note 1(c) 80,616 Dividends and interest receivable 7,224 Prepaid expenses 3,589 75,359,756 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 57,123 Payable for investment securities purchased 1,661,781 Liability for securities loaned--Note 1(c) 80,616 Payable for shares of Beneficial Interest redeemed 155,654 Accrued expenses 25,641 1,980,815 -------------------------------------------------------------------------------- NET ASSETS ($) 73,378,941 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 203,362,707 Accumulated investment (loss) (230,422) Accumulated net realized gain (loss) on investments and foreign currency transactions (109,852,619) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions (19,900,725) -------------------------------------------------------------------------------- NET ASSETS ($) 73,378,941 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 66,243,231 7,135,710 Shares Outstanding 9,767,659 1,057,388 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 6.78 6.75 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 113,011 Cash dividends (net of $3,548 foreign taxes withheld at source) 69,659 TOTAL INCOME 182,670 EXPENSES: Investment advisory fee--Note 3(a) 355,679 Prospectus and shareholders' reports 18,189 Custodian fees--Note 3(b) 15,715 Professional fees 11,685 Distribution fees--Note 3(b) 10,041 Trustees' fees and expenses--Note 3(c) 584 Shareholder servicing costs--Note 3(b) 146 Miscellaneous 1,053 TOTAL EXPENSES 413,092 INVESTMENT (LOSS) (230,422) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (21,126,319) Net realized gain (loss) on forward currency exchange contracts 205 NET REALIZED GAIN (LOSS) (21,126,114) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (9,226,831) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (30,352,945) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (30,583,367) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (230,422) (173,536) Net realized gain (loss) on investments (21,126,114) (59,304,618) Net unrealized appreciation (depreciation) on investments (9,226,831) 10,806,122 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (30,583,367) (48,672,032) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 10,316,695 22,232,936 Service shares 2,721,009 9,773,243 Cost of shares redeemed: Initial shares (11,205,546) (18,579,292) Service shares (1,012,418) (1,159,311) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 819,740 12,267,576 TOTAL INCREASE (DECREASE) IN NET ASSETS (29,763,627) (36,404,456) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 103,142,568 139,547,024 END OF PERIOD 73,378,941 103,142,568 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 1,110,700 2,121,700 Shares redeemed (1,353,275) (1,945,315) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (242,575) 176,385 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 309,030 995,519 Shares redeemed (114,019) (133,177) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 195,011 862,342 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended June 30, 2002 Year Ended December 31, ------------------------------------- INITIAL SHARES (Unaudited) 2001 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.49 14.19 19.45 12.50 Investment Operations: Investment (loss) (.02)(b) (.02)(b) (.06)(b) (.02)(b) Net realized and unrealized gain (loss) on investments (2.69) (4.68) (5.18) 6.97 Total from Investment Operations (2.71) (4.70) (5.24) 6.95 Distributions: Dividends from net realized gain on investments -- -- (.02) -- Net asset value, end of period 6.78 9.49 14.19 19.45 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (28.56)(c) (33.12) (26.98) 55.60(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .42(c) .87 .84 .36(c) Ratio of investment (loss) to average net assets (.23)(c) (.15) (.30) (.14)(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- -- .09(c) Portfolio Turnover Rate 46.08(c) 86.25 121.88 20.01(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 66,243 94,992 139,547 65,707 (A) FROM AUGUST 31, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended June 30, 2002 Year Ended December 31 --------------------------- SERVICE SHARES (Unaudited) 2001 2000(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.45 14.19 14.19 Investment Operations: Investment (loss) (.03)(b) (.05)(b) -- Net realized and unrealized gain (loss) on investments (2.67) (4.69) -- Total from Investment Operations (2.70) (4.74) -- Net asset value, end of period 6.75 9.45 14.19 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (28.57)(c) (33.40) -- ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .53(c) 1.20 -- Ratio of investment (loss) to average net assets (.34)(c) (.60) -- Portfolio Turnover Rate 46.08(c) 86.25 121.88 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 7,136 8,151 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 thirteen 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 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. 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. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. 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'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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $215 during the period ended June 30, 2002, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The portfolio may lend securities to qualified institutions. At origination, all loans are secured by cash collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan will be maintained at all times. Cash collateral is invested in certain money market mutual funds managed by Dreyfus. The portfolio will be entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction. Such income earned is included in interest income. Although each security loaned is fully collateralized, the fund would bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner. (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, 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 $79,328,254 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, $10,860,287 of the carryover expires in fiscal 2008 and $68,467,967 expires in fiscal 2009. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 June 30, 2002, 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. During the period ended June 30, 2002, Service shares were charged $10,041 pursuant to the Plan. 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 June 30, 2002, the portfolio was charged $101 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 June 30, 2002, the portfolio was charged $15,715 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 annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. (d) Commencing June 13, 2002, pursuant to an exemptive order from the Securities and Exchange Commission, the portfolio invests its available cash balances in affiliated money market funds as shown in the portfolio's Statement of Investments. Management fees are not charged to these accounts. The portfolio derived $11,685 in income from these investments, which is included as interest income in the portfolio's Statement of Operations. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding forward currency exchange contracts and short-term securities, during the period ended June 30, 2002, amounted to $37,603,114 and $37,910,521, 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 NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 June 30, 2002, there were no forward currency exchange contracts outstanding. At June 30, 2002, accumulated net unrealized depreciation on investments, was $19,901,074, consisting of $1,612,676 gross unrealized appreciation and $21,513,750 gross unrealized depreciation. At June 30, 2002, 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). 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 9263 Boston, MA 02205-8501 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) 2002 Dreyfus Service Corporation 175SA0602