-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GZumEBMGqKkJ2omRfGeRBhJ0d+jZx+aVyOSBt7t53BXF3c5iRD4gJ7DicOcPAV/P FXXvWUH5rXT0ePN4ZTiRrg== 0001056707-03-000002.txt : 20030303 0001056707-03-000002.hdr.sgml : 20030303 20030303164704 ACCESSION NUMBER: 0001056707-03-000002 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030303 EFFECTIVENESS DATE: 20030303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYFUS INVESTMENT PORTFOLIOS CENTRAL INDEX KEY: 0001056707 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08673 FILM NUMBER: 03589813 BUSINESS ADDRESS: STREET 1: C/O THE DREYFUS CORPORATION STREET 2: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 BUSINESS PHONE: 2129226789 MAIL ADDRESS: STREET 1: C/O THE DREYFUS CORPORATION STREET 2: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 N-30D 1 lp1-172.txt ANNUAL REPORT Dreyfus Investment Portfolios, Core Bond Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 Statement of Investments 17 Statement of Financial Futures 18 Statement of Assets and Liabilities 19 Statement of Operations 20 Statement of Changes in Net Assets 22 Financial Highlights 24 Notes to Financial Statements 31 Report of Independent Auditors 32 Important Tax Information 33 Board Members Information 35 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Bond Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Core Bond Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In stark contrast to the stock market's overall dismal performance, bonds from government and corporate issuers generally performed well in 2002. In fact, 2002 marked the third consecutive year of broad bond market gains and stock market losses. In an environment roiled by allegations of corporate scandal, a lackluster economy and the threat of war, investors flocked to high-quality, fixed-income securities. Declining interest rates and heightened investor demand drove prices of U.S. Treasury securities higher and investment-grade corporate bonds also performed well, despite the bankruptcies of several major U.S. corporations. Can bonds continue to produce attractive total returns in 2003? No one can know for sure. However, we believe that sector allocation and security selection will be key in 2003, requiring intensive research to find the most compelling opportunities. In the meantime, we continue to encourage you to maintain an ongoing dialogue with your financial advisor to ensure that your portfolio reflects your investment needs, long-term goals and attitudes toward risk. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 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 12-month period ended December 31, 2002, the portfolio's Initial shares achieved a total return of 6.70% and its Service shares achieved a total return of 6.78% .(1) In comparison, the Merrill Lynch U.S. Domestic Master Index, the portfolio's benchmark, achieved a total return of 10.41% for the same period.(2 We attribute the portfolio's positive overall performance to declining interest rates and heightened investor demand for high-quality, fixed-income securities. However, the portfolio's returns trailed its benchmark, primarily because of its relatively heavy exposure to both investment-grade corporate bonds and high-yield corporate bonds, which underperformed comparable U.S. government securities during the reporting period. What is the portfolio's investment approach? The portfolio seeks to maximize total return through both capital appreciation and current income. The portfolio invests at least 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? A variety of economic and market influences benefited most areas of the bond market during the reporting period. Perhaps most significant, persistent economic weakness led to further short-term interest-rate reductions by the Federal Reserve Board (the "Fed"), which in November cut the federal funds rate another 0.50 percentage points. Because most bond prices move in the opposite direction of interest rates, lower rates generally led to higher bond prices. This was especially true for U.S. Treasury securities. Many high-quality bonds were also positively affected by corporate scandals during the reporting period. As accounting irregularities and other ethical lapses mounted, investors increasingly shifted assets away from credit-sensitive securities, including stocks and many corporate bonds, toward highly rated fixed-income investments, such as U.S. government securities. This "flight to quality" was further intensified by declining stock prices and war fears. While some investment-grade corporate bonds fared well in 2002 because of robust investor demand, most high-yield corporate bonds and many investment-grade corporate bonds performed relatively poorly in comparison to U.S. government securities. In fact, 2002 included two of the worst performing months in the history of the high-yield market. Because we emphasized corporate bonds during much of the reporting period, our sector allocation strategy detracted from the portfolio's overall performance. By the same token, the portfolio's returns were hurt by its relatively light exposure to U.S. Treasury securities, which we believed were overvalued at the start of 2002. We were proved wrong on this score, and Treasuries ended the year as the bond market's top performer. The effects of our sector allocation strategy were partly offset by our successful duration management strategy, which attempts to benefit from changes in interest rates. By maintaining the portfolio's average duration at points that were generally longer than average for most of the year, we were able to maintain higher yields for as long as we deemed practical. What is the portfolio's current strategy? We continue to believe that credit-sensitive securities represent attractive values, and we expect prices to firm as the economy strengthens. In our view, the Fed' s November rate cut was probably its last for the current cycle, and further attempts to boost the economy over the near term may come primarily from fiscal stimuli, such as tax cuts. While we have continued to maintain above-benchmark positions in high-yield bonds, we have attempted to reduce company-specific risks by increasing the portfolio's level of diversification and purchasing securities that reflect the composition of leading high-yield indices. We have also recently increased the portfolio' s holdings of dollar-denominated bonds from overseas banks, called Yankee bonds. While the prices and yields of foreign bonds can be affected by political and economic instability or changes in currency exchange rates, we believe these bonds will be beneficial because of the likelihood of further rate cuts in Europe. January 15, 2003 (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, 2003, 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 U.S. DOMESTIC MASTER INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. TREASURY AND AGENCY, AND MORTGAGE AND INVESTMENT-GRADE CORPORATE SECURITIES WITH MATURITIES GREATER THAN OR EQUAL TO ONE YEAR. The Portfolio
PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Core Bond Portfolio Initial shares and Service shares and the Merrill Lynch U.S. Domestic Master Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02 Inception From Date 1 Year Inception - ------------------------------------------------------------------------------------------------------------------------------------ INITIAL SHARES 5/1/00 6.70% 7.45% SERVICE SHARES 5/1/00 6.78% 7.45%
THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, CORE BOND PORTFOLIO ON 5/1/00 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE MERRILL LYNCH U.S. DOMESTIC MASTER INDEX (THE "INDEX") ON THAT DATE. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. GOVERNMENT, MORTGAGE AND BBB OR HIGHER RATED CORPORATE SECURITIES WITH MATURITIES GREATER THAN OR EQUAL TO ONE YEAR. U.S. TREASURY SECURITIES IN THE INDEX MUST HAVE PAR AMOUNTS OUTSTANDING GREATER THAN OR EQUAL TO $1 BILLION AND CORPORATE AND GENERIC MORTGAGE-BACKED SECURITIES OF $100 MILLION PER ISSUE. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio STATEMENT OF INVESTMENTS
December 31, 2002 STATEMENT OF INVESTMENTS Principal BONDS AND NOTES--98.2% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AIRCRAFT & AEROSPACE--1.4% American Airlines, Pass-Through Trust Ctfs., Ser. 2001-1, Cl. A2, 6.817%, 2011 275,000 236,422 BE Aerospace, Sr. Sub. Notes, Ser. B, 8.875%, 2011 168,000 124,320 Continental Airlines, Pass-Through Ctfs.: Ser. 1998-1, Cl. A, 6.648%, 2017 266,064 232,618 Ser. 1999-1, Cl. A, 6.545%, 2019 215,243 186,913 Delta Airlines, Pass-Through Ctfs., Ser. 2001-1, Cl. B, 7.711%, 2011 83,000 69,365 Goodrich (B.F.), Notes, 7%, 2038 463,000 413,854 US Airways, Enhanced Equipment Notes, Ser. C, 8.93%, 2009 42,614 (m) 10,654 1,274,146 ASSET-BACKED CTFS./AUTOMOTIVE--.1% Union Acceptance Corp. Securitization Owner Trust, Ser. 2000-D, Cl. A4, 6.89%, 2007 121,000 129,423 ASSET-BACKED CTFS./CREDIT CARDS--.6% MBNA Credit Card Master Note Trust, Ser. 2002-C1, Cl. C1, 6.8%, 2014 525,000 536,025 ASSET-BACKED CTFS./EQUIPMENT--1.1% Xerox Equipment Lease Owner Trust, Ser. 2001-1, Cl. A, 3.42%, 2008 947,098 (a,b) 953,652 ASSET-BACKED CTFS./HOME EQUITY LOANS--2.6% Conseco Finance Home Loan Trust, Ser. 2000-E, Cl. A5, 8.02%, 2031 350,000 383,446 Conseco Finance Securitizations: Ser. 2000-D, Cl. A3, 7.89%, 2018 141,695 143,692 Ser. 2001-A, Cl. IIA2, 6.52%, 2032 470,000 479,682 GE Capital Mortgage Services, Ser. 1999-HE1, Cl. A7, 6.265%, 2029 425,405 449,390 The Money Store Home Equity Trust, Ser. 1998-B, Cl. AF8, 6.11%, 2010 136,451 141,849 Saxon Asset Securities Trust, Ser. 2001-2, Cl. AF6, 6.312%, 2016 750,000 799,216 2,397,275 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ASSET-BACKED CTFS./MANUFACTURED HOUSING--.0% Conseco Finance Securitizations, Ser. 2001-1, Cl. A1B, 5.01%, 2032 19,672 19,724 AUTOMOTIVE--1.8% Ford Motor: Bonds, 7.875%, 2010 347,000 349,659 Bonds, 7.375%, 2011 646,000 629,101 Global Landmark Securities, 7.45%, 2031 162,000 141,298 GMAC, Bonds, 8%, 2031 491,000 495,064 1,615,122 BANKING--1.6% Bank of America, Sr. Notes, 4.875%, 2012 368,000 372,685 Capital One Financial, Notes, 7.25%, 2003 33,000 32,063 Citigroup, Sub. Notes, 5.625%, 2012 498,000 524,614 MBNA America Bank, Sub. Notes, 7.125%, 2012 510,000 534,667 1,464,029 BUILDING MATERIALS--.1% Atrium Cos., Sr. Sub. Notes, Ser. B, 10.5%, 2009 108,000 105,300 CABLE/MEDIA--2.9% America Online, Conv. Sub. Notes, 0%, 2004 960,000 532,800 Charter Communications Holdings/Capital: Sr. Discount Notes, 0/11.75%, 2011 174,000 (c) 44,370 Sr. Notes, 8.625%, 2009 95,000 42,750 Sr. Notes, 10%, 2009 16,000 7,200 Cox Communications, Sr. Notes, 6.75%, 2011 407,000 438,618 TCI Communication Financing III, Gtd. Capital Securities, 9.65%, 2027 369,000 339,886 USA Interactive, Notes, 7%, 2013 327,000 (a) 338,734 Viacom, Gtd. Sr. Notes, 6.625%, 2011 790,000 894,350 2,638,708 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CHEMICALS--.4% Avecia Group, Gtd. Notes, 11%, 2009 200,000 157,000 Huntsman ICI Chemicals, Sr. Sub. Notes, 10.125%, 2009 137,000 114,395 Lyondell Chemicals, Gtd. Sr. Secured Notes, Ser. B, 9.875%, 2007 123,000 118,695 390,090 COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--6.1% 1211 Finance, Ser. 2000-1211, Cl. A, 7.745%, 2035 600,000 (a) 708,069 Bear Stearns Commercial Mortgage Securities, Ser. 2001-TOP2, Cl. A1, 6.08%, 2035 729,755 793,580 CS First Boston Mortgage Securities: Ser. 1998-C1, Cl. C, 6.78%, 2040 441,000 490,066 Ser. 2001-SPGA, Cl. A2, 6.515%, 2018 1,000,000 (a) 1,115,683 Chase Commerical Mortgage Securities, Ser. 2001-245, Cl. A1, 5.974%, 2016 240,000 (a,b) 259,435 Chase Manhattan Bank-First Union National Bank, Ser. 1999-1, Cl. A1, 7.134%, 2031 416,347 460,190 GGP Mall Properties Trust, Ser. 2001-C1-A, Cl. C2, 5.558%, 2011 696,248 (a) 732,692 GS Mortgage Securities II, Ser. 2001-LIBA, Cl. C, 6.733%, 2016 269,000 (a) 286,189 TIAA Commercial Real Estate Securitizations, Ser. 1999-1, Cl. A, 7.17%, 2032 297,387 (a) 328,196 TrizecHahn Office Properties Trust, Ser. 2001-TZHA, Cl. A2, 6.093%, 2016 369,000 (a) 402,210 5,576,310 FINANCIAL SERVICES--1.6% General Electric Capital, Medium-Term Notes, Ser. A, 5.45%, 2013 370,000 385,075 Goldman Sachs Group, Sr. Notes, 5.7%, 2012 365,000 380,321 Household Finance, Notes, 7%, 2012 274,000 300,631 International Lease Finance, Notes, 6.375%, 2009 375,000 401,120 1,467,147 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ FOOD & BEVERAGES--1.1% Kroger, Notes, 7.375%, 2005 255,000 276,936 Panamerican Beverages, Sr. Notes, 7.25%, 2009 390,000 392,392 Tyson Foods, Notes, 8.25%, 2011 245,000 290,133 959,461 FOREIGN/GOVERNMENTAL--.3% United Mexican States, Bonds, Ser. B, 6.25%, 2019 304,000 300,200 HEALTH CARE--.9% American Home Products, Notes, 6.7%, 2011 744,000 830,476 HOTELS--.4% Hilton Hotels, Notes, 7.625%, 2008 238,000 243,773 Resorts International Hotel and Casino, First Mortgage, 11.5%, 2009 144,000 131,040 374,813 INDUSTRIAL--.7% PerkinElmer, Sr. Sub. Notes, 8.875%, 2013 256,000 (a) 253,440 Tyco International Group, Gtd. Notes, 5.8%, 2006 409,000 386,870 640,310 INSURANCE--1.6% Ace Capital Trust II, Gtd. Capital Securities, 9.7%, 2030 607,000 739,691 Liberty Mutual Insurance, Notes, 8.5%, 2025 300,000 (a) 260,538 Mercury General, Sr. Notes, 7.25%, 2011 125,000 135,388 Metlife, Sr. Notes, 5.375%, 2012 305,000 315,672 1,451,289 METALS & MINING--.8% Alcoa, Notes, 6%, 2012 376,000 414,664 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ METALS & MINING (CONTINUED) CODELCO, Notes, 6.375%, 2012 284,000 (a) 298,224 712,888 OIL & GAS--1.2% Valero Energy, Sr. Notes, 6.7%, 2013 850,000 871,374 Williams Cos.: Notes, 6.5%, 2006 57,000 39,900 Notes, 6.5%, 2008 142,000 91,590 Puttable Asset Term Securities, Ser. A, 6.75%, 2006 170,000 (b) 119,850 1,122,714 PAPER & FOREST PRODUCTS--.4% Weyerhaeuser, Notes, 6.75%, 2012 340,000 371,357 REAL ESTATE INVESTMENT TRUSTS--1.1% Health Care REIT, Sr. Notes, 8%, 2012 332,000 339,902 Nationwide Healthcare Properties, Medium-Term Notes, Ser D, 8.25%, 2012 462,000 487,938 New Plan Excel Realty Trust, Sr. Notes, 6.875%, 2004 175,000 184,809 1,012,649 RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--2.5% Chase Mortgage Finance, Ser. 1999-S13, Cl. B4, 6.5%, 2014 191,597 (a) 189,128 Countrywide Home Loans, Ser. 2001-9, Cl. B3, 6.75%, 2031 614,969 (a) 633,895 GE Capital Mortgage Services, Ser. 2000-8, Cl. B5, 7.5%, 2015 168,439 (a) 91,378 PNC Mortgage Securities, Ser. 1998-2, Cl. 5B5, 6.625%, 2028 661,640 (a) 622,702 Residential Funding Mortgage Securities I, Ser. 1999-S11, Cl. M3, 6.5%, 2029 718,927 772,532 2,309,635 RETAIL--.4% Limited Brands, Notes, 6.125%, 2012 335,000 353,291 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ STRUCTURED INDEX--17.5% HYDI-100: Linked Ctf. of Deposit, 7.55%, 2007 1,000,000 (a,d) 1,017,500 Linked Ctf. of Deposit, 8.75%, 2007 5,250,000 (a,d) 5,289,375 Morgan Stanley TRACERS: Notes, 6.799%, 2012 6,510,000 (a,d) 7,181,350 Notes, 7.201%, 2011 800,000 (a,d) 896,956 Notes, 7.252%, 2011 1,440,000 (a,d) 1,614,521 15,999,702 TECHNOLOGY--.5% IBM, Bonds, 4.75%, 2012 480,000 482,803 TELECOMMUNICATION--3.6% AT&T Wireless Services, Sr. Notes, 8.75%, 2031 402,000 395,176 British Telecommunications, Notes, 8.125%, 2010 720,000 864,760 France Telecom, Notes, 7.75%, 2011 408,000 472,592 Koninklijke KPN NV, Sr. Notes, 8%, 2010 421,000 493,899 Marconi, Bonds, 8.375%, 2030 260,000 (e) 41,600 Qwest Services, Notes, 13.5%, 2010 58,000 (a) 60,610 Verizon Florida, Deb., 6.125%, 2013 392,000 421,122 Verizon Global Funding, Sr. Notes, 6.875%, 2012 508,000 567,775 3,317,534 TOBACCO--.5% Philip Morris Cos., Deb., 7.75%, 2027 418,000 461,227 U.S. GOVERNMENT--12.9% U.S. Treasury Inflation Protection Securities: 3.5%, 1/15/2011 841,000 (f) 959,141 3.875%, 1/15/2009 722,000 (f) 888,082 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT (CONTINUED) U.S. Treasury Notes: 2%, 11/30/2004 1,000,000 1,008,590 3%, 11/15/2007 3,998,000 4,047,335 6.5%, 2/15/2010 4,100,000 (l) 4,902,042 11,805,190 U.S. GOVERNMENT AGENCIES--10.0% Federal Home Loan Mortgage Corp., Notes, 4.75%, 10/11/2012 5,000,000 5,054,290 Federal National Mortgage Association, Notes, 5.25%, 3/22/2007 1,987,000 2,081,071 Tennessee Valley Authority, Valley Indexed Principal Securities, 3.375%, 1/15/2007 1,664,000 (f) 2,019,272 9,154,633 U.S. GOVERNMENT AGENCIES/MORTGAGE-BACKED--20.8% Federal Home Loan Mortgage Corp., REMIC Trust, Gtd. Pass-Through Ctfs. (Interest Only Obligations): Ser. 1999, Cl. PW, 7%, 8/15/2026 46,839 (g) 2,297 Ser. 2067, Cl. GE, 6.5%, 1/15/2024 170,000 (g) 4,925 Ser. 2113, Cl. MI, 6.5%, 4/15/2024 260,271 (g) 3,843 Ser. 2322, Cl. KI, 6.5%, 10/15/2020 655,631 (g) 6,587 Federal National Mortgage Association: 6% 1,080,000 (h) 1,128,935 6.406%, 1/1/2011 1,961,960 2,196,123 6.5% 7,142,000 (h) 7,436,608 REMIC Trust, Gtd. Pass-Through Ctfs. (Interest Only Obligations): Ser. 2001-50, Cl. LI, 6.5%, 7/25/2021 1,108,214 (g) 19,040 Ser. 2002-82, Cl. IB, 5.5%, 1/25/2021 4,443,865 (g) 409,669 Government National Mortgage Association I, 5.5% 5,070,000 (h) 5,198,322 Government National Mortgage Association II: 4%, 7/20/2030 94,424 (b) 96,773 6.5%, 5/20/2031-9/20/2031 1,756,428 1,833,273 7%, 7/20/2031 130,853 137,886 7.5%, 5/20/2031-8/20/2031 546,151 581,990 8%, 2/20/2034 37,595 40,449 19,096,720 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES/GAS & ELECTRIC--.7% Calpine, Sr. Notes, 7.625%, 2006 50,000 23,000 Calpine Canada Energy Finance, Gtd. Sr. Notes, 8.5%, 2008 171,000 75,240 Marketspan, Deb., 8.2%, 2023 131,000 137,008 NRG Energy, Sr. Notes, 8.625%, 2031 247,000 (e) 65,455 PSEG Energy Holdings, Sr. Notes, 8.5%, 2011 447,000 364,916 665,619 TOTAL BONDS AND NOTES (cost $87,873,447) 89,989,462 - ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--1.7% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AIRCRAFT & AEROSPACE--.5% Raytheon, Cum. Conv., $4.125 (units) 7,193 (i) 385,725 AUTOMOTIVE--1.0% Ford Motor Capital Trust II, Cum. Conv., $3.25 5,811 237,379 General Motors, Ser. B, Conv. Cum., $1.3125 29,301 688,574 925,953 OIL & GAS--.1% Exco Resources, Cum. Conv., $1.05 6,043 108,049 TELECOMMUNICATION--.1% Motorola, Cum. Conv., $3.50 (units) 3,253 (j) 104,096 TOTAL PREFERRED STOCKS (cost $1,653,733) 1,523,823 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) OTHER INVESTMENTS--13.7% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 4,175,333 (k) 4,175,333 Dreyfus Institutional Cash Advantage Plus Fund 4,175,333 (k) 4,175,333 Dreyfus Institutional Preferred Plus Money Market Fund 4,175,334 (k) 4,175,334 TOTAL OTHER INVESTMENTS (cost $12,526,000) 12,526,000 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--.0% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ U.S. TREASURY BILLS; 1.18%, 2/20/2003 (cost $19,967) 20,000 (l) 19,970 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $102,073,147) 113.6% 104,059,255 LIABILITIES, LESS CASH AND RECEIVABLES (13.6%) (12,425,819) NET ASSETS 100.0% 91,633,436
(A) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT DECEMBER 31, 2002, THESE SECURITIES AMOUNTED TO $23,534,477 OR 25.7% OF NET ASSETS. (B) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE. (C) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON BECOMES EFFECTIVE UNTIL MATURITY. (D) SECURITY LINKED TO A PORTFOLIO OF DEBT SECURITIES. (E) NON-INCOME PRODUCING--SECURITY IN DEFAULT. (F) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON CHANGES IN THE CONSUMER PRICE INDEX. (G) NOTIONAL FACE AMOUNT SHOWN. (H) PURCHASED ON A FORWARD COMMITMENT BASIS. (I) WITH WARRANTS ATTACHED. (J) UNITS REPRESENTS A CONTRACT TO PURCHASE SHARES OF COMMON STOCK FOR $50 ON NOVEMBER 16, 2004 AND A SENIOR NOTE WITH A PRINCIPAL AMOUNT OF $50. (K) INVESTMENTS IN AFFILIATED MONEY MARKET FUNDS--SEE NOTE 3(D). (L) PARTIALLY HELD BY A BROKER AS COLLATERAL FOR OPEN FINANCIAL FUTURES POSITIONS. (M) NON-INCOME PRODUCING -- SECURITY IN DEFAULT. SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF FINANCIAL FUTURES December 31, 2002
Market Value Unrealized Covered by (Depreciation) Contracts Contracts ($) Expiration at 12/31/2002 ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL FUTURES SHORT U.S. Agency 10 Year Notes 41 4,570,219 March 2003 (119,141) FINANCIAL FUTURES LONG U.S. Treasury 10 Year Notes 11 1,265,516 March 2003 (3,609) (122,750)
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 102,073,147 104,059,255 Receivable for investment securities sold 10,001,272 Dividends and interest receivable 1,046,161 Receivable for futures variation margin--Note 4 10,484 Prepaid expenses 1,887 115,119,059 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 55,396 Cash overdraft due to Custodian 520,216 Payable for investment securities purchased 22,862,190 Accrued expenses and other liabilities 47,821 23,485,623 - -------------------------------------------------------------------------------- NET ASSETS ($) 91,633,436 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 91,595,854 Accumulated undistributed investment income--net 1,758 Accumulated net realized gain (loss) on investments (1,827,534) Accumulated net unrealized appreciation (depreciation) on investments [including ($122,750) net unrealized (depreciation) on financial futures] 1,863,358 - -------------------------------------------------------------------------------- NET ASSETS ($) 91,633,436 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 33,810,394 57,823,042 Shares Outstanding 2,626,210 4,493,621 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.87 12.87 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 4,341,769 Cash Dividends 109,478 TOTAL INCOME 4,451,247 EXPENSES: Investment advisory fee--Note 3(a) 475,208 Distribution fees--Note 3(b) 123,495 Prospectus and shareholders' reports 43,477 Custodian fees--Note 3(b) 35,941 Professional fees 29,011 Shareholder servicing costs--Note 3(b) 11,188 Trustees' fees and expenses--Note 3(c) 753 Miscellaneous 11,621 TOTAL EXPENSES 730,694 Less--waiver of fees due to undertaking--Note 3(a) (96,376) NET EXPENSES 634,318 INVESTMENT INCOME--NET 3,816,929 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions: Long transactions (521,723) Short sale transactions (533) Net realized gain (loss) on financial futures (385,922) Net realized gain (loss) on forward currency exchange contracts (28,215) NET REALIZED GAIN (LOSS) (936,393) Net unrealized appreciation (depreciation) on investments, securities sold short and foreign currency transactions [including ($122,750) net unrealized (depreciation) on financial futures] 2,378,169 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,441,776 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 5,258,705 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 3,816,929 1,873,414 Net realized gain (loss) on investments (936,393) (404,725) Net unrealized appreciation (depreciation) on investments 2,378,169 (603,909) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,258,705 864,780 - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (1,470,409) (1,279,630) Service shares (2,466,828) (645,875) Net realized gain on investments: Initial shares -- (280,228) Service shares -- (245,864) TOTAL DIVIDENDS (3,937,237) (2,451,597) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 12,327,742 30,429,561 Service shares 35,038,710 31,321,932 Dividends reinvested: Initial shares 1,470,409 1,559,858 Service shares 2,466,828 891,739 Cost of shares redeemed: Initial shares (7,264,010) (16,497,691) Service shares (10,887,362) (1,007,405) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 33,152,317 46,697,994 TOTAL INCREASE (DECREASE) IN NET ASSETS 34,473,785 45,111,177 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 57,159,651 12,048,474 END OF PERIOD 91,633,436 57,159,651 Undistributed investment income--net 1,758 12,112 Year Ended December 31, ---------------------------------- 2002 2001 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 972,479 2,328,741 Shares issued for dividends reinvested 116,120 120,525 Shares redeemed (573,670) (1,269,346) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 514,929 1,179,920 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 2,762,297 2,410,677 Shares issued for dividends reinvested 194,898 69,290 Shares redeemed (865,805) (77,775) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 2,091,390 2,402,192 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Year Ended December 31, ---------------------------------------------- INITIAL SHARES 2002 2001(a) 2000(b) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.67 12.94 12.50 Investment Operations: Investment income--net .61(c) .75(c) .50 Net realized and unrealized gain (loss) on investments .21 (.18) .56 Total from Investment Operations .82 .57 1.06 Distributions: Dividends from investment income--net (.62) (.72) (.50) Dividends from net realized gain on investments -- (.12) (.12) Total Distributions (.62) (.84) (.62) Net asset value, end of period 12.87 12.67 12.94 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 6.70 4.55 8.61(d) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .80 .80 .80(e) Ratio of net investment income to average net assets 4.82 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 653.12 654.39 953.66(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 33,810 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 $.04 AND DECREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 6.04% TO 5.71%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THESE CHANGES IN PRESENTATION. (B) FROM MAY 1, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED. (E) ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended December 31, ---------------------------------------------- SERVICE SHARES 2002 2001(a) 2000(b) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.66 12.93 12.93 Investment Operations: Investment income--net .62(c) .70(c) -- Net realized and unrealized gain (loss) on investments .21 (.13) -- Total from Investment Operations .83 .57 -- Distributions: Dividends from investment income--net (.62) (.72) -- Dividends from net realized gain on investments -- (.12) -- Total Distributions (.62) (.84) -- Net asset value, end of period 12.87 12.66 12.93 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 6.78 4.46 -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .80 .80 -- Ratio of net investment income to average net assets 4.82 5.77 -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .20 .35 -- Portfolio Turnover Rate 653.12 654.39 953.66(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 57,823 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.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the 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 (the "Manager" ) serves as the portfolio's investment adviser. The Manager 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 the Manager, 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 (the "Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Short-term investments, excluding U.S. Treasury Bills, are carried at amortized cost, which approximates value. Financial futures are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. 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 from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amount of dividends, interest and foreign withholding taxes recorded on the 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (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 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, 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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $48,049, accumulated capital losses $1,609,283 and unrealized appreciation $1,809,428. In addition, the portfolio had $283,073 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, the carryover expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal years ended December 31, 2002 and December 31, 2001, respectively, were as follows: ordinary income $3,937,237 and $2,451,597. During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $109,954, decreased net realized gain (loss) on investments by $94,031 and decreased paid-in capital by $15,923. Net assets were not affected by this reclassification. 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 December 31, 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 the Manager, 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. The Manager has agreed, from January 1, 2002 to December 31, 2003, 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 December 31, 2002, the Manager waived receipt of fees of $96,376, 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 December 31, 2002, Service shares were charged $123,495 pursuant to the Plan. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $209 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $35,941 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 September 10, 2002, pursuant to an exemptive order from the Securities and Exchange Commission, the portfolio may invest 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. During the period ended December 31, 2002, the portfolio derived $58,559 in income from these investments, which is included in dividend income in the portfolio's Statement of Operations. NOTE 4--Securities Transactions: The following summarizes the aggregate amount of purchases and sales (including paydowns) of investment securities and securities sold short, excluding short-term securities, financial futures and forward currency exchange contracts, during the period ended December 31, 2002: Purchases ($) Sales ($) - -------------------------------------------------------------------------------- Long transactions 524,431,530 488,379,245 Short sale transactions 2,329,156 2,328,623 TOTAL 526,760,686 490,707,868 The portfolio is engaged in short-selling which obligates the portfolio to replace the security borrowed by purchasing the security at current market value. The portfolio would incur a loss if the price of the security increases between the date of the short sale and the date on which the portfolio replaces the borrowed security. The portfolio would realize a gain if the price of the security declines between those dates. The portfolio's long security positions serve as collateral for the open short positions. At December 31, 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) Contracts open at December 31, 2002, are set forth in the Statement of Financial Futures. The portfolio enters into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the portfolio is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counterparty nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. At December 31, 2002, there were no forward currency exchange contracts outstanding. At December 31, 2002, the cost of investments for federal income tax purposes was $102,249,827; accordingly, accumulated net unrealized appreciation on investments was $1,809,428, consisting of $3,309,420 gross unrealized appreciation and $1,499,992 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Core Bond Portfolio We have audited the accompanying statement of assets and liabilities, including the statements of investments and financial futures, of Dreyfus Investment Portfolios, Core Bond Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2002 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Core Bond Portfolio at December 31, 2002, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio IMPORTANT TAX INFORMATION (Unaudited) For federal tax purposes, the portfolio hereby designates 2.68% of the ordinary dividends paid during the fiscal year ended December 31, 2002 as qualifying for the corporate dividends received deduction. BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (59) Chairman of the Board (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- Clifford L. Alexander (69) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- Lucy Wilson Benson (75) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980 - present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED) David W. Burke (66) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- Whitney I. Gerard (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- Arthur A. Hartman (76) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- George L. Perry (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 57 years old and has been an employee of the Manager since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 49 years old and has been an employee of the Manager since January 2000. Prior to joining the Manager, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 53 years old and has been an employee of the Manager since July 1980. JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 12 investment companies (comprised of 65 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Manager since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 200 portfolios) managed by the Manager. He is 42 years old and has been an employee of the Manager since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of the Manager, and an officer of 18 investment companies (comprised of 77 portfolios) managed by the Manager. He is 34 years old and has been an employee of the Manager since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 38 years old and has been an employee of the Manager since October 1988. The Portfolio OFFICERS OF THE FUND (Unaudited) (CONTINUED) ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 35 years old and has been an employee of the Manager since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by the Manager. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc. 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. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 165AR1202 Dreyfus Investment Portfolios, Japan Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 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 23 Report of Independent Auditors 24 Board Members Information 26 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Japan Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Japan Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In 2002, investors witnessed the third consecutive year of negative returns for the global stock markets. With broad measures of global stock market performance down since early 2000, this bear market has been driven by deteriorating business conditions in Europe and deflationary pressures in Japan. Despite recent financial crises in Latin America, the emerging markets generally fared better than the developed markets during the year. However, the market's disappointing start to the 21st century may be good news for today' s growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 DISCUSSION OF PERFORMANCE Miki Sugimoto, Portfolio Manager How did Dreyfus Investment Portfolios, Japan Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2002, the portfolio's total returns were -10.45% for its Initial shares and -10.45% for Service shares.(1) The total return of the Morgan Stanley Capital International Japan Index ("MSCI Japan Index"), the portfolio's benchmark, was -10.28% for the reporting period.(2) We attribute the portfolio's performance to a generally negative environment for equities, driven by Japan's domestic economic problems, disappointing rates of global economic growth and concerns regarding escalating international political tensions in the Middle East and Pacific Rim. The portfolio's results roughly matched those of its benchmark, with relatively weak performance during the first half of the reporting period mostly offset by relatively strong performance during the second half of the reporting period. 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 The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) outlooks or industries that are undergoing dramatic change. Second, we look for companies with quality management teams and strong franchises. Third, we strive to identify high-quality companies with high intrinsic values as measured by fundamental valuation criteria, such as earnings outlook, business prospects and asset values. What other factors influenced the portfolio's performance? During 2002, Japanese markets remained under pressure from the country's ongoing recession. Positive developments, such as corporate stock buyback programs and U.S. investments in Japanese companies, were counterbalanced by deepening financial difficulties among Japanese banks and the impact of an uncertain global economic climate on Japanese exporters. As the year progressed, investors' concerns were intensified by unexpectedly slow economic growth in the United States, Japan's largest trading partner. These conditions led to high levels of volatility for Japanese stocks, with market strength shifting abruptly from sector to sector within an overall downward trend. Because of the lack of strong economic fundamentals, the portfolio maintained a mildly defensive investment posture. This was expressed in the portfolio's emphasis on traditionally defensive industry groups, including the domestic retail, real estate and non-bank financial areas. Not surprisingly, given the market's volatility, this strategy worked well at some times while detracting from performance at other times. Performance relative to the benchmark suffered during the first few months of the year, when market strength was concentrated in cyclical stocks, which rose in hopes of a robust global economic recovery. Although some of the fund's other holdings such as OLYMPUS OPTICAL performed relatively well during these months, such gains failed to make up for losses in the fund's primary areas of concentration. These conditions reversed themselves in mid-2002, when retail and real estate stocks began delivering better than average performance. The portfolio gained ground relative to its benchmark with relatively good returns from domestic Japanese retailers such as ITO-YOKADO, and small-cap real estate holdings such as Diamond Lease. The portfolio also boosted performance by targeting attractively priced securities in companies with sound balance sheets and good long-term prospects in a variety of other industry groups. Returns benefited from investments in telecommunications companies, such as NTT DoCoMo; shipping businesses, including Nippon Yusen Kabushiki Kaisha; and pharmaceutical manufacturers, such as Eisai. Portfolio performance also benefited from our decision to increase the portfolio's exposure to the changing relationship between the Japanese yen and U.S. dollar by reducing currency hedging positions as the yen's value increased between January 2002 and the end of the year. What is the portfolio's current strategy? As of December 31, 2002, Japanese domestic economic conditions remained fragile, but some stocks with international economic exposure appeared poised to benefit from a strengthening of U.S. economic growth. Accordingly, we have shifted the portfolio's emphasis in favor of more attractively valued stocks in the basic materials and shipping groups, which we believe are likely to gain from such trends. In contrast, we have found relatively few attractive opportunities in the areas of technology and banks. January 15, 2003 (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, 2003, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) JAPAN INDEX IS A MARKET CAPITALIZATION INDEX OF JAPANESE COMPANIES BASED ON MSCI-SELECTED CRITERIA. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Japan Portfolio Initial shares and Service shares and the Morgan Stanley Capital International Japan Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02
Inception From Date 1 Year Inception - ------------------------------------------------------------------------------------------------------------------------------------ INITIAL SHARES 12/15/99 (10.45)% (15.25)% SERVICE SHARES 12/15/99 (10.45)% (15.25)%
THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, JAPAN PORTFOLIO ON 12/15/99 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY CAPITAL INTERNATIONAL JAPAN INDEX (THE "INDEX") ON THAT DATE. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/99 IS USED AS THE BEGINNING VALUE ON 12/15/99. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS A MARKET CAPITALIZATION INDEX OF JAPANESE COMPANIES BASED ON MSCI-SELECTED CRITERIA. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio STATEMENT OF INVESTMENTS December 31, 2002
COMMON STOCKS--100.0% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ BASIC MATERIALS--13.7% JFE Holdings 3,200 (a) 38,831 JSR 3,000 30,114 KANEKA 6,000 32,084 Kao 2,000 43,874 NITTO DENKO 1,000 28,463 Shin-Etsu Chemical 1,100 36,034 Shiseido 2,000 25,987 235,387 COMMUNICATIONS--7.6% JAPAN TELECOM 13 40,286 NIPPON TELEGRAPH AND TELEPHONE 13 47,183 NTT DoCoMo 23 42,417 129,886 CONSTRUCTION/PROPERTY--12.4% JGC 6,000 33,550 Japan Real Estate Investment 10 50,863 Japan Retail Fund Investment 9 43,200 Mitsubishi Estate 2,000 15,225 Office Building Fund of Japan 8 41,903 Sekisui House 4,000 28,295 213,036 CONSUMER--15.8% BANDAI 400 13,777 C TWO-NETWORK 900 19,061 HANKYU DEPARTMENT STORES 5,000 24,126 HONDA MOTOR 900 33,272 LAWSON 1,000 24,084 NICHIREI 8,000 22,434 NIPPON MEAT PACKERS 3,000 29,937 NISSAN MOTOR 5,000 38,989 Nintendo 300 28,017 YAMAHA 4,000 36,952 270,649 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL--5.9% ACOM 1,100 36,127 Bank of Yokohama 9,000 35,545 Millea Holdings 4 28,766 100,438 PHARMACEUTICAL--9.6% Eisai 1,500 33,663 FUJISAWA PHARMACEUTICAL 2,000 45,726 HISAMITSU PHARMACEUTICAL 3,000 35,369 ROHTO PHARMACEUTICAL 3,000 20,766 TERUMO 2,100 29,038 164,562 SERVICES--13.2% Aoi Advertising Promotion 300 1,529 DAIICHIKOSHO 1,500 34,863 DOSHISHA 2,000 25,785 Drake Beam Morin-Japan 600 22,030 Goodwill Group 8 25,263 Mitsubishi 5,000 30,526 NICHII GAKKAN 50 2,585 OBIC 100 17,390 RESORTTRUST 1,300 24,084 SOHGO SECURITY SERVICES 2,400 33,954 ServiceWare 1,000 8,606 226,615 TECHNOLOGY--12.1% ALPS ELECTRIC 3,000 33,095 CANON 1,000 37,642 Hitachi 4,000 15,326 KONICA 4,000 29,002 KYOCERA 400 23,276 Matsushita Electric Industrial 2,000 19,705 OLYMPUS OPTICAL 3,000 48,859 206,905 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION--6.2% East Japan Railway 8 39,680 Nippon Yusen Kabushiki Kaisha 12,000 40,421 YAMATO TRANSPORT 2,000 26,105 106,206 UTILITIES--3.5% Chubu Electric Power 1,200 21,423 Kyushu Electric Power 2,700 39,471 60,894 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $1,860,259) 100.0% 1,714,578 CASH AND RECEIVABLES (NET) .0% 790 NET ASSETS 100.0% 1,715,368 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 1,860,259 1,714,578 Cash 22,647 Cash denominated in foreign currencies 1,584 1,607 Receivable for investment securities sold 4,851 Dividends receivable 1,201 1,744,884 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 1,967 Payable for shares of Beneficial Interest redeemed 115 Accrued expenses 27,434 29,516 - -------------------------------------------------------------------------------- NET ASSETS ($) 1,715,368 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 2,906,593 Accumulated distributions in excess of investment income--net (21,893) Accumulated net realized gain (loss) on investments (1,023,729) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions (145,603) - -------------------------------------------------------------------------------- NET ASSETS ($) 1,715,368 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 1,594,188 121,180 Shares Outstanding 227,509 17,288 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 7.01 7.01 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $2,571 foreign taxes withheld at source) 14,738 Interest 564 TOTAL INCOME 15,302 EXPENSES: Investment advisory fee--Note 3(a) 17,374 Auditing fees 23,696 Prospectus and shareholders' reports 19,614 Custodian fees 10,849 Shareholder servicing costs--Note 3(b) 1,073 Trustees' fees and expenses--Note 3(c) 422 Legal fees 324 Distribution fees--Note 3(b) 126 Miscellaneous 4,174 TOTAL EXPENSES 77,652 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertaking--Note 3(a) (51,591) NET EXPENSES 26,061 INVESTMENT (LOSS)--NET (10,759) - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (450,366) Net realized gain (loss) on forward currency exchange contracts 20,241 NET REALIZED GAIN (LOSS) (430,125) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 234,252 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (195,873) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (206,632) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, --------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss)--net (10,759) (15,006) Net realized gain (loss) on investments (430,125) (403,424) Net unrealized appreciation (depreciation) on investments 234,252 (236,543) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (206,632) (654,973) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (56,580) -- Service shares (228) -- TOTAL DIVIDENDS (56,808) -- - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 788,140 1,454,950 Service shares 145,325 10,628 Dividends reinvested: Initial shares 56,580 -- Service shares 228 -- Cost of shares redeemed: Initial shares (700,043) (1,353,826) Service shares (18,751) (3,727) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 271,479 108,025 TOTAL INCREASE (DECREASE) IN NET ASSETS 8,039 (546,948) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 1,707,329 2,254,277 END OF PERIOD 1,715,368 1,707,329 Undistributed (distributions in excess of) investment income--net (21,893) 24,022 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended December 31, --------------------------------- 2002 2001 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 97,926 142,811 Shares issued for dividends reinvested 7,282 -- Shares redeemed (87,957) (133,411) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 17,251 9,400 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 19,169 1,073 Shares issued for dividends reinvested 29 -- Shares redeemed (2,660) (368) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 16,538 705 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.
Year Ended December 31, ------------------------------------------------------------------- INITIAL SHARES 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 8.09 11.22 12.84 12.50 Investment Operations: Investment income (loss)--net (.05)(b) (.07)(b) (.08)(b) .00(b, c) Net realized and unrealized gain (loss) on investments (.76) (3.06) (1.06) .34 Total from Investment Operations (.81) (3.13) (1.14) .34 Distributions: Dividends from investment income--net (.27) -- (.05) -- Dividends from net realized gain on investments -- -- (.43) -- Total Distributions (.27) -- (.48) -- Net asset value, end of period 7.01 8.09 11.22 12.84 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (10.45) (27.90) (8.92) 2.64(d) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 1.50 1.50 .07(d) Ratio of net investment income (loss) to average net assets (.62) (.74) (.80) .03(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 2.94 2.88 1.90 1.35(d) Portfolio Turnover Rate 217.25 160.78 378.54 -- - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 1,594 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 $.01 PER SHARE. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED)
Year Ended December 31, ------------------------------------------------ SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 8.09 11.22 11.22 Investment Operations: Investment (loss)--net (.04)(b) (.07)(b) -- Net realized and unrealized gain (loss) on investments (.77) (3.06) -- Total from Investment Operations (.81) (3.13) -- Distributions: Dividends from investment income--net (.27) -- -- Net asset value, end of period 7.01 8.09 11.22 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (10.45) (27.90) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 1.50 -- Ratio of net investment (loss) to average net assets (.57) (.78) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 4.10 3.29 -- Portfolio Turnover Rate 217.25 160.78 378.54 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 121 6 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering twelve series, including the Japan Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Newton Capital Management Limited ("Newton"), serves as the portfolio's sub-investment adviser. Newton is an affiliate of 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 December 31, 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 (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 received net earnings credits of $511 during the period ended December 31, 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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $405, accumulated capital losses $888,739 and unrealized depreciation $267,808. In addition, the portfolio had $35,083 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, $470,154 of the carryover expires in fiscal 2009 and $418,585 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal years ended December 31, 2002 and December 31, 2001, respectively, were as follows: ordinary income $56,808 and $0. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $21,652, decreased net realized gain (loss) on investments by $21,676 and increased paid-in capital by $24. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2002, the portfolio did not borrow under the line of credit. NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates: (A) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of 1% of the value of the portfolio's average daily net assets and is payable monthly. Dreyfus has agreed, from January 1, 2002 to December 31, 2003, 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 December 31, 2002, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $51,591, 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. . . . . . . . . . . . . .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 December 31, 2002, Service shares were charged $126 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 December 31, 2002, the portfolio was charged $241 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 December 31, 2002, amounted to $3,914,043 and $3,641,792, respectively. The portfolio enters into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the portfolio is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counter party nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. At December 31, 2002, there were no forward currency exchange contracts outstanding. At December 31, 2002, the cost of investments for federal income tax purposes was $1,982,464; accordingly, accumulated net unrealized depreciation on investments was $267,886, consisting of $84,570 gross unrealized appreciation and $352,456 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Japan Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Japan Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2002 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Japan Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (59) Chairman of the Board (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- Clifford L. Alexander (69) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- Lucy Wilson Benson (75) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980-Present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 David W. Burke (66) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- Whitney I. Gerard (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- Arthur A. Hartman (76) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- George L. Perry (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. The Portfolio OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 57 years old and has been an employee of Dreyfus since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 49 years old and has been an employee of Dreyfus since January 2000. Prior to joining Dreyfus, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 56 years old and has been an employee of Dreyfus since June 1977 STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 53 years old and has been an employee of Dreyfus since July 1980 JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 12 investment companies (comprised of 65 portfolios) managed by Dreyfus. He is 37 years old and has been an employee of Dreyfus since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 93 investment companies (comprised of 200 portfolios) managed by Dreyfus. He is 42 years old and has been an employee of Dreyfus since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 44 years old and has been an employee of Dreyfus since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of Dreyfus, and an officer of 18 investment companies (comprised of 77 portfolios) managed by Dreyfus. He is 34 years old and has been an employee of Dreyfus since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 38 years old and has been an employee of Dreyfus since October 1988. ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 35 years old and has been an employee of Dreyfus since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 48 years old and has been an employee of Dreyfus since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by Dreyfus. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc. The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Japan Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Newton Capital Management Limited 71 Queen Victoria Street London, EC4V 4DR England Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 189AR1202 Dreyfus Investment Portfolios, Emerging Markets Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 Statement of Investments 13 Statement of Assets and Liabilities 14 Statement of Operations 15 Statement of Changes in Net Assets 17 Financial Highlights 19 Notes to Financial Statements 25 Report of Independent Auditors 26 Important Tax Information 27 Board Members Information 29 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Emerging Markets Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Emerging Markets Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In 2002, investors witnessed the third consecutive year of negative returns for the global stock markets. With broad measures of global stock market performance down since early 2000, this bear market has been driven by deteriorating business conditions in Europe and deflationary pressures in Japan. Despite recent financial crises in Latin America, the emerging markets generally fared better than the developed markets during the year. However, the market's disappointing start to the 21st century may be good news for today' s growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 DISCUSSION OF PERFORMANCE D. Kirk Henry, Portfolio Manager How did Dreyfus Investment Portfolios, Emerging Markets Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2002, the portfolio produced total returns of -0.48% for its Initial shares and -0.59% for its Service shares.(1) In comparison, the portfolio' s benchmark, the Morgan Stanley Capital International Emerging Markets Free Index ("MSCI EMF Index"), posted a -6.00% total return for the same period.(2) We attribute the fund's and market's relatively modest negative returns to the effects of a generally weak global economy and negative investor sentiment related to heightened political tensions in several regions of the world. While we are never satisfied with even slightly negative returns, we are pleased that the fund outperformed its benchmark, due in large part to our stock selection strategy. 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 * BUSINESS MOMENTUM -- the presence of a catalyst that potentially will trigger a price increase near- or midterm. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) What other factors influenced the portfolio's performance? 2002 saw a difficult investment environment in most parts of the world. Global stock prices declined sharply due to weak global economic conditions, lackluster corporate profits, fear of terrorism and threats of war with Iraq. Stocks in the emerging markets generally declined much less than those in the developed markets, chiefly because many emerging market countries have spent the past several years strengthening their local economies. As a result, less-developed countries have become less susceptible to the effects of global economic weakness on exporters. Although the portfolio posted a negative absolute return for the year, we are pleased that the portfolio's relative performance benefited from investments in several of the larger markets: India, South Africa, Mexico and Taiwan. For some time now, we have favored consumer stocks in India, primarily because India is home to the world's largest middle class population. The portfolio's investments in a tobacco company, an auto and scooter manufacturer and a construction-engineering firm helped fuel returns. In addition, the portfolio benefited from its holdings in a major industrial conglomerate involved in a significant discovery of gas off the coast of India. Improved local economic conditions in South Africa boosted returns, where a food and beverage company, a grocery chain and a financial services company also benefited from a firming currency. Mexican industrial companies with exposure to infrastructure development and United States auto sales rose during the year. As for Taiwan, we generally limited the portfolio's exposure to poorly performing semiconductor stocks, which benefited the portfolio's relative performance Finally, as a group, the portfolio's basic material and energy stocks held up relatively well throughout the reporting period. For example, we scored successes with oil and gas producers in Russia, India and Hungary as petroleum prices soared amid tension in the Middle East. What is the portfolio's current strategy? As of the end of the reporting period, the combination of rising geopolitical tensions, declining consumer confidence and mixed economic news has continued to generate an atmosphere of uncertainty and volatility. We continue to remain focused on uncovering investment opportunities that may have been overlooked by the marketplace. To that end, we have recently invested in several Chinese companies that we believe are positioned to benefit from growing consumer demand. In addition, we are closely monitoring technology stocks in several emerging markets, most notably India and Taiwan. In our view, these companies typically have what we consider to be solid balance sheets, strong business fundamentals and stock prices near our target range. On the other hand, we have limited our exposure to larger index positions that have risen sharply this year on investor sentiment. January 15, 2003 (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, 2003, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. () INTERNATIONAL INVESTING INVOLVES SPECIAL RISKS, INCLUDING CHANGES IN CURRENCY EXCHANGE RATES, POLITICAL, ECONOMIC AND SOCIAL INSTABILITY, A LACK OF COMPREHENSIVE COMPANY INFORMATION, DIFFERING AUDITING AND LEGAL STANDARDS, AND LESS MARKET LIQUIDITY. THESE RISKS ARE GENERALLY GREATER WITH EMERGING MARKET COUNTRIES THAN WITH MORE ECONOMICALLY AND POLITICALLY ESTABLISHED COUNTRIES. () 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 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 PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Emerging Markets Portfolio Initial shares and Service shares and the Morgan Stanley Capital International Emerging Markets Free Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02
Inception From Date 1 Year Inception - ------------------------------------------------------------------------------------------------------------------------------------ INITIAL SHARES 12/15/99 (0.48)% (8.43)% SERVICE SHARES 12/15/99 (0.59)% (8.43)%
THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. PART OF THE PORTFOLIO'S RECENT PERFORMANCE IS ATTRIBUTABLE TO POSITIVE RETURNS FROM 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. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, EMERGING MARKETS PORTFOLIO ON 12/15/99 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX (THE "INDEX") ON THAT DATE. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/99 IS USED AS THE BEGINNING VALUE ON 12/15/99. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS A MARKET CAPITALIZATION-WEIGHTED INDEX COMPOSED OF COMPANIES REPRESENTATIVE OF THE MARKET STRUCTURE OF 26 EMERGING MARKET COUNTRIES IN EUROPE, LATIN AMERICA AND THE PACIFIC BASIN. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio STATEMENT OF INVESTMENTS December 31, 2002
COMMON STOCKS-93.0% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ARGENTINA--.4% Perez Companc, ADR 6,421 (a) 40,324 BRAZIL--7.8% Banco Itau, ADR 4,780 113,764 Companhia de Saneamento Basico do Estado de Sao Paulo 2,960 76,927 Empresa Brasileira de Aeronautica, ADR 4,780 76,002 Petroleo Brasileiro, ADR 13,340 199,300 Tele Celular Sul Participacoes, ADR 5,400 42,444 Tele Norte Leste Participacoes, ADR 12,600 92,610 Telecomunicacoes Brasileiras, ADR 5,800 108,170 Ultrapar Participacoes, ADR 6,400 43,072 Unibanco, GDR 3,950 43,252 795,541 CHILE--.2% Quinenco, ADR 5,100 24,480 CHINA--4.1% Aluminum Corporation of China 570,000 82,593 PetroChina, Cl. H 576,000 114,484 Quingling Motors, Cl. H 447,000 52,160 Shangdong International Power Development, Cl. H 284,000 63,366 Sinopec Shanghai Petrochemical 315,000 (a) 47,663 Sinopec Yizheng Chemical Fibre, Cl. H 445,000 58,203 418,469 CROATIA--.8% Pliva d.d., GDR 5,900 (b) 83,780 CZECH REPUBLIC--.8% CEZ 27,700 83,988 EGYPT--1.3% Commercial International Bank, GDR 7,700 (b) 40,810 Misr International Bank, GDR 7,500 (b) 11,063 Orascom Construction Industries 5,103 25,107 Suez Cement, GDR 8,532 (b) 54,903 131,883 HONG KONG--3.2% China Mobile (Hong Kong) 49,500 (a) 117,744 China Mobile (Hong Kong), ADR 9,700 (a) 117,176 China Resources Enterprise 26,000 23,004 Shanghai Industrial 50,000 68,924 326,848 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ HUNGARY--2.7% Gedeon Richter 1,650 109,058 MOL Magyar Olaj-es Gazipari 3,300 77,038 Magyar Tavkozlesi 26,200 95,039 281,135 INDIA--10.8% Bajaj Auto, GDR 4,300 (a,b) 45,086 Gail India, GDR 10,300 (b) 88,580 Grasim Industries, GDR 6,500 (b) 41,405 Hindalco Industries, GDR 7,400 (b) 90,687 ICICI Bank, ADR 10,750 69,875 ITC, GDR 6,400 (b) 88,640 Indian Hotels, GDR 11,650 (b) 46,018 Mahanagar Telephone Nigam, ADR 44,200 174,590 Mahindra & Mahindra, GDR 17,050 (b) 39,044 Reliance Industries, GDR 17,750 (b) 219,656 Satyam Computer Services, ADR 2,100 26,985 State Bank of India, GDR 6,700 (b) 90,450 Tata Engineering & Locomotive, GDR 23,600 (a,b) 80,240 1,101,256 INDONESIA--2.4% PT Gudang Garam 80,000 74,190 PT Indofood Sukses Makmur 875,000 58,659 PT Indonesian Satellite 41,000 42,374 PT Telekomunikasi Indonesia 158,000 67,967 243,190 ISRAEL--2.4% AudioCodes 8,800 (a) 22,704 Bank Hapoalim 101,450 (a) 145,057 Check Point Software Technologies 4,300 (a) 55,771 ECI Telecom 11,200 (a) 22,736 246,268 MALAYSIA--2.6% Genting 11,000 38,789 Malaysia International Shipping 59,000 107,132 Sime Darby 89,500 116,821 262,742 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ MEXICO--10.4% Apasco 11,100 67,049 Cemex 13,039 56,440 Coca-Cola Femsa, ADR 4,800 85,920 Consorcio ARA 42,000 (a) 62,717 Controladora Comercial Mexicana 161,500 84,017 Desc, Ser. B 157,600 62,251 Grupo Aeroportuario del Sureste, ADR 6,000 70,500 Grupo Continental 28,200 46,185 Grupo Financiero BBVA Bancomer, Cl. B 100,000 (a) 76,204 Kimberly-Clark de Mexico, Cl. A 87,100 201,387 Telefonos de Mexico, Ser. L, ADR 7,900 252,642 1,065,312 PANAMA--.1% Banco Latinoamericano de Exportaciones, Cl. E 2,500 (a) 11,375 PHILIPPINES--1.4% ABS-CBN Broadcasting 61,200 (a) 18,629 Bank of the Philippine Islands 44,960 28,213 Manila Electric, Cl. B 182,000 (a) 30,001 Philippine Long Distance Telephone 8,000 (a) 40,461 Philippine Long Distance Telephone, ADR 5,100 (a) 25,653 Universal Robina 44,000 2,493 145,450 POLAND--3.3% Bank Przemyslowo-Handlowy PBK 1,075 76,224 KGHM Polska Miedz 40,341 (a) 142,231 Polski Koncern Naftowy Orlen 13,000 60,094 Telekomunikacja Polska 17,201 (a) 57,277 335,826 RUSSIA--1.4% LUKOIL, ADR 2,450 (b) 148,837 SOUTH AFRICA--7.9% ABSA 29,000 106,838 Aveng 24,500 28,563 Bidvest 21,400 112,270 Metro Cash and Carry 150,166 (a) 40,791 Nampak 86,162 142,138 Nedcor 13,139 170,183 STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SOUTH AFRICA (CONTINUED) Shoprite 45,000 37,249 Steinhoff International 85,313 69,623 Tiger Brands 12,400 103,219 810,874 SOUTH KOREA--13.7% Hyundai Motor, GDR 18,200 (a,b) 118,118 KT, ADR 6,300 135,765 Kookmin Bank, ADR 5,985 211,570 Korea Electric Power, ADR 36,600 311,100 Korea Tobacco & Ginseng, GDR 16,300 (b) 108,395 POSCO, ADR 6,400 158,272 Samsung Electronics, GDR 1,760 (b) 231,000 Samsung SDI, GDR 8,000 (b) 130,800 1,405,020 TAIWAN--8.4% Accton Technology 20,000 (a) 20,491 Advanced Semiconductor Engineering 101,190 (a) 59,575 Advanced Semiconductor Engineering, ADR 2,818 (a) 8,228 Asustek Computer 68,000 119,711 Elan Microelectronics 72,872 47,530 Nan Ya Plastics 78,341 67,828 Powerchip Semiconductor, GDR 5,400 (a,b) 15,525 Quanta Computer 36,000 59,221 SinoPac 273,404 114,806 Taiwan Cellular 94,260 78,890 United Microelectronics 295,900 (a) 180,187 Yageo 320,280 (a) 83,190 855,182 THAILAND--2.8% Hana Microelectronics 24,000 36,726 PTT Exploration and Production 20,000 65,848 Siam Commercial Bank 108,000 (a) 71,992 Siam Makro 28,000 20,774 Thai Farmers Bank 130,000 (a) 90,424 285,764 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TURKEY--.4% Tupras-Turkiye Petrol Rafinerileri 8,137,000 38,234 UNITED KINGDOM--3.7% Anglo American 12,273 182,315 Dimension Data 107,400 (a) 50,154 Old Mutual 99,900 141,565 374,034 TOTAL COMMON STOCKS (cost $10,189,896) 9,515,812 - ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCK--.9% - ------------------------------------------------------------------------------------------------------------------------------------ BRAZIL; Companhia Energetica de Minas Gerais (cost $133,597) 12,246 91,505 - ------------------------------------------------------------------------------------------------------------------------------------ OTHER INVESTMENTS--5.4% - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 183,333 (c) 183,333 Dreyfus Institutional Cash Advantage Plus Fund 183,333 (c) 183,333 Dreyfus Institutional Preferred Plus Money Market Fund 183,334 (c) 183,334 TOTAL OTHER INVESTMENTS (cost $550,000) 550,000 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $10,873,493) 99.3% 10,157,317 CASH AND RECEIVABLES (NET) .7% 73,660 NET ASSETS 100.0% 10,230,977 (A) NON-INCOME PRODUCING. (B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT DECEMBER 31, 2002, THESE SECURITIES AMOUNTED TO $1,773,037 OR 17.3% OF NET ASSETS. (C) INVESTMENTS IN AFFILIATED MONEY MARKETS FUNDS--SEE NOTE 3(D).
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities- See Statement of Investments 10,873,493 10,157,317 Cash 41,089 Cash denominated in foreign currencies 168,707 168,111 Dividends and interest receivable 41,718 Receivable for investment securities sold 35,194 10,443,429 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 4,010 Payable for investment securities purchased 130,900 Payable for shares of Beneficial Interest redeemed 27,863 Net unrealized depreciation on forward currency exchange contracts--Note 4 95 Accrued expenses and other liabilities 49,584 212,452 - -------------------------------------------------------------------------------- NET ASSETS ($) 10,230,977 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 11,308,225 Accumulated undistributed investment income--net 13,412 Accumulated net realized gain (loss) on investments (372,504) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions (718,156) - -------------------------------------------------------------------------------- NET ASSETS ($) 10,230,977 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 9,111,434 1,119,543 Shares Outstanding 974,806 119,758 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 9.35 9.35 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $21,931 foreign taxes withheld at source) 281,200 Interest 5,052 TOTAL INCOME 286,252 EXPENSES: Investment advisory fee--Note 3(a) 115,684 Custodian fees 83,056 Prospectus and shareholders' reports 23,873 Auditing fees 20,246 Shareholder servicing costs--Note 3(b) 2,537 Distribution fees--Note 3(b) 1,770 Legal fees 737 Trustees' fees and expenses--Note 3(c) 355 Miscellaneous 14,746 TOTAL EXPENSES 263,004 Less--waiver of fees due to undertaking--Note 3(a) (81,428) NET EXPENSES 181,576 INVESTMENT INCOME--NET 104,676 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions 56,795 Net realized gain (loss) on forward currency exchange contracts (12,144) NET REALIZED GAIN (LOSS) 44,651 Net unrealized appreciation (depreciation) on investments and foreign currency transactions (686,383) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (641,732) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (537,056) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 104,676 52,443 Net realized gain (loss) on investments 44,651 (265,200) Net unrealized appreciation (depreciation) on investments (686,383) 435,281 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (537,056) 222,524 - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (81,609) (30,371) Service shares (10,086) (1,201) TOTAL DIVIDENDS (91,695) (31,572) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 66,624,961 13,118,634 Service shares 1,341,355 231,982 Dividends reinvested: Initial shares 81,609 30,371 Service shares 10,086 1,201 Cost of shares redeemed: Initial shares (62,714,092) (9,824,770) Service shares (381,270) (23,624) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 4,962,649 3,533,794 TOTAL INCREASE (DECREASE) IN NET ASSETS 4,333,898 3,724,746 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 5,897,079 2,172,333 END OF PERIOD 10,230,977 5,897,079 Undistributed investment income--net 13,412 -- The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended December 31, --------------------------------- 2002 2001 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 6,693,123 1,448,094 Shares issued for dividends reinvested 8,663 3,283 Shares redeemed (6,325,253) (1,088,512) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 376,533 362,865 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 133,481 25,920 Shares issued for dividends reinvested 1,071 130 Shares redeemed (38,255) (2,643) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 96,297 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.
Year Ended December 31, ------------------------------------------ INITIAL SHARES 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.48 9.23 13.63 12.50 Investment Operations: Investment income--net .11(b) .15(b) .04(b) .02 Net realized and unrealized gain (loss) on investments (.15) .16 (4.37) 1.11 Total from Investment Operations (.04) 31 (4.33) 1.13 Distributions: Dividends from investment income--net (.09) (.06) (.06) -- Dividends from net realized gain on investments -- -- (.01) -- Total Distributions (.09) (.06) (.07) -- Net asset value, end of period 9.35 9.48 9.23 13.63 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (.48) 3.32 (31.81) 9.04(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.96 2.00 2.00 .09(c) Ratio of net investment income to average net assets 1.16 1.70 .36 .18(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .87 3.40 1.86 1.51(c) Portfolio Turnover Rate 76.18 119.06 123.49 .43(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 9,111 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)
Year Ended December 31, -------------------------------- SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.49 9.23 9.23 Investment Operations: Investment income--net .08(b) .16(b) -- Net realized and unrealized gain (loss) on investments (.13) .16 -- Total from Investment Operations (.05) .32 -- Distributions: Dividends from investment income--net (.09) (.06) -- Net asset value, end of period 9.35 9.49 9.23 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (.59) 3.43 -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.97 2.00 -- Ratio of net investment income to average net assets .84 1.74 -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.01 3.64 -- Portfolio Turnover Rate 76.18 119.06 123.49 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 1,120 223 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the 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 (the "Manager") serves as the portfolio's investment adviser. The Manager 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 the Manager, 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $13,320, accumulated capital losses $208,290 and unrealized depreciation $871,652. In addition, the portfolio had $10,626 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal periods ended December 31, 2002 and December 31, 2001, respectively, were as follows: ordinary income $91,695 and $31,572. During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $431, decreased net realized gain (loss) on investments by $730 and increased paid-in capital by $299. Net assets were not affected by this reclassification. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 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 the Manager, 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. The Manager has agreed, from January 1, 2002 to December 31, 2003, 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 December 31, 2002, the Manager waived receipt of fees and assumed expenses of the portfolio of $81,428, 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 December 31, 2002, Service shares were charged $1,770 pursuant to the Plan. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $217 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 may invest 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. During the period ended December 31, 2002, the portfolio derived $5,418 in income from these investments, which is included in dividend 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 December 31, 2002, amounted to $11,401,766 and $6,251,584, respectively. The portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) portfolio is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counterparty nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. The following summarizes open forward currency exchange contracts at December 31, 2002:
Foreign Forward Currency Currency Unrealized Exchange Contracts Amounts Cost ($) Value ($) (Depreciation) ($) - ------------------------------------------------------------------------------------------------------------------------------------ PURCHASES: South African Rand, expiring 1/2/2003 438,905 51,262 51,169 (93) SALES: PROCEEDS ($) Hong Kong Dollar, expiring 1/2/2003 305,000 39,108 39,110 (2) TOTAL (95)
At December 31, 2002, the cost of investments for federal income tax purposes was $11,027,081; accordingly, accumulated net unrealized depreciation on investments was $869,764, consisting of $756,405 gross unrealized appreciation and $1,626,169 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Emerging Markets Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Emerging Markets Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2002 by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Emerging Markets Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio IMPORTANT TAX INFORMATION (Unaudited) In accordance with federal tax law, the portfolio elects to provide each shareholder with their portion of the portfolio's foreign taxes paid and the income sourced from foreign countries. Accordingly, the portfolio hereby makes the following designations regarding its fiscal year ended December 31, 2002: -- the total amount of taxes paid to foreign countries was $21,931 -- the total amount of income sourced from foreign countries was $122,498 As required by federal tax law rules, shareholders will receive notification of their proportionate share of foreign taxes paid and foreign source income for the 2002 calendar year with Form 1099-DIV which will be mailed by January 31, 2003. BOARD MEMBERS INFORMATION (Unaudited) JOSEPH S. DIMARTINO (59) CHAIRMAN OF THE BOARD (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- CLIFFORD L. ALEXANDER (69) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- LUCY WILSON BENSON (75) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980 - present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED) DAVID W. BURKE (66) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum; Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- WHITNEY I. GERARD (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ARTHUR A. HARTMAN (76) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- GEORGE L. PERRY (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 57 years old and has been an employee of the Manager since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 49 years old and has been an employee of the Manager since January 2000. Prior to joining the Manager, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 53 years old and has been an employee of the Manager since July 1980. JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 12 investment companies (comprised of 65 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Manager since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 200 portfolios) managed by the Manager. He is 42 years old and has been an employee of the Manager since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of the Manager, and an officer of 18 investment companies (comprised of 77 portfolios) managed by the Manager. He is 34 years old and has been an employee of the Manager since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 38 years old and has been an employee of the Manager since October 1988. The Portfolio OFFICERS OF THE FUND (Unaudited) (CONTINUED) ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 35 years old and has been an employee of the Manager since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by the Manager. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc 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. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 191AR1202 Dreyfus Investment Portfolios, Emerging Leaders Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 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 23 Report of Independent Auditors 24 Board Members Information 26 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Emerging Leaders Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Emerging Leaders Portfolio, covering the 12-month period from January 1, 2002 through December 31, 2002. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the fund's portfolio managers, Paul Kandel and Hilary Woods. In 2002, investors witnessed the third consecutive year of negative returns for the broad U.S. stock markets. Virtually every industry group, investment style and capitalization range, including small-cap stocks, suffered losses in 2002, leaving investors few shelters from the storm. However, the market' s disappointing start to the 21st century may be good news for today' s growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 DISCUSSION OF PERFORMANCE Paul Kandel and Hilary Woods, Portfolio Managers How did Dreyfus Investment Portfolios, Emerging Leaders Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2002, Dreyfus Investment Portfolios, Emerging Leaders Portfolio produced a total return of -19.86% for its Initial shares and -20.04% for its Service shares.(1) This compares with a total return of -20.48% for the portfolio's benchmark, the Russell 2000 Index (the "Index"), for the same period.(2) We attribute the portfolio's performance to an unfavorable environment for most equities, including the kinds of innovative, small companies on which the portfolio focuses. The portfolio slightly outperformed its benchmark, because above-average performance in the health care, energy and materials and processing areas counterbalanced losses among its holdings in the technology and producer-durables sectors. 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 Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) the reasons for buying it no longer apply or when the company begins to show deteriorating fundamentals or poor relative performance. What other factors influenced the portfolio's performance? The U.S. economy showed evidence of mild recovery in 2002, rebounding from the previous year's recession. The slow pace of economic growth undermined virtually all areas of the stock market. Corporate scandals and bankruptcies afflicted several prominent corporations, eroding investor confidence, while questions regarding the economic impact of the potential war in Iraq intensified investors' concerns. These forces drove stock prices sharply lower during the reporting period, and the portfolio was hurt by this downward trend. Nevertheless, the portfolio outperformed its benchmark in several key industry groups, enabling it to deliver slightly stronger returns for the reporting period as a whole. In the health care sector, the portfolio de-emphasized biotechnology stocks, focusing instead on stocks in the pharmaceutical and services areas. Although some of these stocks, such as nursing home provider Beverly Enterprises, suffered setbacks, other holdings, such as Inspire Pharmaceuticals, rose sharply. As a result, the portfolio' s health care losses proved far milder than the health care sector' s declines within the Index. Among energy stocks, the portfolio benefited from its emphasis on oil and gas exploration and production companies such as XTO Energy, which benefited from firming commodity prices. Finally, in the materials and processing area, the portfolio bettered its benchmark through holdings such as Agnico-Eagle Mines, which benefited from rising gold prices; newsprint producer Bowater which had declined on balance sheet worries; and Airgas, which benefited from improving fundamentals. Unfortunately, poorer than average performance in other industry groups offset many of these gains. The technology sector was hit particularly hard by excess inventories and weak levels of corporate capital spending. Although we allocated fewer assets than average to technology stocks, disappointing earnings among several software holdings, such as electronic security provider RSA Security and enterprise software provider NetIQ, drove returns lower for the reporting period and undermined the portfolio' s performance relative to its benchmark. Relative performance also suffered as a result of poor returns from individual holdings in the producer durables area such as Loral Space & Communications, a satellite communications company that suffered from weak industry demand and a leveraged balance sheet. What is the portfolio's current strategy? As of the end of the reporting period, the portfolio holds a smaller percentage of financial stocks than its benchmark, reflecting our view that interest rates have begun to flatten. Flat-to-rising rates we believe are likely to affect interest-rate-sensitive financial stocks adversely. We have also de-emphasized consumer-related stocks, because flattening rates are likely to diminish the wave of home refinancings that has helped fuel consumer spending. On the other hand, the portfolio holds relatively large positions in economically sensitive industry groups -- such as energy, materials and processing, producer durables and autos and transports -- that we believe are well-positioned to benefit from improving economic fundamentals. January 15, 2003 (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 PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Emerging Leaders Portfolio Initial shares and Service shares and the Russell 2000 Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02
Inception From Date 1 Year Inception - ------------------------------------------------------------------------------------------------------------------------------------ INITIAL SHARES 12/15/99 (19.86)% 7.14% SERVICE SHARES 12/15/99 (20.04)% 7.02%
THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. PART OF THE PORTFOLIO'S RECENT PERFORMANCE IS ATTRIBUTABLE TO POSITIVE RETURNS FROM 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. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, EMERGING LEADERS PORTFOLIO ON 12/15/99 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE RUSSELL 2000 INDEX (THE "INDEX") ON THAT DATE. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/99 IS USED AS THE BEGINNING VALUE ON 12/15/99. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK MARKET PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio STATEMENT OF INVESTMENTS December 31, 2002
COMMON STOCKS--98.0% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AUTOS & TRANSPORTS--6.3% American Axle & Manufacturing Holdings 13,500 (a) 316,170 Heartland Express 14,000 (a) 320,754 JetBlue Airways 13,500 (a) 364,500 UTI Worldwide 13,500 354,375 1,355,799 CONSUMER--13.3% American Italian Pasta Co., Cl. A 9,000 (a) 323,820 Emmis Communications, Cl. A 15,000 (a) 312,450 Entercom Communications 6,500 (a) 304,980 Hot Topic 14,000 (a) 320,320 Jos. A. Bank Clothiers 13,500 (a) 287,820 La Quinta 60,000 (a) 264,000 Smithfield Foods 20,000 (a) 396,800 Station Casinos 19,000 (a) 336,300 Talbots 11,000 302,830 2,849,320 ENERGY--6.1% National-Oilwell 14,000 (a) 305,760 Rowan Cos. 14,500 329,150 Unit 16,500 (a) 306,075 XTO Energy 15,000 370,500 1,311,485 FINANCIAL SERVICES--18.6% Arch Capital Group 12,500 (a) 389,625 Bank United (CPR) 1,400 (a) 140 Chittenden 11,500 293,020 Doral Financial 13,000 371,800 Global Payments 12,000 384,120 Hilb, Rogal and Hamilton 8,000 327,200 Max Re Capital 22,500 247,950 Montpelier Re Holdings 11,500 331,200 Protective Life 10,000 275,200 Texas Regional Bancshares, Cl. A 10,700 380,289 Webster Financial 9,500 330,600 Westamercia Bancorporation 7,500 301,350 Whitney Holding 10,500 349,965 3,982,459 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE--14.7% Andrx 21,500 (a) 315,405 Axcan Pharma 27,000 (a) 317,790 First Horizon Pharmaceutical 75,000 (a) 560,850 Inspire Pharmaceuticals 47,000 (a) 438,980 NDCHealth 21,000 417,900 Protein Design Labs 28,000 (a) 238,000 Renal Care Group 10,500 (a) 332,220 SICOR 20,000 (a) 317,000 United Surgical Partners International 13,000 (a) 203,073 3,141,218 MATERIALS & PROCESSING--11.4% Agnico-Eagle Mines 25,000 371,500 Airgas 23,500 (a) 405,375 Bowater 9,000 377,550 Cambrex 11,500 347,415 Genencor International 32,000 (a) 312,960 NOVA Chemicals 15,000 274,500 OM Group 50,000 344,000 2,433,300 PRODUCER DURABLES--10.7% Donaldson Co. 9,500 342,000 Joy Global 26,000 (a) 292,760 MagneTek 29,000 (a) 128,760 Roper Industries 9,000 (a) 329,400 Standard Pacific 12,500 309,375 Terex 16,500 (a) 183,810 United Defense Industries 16,000 (a) 372,800 Wabash National 40,000 (a) 335,200 2,294,105 TECHNOLOGY--13.8% Advanced Energy Industries 18,500 (a) 235,320 Borland Software 20,000 (a) 246,000 Cognos 14,000 (a) 328,300 Emulex 14,000 (a) 259,700 Exar 22,500 (a) 279,000 Integrated Circuit Systems 14,000 (a) 255,500 J.D. Edwards & Co. 27,500 (a) 310,200 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) Legato Systems 55,000 (a) 276,650 McDATA, Cl. B 40,000 (a) 281,200 MicroStrategy, Cl. A 17,500 (a) 264,250 NetIQ 18,000 (a) 222,300 2,958,420 UTILITIES--3.1% El Paso Electric 30,000 (a) 330,000 Western Gas Resources 9,000 331,650 661,650 TOTAL COMMON STOCKS (cost $20,461,988) 20,987,756 - ------------------------------------------------------------------------------------------------------------------------------------ OTHER INVESTMENTS--3.1% - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 221,333 (b) 221,333 Dreyfus Institutional Cash Advantage Plus Fund 221,333 (b) 221,333 Dreyfus Institutional Preferred Plus Money Market Fund 221,334 (b) 221,334 TOTAL OTHER INVESTMENTS (cost $664,000) 664,000 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $21,125,988) 101.1% 21,651,756 LIABILITIES, LESS CASH AND RECEIVABLES (1.1%) (243,502) NET ASSETS 100.0% 21,408,254 (A) NON-INCOME PRODUCING. (B) INVESTMENTS IN AFFLILIATED MONEY MARKET FUNDS--SEE NOTE 3(D).
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 21,125,988 21,651,756 Cash 42,040 Receivable for investment securities sold 123,098 Dividends and interest receivable 7,826 Receivable for shares of Beneficial Interest subscribed 150 21,824,870 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 19,875 Payable for investment securities purchased 328,590 Payable for shares of Beneficial Interest redeemed 32,853 Accrued expenses 35,298 416,616 - -------------------------------------------------------------------------------- NET ASSETS ($) 21,408,254 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 24,695,479 Accumulated net realized gain (loss) on investments (3,812,993) Accumulated net unrealized appreciation (depreciation) on investments 525,768 - -------------------------------------------------------------------------------- NET ASSETS ($) 21,408,254 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 11,776,997 9,631,257 Shares Outstanding 793,311 650,982 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 14.85 14.79 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $649 foreign taxes withheld at source) 134,473 Interest 9,906 TOTAL INCOME 144,379 EXPENSES: Investment advisory fee--Note 3(a) 198,227 Prospectus and shareholders' reports 24,663 Auditing fees 23,692 Distribution fees--Note 3(b) 20,113 Custodian fees--Note 3(b) 6,399 Legal fees 3,585 Shareholder servicing costs--Note 3(b) 1,909 Trustees' fees and expenses--Note 3(c) 404 TOTAL EXPENSES 278,992 INVESTMENT (LOSS)--NET (134,613) - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (2,725,341) Net unrealized appreciation (depreciation) on investments (2,551,899) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (5,277,240) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,411,853) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss)--net (134,613) (44,865) Net realized gain (loss) on investments (2,725,341) (844,848) Net unrealized appreciation (depreciation) on investments (2,551,899) 1,960,602 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,411,853) 1,070,889 - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Net realized gain on investments: Initial shares -- (3,153) Service shares -- (82) TOTAL DIVIDENDS -- (3,235) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 7,099,782 11,258,210 Service shares 8,328,068 4,665,119 Dividends reinvested: Initial shares -- 3,153 Service shares -- 82 Cost of shares redeemed: Initial shares (5,168,938) (4,608,821) Service shares (1,476,905) (250,066) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 8,782,007 11,067,677 TOTAL INCREASE (DECREASE) IN NET ASSETS 3,370,154 12,135,331 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 18,038,100 5,902,769 END OF PERIOD 21,408,254 18,038,100 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended December 31, -------------------------------- 2002 2001 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 404,268 648,465 Shares issued for dividends reinvested -- 196 Shares redeemed (329,243) (276,585) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 75,025 372,076 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 493,678 271,017 Shares issued for dividends reinvested -- 5 Shares redeemed (98,214) (15,533) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 395,464 255,489 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.
Year Ended December 31, -------------------------------------------------------------- INITIAL SHARES 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 18.53 17.05 13.44 12.50 Investment Operations: Investment income (loss)--net (.09)(b) (.08)(b) (.09)(b) .01 Net realized and unrealized gain (loss) on investments (3.59) 1.57 4.30 .93 Total from Investment Operations (3.68) 1.49 4.21 .94 Distributions: Dividends from investment income--net -- -- (.01) -- Dividends from net realized gain on investments -- (.01) (.59) -- Total Distributions -- (.01) (.60) -- Net asset value, end of period 14.85 18.53 17.05 13.44 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (19.86) 8.74 31.70 7.52(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.17 1.46 1.50 .07(c) Ratio of net investment income (loss) to average net assets (.51) (.44) (.59) .04(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- .16 .70 1.25(c) Portfolio Turnover Rate 127.24 175.21 234.94 1.79(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 11,777 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. The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED)
Year Ended December 31, --------------------------------------------- SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 18.51 17.05 17.05 Investment Operations: Investment (loss)--net (.13)(b) (.08)(b) -- Net realized and unrealized gain (loss) on investments (3.59) 1.55 -- Total from Investment Operations (3.72) 1.47 -- Distributions: Dividends from net realized gain on investments -- (.01) -- Net asset value, end of period 14.79 18.51 17.05 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (20.04) 8.62 -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.43 1.50 -- Ratio of net investment (loss) to average net assets (.79) (.49) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation -- .30 -- Portfolio Turnover Rate 127.24 175.21 234.94 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 9,631 4,730 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company operating as a series company currently offering twelve series, including the 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 (the "Manager") serves as the portfolio's investment adviser. The Manager 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 the Manager, 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 (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. (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 received net earnings credits of $167 during the period ended December 31, 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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $3,508,038 and unrealized appreciation $506,844. In addition, the portfolio had $286,031 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, $928,554 of the carryover expires in fiscal 2009 and $2,579,484 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal periods ended December 31, 2002 and December 31, 2001, respectively, were as follows: ordinary income $0 and $3,235. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $134,613 and decreased paid-in capital by the same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 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 the Manager, 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 Manager has agreed, from January 1, 2002 to December 31, 2003, 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 December 31, 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 December 31, 2002, Service shares were charged $20,113 pursuant to the Plan. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $92 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $6,399 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 may invest 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. During the period ended December 31, 2002, the portfolio derived $8,796 in income from these investments, which is included in dividend income in the portfolio's Statement of Operations. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2002, amounted to $35,233,433 and $26,827,744, respectively. At December 31, 2002, the cost of investments for federal income tax purposes was $21,144,912; accordingly, accumulated net unrealized appreciation on investments was $506,844, consisting of $2,129,232 gross unrealized appreciation and $1,622,388 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Emerging Leaders Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Emerging Leaders Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2002 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Emerging Leaders Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) JOSEPH S. DIMARTINO (59) CHAIRMAN OF THE BOARD (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- CLIFFORD L. ALEXANDER (69) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- LUCY WILSON BENSON (75) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980-Present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 DAVID W. BURKE (66) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- WHITNEY I. GERARD (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ARTHUR A. HARTMAN (76) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- GEORGE L. PERRY (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. The Portfolio OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 57 years old and has been an employee of the Manager since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 49 years old and has been an employee of the Manager since January 2000. Prior to joining the Manager, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 53 years old and has been an employee of the Manager since July 1980. JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 12 investment companies (comprised of 65 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Manager since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 200 portfolios) managed by the Manager. He is 42 years old and has been an employee of the Manager since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of the Manager, and an officer of 18 investment companies (comprised of 77 portfolios) managed by the Manager. He is 34 years old and has been an employee of the Manager since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 38 years old and has been an employee of the Manager since October 1988. ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 35 years old and has been an employee of the Manager since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by the Manager. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc The Portfolio NOTES 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. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 192AR1202 Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 7 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 33 Report of Independent Auditors 34 Board Members Information 36 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this report for Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio, covering the period from the portfolio' s inception May 1, 2002 through December 31, 2002. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio managers, Steve Falci and Thomas Durante. In 2002, investors witnessed the third consecutive year of negative returns for the broad U.S. stock markets. Virtually every industry group, investment style and capitalization range; including small-cap stocks, suffered losses in 2002, leaving investors few shelters from the storm. However, the market' s disappointing start to the 21st century may be good news for today' s growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 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 on May 1, 2002 through the end the reporting period on December 31, 2002, the portfolio's Service shares produced a total return of -23.25%.(1) In comparison, the portfolio's benchmark, the Standard & Poor' s SmallCap 600 Index ("S&P 600 Index"), produced a -22.38% return for the same period.(2) The difference in returns was primarily due to transaction costs and other fund operating expenses. We attribute the portfolio and market's disappointing returns to a sluggish economic recovery and a delay in corporate capital spending. Small-cap stocks generally provided better performance than their large-cap counterparts due to investors' preference for focused businesses over large conglomerates, where accounting and corporate governance scandals were more prevalent. The situation reversed itself in the last few months of 2002 as the stocks that were beaten down had a sharp reversal. What is the portfolio's investment approach? The portfolio seeks to match the total return of the S&P 600 Index. To pursue this goal, the portfolio generally 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 those circumstances, the portfolio maintains approximately the same weighting for each stock as the S&P 600 Index does. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) The S&P 600 Index is composed of 600 domestic stocks with market capitalizations ranging between $40 million and $3 billion, depending on index composition. Each stock is weighted by its market capitalization, which means larger companies have 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? When the reporting period began on May 1, 2002, investors were concerned that the much-anticipated economic recovery had not yet materialized fully. Corporate earnings had stalled, capital spending by corporations had not materialized and economic growth was inconsistent from quarter to quarter. During 2002, most accounting-related concerns involved well-known, large-cap companies, but repercussions were felt across all market-capitalization ranges as investor confidence eroded. Geopolitical concerns also hurt all capitalization ranges, as investors were concerned that tensions in the Middle East would drive up oil prices. The bulk of the fund's negative returns can be traced to four industry groups: technology, chemicals, pharmaceuticals and specialty retail. Semiconductor stocks within the technology group detracted the most from performance during the reporting period, primarily because of low levels of corporate capital spending and, later in the year, a disappointing holiday season for consumer electronic products. Chemical companies also suffered, particularly in the latter part of the year, due to the rising price of oil needed for chemical processing. Within the health care group, biotechnology and medical services providers posted steep declines as their stock valuations moved closer to historical norms after having been inflated over the past several years. On a more positive note, the surge in mortgage activity benefited the earnings of small banks and thrifts, which tended to focus on their local markets. In contrast, many large-cap financial services companies were embroiled in troubled foreign loans. In addition, historically low interest rates increased the attractiveness of mortgage refinancing and first-time homeownership, benefiting smaller, local banks. What is the portfolio's current strategy? The portfolio's strategy remains consistent: we attempt to replicate the return of the S&P 600 Index by investing in most of the S&P 600 Index's 600 small-cap stocks in approximate proportions to their weight in the S&P 600 Index. January 15, 2003 (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: 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 PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio and the Standard & Poor's SmallCap 600 Index - -------------------------------------------------------------------------------- Actual Aggregate Total Return AS OF 12/31/02 Inception From Date Inception - -------------------------------------------------------------------------------- PORTFOLIO 5/1/02 (23.25)% ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS INVESTMENT PORTFOLIOS, SMALL CAP STOCK INDEX PORTFOLIO ON 5/1/02 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE STANDARD & POOR'S SMALLCAP 600 INDEX (THE "INDEX") ON THAT DATE. THE PORTFOLIO IS SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES. THE INDEX IS A BROAD-BASED INDEX AND A WIDELY ACCEPTED, UNMANAGED INDEX OF OVERALL SMALL-CAP STOCK MARKET PERFORMANCE. THE INDEX REFLECTS THE REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. STATEMENT OF INVESTMENTS December 31, 2002
COMMON STOCKS--99.6% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ALCOHOL & TOBACCO--.1% DIMON 6,400 38,400 CONSUMER CYCLICAL--17.6% A.T. Cross, Cl. A 1,700 (a) 9,095 Action Performance Cos. 2,700 51,300 Advanced Marketing Services 2,000 29,400 Angelica 1,300 26,845 AnnTaylor Stores 6,050 123,541 Applebee's International 7,400 171,613 Applica 1,600 (a) 8,000 Arctic Cat 3,200 51,200 Argosy Gaming 4,100 (a) 77,613 Ashworth 600 (a) 3,840 Atlantic Coast Airlines Holdings 5,800 (a) 69,774 Aztar 4,900 (a) 69,972 Bally Total Fitness Holdings 4,200 (a) 29,778 Bassett Furniture 1,800 25,776 Brown Shoe 2,600 61,958 Burlington Coat Factory Warehouse 5,800 104,110 CEC Entertainment 3,700 (a) 113,590 CPI 1,200 17,388 Casey's General Stores 6,300 76,923 Cato, Cl. A 3,100 66,929 Chico's FAS 11,200 (a) 211,792 Children's Place Retail Stores 3,600 (a) 38,304 Christopher & Banks 3,100 (a) 64,325 Coachmen Industries 2,600 41,080 Concord Camera 1,900 (a) 10,317 Cost Plus 2,700 (a) 77,409 Department 56 2,200 (a) 28,380 Dress Barn 3,400 (a) 45,220 Duane Reade 2,700 (a) 45,900 Enesco Group 1,500 (a) 10,620 Ethan Allen Interiors 4,900 168,413 Fedders 1,200 3,396 Footstar 2,200 (a) 15,312 Fossil 6,000 (a) 122,040 Fred's 3,400 87,380 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL (CONTINUED) Genesco 3,100 (a) 57,753 Goody's Family Clothing 3,800 (a) 16,872 Great Atlantic & Pacific 3,800 (a) 30,628 Group 1 Automotive 2,700 (a) 64,476 Gymboree 4,100 (a) 65,026 Haggar 400 5,036 Hancock Fabrics 2,900 44,225 Harman International Industries 4,100 243,950 Haverty Furniture 3,100 43,090 Hot Topic 3,600 (a) 82,368 Huffy 600 (a) 3,582 IHOP 2,700 (a) 64,800 Insight Enterprises 5,300 (a) 44,043 Interface, Cl. A 6,200 19,034 Intermet 2,500 10,500 J. Jill Group 2,300 (a) 32,154 JAKKS Pacific 2,700 (a) 36,369 Jack in the Box 5,100 (a) 88,179 Jo-Ann Stores, Cl. A 2,900 (a) 66,613 K-Swiss 2,200 47,762 K2 2,100 (a) 19,740 Kellwood 3,600 93,600 La-Z Boy 7,400 177,452 Landry's Restaurants 3,300 70,092 Linens 'n Things 5,500 (a) 124,300 Lone Star Steakhouse & Saloon 3,100 59,954 Men's Wearhouse 5,700 (a) 97,755 Mesa Air Group 5,700 (a) 23,199 Midas 1,800 (a) 11,574 Midwest Express Holdings 1,500 (a) 8,025 Monaco Coach 3,600 (a) 59,580 NBTY 8,900 (a) 156,462 National Presto Industries 1,000 29,380 Nautica Enterprises 4,400 (a) 48,884 O'Charleys 2,500 (a) 51,325 O'Reilly Automotive 6,600 (a) 166,914 OshKosh B'Gosh 1,600 44,880 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL (CONTINUED) Oshkosh Truck 2,100 129,150 Oxford Industries 1,000 25,650 P.F. Chang's China Bistro 3,200 (a) 116,160 Pacific Sunwear of California 6,450 (a) 114,101 Panera Bread, Cl. A 3,700 (a) 128,797 Pep Boys-Manny, Moe & Jack 7,000 81,200 Phillips-Van Heusen 3,600 41,616 Pinnacle Entertainment 1,800 (a) 12,474 Polaris Industries 3,200 187,520 Prime Hospitality 4,800 (a) 39,120 Quicksilver 3,400 (a) 90,644 RARE Hospitality International 2,900 (a) 80,098 Royal Appliance Manufacturing 300 (a) 2,181 Ruby Tuesday 8,400 145,236 Russ Berrie & Co. 2,800 94,584 Russell 4,100 68,634 Ryan's Family Steak House 5,500 (a) 62,425 SCP Pool 2,900 (a) 84,680 Salton 1,200 (a) 11,544 School Specialty 2,300 (a) 45,954 ShopKo Stores 4,300 (a) 53,535 Shuffle Master 2,700 (a) 51,597 SkyWest 8,000 104,560 Sonic 5,500 (a) 112,695 Steak n Shake 3,800 (a) 38,000 Stein Mart 5,300 (a) 32,330 Stride Rite 6,000 43,020 Sturm Ruger 4,300 41,151 TBC 2,800 (a) 33,628 Thor Industries 4,000 137,720 Too 4,200 (a) 98,784 Toro 1,700 108,630 Tower Automotive 8,000 (a) 36,000 Triarc 2,200 (a) 57,728 Ultimate Electronics 1,200 (a) 12,180 WMS Industries 3,500 (a) 52,430 Wet Seal, Cl. A 3,850 (a) 41,430 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL (CONTINUED) Winnebago Industries 2,600 101,998 Wolverine World Wide 5,500 83,105 Zale 4,500 (a) 143,550 7,413,948 CONSUMER STAPLES--2.7% American Italian Pasta, Cl. A 2,200 (a) 79,156 Coca-Cola Bottling 1,200 77,412 Corn Products International 4,800 144,624 Delta & Pine Land 4,600 93,886 Fleming Cos. 7,900 51,903 Hain Celestial Group 4,300 (a) 65,360 International Multifoods 2,500 (a) 52,975 J & J Snack Foods 1,300 (a) 46,423 Lance 3,500 41,436 Libbey 2,300 59,800 Nash Finch 1,300 10,049 Nature's Sunshine Products 1,900 18,449 Performance Food Group 5,400 (a) 183,379 Ralcorp Holdings 3,700 (a) 93,018 United Natural Foods 2,300 (a) 58,305 WD-40 2,100 55,482 1,131,657 ENERGY--8.7% American States Water 1,650 38,197 Atmos Energy 5,700 132,924 Atwood Oceanics 1,700 (a) 51,170 Cabot Oil & Gas 4,000 99,120 Cal Dive International 5,200 (a) 122,200 Carbo Ceramics 1,900 64,030 Cascade Natural Gas 1,200 24,000 Cimarex Energy 5,000 (a) 89,500 Dril-Quip 1,900 (a) 32,110 Energen 4,800 139,680 Evergreen Resources 2,500 (a) 112,125 Frontier Oil 3,700 63,714 Hydril 2,900 (a) 68,353 Laclede Group 2,500 60,500 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY (CONTINUED) NUI 2,700 46,602 New Jersey Resources 3,400 107,406 Newfield Exploration 6,800 (a) 245,140 Northwest Natural Gas 3,500 94,710 NorthWestern 5,000 25,400 Nuevo Energy 1,700 (a) 18,870 Oceaneering International 3,100 (a) 76,694 Patina Oil & Gas 3,775 119,479 Philadelphia Suburban 8,600 177,160 Piedmont Natural Gas 4,200 148,470 Plains Resources 2,900 (a) 34,365 Pogo Producing 8,000 298,000 Prima Energy 1,400 (a) 31,304 Remington Oil & Gas 3,400 (a) 55,794 St. Mary Land & Exploration 4,000 100,000 Southern Union 7,185 (a) 118,553 Southwest Gas 4,000 93,800 Southwestern Energy 3,300 (a) 37,785 Stone Energy 3,600 (a) 120,096 Swift Energy 2,600 (a) 25,142 TETRA Technologies 2,300 (a) 49,151 Tom Brown 5,000 (a) 125,500 UGI 3,400 127,126 Unit 5,500 (a) 102,025 Veritas DGC 4,800 (a) 37,920 Vintage Petroleum 6,800 71,740 W-H Energy Services 3,700 (a) 53,983 3,639,838 HEALTH CARE--11.4% Accredo Health 5,700 (a) 200,925 Advanced Medical Optics 3,500 (a) 41,895 Alpharma, Cl. A 6,500 77,415 Amerigroup 2,800 84,868 AmeriPath 3,800 (a) 81,700 AmSurg 2,500 (a) 51,075 Analogic 1,900 95,547 ArQule 2,000 (a) 6,100 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE (CONTINUED) ArthroCare 1,900 (a) 18,715 Bio-Technology General 7,800 (a) 24,968 Biosite 2,100 (a) 71,442 CIMA Labs 1,500 (a) 36,287 CONMED 3,700 (a) 72,483 Cephalon 7,000 (a) 340,676 Cooper Cos. 4,200 105,084 Coventry Health Care 8,100 (a) 235,143 CryoLife 2,300 (a) 15,709 Curative Health Services 2,000 (a) 34,500 Datascope 2,100 52,082 Diagnostic Products 3,700 142,894 Dianon Systems 1,300 (a) 62,023 Enzo Biochem 3,700 (a) 51,800 Haemonetics 3,400 (a) 72,964 Hologic 2,500 (a) 30,525 Hooper Holmes 8,200 50,348 ICU Medical 1,700 (a) 63,410 IDEXX Laboratories 4,700 (a) 156,510 IMPATH 1,500 (a) 29,580 INAMED 2,700 (a) 83,160 Invacare 4,100 136,530 MGI Pharma 2,500 (a) 18,125 Medicis Pharmaceutical, Cl. A 3,500 (a) 173,845 Mentor 3,100 119,350 Mid Atlantic Medical Services 6,100 (a) 197,640 Noven Pharmaceuticals 2,900 (a) 26,767 Orthodontic Centers of America 6,400 (a) 69,824 Osteotech 2,000 (a) 12,880 Owens & Minor 4,700 77,174 Pediatrix Medical Group 3,400 (a) 136,204 PolyMedica 1,500 (a) 46,260 Priority Healthcare, Cl. B 5,700 (a) 132,240 Province Healthcare 6,000 (a) 58,380 Regeneron Pharmaceuticals 5,300 (a) 98,103 RehabCare Group 2,100 (a) 40,068 Renal Care Group 6,300 (a) 199,332 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE (CONTINUED) ResMed 3,600 (a) 110,052 Respironics 4,300 (a) 130,853 Sierra Health Services 4,500 (a) 54,045 Sola International 3,300 (a) 42,900 Sunrise Assisted Living 2,900 (a) 72,181 Sybron Dental Specialties 5,300 (a) 78,970 Techne 5,400 (a) 154,267 Theragenics 3,300 (a) 13,299 US Oncology 11,200 (a) 97,104 Viasys Healthcare 3,300 (a) 49,137 Vital Signs 1,800 53,784 4,789,142 INTEREST SENSITIVE--14.0% American Financial Holdings 2,800 83,664 Anchor Bancorp Wisconsin 3,100 64,325 Boston Private Financial Holdings 2,200 43,692 Capital Automotive 3,400 80,580 Cash America International 3,300 31,416 Chittenden 4,300 109,564 Colonial Properties Trust 3,300 112,002 Commercial Federal 6,100 142,435 Community First Bankshares 4,900 129,654 Cullen/Frost Bankers 6,600 215,820 Delphi Financial Group, Cl. A 2,500 94,900 Dime Community Bancshares 3,300 63,195 Downey Financial 3,300 128,700 East West Bancorp 3,200 115,456 Essex Property Trust 2,100 106,785 Financial Federal 2,000 (a) 50,260 First American 9,600 213,120 First Bancorp 4,850 109,610 First Midwest Bancorp 5,800 154,918 First Republic Bank 2,100 (a) 41,979 FirstFed Financial 2,600 (a) 75,270 Flagstar Bancorp 4,000 86,400 Fremont General 9,600 43,104 GBC Bancorp 1,000 19,360 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST SENSITIVE (CONTINUED) Glenborough Realty Trust 3,700 65,934 Hilb, Rogal & Hamilton 4,000 163,600 Hudson United Bancorp 5,800 180,380 Irwin Financial 3,600 59,400 Jefferies Group 3,600 151,092 Kilroy Realty 3,200 73,760 LandAmerica Financial Group 2,700 95,715 MAF Bancorp 3,300 111,969 NCO Group 3,100 (a) 49,445 New Century Financial 3,700 93,943 Philadelphia Consolidated Holding 2,600 (a) 92,040 Presidential Life 4,500 44,685 Provident Bankshares 3,600 83,200 RLI 2,800 (a) 78,120 Raymond James Financial 6,100 180,438 Riggs National 3,600 55,764 SWS Group 1,500 20,340 Seacoast Financial Services 3,100 62,034 Selective Insurance Group 3,300 83,094 Shurgard Storage Centers, Cl. A 4,600 144,164 South Financial Group 5,700 117,762 Southwest Bancorporation of Texas 4,000 (a) 115,240 Staten Island Bancorp 8,200 165,148 Sterling Bancshares 6,200 75,764 Stewart Information Services 2,300 (a) 49,197 Susquehanna Bancshares 4,900 102,121 Trustco Bank 10,100 108,878 UCBH Holdings 2,300 97,635 UICI 6,000 (a) 93,300 United Bankshares 5,200 151,117 Washington Federal 8,400 208,740 Waypoint Financial 4,700 83,660 Whitney Holding 5,200 173,316 Wintrust Financial 2,200 68,904 Zenith National Insurance 2,800 65,856 5,881,964 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INTERNET--.2% Netegrity 1,700 (a) 5,530 PC-Tel 2,600 (a) 17,628 Verity 4,600 (a) 61,599 84,757 PRODUCER GOODS & SERVICES--21.1% A.M. Castle 1,100 (a) 5,005 A.O. Smith 4,100 110,741 AAR 3,300 16,995 Acuity Brands 5,900 79,886 Alliant Techsystems 4,800 (a) 299,280 Apogee Enterprises 3,500 31,328 Applied Industrial Technologies 2,700 51,030 AptarGroup 4,700 146,828 Arch Chemicals 3,100 56,575 Arkansas Best 3,200 (a) 83,139 Astec Industries 1,700 (a) 16,881 BE Aerospace 3,400 (a) 12,376 Baldor Electric 4,300 84,925 Barnes Group 2,300 46,805 Belden 3,300 50,226 Brady, Cl. A 2,900 96,715 Briggs & Stratton 2,800 118,916 Brooks-PRI Automation 3,300 (a) 37,818 Buckeye Technologies 2,900 (a) 17,835 Building Materials Holding 1,800 25,740 Butler Manufacturing 1,000 19,350 C&D Technologies 3,400 60,078 CUNO 2,400 (a) 79,488 Cable Design Technologies 3,800 (a) 22,420 Cambrex 3,100 93,651 Caraustar Industries 3,400 32,232 Century Aluminum 2,300 17,043 Champion Enterprises 1,500 (a) 4,275 Chesapeake 2,000 35,700 Clarcor 3,400 109,718 Cleveland-Cliffs 1,600 31,760 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) Commercial Metals 4,200 68,208 Commonweath Industries 3,200 21,856 Curtiss-Wright 1,400 89,348 DRS Technologies 2,800 (a) 87,724 Deltic Timber 1,400 37,380 EDO 2,100 43,638 ElkCorp 2,500 43,250 Emcor Group 1,800 (a) 95,418 Engineered Support Systems 2,050 75,153 Fleetwood Enterprises 3,200 (a) 25,120 Florida Rock Industries 4,000 152,200 Forward Air 2,700 (a) 52,407 Gardner Denver 1,900 (a) 38,570 GenCorp 6,200 49,104 Georgia Gulf 4,400 101,816 Graco 6,250 179,062 Griffon 4,200 (a) 57,204 Heartland Express 6,600 (a) 151,213 Hughes Supply 3,300 90,156 IDEX 4,100 134,070 IMCO Recycling 2,200 (a) 17,886 Insituform Technologies, Cl. A 3,000 (a) 51,150 Intermagnetics General 2,000 (a) 39,280 Ionics 1,900 (a) 43,320 JLG Industries 5,200 39,156 Kaman, Cl. A 3,100 34,100 Kansas City Southern 7,000 (a) 84,000 Kirby 3,300 (a) 90,387 Knight Transportation 4,800 (a) 100,800 Landstar System 2,200 (a) 128,392 Lawson Products 1,400 43,372 Lennox International 7,300 91,615 Lindsay Manufacturing 1,500 32,100 Lone Star Technologies 3,400 (a) 50,626 Lydall 2,100 (a) 23,835 M.D.C. Holdings 3,700 141,562 MacDermid 4,100 93,685 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) Manitowoc 3,300 84,150 Massey Energy 9,200 89,424 Maverick Tube 5,000 (a) 65,150 Milacron 3,600 21,420 Mueller Industries 4,400 (a) 119,900 Myers Industries 3,675 39,323 NVR 1,000 (a) 325,500 OM Group 3,200 22,016 Offshore Logistics 3,100 (a) 67,952 Omnova Solutions 5,300 21,359 Penford 900 12,681 PolyOne 10,000 39,200 Pope & Talbot 2,200 31,372 Quaker Chemical 1,500 34,800 Quanex 2,500 83,750 RTI International Metals 3,200 32,320 Regal Beloit 3,400 70,380 Reliance Steel & Aluminum 4,100 85,444 Roadway 2,300 84,663 Robins & Myers 1,700 31,280 Rock-Tenn, Cl. A 4,500 60,660 Rogers 1,700 (a) 37,825 Ryerson Tull 3,600 21,960 Ryland Group 3,600 120,060 SPS Technologies 1,600 (a) 38,000 Schweitzer-Mauduit International 2,300 56,350 Scotts, Cl. A 3,700 (a) 181,448 Seacor Smit 2,500 (a) 111,250 Shaw Group 5,000 (a) 82,250 Simpson Manufacturing 3,300 (a) 108,570 Skyline 1,100 32,450 Standard Motor Products 1,900 24,700 Standard Pacific 4,500 111,375 Standex International 1,800 42,912 Steel Dynamics 6,800 (a) 81,804 Steel Technologies 1,800 30,528 Stewart & Stevenson Services 3,500 49,490 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) Stillwater Mining 5,500 (a) 29,425 SurModics 2,000 (a) 57,360 Technitrol 4,900 79,086 Teledyne Technologies 4,100 (a) 64,288 Texas Industries 2,100 51,030 Thomas Industries 2,100 54,726 Timken 8,200 156,620 Toll Brothers 9,600 (a) 193,920 Tredegar 5,500 82,500 Triumph Group 2,100 (a) 67,074 URS 3,400 (a) 48,382 USFreightways 3,300 94,875 United Stationers 4,300 (a) 123,844 Universal Forest Products 2,300 49,038 Valmont Industries 3,500 67,900 Watsco 3,700 60,606 Watts Industries, Cl. A 3,500 55,090 Wellman 4,700 63,403 Werner Enterprises 8,300 178,699 Wolverine Tube 800 (a) 4,568 Woodward Governor 1,600 69,600 Yellow 3,500 (a) 88,169 8,886,841 SERVICES--9.8% ABM Industries 6,400 99,200 ADVO 2,500 (a) 82,075 Aaron Rents 3,000 65,640 Administaff 2,100 (a) 12,600 American Management Systems 5,500 (a) 65,945 Analysts International 900 (a) 1,782 Arbitron 4,000 (a) 134,000 Armor Holdings 3,100 (a) 42,687 BARRA 2,900 (a) 87,957 Boston Communications Group 1,900 (a) 24,149 Bowne & Co. 4,300 51,385 CACI International, Cl. A 3,600 (a) 128,304 CDI 2,700 (a) 72,846 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SERVICES (CONTINUED) Central Parking 4,300 81,098 Chemed 1,500 53,025 Ciber 7,700 (a) 39,655 Computer Task Group 1,100 (a) 3,839 Consolidated Graphics 1,400 (a) 31,150 Corinthian Colleges 5,700 (a) 215,802 eFunds 5,400 (a) 49,194 4Kids Entertainment 1,700 (a) 37,536 FactSet Research Systems 4,600 130,042 Fair Isaac & Co. 6,450 275,415 G & K Services, Cl. A 2,600 92,043 Global Payments 4,800 153,648 Heidrick & Struggles International 2,000 (a) 29,340 ITT Educational Services 6,200 (a) 146,010 Information Holdings 2,800 (a) 43,456 Information Resources 2,200 (a) 3,520 Insurance Auto Auction 1,900 (a) 31,521 John H. Harland 4,000 88,520 Kroll 5,500 (a) 104,940 Labor Ready 6,400 (a) 41,088 MAXIMUS 3,000 (a) 78,300 MICROS Systems 2,500 (a) 56,050 Marcus 4,300 61,060 MemberWorks 1,600 (a) 28,768 Mobile Mini 1,500 (a) 23,505 NDCHealth 4,600 91,540 New England Business Service 1,900 46,360 On Assignment 2,600 (a) 22,152 PAREXEL International 3,100 (a) 34,069 Paxar 5,500 (a) 81,125 Pegasus Solutions 1,800 (a) 18,054 Pharmaceutical Product Development 7,300 (a) 213,671 Pre-Paid Legal Services 2,700 (a) 70,740 PRG-Schultz International 8,600 (a) 76,540 Regis 5,700 148,143 Sourcecorp 2,000 (a) 37,180 Spherion 7,500 (a) 50,250 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SERVICES (CONTINUED) Standard Register 3,700 66,600 StarTek 1,900 (a) 52,440 Tetra Tech 6,500 (a) 79,300 Thomas Nelson 1,400 (a) 14,028 Volt Information Sciences 2,100 (a) 35,910 Waste Connections 3,600 (a) 138,996 Watson Wyatt & Company Holdings 4,500 (a) 97,875 4,142,068 TECHNOLOGY--12.8% ANSYS 2,200 (a) 44,440 ATMI 3,600 (a) 66,672 Actel 3,500 (a) 56,770 Adaptec 11,500 (a) 64,975 Advanced Energy Industries 3,500 (a) 44,520 Aeroflex 7,500 (a) 51,750 Allen Telecom 4,300 (a) 40,721 Alliance Semiconductor 2,500 (a) 9,825 Anixter International 5,300 (a) 123,225 Artesyn Technologies 4,600 (a) 17,664 AstroPower 2,800 (a) 22,372 Audiovox, Cl. A 3,700 (a) 38,262 Avid Technology 3,600 (a) 82,620 Aware 600 (a) 1,308 Axcelis Technologies 12,500 (a) 70,112 BEI Technologies 2,100 23,499 Bel Fuse, Cl. B 1,900 38,285 Bell Microproducts 3,800 (a) 21,052 Benchmark Electronics 3,500 (a) 100,310 Black Box 2,600 116,480 C-COR.net 3,400 (a) 11,288 Captaris 1,200 (a) 2,880 Carreker 2,300 (a) 10,419 Catapult Communications 1,700 (a) 20,315 Cerner 4,800 (a) 150,048 Checkpoint Systems 5,100 (a) 52,734 Cognex 5,800 (a) 106,894 Coherent 4,100 (a) 81,795 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) Cohu 3,300 48,510 Concord Communications 2,100 (a) 18,879 Cymer 4,400 (a) 141,900 DSP Group 3,600 (a) 56,952 Dendrite International 5,100 (a) 38,097 Digi Inernational 900 (a) 2,619 Dionex 3,000 (a) 89,130 DuPont Photomasks 2,100 (a) 48,825 ESS Technology 6,700 (a) 42,143 Electro Scientific Industries 3,200 (a) 64,000 Esterline Technologies 3,200 (a) 56,544 Exar 5,100 (a) 63,240 FLIR Systems 2,100 (a) 102,480 FileNet 4,200 (a) 51,240 Gerber Scientific 2,400 (a) 9,744 Global Imaging Systems 2,800 (a) 51,464 Harmonic 4,300 (a) 9,890 Helix Technology 2,700 30,240 Hutchinson Technology 3,600 (a) 74,520 Hyperion Solutions 4,700 (a) 120,649 Imagistics International 2,500 (a) 50,000 Input/Output 6,500 (a) 27,625 Inter-Tel 3,400 71,094 Itron 3,000 (a) 57,510 JDA Software Group 4,100 (a) 39,606 Keithley Instruments 2,300 28,750 Kopin 10,000 (a) 39,200 Kronos 2,500 (a) 92,475 Kulicke & Soffa Industries 3,900 (a) 22,308 MRO Software 3,000 (a) 36,435 Manhattan Associates 3,800 (a) 89,908 Maplnfo 1,800 (a) 9,990 Meade Instruments 1,200 (a) 3,744 Mercury Computer Systems 3,100 (a) 94,612 Methode Electronics, Cl. A 5,500 60,335 Microsemi 3,700 (a) 22,533 Midway Games 4,000 (a) 16,680 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) NYFIX 2,400 (a) 10,800 Network Equipment Technologies 600 (a) 2,352 Park Electrochemical 2,600 49,920 Pericom Semiconductor 2,700 (a) 22,437 Phoenix Technologies 3,700 (a) 21,349 Photon Dynamics 2,200 (a) 50,160 Photronics 4,100 (a) 56,170 Pinnacle Systems 7,700 (a) 104,797 Pioneer-Standard Electronics 5,100 46,818 Planar Systems 2,100 (a) 43,323 Power Integrations 4,300 (a) 73,100 Progress Software 4,800 (a) 62,160 Radiant Systems 3,700 (a) 35,631 RadiSys 2,000 (a) 15,960 Rainbow Technologies 4,400 (a) 31,548 Roper Industries 4,400 161,040 Roxio 2,000 (a) 9,540 Rudolph Technologies 1,900 (a) 36,404 SBS Technologies 2,000 (a) 18,320 SCM Microsystems 1,900 (a) 8,075 SPSS 2,000 (a) 27,980 Serena Software 5,300 (a) 83,687 Skyworks Solutions 16,400 (a) 141,368 Standard Microsystems 2,800 (a) 54,516 Supertex 2,100 (a) 31,269 Symmetricom 3,100 (a) 13,082 Systems & Computer Technology 4,400 (a) 37,840 TALX 2,200 28,424 THQ 5,000 (a) 66,250 Take-Two Interactive Software 5,100 (a) 119,799 Three-Five Systems 1,700 (a) 10,965 Tollgrade Communications 1,900 (a) 22,287 Trimble Navigation 3,800 (a) 47,462 Ultratech Stepper 1,700 (a) 16,726 Varian Semiconductor Equipment Associates 4,800 (a) 114,053 Veeco Instruments 3,000 (a) 34,680 ViaSat 2,800 (a) 32,312 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) Vicor 5,300 (a) 43,730 X-Rite 3,000 20,970 Zebra Technologies, Cl. A 4,100 (a) 234,930 Zix 400 (a) 1,764 5,399,104 UTILITIES--1.2% Avista 6,100 70,516 CH Energy Group 2,200 102,586 Central Vermont Public Service 1,900 34,732 El Paso Electric 6,100 (a) 67,100 General Communication, Cl. A 7,300 (a) 48,983 Green Mountain Power 600 12,582 Metro One Telecommunications 1,800 (a) 11,610 UIL Holdings 1,900 66,253 UniSource Energy 4,600 79,534 493,896 TOTAL COMMON STOCKS (cost $40,614,733) 41,901,615 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--.1% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ U.S. TREASURY BILLS; 1.17%, 2/6/2003 (cost $59,930) 60,000 59,935 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $40,674,663) 99.7% 41,961,550 CASH AND RECEIVABLES (NET) .3% 132,246 NET ASSETS 100.0% 42,093,796 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 40,674,663 41,961,550 Receivable for investment securities sold 1,718,424 Receivable for shares of Beneficial Interest subscribed 43,279 Dividends receivable 32,381 43,755,634 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 20,590 Cash overdraft due to Custodian 1,059,905 Payable for investment securities purchased 383,418 Payable for shares of Beneficial Interest redeemed 197,925 1,661,838 - -------------------------------------------------------------------------------- NET ASSETS ($) 42,093,796 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 45,335,755 Accumulated undistributed investment income--net 954 Accumulated net realized gain (loss) on investments (4,529,800) Accumulated net unrealized appreciation (depreciation) on investments 1,286,887 - -------------------------------------------------------------------------------- NET ASSETS ($) 42,093,796 - -------------------------------------------------------------------------------- SHARES OUTSTANDING (unlimited number of $.001 par value shares of Beneficial Interest authorized) 4,392,104 NET ASSET VALUE, offering and redemption price per share ($) 9.58 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS from May 1, 2002 (commencement of operations) to December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $97 foreign taxes withheld at source) 150,720 Interest 10,827 TOTAL INCOME 161,547 EXPENSES: Investment advisory fee--Note 3(a) 56,561 Distribution fees--Note 3(b) 40,401 Interest expense--Note 2 244 TOTAL EXPENSES 97,206 INVESTMENT INCOME--NET 64,341 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (4,570,262) Net realized gain (loss) on financial futures 37,586 NET REALIZED GAIN (LOSS) (4,532,676) Net unrealized appreciation (depreciation) on investments 1,286,887 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (3,245,789) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (3,181,448) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS from May 1, 2002 (commencement of operations) to December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 64,341 Net realized gain (loss) on investments (4,532,676) Net unrealized appreciation (depreciation) on investments 1,286,887 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (3,181,448) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): INVESTMENT INCOME--NET (60,511) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold 86,649,964 Dividends reinvested 60,511 Cost of shares redeemed (41,374,720) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 45,335,755 TOTAL INCREASE (DECREASE) IN NET ASSETS 42,093,796 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period -- END OF PERIOD 42,093,796 Undistributed investment income--net 954 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): Shares sold 8,535,211 Shares issued for dividends reinvested 6,251 Shares redeemed (4,149,358) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 4,392,104 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for the period from May 1, 2002 (commencement of operations) to December 31, 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 ($): Net asset value, beginning of period 12.50 Investment Operations: Investment income--net .03(a) Net realized and unrealized gain (loss) on investments (2.94) Total from Investment Operations (2.91) Distributions: Dividends from investment income--net (.01) Net asset value, end of period 9.58 - -------------------------------------------------------------------------------- TOTAL RETURN (%) (23.25)(b) - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .40(b) Ratio of net investment income to average net assets .27(b) Portfolio Turnover Rate 117.52(b) - -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 42,094 (A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (B) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company, operating as a series company currently offering twelve series, including the 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 (the "Manager") serves as the portfolio's investment adviser. The Manager 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 the Manager, is the distributor of the portfolio's shares, which are sold without a sales charge. At December 31, 2002, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 801,174 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, 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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $954, accumulated capital losses $64,060 and unrealized depreciation $3,178,853. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, the carryover expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal period ended December 31, 2002 was as follows: ordinary income $60,511. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio decreased accumulated undistributed investment income-net by $2,876 and increased net realized gain (loss) on investments by the same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $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 at rates based on prevailing market rates in effect at the time of borrowings. The average daily amount of borrowings outstanding under the Facility during the period ended December 31, 2002 was approximately $21,200, with a related weighted average annualized interest rate of 1.71%. NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (A) Pursuant to an Investment Advisory Agreement ("Agreement") with the Manager, 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, the Manager has agreed to pay all of the expenses of the portfolio except management fees, Distribution Plan fees, taxes, interest expenses, brokerage commissions, fees and expenses of independent counsel to the portfolio and the non-interested Board members, and extraordinary expenses. In addition, the Manager 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 December 31, 2002, the portfolio was charged $40,401 pursuant to the Plan. (C) Each Board member also serves as a Board member of other funds within the Manager's 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 December 31, 2002, amounted to $73,692,143 and $28,507,148, respectively. 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 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. At December 31, 2002, there were no financial futures contracts outstanding. At December 31, 2002, the cost of investments for federal income tax purposes was $45,140,403; accordingly, accumulated net unrealized depreciation on investments was $3,178,853, consisting of $2,572,267 gross unrealized appreciation and $5,751,120 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statements of operations and changes in net assets and financial highlights for the period from May 1, 2002 (commencement of operations) to December 31, 2002. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2002 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for the period from May 1, 2002 to December 31, 2002, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (59) Chairman of the Board (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- Clifford L. Alexander (69) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- Lucy Wilson Benson (75) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980 - present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 David W. Burke (66) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- Whitney I. Gerard (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chadbourne & Parke LLP, Partner NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- Arthur A. Hartman (76) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * First NIS Regional Fund (ING/Barings Management) and New Russia Fund, Chairma * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- George L. Perry (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Brookings Institution, Economist and Senior Fellow OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. The Portfolio OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 57 years old and has been an employee of the Manager since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 49 years old and has been an employee of the Manager since January 2000. Prior to joining the Manager, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 53 years old and has been an employee of the Manager since July 1980. JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 12 investment companies (comprised of 65 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Manager since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 200 portfolios) managed by the Manager. He is 42 years old and has been an employee of the Manager since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of the Manager, and an officer of 18 investment companies (comprised of 77 portfolios) managed by the Manager. He is 34 years old and has been an employee of the Manager since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 38 years old and has been an employee of the Manager since October 1988. ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 35 years old and has been an employee of the Manager since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by the Manager. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc. The Portfolio 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. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 410AR1202 Dreyfus Investment Portfolios, Founders Discovery Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 Statement of Investments 13 Statement of Assets and Liabilities 14 Statement of Operations 15 Statement of Changes in Net Assets 16 Financial Highlights 18 Notes to Financial Statements 23 Report of Independent Auditors 24 Board Members Information 26 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Discovery Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Founders Discovery Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In 2002, investors witnessed the third consecutive year of negative returns for the broad U.S. stock markets. Virtually every industry group, investment style and capitalization range, including small-cap stocks, suffered losses in 2002, leaving investors few shelters from the storm. However, the market' s disappointing start to the 21st century may be good news for today' s growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 DISCUSSION OF PERFORMANCE Robert Ammann, CFA, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders Discovery Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2002, the portfolio produced a - -33.23% total return for both its Initial shares and Service shares.(1) In comparison, the Russell 2000 Index, the portfolio's benchmark, and the Russell 2000 Growth Index produced total returns of -20.48% and -30.26%, 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 The small-cap stock market was hurt by a number of factors, including a weak economy and negative investor sentiment related to corporate scandals and the possibility of war with Iraq. The portfolio produced lower returns than the Russell 2000 Growth Index, primarily because of disappointing performance among several technology holdings and a relative lack of exposure to the stronger-performing financials sector. What is the portfolio's investment approach? The portfolio invests primarily in equity securities of small and relatively unknown U.S.-based companies that we believe possess high-growth potential. Typically, these companies are not listed on national securities exchanges but instead trade on the over-the-counter market. The portfolio may also invest in larger companies if, in our opinion, they represent better prospects for capital appreciation. Although the portfolio will normally invest in common stocks of U.S.-based companies, it may invest up to 30% of its total assets in foreign securities. Rather than utilizing a "top-down" approach to stock selection, which relies on forecasting stock market trends, we focus on a "bottom-up" approach in which stocks are chosen according to their own individual merits. Stock selection is made on a company-by-company basis, The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) with particular emphasis on companies that we believe are well-managed and well-positioned within their industries. What other factors influenced the portfolio's performance? A weak economic environment combined with rising geopolitical risks, the ongoing threat of terrorism, corporate malfeasance and weak corporate earnings took a toll on equity returns during 2002. Small-cap growth stocks were hard-hit, particularly relative to small, value-oriented stocks. The portfolio's relative performance was undermined by poor performance among its technology holdings. During 2002, many companies "battened down the hatches" on non-critical capital spending, and information-technology expenditures declined. While the portfolio held a lower percentage of technology stocks than the Russell 2000 Growth Index, the benefits of this underweighted position were more than offset by poor performance among the portfolio's individual technology holdings, such as communications equipment makers REMEC and Stratex Networks. Financials proved to be the only industry group within the Russell 2000 Growth Index that posted a positive return during 2002. However, the portfolio held relatively few financial stocks, because they generally failed to meet our growth criteria or did not offer sufficient liquidity. In addition, we believed that interest rates were unlikely to fall much further following the Federal Reserve Board' s aggressive interest-rate reductions in 2001. However, interest rates declined more dramatically than we had expected, resulting in relatively strong performance for this sector. A variety of stock-specific disappointments also dampened the portfolio's 2002 performance. Among the most significant was Insight Enterprises, a PC direct-marketing company, where earnings were hurt by problems integrating an acquisition in Europe. Health care holding First Horizon Pharmaceuticals also proved disappointing after management released downward earnings guidance, and investors became concerned about new competition. On the other hand, some holdings contributed positively to performance. For example, education-related stocks such as Corinthian Colleges, Strayer Education and Career Education successfully translated strong student enrollment growth into higher earnings. The portfolio also received strong returns from economically sensitive holdings, such as transportation-related stocks Yellow and Werner Enterprises. Accredo Health, a provider of contract pharmacy services to biopharmaceutical manufacturers, proved to be the most positive contributor to performance during the year Finally, the portfolio maintained a cash position slightly above average during most of the year. Although we generally try to remain fully invested, the portfolio' s cash position helped dampen the effects of the market's decline on the portfolio's performance. What is the portfolio's current strategy? We were encouraged when small-cap growth stocks began to perform well relative to their value-oriented counterparts during the fourth quarter of 2002. In addition, we began to see signs of stability in corporate spending. Given many companies' aggressive cost controls in 2002, we believe that even modest sales recoveries could deliver strong earnings growth in 2003. Accordingly, we have maintained the portfolio' s focus on companies that lead their industries and that we believe have the potential to deliver strong earnings growth over time. January 15, 2003 (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, 2003, 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 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 PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Founders Discovery Portfolio Initial shares and Service shares and the Russell 2000 Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02
Inception From Date 1 Year Inception - ------------------------------------------------------------------------------------------------------------------------------------ INITIAL SHARES 12/15/99 (33.23)% (19.00)% SERVICE SHARES 12/15/99 (33.23)% (19.08)%
THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. PART OF THE PORTFOLIO'S RECENT PERFORMANCE IS ATTRIBUTABLE TO POSITIVE RETURNS FROM 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. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS DISCOVERY PORTFOLIO ON 12/15/99 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE RUSSELL 2000 INDEX (THE "INDEX") ON THAT DATE. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/99 IS USED AS THE BEGINNING VALUE ON 12/15/99. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK MARKET PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio STATEMENT OF INVESTMENTS December 31, 2002
COMMON STOCKS--88.7% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AEROSPACE & DEFENSE--.7% Alliant Techsystems 1,340 (a) 83,549 AIR FREIGHT & LOGISTICS--2.2% J.B. Hunt Transport Services 2,130 (a) 62,409 Pacer International 9,280 (a) 123,424 UTI Worldwide 2,510 65,887 251,720 AIRLINES--.7% Atlantic Coast Airlines Holdings 6,330 (a) 76,150 APPAREL, ACCESSORIES & LUXURY GOODS--.6% Columbia Sportswear 1,490 (a) 66,186 BANKS--.7% Southwest Bancorporation of Texas 2,570 (a) 74,042 BIOTECHNOLOGY--1.7% Cephalon 1,860 (a) 90,522 Myriad Genetics 1,720 (a) 25,112 Scios 870 (a) 28,345 Trimeris 1,170 (a) 50,415 194,394 BROADCASTING & CABLE TV--1.3% Radio One, Cl. D 10,460 (a) 150,938 CASINOS & GAMING--2.1% Boyd Gaming 4,120 (a) 57,886 Mandalay Resort Group 3,320 (a) 101,625 Penn National Gaming 4,520 (a) 71,687 231,198 COMMERCIAL SERVICES--6.2% Career Education 1,570 (a) 62,800 Corinthian Colleges 6,450 (a) 244,197 Education Management 1,870 (a) 70,312 FTI Consulting 3,820 (a) 153,373 Kroll 4,710 (a) 89,867 Strayer Education 1,340 77,050 697,599 CONSTRUCTION & ENGINEERING--2.1% Jacobs Engineering Group 6,730 (a) 239,588 CONSUMER ELECTRONICS--1.3% Harman International Industries 2,400 142,800 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ELECTRICAL COMPONENTS & EQUIPMENT--1.5% AMETEK 4,290 165,122 ELECTRONIC EQUIPMENT & INSTRUMENTS--4.2% Aeroflex 14,010 (a) 96,669 Coherent 2,840 (a) 56,658 FLIR Systems 1,760 (a) 85,888 Fisher Scientific International 5,020 (a) 151,002 Tech Data 2,940 (a) 79,262 469,479 ENVIRONMENTAL SERVICES--3.2% Stericycle 5,830 (a) 188,770 Waste Connections 4,580 (a) 176,834 365,604 GENERAL MERCHANDISE STORES--.4% Tuesday Morning 2,730 (a) 46,683 HEALTH CARE--15.5% AMN Healthcare Services 9,950 (a) 168,254 Accredo Health 8,355 (a) 294,514 Charles River Laboratories International 3,670 (a) 141,222 Community Health Systems 11,920 (a) 245,433 Cooper Cos. 2,420 60,548 DIANON Systems 2,030 (a) 96,851 Integra LifeSciences Holdings 6,700 (a) 118,255 LifePoint Hospitals 3,730 (a) 111,643 Odyssey Healthcare 1,700 (a) 58,990 Omnicare 7,770 185,159 Patterson Dental 1,202 (a) 52,575 Select Medical 5,940 (a) 80,131 United Surgical Partners International 2,310 (a) 36,085 WellChoice 3,870 92,687 1,742,347 HOME FURNISHINGS--1.5% Furniture Brands International 6,930 (a) 165,280 HOTELS, RESORTS & CRUISE LINES--1.3% Fairmont Hotels & Resorts 3,880 91,374 Hotels.com, Cl. A 1,080 (a) 59,000 150,374 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INFORMATION TECHNOLOGY CONSULTING & SERVICES--.7% Management Network Group 2,459 (a) 3,688 ManTech International, Cl. A 3,730 71,131 74,819 INSURANCE BROKERS--1.4% Arthur J. Gallagher & Co. 2,500 73,450 Platinum Underwriters Holdings 3,430 90,380 163,830 LEISURE PRODUCTS--1.1% Polaris Industries 1,400 82,040 SCP Pool 1,420 (a) 41,464 123,504 MOVIES & ENTERTAINMENT--1.1% Macrovision 7,506 (a) 120,396 NETWORKING EQUIPMENT--.8% NetScreen Technologies 5,410 (a) 91,104 OIL & GAS--2.1% National-Oilwell 7,914 (a) 172,842 Pioneer Natural Resources 2,660 (a) 67,165 240,007 PHARMACEUTICALS--2.5% Medicis Pharmaceutical, Cl. A 3,160 (a) 156,957 SICOR 2,476 (a) 39,245 Taro Pharmaceutical Industries 2,200 (a) 82,720 278,922 PUBLISHING--.8% Scholastic 2,390 (a) 85,921 REAL ESTATE INVESTMENT TRUSTS--.5% La Quinta 12,080 (a) 53,152 RESTAURANTS--3.1% Krispy Kreme Doughnuts 2,360 (a) 79,697 Panera Bread, Cl. A 1,250 (a) 43,512 Ruby Tuesday 13,240 228,920 352,129 RETAIL--5.4% Alloy 15,350 (a) 168,082 Duane Reade 4,570 (a) 77,690 Electronics Boutique Holdings 4,320 (a) 68,299 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ RETAIL (CONTINUED) GameStop 5,870 57,526 Genesco 3,600 (a) 67,068 Insight Enterprises 9,138 (a) 75,937 Ultimate Electronics 2,118 (a) 21,498 Whole Foods Market 1,380 (a) 72,767 608,867 SEMICONDUCTORS & EQUIPMENT--2.6% Brooks-PRI Automation 4,209 (a) 48,235 Entegris 6,770 (a) 69,731 FEI 5,730 (a) 87,612 Semtech 7,580 (a) 82,774 288,352 SOFTWARE--5.6% Activision 4,690 (a) 68,427 Documentum 8,130 (a) 127,316 J.D. Edwards & Co. 12,740 (a) 143,707 Mercury Interactive 4,610 (a) 136,686 NetIQ 7,770 (a) 95,960 Secure Computing 8,671 (a) 55,581 627,677 SPECIALTY CHEMICALS--2.4% RPM International 8,470 129,422 Valspar 3,170 140,051 269,473 SPECIALTY STORES--4.0% Advance Auto Parts 2,970 (a) 145,233 Cost Plus 2,040 (a) 58,487 Hollywood Entertainment 3,470 (a) 52,397 Movie Gallery 7,990 (a) 103,870 Rent-A-Center 1,750 (a) 87,413 447,400 TELECOMMUNICATIONS EQUIPMENT--3.3% Harris 5,436 142,967 Polycom 8,330 (a) 79,302 Powerwave Technologies 13,810 (a) 74,574 Stratex Networks 33,082 (a) 73,111 369,954 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TRADING COMPANIES & DISTRIBUTORS--1.5% Fastenal 4,460 166,759 TRUCKING--2.6% SCS Transportation 2,445 24,230 Werner Enterprises 7,300 157,169 Yellow 4,550 (a) 114,619 296,018 TOTAL COMMON STOCKS (cost $10,985,999) 9,971,337 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--13.8% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTES; Federal Farm Credit Bank, .85%, 1/2/2003 (cost $1,554,963) 1,555,000 1,554,963 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $12,540,962) 102.5% 11,526,300 LIABILITIES, LESS CASH AND RECEIVABLES (2.5%) (276,225) NET ASSETS 100.0% 11,250,075 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 12,540,962 11,526,300 Cash 99,850 Receivable for investment securities sold 76,300 Receivable for shares of Beneficial Interest subscribed 1,241 Dividends receivable 1,131 Prepaid expenses 1,374 11,706,196 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 9,734 Payable for investment securities purchased 412,721 Payable for shares of Beneficial Interest redeemed 90 Accrued expenses 33,576 456,121 - -------------------------------------------------------------------------------- NET ASSETS ($) 11,250,075 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 22,676,742 Accumulated net realized gain (loss) on investments (10,412,005) Accumulated net unrealized appreciation (depreciation) on investments (1,014,662) - -------------------------------------------------------------------------------- NET ASSETS ($) 11,250,075 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 8,880,923 2,369,152 Shares Outstanding 1,355,243 362,717 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 6.55 6.53 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 26,598 Cash dividends (net of $18 foreign taxes withheld at source) 12,709 TOTAL INCOME 39,307 EXPENSES: Investment advisory fee--Note 3(a) 123,322 Auditing fees 22,650 Prospectus and shareholders' reports 22,611 Custodian fees--Note 3(b) 18,437 Distribution fees--Note 3(b) 6,812 Shareholder servicing costs--Note 3(b) 1,818 Legal fees 1,511 Trustees' fees and expenses--Note 3(c) 355 Loan commitment fees--Note 2 191 TOTAL EXPENSES 197,707 Less--waiver of fees due to undertaking--Note 3(a) (10,143) NET EXPENSES 187,564 INVESTMENT (LOSS)--NET (148,257) - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (3,820,832) Net unrealized appreciation (depreciation) on investments (1,623,887) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (5,444,719) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,592,976) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss)--net (148,257) (119,640) Net realized gain (loss) on investments (3,820,832) (4,535,106) Net unrealized appreciation (depreciation) on investments (1,623,887) 1,679,769 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,592,976) (2,974,977) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 2,309,288 6,101,009 Service shares 1,553,261 2,745,217 Cost of shares redeemed: Initial shares (3,717,669) (2,337,131) Service shares (655,833) (140,798) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (510,953) 6,368,297 TOTAL INCREASE (DECREASE) IN NET ASSETS (6,103,929) 3,393,320 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 17,354,004 13,960,684 END OF PERIOD 11,250,075 17,354,004 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 295,747 592,255 Shares redeemed (445,294) (247,406) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (149,547) 344,849 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 182,820 279,296 Shares redeemed (85,758) (13,683) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 97,062 265,613 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Year Ended December 31, --------------------------------------------------------------- INITIAL SHARES 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.81 12.04 13.89 12.50 Investment Operations: Investment income (loss)--net (.08)(b) (.08)(b) (.08)(b) .01 Net realized and unrealized gain (loss) on investments (3.18) (2.15) (1.71) 1.38 Total from Investment Operations (3.26) (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 6.55 9.81 12.04 13.89 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (33.23) (18.52) (13.02) 11.12(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.34 1.39 1.41 .07(c) Ratio of net investment income (loss) to average net assets (1.06) (.77) (.60) .06(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .05 .11 .52 1.45(c) Portfolio Turnover Rate 132.08 106.00 123.96 7.49(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 8,881 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.
Year Ended December 31, --------------------------------------------- SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.78 12.04 12.04 Investment Operations: Investment (loss)--net (.09)(b) (.09)(b) -- Net realized and unrealized gain (loss) on investments (3.16) (2.17) -- Total from Investment Operations (3.25) (2.26) -- Net asset value, end of period 6.53 9.78 12.04 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (33.23) (18.77) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.46 1.49 -- Ratio of net investment (loss) to average net assets (1.17) (1.02) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .18 .28 -- Portfolio Turnover Rate 132.08 106.00 123.96 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 2,369 2,599 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the Founders 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 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 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 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 $491 during the period ended December 31, 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 (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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $9,743,310 and unrealized depreciation $1,394,505. In addition, the portfolio had $288,852 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, $1,024,575 of the carryover expires in fiscal 2008, $4,917,933 expires in fiscal 2009 and $3,800,802 expires in fiscal 2010. During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $148,257 and decreased paid-in capital by the same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 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. Dreyfus has agreed, from January 1, 2002 to December 31, 2003, 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 December 31, 2002, Dreyfus waived receipt of fees of $10,143 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended December 31, 2002, Service shares were charged $6,812 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 December 31, 2002, the portfolio was charged $177 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $18,437 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 December 31, 2002, amounted to $16,332,517 and $16,258,782, respectively. At December 31, 2002, the cost of investments for federal income tax purposes was $12,920,805; accordingly, accumulated net unrealized depreciation on investments was $1,394,505, consisting of $929,794 gross unrealized appreciation and $2,324,299 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Founders Discovery Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders Discovery Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2002 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders Discovery Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) JOSEPH S. DIMARTINO (59) CHAIRMAN OF THE BOARD (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- CLIFFORD L. ALEXANDER (69) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- LUCY WILSON BENSON (75) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980 - present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 DAVID W. BURKE (66) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- WHITNEY I. GERARD (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ARTHUR A. HARTMAN (76) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- GEORGE L. PERRY (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. The Portfolio OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 57 years old and has been an employee of Dreyfus since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 49 years old and has been an employee of Dreyfus since January 2000. Prior to joining Dreyfus, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 56 years old and has been an employee of Dreyfus since June 1977 STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 53 years old and has been an employee of Dreyfus since July 1980 JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 12 investment companies (comprised of 65 portfolios) managed by Dreyfus. He is 37 years old and has been an employee of Dreyfus since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 93 investment companies (comprised of 200 portfolios) managed by Dreyfus. He is 42 years old and has been an employee of Dreyfus since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 44 years old and has been an employee of Dreyfus since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of Dreyfus, and an officer of 18 investment companies (comprised of 77 portfolios) managed by Dreyfus. He is 34 years old and has been an employee of Dreyfus since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 38 years old and has been an employee of Dreyfus since October 1988. ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 35 years old and has been an employee of Dreyfus since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 48 years old and has been an employee of Dreyfus since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by Dreyfus. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc. The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Founders Discovery Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 193AR1202 Dreyfus Investment Portfolios, Core Value Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 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 23 Report of Independent Auditors 24 Important Tax Information 25 Board Members Information 27 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Value Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Core Value Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In 2002, investors witnessed the third consecutive year of negative returns for the U.S. stock market. Moreover, with the S&P 500 Index down dramatically since its peak in mid-2000, this bear market ranks as the worst since the 1970s. Virtually every industry group, capitalization range and investment style suffered losses in 2002, leaving investors few shelters from the storm. However, the market's disappointing start to the 21st century may be good news for today's growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 DISCUSSION OF PERFORMANCE Valerie J. Sill, Portfolio Manager How did Dreyfus Investment Portfolios, Core Value Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2002, the portfolio produced total returns of -23.29% for its Initial shares and -23.31% for its Service shares.(1) In comparison, the portfolio' s benchmark, the S& P 500/BARRA Value Index, produced a total return of -20.85% for the same period.(2) The portfolio' s performance was due in part to a weaker than expected economic recovery, a number of corporate scandals and concerns about a possible war with Iraq. The portfolio's returns lagged its benchmark, primarily because the portfolio did not hold as many bank stocks, which performed relatively well in a declining 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. When 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? The economy grew modestly in 2002, but mixed economic data generally confused and disappointed equity investors. On one hand, the rate of economic growth was positive throughout the year. On the other hand, unemployment rose, and the federal budget deficit swelled. In addition, the year was characterized by fears of war and allegations of corporate malfeasance. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) The portfolio was challenged by a number of corporate accounting irregularities. Software maker Computer Associates came under scrutiny and as a result, we eliminated it from the portfolio soon after the allegations surfaced. Tyco International and Tenet Healthcare were removed earlier in the year, before they were in the headlines for aggressive accounting and for controversial Medicare billing, respectively. Another factor adversely influencing the portfolio was the decision to minimize the portfolio's exposure to bank stocks and emphasize brokerage firms. When the reporting period began, we believed that bank stocks were generally expensive relative to their earnings. However, they performed well during 2002 as interest rates and their deposit costs continued to decline. In contrast, brokerage stocks performed poorly when the economic recovery stumbled. In an attempt to counteract this weakness, we focused on companies we considered likely to resist market declines. Although this is a value-oriented portfolio, we purchased traditional growth stocks, such as Microsoft and Intel, that had come down significantly in price. These companies have leading market shares, very little debt and the potential for strong earnings once the economy turns around. However, because the economy has not yet gained momentum, neither stock performed particularly well during 2002. On the other hand, stocks that contributed positively to performance included telecommunications giant AT&T, natural gas producer Encana, banking concern Bank of America, health management provider WellPoint Health Networks and food retailer Winn-Dixie Stores. AT& T completed the sale of its cable business, returning it to its roots as a long-distance carrier. Encana benefited from rising energy prices, while Bank of America saw profits increase when interest rates sank to new lows. WellPoint Health Networks is in one of the few industries with the ability to raise prices, while Winn-Dixie Stores is a profitable grocer that, unlike many other chains, did not face competition from Wal-Mart. In addition, the portfolio invested in pharmaceutical companies, such as Merck & Co. and Pharmacia, that were out of favor early in 2002. The stocks had become inexpensive, and the earnings power of these companies led to a rebound in the second half of the year. What is the portfolio's current strategy? Although both growth and value stocks performed poorly in 2002, value stocks generally did not decline as much as their growth counterparts. We have continued to look for large-cap value stocks that are selling at what we believe to be low prices with the potential for appreciation. The companies we seek enjoy strong business fundamentals and have a catalyst in place to generate capital appreciation. Catalysts may include accelerating sales and earnings growth, improving balance sheet trends, new management, corporate restructuring or pending legislation. January 15, 2003 (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, 2003, 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 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 STOCK PRICE INDEX ("S&P 500 INDEX") THAT HAVE LOW PRICE-TO-BOOK RATIOS. THE S&P 500 INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. The Portfolio PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Core Value Portfolio Initial shares and Service shares and the Standard & Poor's 500/BARRA Value Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02
Inception From Date 1 Year Inception - ------------------------------------------------------------------------------------------------------------------------------------ INITIAL SHARES 5/1/98 (23.29)% (1.06)% SERVICE SHARES 5/1/98 (23.31)% (1.06)%
THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO ON 5/1/98 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE STANDARD & POOR'S 500/BARRA VALUE INDEX (THE "INDEX") ON THAT DATE. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE STOCKS IN THE S&P 500 THAT HAVE LOW PRICE-TO-BOOK RATIOS. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio STATEMENT OF INVESTMENTS December 31, 2002
COMMON STOCKS--95.6% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AUTOMOBILES--1.2% Nissan Motor, ADR 48,300 742,854 BANKING--13.2% American Express 28,500 1,007,475 Bank of America 9,400 653,958 Citigroup 75,900 2,670,921 Fannie Mae 15,900 1,022,847 FleetBoston Financial 49,906 1,212,716 U.S. Bancorp 38,700 821,214 Wachovia 17,500 637,700 8,026,831 BASIC INDUSTRIES--5.0% Air Products & Chemicals 9,600 410,400 Alcoa 26,000 592,280 International Paper 23,700 828,789 Praxair 20,900 1,207,393 3,038,862 BEVERAGES & TOBACCO--1.0% Philip Morris Cos 14,400 583,632 BROADCASTING & PUBLISHING--1.3% McGraw-Hill Cos 12,700 767,588 BROKERAGE--5.2% Bear Stearns Cos 9,800 582,120 Goldman Sachs 6,400 435,840 JPMorgan Chase Bank 20,200 484,800 Lehman Brothers Holdings 15,500 825,995 Morgan Stanley 21,600 862,272 3,191,027 CAPITAL GOODS--7.3% Boeing 17,000 560,830 Emerson Electric 13,500 686,475 General Electric 12,000 292,200 Nokia, ADR 40,600 629,300 Pitney Bowes 19,700 643,402 Rockwell Collins 15,500 360,530 United Technologies 20,800 1,288,352 4,461,089 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER DURABLES--3.5% Black & Decker 7,700 330,253 Genuine Parts 10,300 317,240 Johnson Controls 8,000 641,360 Koninklijke (Royal) Philips Electronics (New York Shares) 46,100 815,048 2,103,901 CONSUMER NON-DURABLES--5.2% Clorox 8,100 334,125 ConAgra Foods 12,200 305,122 Del Monte Foods 8,307 (a) 63,962 H.J. Heinz 18,600 611,382 Kimberly-Clark 6,200 294,314 Loews 13,700 609,102 Nestle, ADR 11,800 627,613 Procter & Gamble 3,600 309,384 3,155,004 CONSUMER SERVICES--10.8% Comcast, Cl. A 13,297 (a) 313,410 Federated Department Stores 32,400 (a) 931,824 Gannett 13,700 983,660 Knight-Ridder 11,100 702,075 Kroger 35,000 (a) 540,750 Liberty Media, Cl. A 101,164 (a) 904,406 McDonald's 38,800 623,904 Office Depot 50,800 (a) 749,808 RadioShack 30,400 569,696 Walt Disney 15,100 246,281 6,565,814 ENERGY--9.0% BP, ADR 20,400 829,260 ConocoPhillips 13,867 671,024 Encana 27,094 842,623 Exxon Mobil 61,404 2,145,456 Royal Dutch Petroleum (New York Shares) 23,000 1,012,460 5,500,823 FINANCIAL SERVICES--.8% CIT Group 23,800 466,480 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE--10.1% Aetna 15,700 645,584 Becton, Dickinson & Co 10,300 316,107 Bristol-Myers Squibb 37,100 858,865 C.R. Bard 20,800 1,206,400 Guidant 12,300 (a) 379,455 Merck & Co 11,000 622,710 Mylan Laboratories 9,500 331,550 Pharmacia 17,800 744,040 Schering-Plough 46,300 1,027,860 6,132,571 HOUSEHOLD APPLIANCES--1.1% Sony, ADR 16,000 660,960 INSURANCE--7.9% Allstate 31,800 1,176,282 American International Group 33,296 1,926,174 Chubb 5,700 297,540 John Hancock Financial Services 10,500 292,950 Lincoln National 18,100 571,598 Principal Financial Group 18,300 551,379 4,815,923 TECHNOLOGY--6.0% Intel 53,000 825,210 International Business Machines 8,500 658,750 Microsoft 29,900 (a) 1,545,830 Motorola 73,000 631,450 3,661,240 TRANSPORTATION--2.6% FedEx 14,900 807,878 Union Pacific 12,700 760,349 1,568,227 UTILITIES--4.4% AT&T 30,440 794,788 BellSouth 24,000 620,880 Verizon Communications 31,850 1,234,188 2,649,856 TOTAL COMMON STOCKS (cost $61,787,094) 58,092,682 PREFERRED STOCKS--2.6% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER SERVICES; News Corp, ADR (cost $1,658,153) 68,450 1,550,392 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--1.9% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTE; Federal Farm Credit Bank, .75%, 1/2/2003 (cost $1,167,976) 1,168,000 1,167,976 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $64,613,223) 100.1% 60,811,050 LIABILITIES, LESS CASH AND RECEIVABLES (.1%) (30,464) NET ASSETS 100.0% 60,780,586 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 64,613,223 60,811,050 Dividends and interest receivable 99,309 Prepaid expenses 1,784 60,912,143 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 43,865 Cash overdraft due to Custodian 254 Payable for shares of Beneficial Interest redeemed 42,721 Accrued expenses and other liabilities 44,717 131,557 - -------------------------------------------------------------------------------- NET ASSETS ($) 60,780,586 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 76,636,377 Accumulated undistributed investment income--net 228,180 Accumulated net realized gain (loss) on investments (12,281,798) Accumulated net unrealized appreciation (depreciation) on investments (3,802,173) - -------------------------------------------------------------------------------- NET ASSETS ($) 60,780,586 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 27,354,457 33,426,129 Shares Outstanding 2,472,948 3,020,876 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 11.06 11.07 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $12,272 foreign taxes witheld at source) 948,920 Interest 69,171 TOTAL INCOME 1,018,091 EXPENSES: Investment advisory fee--Note 3(a) 480,210 Distribution fees--Note 3(b) 77,993 Professional fees 35,678 Prospectus and shareholders' reports 22,385 Custodian fees--Note 3(b) 15,566 Shareholder servicing costs--Note 3(b) 5,562 Trustees' fees and expenses--Note 3(c) 297 Miscellaneous 4,471 TOTAL EXPENSES 642,162 Less--waiver of fees due to undertaking--Note 3(a) (40,885) NET EXPENSES 601,277 INVESTMENT INCOME--NET 416,814 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (11,139,001) Net unrealized appreciation (depreciation) on investments (6,808,564) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (17,947,565) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (17,530,751) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 416,814 308,514 Net realized gain (loss) on investments (11,139,001) (946,878) Net unrealized appreciation (depreciation) on investments (6,808,564) 513,040 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (17,530,751) (125,324) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (281,596) (11,915) Service shares (230,189) (873) Net realized gain on investments: Initial shares -- (432,914) Service shares -- (31,706) TOTAL DIVIDENDS (511,785) (477,408) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 6,631,731 18,191,167 Service shares 22,995,663 21,350,074 Dividends reinvested: Initial shares 281,596 444,829 Service shares 230,189 32,579 Cost of shares redeemed: Initial shares (7,854,362) (3,875,822) Service shares (2,525,634) (373,262) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 19,759,183 35,769,565 TOTAL INCREASE (DECREASE) IN NET ASSETS 1,716,647 35,166,833 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 59,063,939 23,897,106 END OF PERIOD 60,780,586 59,063,939 Undistributed investment income--net 228,180 311,870 Year Ended December 31, --------------------------------- 2002 2001 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 507,506 1,248,972 Shares issued for dividends reinvested 21,783 32,257 Shares redeemed (642,363) (278,274) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (113,074) 1,002,955 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 1,741,452 1,499,786 Shares issued for dividends reinvested 17,931 2,363 Shares redeemed (214,858) (25,831) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,544,525 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.
Year Ended December 31, ---------------------------------------------------------------------- INITIAL SHARES 2002 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.54 15.10 13.97 11.72 12.50 Investment Operations: Investment income--net .09(b) .12(b) .17(b) .07(b) .07 Net realized and unrealized gain (loss) on investments (3.46) (.45) 1.50 2.24 (.77) Total from Investment Operations (3.37) (.33) 1.67 2.31 (.70) Distributions: Dividends from investment income--net (.11) (.01) (.16) (.06) (.08) Dividends from net realized gain on investments -- (.22) (.38) -- -- Total Distributions (.11) (.23) (.54) (.06) (.08) Net asset value, end of period 11.06 14.54 15.10 13.97 11.72 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (23.29) (2.08) 12.06 19.73 (5.59)(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .88 .96 .97 1.00 .67(c) Ratio of net investment income to average net assets .69 .83 1.19 .56 .62(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- .02 .07 .50 .74(c) Portfolio Turnover Rate 65.72 65.13 110.74 97.14 47.37(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 27,354 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.
Year Ended December 31, ------------------------------------------------- SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.54 15.09 15.09 Investment Operations: Investment income--net .08(b) .08(b) -- Net realized and unrealized gain (loss) on investments (3.45) (.40) -- Total from Investment Operations (3.37) (.32) -- Distributions: Dividends from investment income--net (.10) (.01) -- Dividends from net realized gain on investments -- (.22) -- Total Distributions (.10) (.23) -- Net asset value, end of period 11.07 14.54 15.09 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (23.31) (2.08) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.00 1.00 -- Ratio of net investment income to average net assets .62 .61 -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .13 .27 -- Portfolio Turnover Rate 65.72 65.13 110.74 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 33,426 21,469 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering twelve series, including the 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 (the "Manager") serves as the portfolio' s investment adviser. The Manager 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 the Manager, 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 $387 during the period ended December 31, 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 (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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $228,180, accumulated capital losses $10,613,425 and unrealized depreciation $4,058,995. In addition, the portfolio had $1,411,551 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, $512,304 of the carryover expires in fiscal 2009 and $10,101,121 of the carryover expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal years ended December 31, 2002 and December 31, 2001, respectively, were as follows: ordinary income $511,785 and $387,894 and long-term capital gains $0 and $89,514. During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $11,281 and decreased paid-in capital by the same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 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 the Manager, 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. The Manager has agreed, from January 1, 2002 to December 31, 2003, 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 December 31, 2002, the Manager waived receipt of fees of $40,885, 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 December 31, 2002, Service shares were charged $77,993 pursuant to the Plan. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $145 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $15,566 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 December 31, 2002, amounted to $60,645,124 and $39,853,314, respectively. At December 31, 2002, the cost of investments for federal income tax purposes was $64,870,045; accordingly, accumulated net unrealized depreciation on investments was $4,058,995, consisting of $1,462,106 gross unrealized appreciation and $5,521,101 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Core Value Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Core Value Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2002 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Core Value Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio IMPORTANT TAX INFORMATION (Unaudited) For federal tax purposes, the portfolio hereby designates 100% of the ordinary dividends paid during the fiscal year ended December 31, 2002 as qualifying for the corporate dividends received deduction. BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (59) Chairman of the Board (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- Clifford L. Alexander (69) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- Lucy Wilson Benson (75) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980 - present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED) David W. Burke (66) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- Whitney I. Gerard (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- Arthur A. Hartman (76) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- George L. Perry (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 57 years old and has been an employee of the Manager since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 49 years old and has been an employee of the Manager since January 2000. Prior to joining the Manager, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 53 years old and has been an employee of the Manager since July 1980. JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 12 investment companies (comprised of 65 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Manager since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 200 portfolios) managed by the Manager. He is 42 years old and has been an employee of the Manager since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of the Manager, and an officer of 18 investment companies (comprised of 77 portfolios) managed by the Manager. He is 34 years old and has been an employee of the Manager since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 38 years old and has been an employee of the Manager since October 1988. The Portfolio OFFICERS OF THE FUND (Unaudited) (CONTINUED) ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 35 years old and has been an employee of the Manager since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by the Manager. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc. The Portfolio For More Information Dreyfus Investment Portfolios, Core Value Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 172AR1202 Dreyfus Investment Portfolios, Founders Growth Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 Statement of Investments 13 Statement of Assets and Liabilities 14 Statement of Operations 15 Statement of Changes in Net Assets 17 Financial Highlights 19 Notes to Financial Statements 25 Report of Independent Auditors 26 Important Tax Information 27 Board Members Information 29 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Growth Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Founders Growth Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In 2002, investors witnessed the third consecutive year of negative returns for the U.S. stock market. Moreover, with the S&P 500 Index down dramatically since its peak in mid-2000, this bear market ranks as the worst since the 1970s. Virtually every industry group, capitalization range and investment style suffered losses in 2002, leaving investors few shelters from the storm. However, the market's disappointing start to the 21st century may be good news for today's growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 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 12-month period ended December 31, 2002, the portfolio's Initial shares produced a total return of -28.25% and its Service shares produced a total return of -28.21%.(1) In contrast, the Standard & Poor's 500 BARRA Growth Index (the "Index"), the portfolio's benchmark, produced a total return of -23.59% for the same period.(2) Unfortunately, 2002 was disappointing for equity investors, producing the third year of negative returns in a row. Persistent economic weakness, corporate accounting scandals and concerns about war with Iraq drove stock prices downward. Particularly hard-hit were growth stocks that thrive on an optimistic outlook. 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. What other factors influenced the portfolio's performance? 2002 started on a positive note, as corporations reported reasonably good results while the economy rebounded from the terrorist attacks on September 11, 2001. However, the market environment began to The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) deteriorate in the summer, as a number of companies were forced to restate profits due to errors, misjudgments or fraud. At the same time, the spring's promising economic data began to turn gloomy, causing corporations to cut back on spending. Corporate travel was reduced sharply, and airlines and hotels which benefit from a buoyant economic climate saw a downturn in their businesses. In addition, heightened fear of war with Iraq injected additional uncertainty into the stock market. Fortunately, consumers were fairly resilient during 2002, as spending on housing, automobiles, electronics and other big ticket items remained brisk. Interest rates stayed at very low levels during the year, and the Federal Reserve Board' s (the "Fed" ) decision in November to reduce interest rates another 0.5 percentage points, as well as a significant drop in mortgage rates, pumped more money into consumers' pockets. The stock market rallied after the Fed's announcement, posting significant gains. However, the rally was not enough to make up for the damage done during the rest of the year. The portfolio performed in line with its benchmark, which saw areas sensitive to economic growth, such as technology and most telecommunications stocks, continue to perform poorly. The portfolio's investment in Brocade Communications Systems, which makes storage area networking equipment, saw its market share diminish as new competitors came into the market to meet demand for data storage generated by the terrorist attacks. Meanwhile, basic materials companies, such as steel producer Nucor and forest products company Weyerhaeuser, performed poorly, primarily because these companies depend on economic growth to do well One of the year's best performing sectors was health care, partly because demand for goods and services is generally unrelated to economic growth. Generic drug company stocks posted relatively good returns, while large pharmaceutical companies depending on brand name products lagged. The fund benefited from its position in Forest Laboratories, a generic drug company that has taken advantage of expiring patents by entering the market with cheaper products. I addition, the fund benefited from investments in companies dependent on consumer spending, such as Royal Carribean Cruises, one of the world's largest cruise companies, which has recently cut costs and reduced prices to entice a broader clientele. What is the portfolio's current strategy? Our strategy is to reduce risk by keeping our sector allocation strategy closely in line with our benchmark. We try to add value through good stock selection within those industries. Accordingly, we have continued to search for companies selling at attractive prices that can grow faster than the investment community expects. While we do not expect the consumer to continue to prop up the economy, we are hopeful that the business environment will improve in the industrial sector. Fear of war caused anxiety among investors during 2002, and we believe that an actual war with Iraq may also have a negative impact on stocks in 2003. January 15, 2003 (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, 2003, 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 PORTFOLIO PERFORMANCE Comparison of change in value of a $10,000 investment in Dreyfus Investment Portfolios, Founders Growth Portfolio Initial shares and Service shares and the Standard & Poor's 500/BARRA Growth Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02 Inception From Date 1 Year Inception - -------------------------------------------------------------------------------- INITIAL SHARES 9/30/98 (28.25)% (6.34)% SERVICE SHARES 9/30/98 (28.21)% (6.37)% THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO ON 9/30/98 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE STANDARD AND POOR'S 500/BARRA GROWTH INDEX (THE "INDEX") ON THAT DATE. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE STOCKS IN THE STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX THAT HAVE HIGH PRICE-TO-BOOK RATIOS. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio
STATEMENT OF INVESTMENTS December 31, 2002 STATEMENT OF INVESTMENTS COMMON STOCKS--89.4% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AIRLINES--.8% Delta Air Lines 12,581 152,230 ALUMINUM--.4% Alcoa 3,578 81,507 APPLICATION SOFTWARE--1.5% PeopleSoft 11,751 (a) 215,043 Siebel Systems 9,925 (a) 74,239 289,282 BANKS--3.0% Bank of America 4,498 312,926 Wells Fargo & Co. 5,189 243,208 556,134 BIOTECHNOLOGY--1.8% Amgen 2,787 (a) 134,723 Genentech 6,098 (a) 202,210 336,933 BROADCASTING & CABLE TV--4.4% Clear Channel Communications 11,647 (a) 434,317 Comcast, Cl. A 14,811 (a) 334,581 Cox Communications, Cl. A 2,351 (a) 66,768 835,666 CASINOS & GAMING--1.5% Mandalay Resort 8,989 (a) 275,153 COMPUTER & ELECTRONICS RETAIL--1.1% Best Buy Co. 8,478 (a) 204,744 COMPUTER HARDWARE--1.6% Dell Computer 2,997 (a) 80,140 Hewlett-Packard 3,514 61,003 International Business Machines 2,057 159,417 300,560 CONSUMER FINANCE--1.9% MBNA 18,342 348,865 DATA PROCESSING SERVICES--1.0% First Data 5,197 184,026 DIVERSIFIED COMMERCIAL SERVICES--.7% Cendant 13,286 (a) 139,237 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES--6.4% Citigroup 14,494 510,044 Freddie Mac 1,637 96,665 Goldman Sachs Group 2,803 190,884 Morgan Stanley 6,402 255,568 Stilwell Financial 11,145 145,665 1,198,826 DRUG RETAIL--.2% Walgreen 1,244 36,312 EXCHANGE TRADED FUNDS--4.0% SPDRs 8,518 751,628 GAS UTILITIES--1.5% Kinder Morgan 6,452 272,726 GENERAL MERCHANDISE STORES--1.3% Wal-Mart Stores 4,847 244,822 HEALTHCARE DISTRIBUTORS & SERVICES--1.0% Express Scripts, Cl. A 3,955 (a) 189,998 HEALTHCARE EQUIPMENT--1.6% Boston Scientific 7,018 (a) 298,405 HEALTHCARE FACILITIES--.8% HCA 3,420 141,930 HOME IMPROVEMENT RETAIL--.5% Lowe's Cos. 2,752 103,200 HOUSEHOLD PRODUCTS--2.1% Colgate-Palmolive 3,798 199,129 Procter & Gamble 2,291 196,889 396,018 IT CONSULTING & SERVICES--1.3% Accenture, Cl. A 13,958 (a) 251,104 INDUSTRIAL CONGLOMERATES--5.2% General Electric 23,617 575,074 3M 3,238 399,245 974,319 INDUSTRIAL GASES--.7% Praxair 2,367 136,742 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIAL MACHINERY--1.1% Illinois Tool Works 3,271 212,157 INTEGRATED OIL & GAS--1.2% Exxon Mobil 6,562 229,276 LEISURE FACILITIES--1.2% Royal Caribbean Cruises 13,725 229,208 LEISURE PRODUCTS--.3% Mattel 2,575 49,311 MANAGED HEALTHCARE--.5% Caremark Rx 5,754 (a) 93,503 MOTORCYCLE MANUFACTURERS--1.1% Harley-Davidson 4,472 206,606 MOVIES & ENTERTAINMENT--4.2% AOL Time Warner 6,844 (a) 89,657 Viacom, Cl. B 10,328 (a) 420,969 Walt Disney 16,535 269,686 780,312 MULTI-LINE INSURANCE--.6% American International Group 1,974 114,196 NETWORKING EQUIPMENT--.7% Cisco Systems 10,319 (a) 135,179 OIL & GAS DRILLING--.4% Nabors Industries 2,091 (a) 73,750 OIL & GAS EQUIPMENT & SERVICES--1.4% BJ Services 1,947 (a) 62,908 Smith International 6,397 (a) 208,670 271,578 OIL & GAS EXPLORATION & PRODUCTION--.4% Anadarko Petroleum 1,638 78,460 PERSONAL PRODUCTS--1.1% Estee Lauder Cos., Cl. A 7,622 201,221 PHARMACEUTICALS--11.2% Abbott Laboratories 7,590 303,600 Barr Laboratories 845 (a) 55,001 Forest Laboratories 4,906 (a) 481,867 Johnson & Johnson 6,423 344,979 Merck & Co. 5,872 332,414 Pfizer 14,512 443,632 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICALS (CONTINUED) Teva Pharmaceutical Industries, ADR 3,800 146,718 2,108,211 PUBLISHING--1.7% Tribune 6,938 315,401 RAILROADS--1.2% Union Pacific 3,631 217,388 SEMICONDUCTOR EQUIPMENT--.9% KLA-Tencor 2,821 (a) 99,779 Novellus Systems 2,252 (a) 63,236 163,015 SEMICONDUCTORS--2.2% Broadcom, Cl. A 12,339 (a) 185,825 Intel 5,626 87,597 Linear Technology 5,122 131,738 405,160 SOFT DRINKS--1.1% Coca-Cola 4,938 216,383 SPECIALTY STORES--1.7% AutoZone 1,871 (a) 132,186 Office Depot 6,843 (a) 101,003 Tiffany & Co. 3,768 90,093 323,282 STEEL--.7% Nucor 3,236 133,647 SYSTEMS SOFTWARE--7.0% Adobe Systems 4,314 107,462 Microsoft 15,313 (a) 791,682 Oracle 26,602 (a) 287,302 VERITAS Software 8,224 (a) 128,459 1,314,905 TELECOMMUNICATIONS EQUIPMENT--1.2% Nokia, ADR 8,700 134,850 QUALCOMM 2,498 (a) 90,902 225,752 TOTAL COMMON STOCKS (cost $17,823,013) 16,798,268 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal SHORT-TERM INVESTMENTS--11.0% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTE; Federal Farm Credit Bank, .85%, 1/2/2003 (cost $2,059,951) 2,060,000 2,059,951 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $19,882,964) 100.4% 18,858,219 LIABILITIES, LESS CASH AND RECEIVABLES (.4%) (83,110) NET ASSETS 100.0% 18,775,109 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 19,882,964 18,858,219 Cash 21,834 Dividends receivable 16,244 Prepaid expenses 1,237 18,897,534 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 11,326 Payable for investment securities purchased 65,243 Payable for shares of Beneficial Interest redeemed 164 Accrued expenses 45,692 122,425 - -------------------------------------------------------------------------------- NET ASSETS ($) 18,775,109 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 39,868,912 Accumulated net realized gain (loss) on investments (20,069,058) Accumulated net unrealized appreciation (depreciation) on investments (1,024,745) - -------------------------------------------------------------------------------- NET ASSETS ($) 18,775,109 NET ASSET VALUE PER SHARE Initial Shares Service Shares - ------------------------------------------------------------------------------ Net Assets ($) 14,441,761 4,333,348 Shares Outstanding 1,711,248 514,017 - ------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 8.44 8.43 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2002 - ------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $718 foreign taxes withheld at source) 165,692 Interest 59,146 TOTAL INCOME 224,838 EXPENSES: Investment advisory fee--Note 3(a) 181,793 Auditing fees 36,137 Prospectus and shareholders' reports 27,746 Custodian fees--Note 3(b) 13,323 Distribution fees--Note 3(b) 11,718 Shareholder servicing costs--Note 3(b) 2,594 Legal fees 2,309 Trustees' fees and expenses--Note 3(c) 563 Loan commitment fees--Note 2 364 TOTAL EXPENSES 276,547 Less--waiver of fees due to undertaking--Note 3(a) (34,156) NET EXPENSES 242,391 INVESTMENT (LOSS)--NET (17,553) - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (5,372,612) Net unrealized appreciation (depreciation) on investments (2,834,277) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (8,206,889) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (8,224,442) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net (17,553) 20,936 Net realized gain (loss) on investments (5,372,612) (9,372,347) Net unrealized appreciation (depreciation) on investments (2,834,277) 2,834,362 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (8,224,442) (6,517,049) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (15,843) (21,791) Service shares (3,788) (438) TOTAL DIVIDENDS (19,631) (22,229) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 692,907 6,773,264 Service shares 3,124,265 4,274,009 Dividends reinvested: Initial shares 15,843 21,791 Service shares 3,788 438 Cost of shares redeemed: Initial shares (5,262,139) (3,263,377) Service shares (1,309,317) (95,938) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (2,734,653) 7,710,187 TOTAL INCREASE (DECREASE) IN NET ASSETS (10,978,726) 1,170,909 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 29,753,835 28,582,926 END OF PERIOD 18,775,109 29,753,835 Undistributed investment income--net -- 19,603 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended December 31, -------------------------------- 2002 2001 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 67,093 519,383 Shares issued for dividends reinvested 1,334 1,834 Shares redeemed (533,187) (285,622) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (464,760) 235,595 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 286,912 360,893 Shares issued for dividends reinvested 319 37 Shares redeemed (126,016) (8,145) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 161,215 352,785 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.
Year Ended December 31, ------------------------------------------------------------------------ INITIAL SHARES 2002 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.77 14.73 19.87 15.90 12.50 Investment Operations: Investment income (loss)--net (.01)(b) .01(b) .02(b) (.02)(b) .01 Net realized and unrealized gain (loss) on investments (3.31) (2.96) (5.03) 5.79 3.39 Total from Investment Operations (3.32) (2.95) (5.01) 5.77 3.40 Distributions: Dividends from investment income--net (.01) (.01) -- (.01) -- Dividends from net realized gain on investments -- -- (.13) (1.79) -- Total Distributions (.01) (.01) (.13) (1.80) -- Net asset value, end of period 8.44 11.77 14.73 19.87 15.90 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (28.25) (20.03) (25.40) 39.01 27.20(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.00 .99 .97 1.00 .25(c) Ratio of net investment income (loss) to average net assets (.08) .08 .11 (.11) .05(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .09 .10 .11 1.33 .31(c) Portfolio Turnover Rate 165.08 180.84 171.96 115.08 75.65(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 14,442 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.
The Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended December 31, ---------------------------------------------------- SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.76 14.73 14.73 Investment Operations: Investment (loss)--net (.01)(b) (.00)(b,c) -- Net realized and unrealized gain (loss) on investments (3.31) (2.96) -- Total from Investment Operations (3.32) (2.96) -- Distributions: Dividends from investment income--net (.01) (.01) -- Net asset value, end of period 8.43 11.76 14.73 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (28.21) (20.16) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.00 1.00 -- Ratio of net investment (loss) to average net assets (.06) (.01) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .34 .40 -- Portfolio Turnover Rate 165.08 180.84 171.96 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 4,333 4,147 --(d) (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) AMOUNT REPRESENTS LESS THAN $1,000. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering twelve series, including the Founders 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 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 (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, 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 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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $18,890,182 and unrealized depreciation $1,873,452. In addition, the portfolio had $330,169 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, $1,609,264 of the carryover expires in fiscal 2008, $11,561,842 expires in fiscal 2009 and $5,719,076 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal periods ended December 31, 2002 and December 31, 2001, respectively, were as follows: ordinary income $19,631 and $22,229. During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $17,581 and decreased paid-in capital by the same amount. Net assets were not affected by this reclassification. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 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, 2003, 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 December 31, 2002, Dreyfus waived receipt of fees of $34,156, 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 December 31, 2002, Service shares were charged $11,718 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 December 31, 2002, the portfolio was charged $150 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $13,323 pursuant to the custody agreement. (C) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2002, amounted to $34,100,673 and $33,730,510, respectively. At December 31, 2002, the cost of investments for federal income tax purposes was $20,731,671; accordingly, accumulated net unrealized depreciation on investments was $1,873,452, consisting of $557,531 gross unrealized appreciation and $2,430,983 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Founders Growth Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders Growth Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2002 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders Growth Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio IMPORTANT TAX INFORMATION (Unaudited) For federal tax purposes, the portfolio hereby designates 99.85% of the ordinary dividends paid during the fiscal year ended December 31, 2002 as qualifying for the corporate dividends received deduction. BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (59) Chairman of the Board (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- Clifford L. Alexander (69) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- Lucy Wilson Benson (75) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980 - present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED) David W. Burke (66) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee. OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- Whitney I. Gerard (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- Arthur A. Hartman (76) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- George L. Perry (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 57 years old and has been an employee of Dreyfus since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 49 years old and has been an employee of Dreyfus since January 2000. Prior to joining Dreyfus, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 56 years old and has been an employee of Dreyfus since June 1977 STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 53 years old and has been an employee of Dreyfus since July 1980 JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 12 investment companies (comprised of 65 portfolios) managed by Dreyfus. He is 37 years old and has been an employee of Dreyfus since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 93 investment companies (comprised of 200 portfolios) managed by Dreyfus. He is 42 years old and has been an employee of Dreyfus since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 44 years old and has been an employee of Dreyfus since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of Dreyfus, and an officer of 18 investment companies (comprised of 77 portfolios) managed by Dreyfus. He is 34 years old and has been an employee of Dreyfus since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 38 years old and has been an employee of Dreyfus since October 1988. The Portfolio OFFICERS OF THE FUND (Unaudited) (CONTINUED) ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 35 years old and has been an employee of Dreyfus since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 48 years old and has been an employee of Dreyfus since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by Dreyfus. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc. NOTES For More Information Dreyfus Investment Portfolios, Founders Growth Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 176AR1202 Dreyfus Investment Portfolios, Founders International Equity Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 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 23 Report of Independent Auditors 24 Important Tax Information 25 Board Members Information 27 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders International Equity Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Founders International Equity Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In 2002, investors witnessed the third consecutive year of negative returns for the global stock markets. With broad measures of global stock market performance down since early 2000, this bear market has been driven by deteriorating business conditions in Europe and deflationary pressures in Japan. Despite recent financial crises in Latin America, the emerging markets generally fared better than the developed markets during the year. However, the market's disappointing start to the 21st century may be good news for today' s growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 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 12-month period ended December 31, 2002, the portfolio produced total returns of -27.15% for its Initial Shares and -27.21% for its Service shares.(1) This compares with a -15.80% total return produced by the fund's benchmark, the Morgan Stanley Capital International World ex U.S. Index, for the same period.(2) We attribute the portfolio and market's negative returns to a continued downward shift in valuation, which is a measure of the price investors are willing to pay for each dollar of corporate earnings. Confidence-eroding corporate scandals and the threat of geopolitical instability intensified investors' concerns. The portfolio's returns trailed its benchmark, primarily because we emphasized investments in health care, technology and telecommunications companies, which generally performed worse than market averages. 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? The global economy continued to produce better than expected growth, coupled with relatively low rates of interest, inflation and unemployment. Under such generally positive economic conditions, markets have historically tended to go up. Unfortunately, this was not the case in 2002 as ongoing deterioration of investor sentiment more than offset generally positive economic influences. After several years of willingness to pay ever-higher prices for each dollar of corporate earnings, an abrupt shift occurred in early 2000, and this contraction in valuation continued through 2002. The trend toward lower valuations was exacerbated during the reporting period by concern over the strength and sustainability of corporate earnings growth, corporate scandals in the U.S. and continued worries related to the war on terrorism and potential war in Iraq. As a result, stock market returns were disappointing around the globe. In this time of market stress, investors tended to favor relatively defensive holdings such as consumer staples, utilities and basic materials companies. These industry groups were among the market' s best performers but were underrepresented in the portfolio. Instead, in the belief that they would benefit from a growing global economy, we focused on some of the market's most poorly performing sectors, notably technology, telecommunications and health care. Stocks such as Flextronics International and Check Point Software Technologies were hurt by weak capital spending and market saturation. Health care and pharmaceutical stocks faced a difficult regulatory and competitive market, and stocks such as Elan Corp. and Biovale dampened the portfolio's performance. On the other hand, a number of investments contributed positively to the portfolio's relative performance during the reporting period. Among these were CANON, which benefited from the trend towards digitalization in cameras and printing, and Hyundai Motors and Samsung Electronics, which benefited from Korea's strong domestic economy and rising export demand. What is the portfolio's current strategy? We have positioned the portfolio to benefit from a recovery in earnings, an increase in corporate spending and an improvement in investor sentiment. While we may have been somewhat early in our timing, we continue to believe that steadily improving economic data will translate into greater customer demand, which should drive a sustained improvement in corporate profits. We also continue to believe that stocks outside the United States are generally reasonably priced and offer good value. The most significant values, we believe, may be found in former growth companies with strong business fundamentals, seasoned management teams and solid brand positions. Accordingly, the portfolio is more concentrated in high-quality firms that, in our view, are well-positioned to benefit from a global economic rebound. January 15, 2003 (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, 2003, 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 PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Founders International Equity Portfolio Initial shares and Service shares and the Morgan Stanley Capital International World ex U.S. Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02 Inception From Date 1 Year Inception - -------------------------------------------------------------------------------- INITIAL SHARES 9/30/98 (27.15)% (5.61)% SERVICE SHARES 9/30/98 (27.21)% (5.61)% THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO ON 9/30/98 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. INDEX (THE "INDEX") ON THAT DATE. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS AN UNMANAGED INDEX OF GLOBAL STOCK MARKET PERFORMANCE, EXCLUDING THE U.S., CONSISTING SOLELY OF EQUITY SECURITIES AND INCLUDES NET DIVIDENDS REINVESTED. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio
STATEMENT OF INVESTMENTS December 31, 2002 COMMON STOCKS--94.0% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CANADA--4.5% Abitibi--Consolidated 21,925 168,547 EnCana 4,275 132,160 300,707 FINLAND--1.5% UPM-Kymmene 3,100 100,398 FRANCE--8.6% Axa 13,850 185,963 BNP Paribas 2,900 118,215 Suez 7,400 128,491 Total Fina Elf 1,000 142,878 575,547 GERMANY--3.0% Schering 1,550 67,529 Siemens 3,175 134,991 202,520 HONG KONG--1.9% China Unicom 96,000 (a) 65,243 Hutchison Whampoa 10,000 62,576 127,819 INDIA--3.2% Satyam Computer Services, ADR 16,700 214,595 JAPAN--15.7% CANON 3,000 112,926 FAST RETAILING 4,300 151,360 HONDA MOTOR 2,700 99,815 Mitsubishi Tokyo Financial 18 97,768 NTT DoCoMo 81 149,381 Nikko Cordial 38,000 128,000 Nintendo 1,500 140,084 SONY 4,100 171,251 1,050,585 NETHERLANDS--11.9% Heineken 3,775 147,423 ING Groep 10,725 181,722 Koninklijke (Royal) Philips Electronics 5,500 96,424 Royal Dutch Petroleum 2,825 124,411 Schlumberger 2,825 118,904 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ NETHERLANDS (CONTINUED) Unilever 2,075 127,542 796,426 SINGAPORE--1.9% Flextronics International 15,625 (a) 127,968 SPAIN--2.4% Endesa 6,325 74,036 Telefonica 9,550 (a) 85,518 159,554 SWEDEN--1.0% Telefonaktiebolaget LM Ericsson, Cl. B 98,000 (a) 68,858 SWITZERLAND--8.8% Adecco 2,500 98,075 Converium 1,650 (a) 80,016 Credit Suisse 6,025 (a) 130,827 Novartis 4,675 170,710 UBS 2,300 (a) 111,870 591,498 UNITED KINGDOM--29.6% ARM 66,400 (a) 51,324 Amvescap 22,400 143,561 BP 31,200 214,531 Barclays 11,850 73,466 Diageo 15,225 165,489 Exel 11,025 122,144 GlaxoSmithKline 7,525 144,441 HSBC 8,625 95,347 Lloyds TSB 7,625 54,762 Pearson 13,375 123,734 Reed Elsevier 7,550 64,679 Rio Tinto 7,675 153,252 Royal Bank of Scotland 3,200 76,676 Shire Pharmaceuticals 14,975 (a) 95,854 Smith & Nephew 11,225 68,778 Standard Chartered 11,600 131,877 Vodafone 113,825 207,580 1,987,495 TOTAL COMMON STOCKS (cost $7,379,253) 6,303,970 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) PREFERRED STOCKS--1.4% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ GERMANY; Porsche (cost $100,786) 225 93,537 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--4.5% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER; Transamerica Finance Corp. 1.20%, 1/2/2003 (cost $299,990) 300,000 299,990 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $7,780,029) 99.9% 6,697,497 CASH AND RECEIVABLES (NET) .1% 8,222 NET ASSETS 100.0% 6,705,719 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 7,780,029 6,697,497 Cash 65,250 Dividends receivable 10,338 Due from The Dreyfus Corporation and affiliates 958 6,774,043 - -------------------------------------------------------------------------------- LIABILITIES ($): Payable for shares of Beneficial Interest redeemed 30,573 Accrued expenses and other liabilities 37,751 68,324 - -------------------------------------------------------------------------------- NET ASSETS ($) 6,705,719 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 14,162,865 Accumulated undistributed investment income--net 6,617 Accumulated net realized gain (loss) on investments (6,381,979) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions (1,081,784) - -------------------------------------------------------------------------------- NET ASSETS ($) 6,705,719 NET ASSET VALUE PER SHARE Initial Shares Service Shares - ------------------------------------------------------------------------------ Net Assets ($) 5,103,478 1,602,241 Shares Outstanding 585,382 183,749 - ------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 8.72 8.72 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $14,090 foreign taxes withheld at source) 128,676 Interest 7,455 TOTAL INCOME 136,131 EXPENSES: Investment advisory fee--Note 3(a) 87,190 Custodian fees 29,219 Auditing fees 22,703 Prospectus and shareholders' reports 21,558 Distribution fees--Note 3(b) 4,297 Shareholder servicing costs--Note 3(b) 1,865 Trustees' fees and expenses--Note 3(c) 1,803 Legal fees 846 Loan commitment fees--Note 2 123 Miscellaneous 10,120 TOTAL EXPENSES 179,724 Less--waiver of fees due to undertaking--Note 3(a) (49,087) NET EXPENSES 130,637 INVESTMENT INCOME--NET 5,494 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (1,268,084) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (1,548,573) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (2,816,657) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,811,163) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, --------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net 5,494 (16,365) Net realized gain (loss) on investments (1,268,084) (4,203,196) Net unrealized appreciation (depreciation) on investments (1,548,573) 166,599 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,811,163) (4,052,962) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (3,830) Service shares -- (111) TOTAL DIVIDENDS -- (3,941) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 1,670,744 3,190,890 Service shares 1,034,932 3,448,933 Dividends reinvested: Initial shares -- 3,830 Service shares -- 111 Cost of shares redeemed: Initial shares (3,403,241) (2,091,434) Service shares (388,952) (1,780,905) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (1,086,517) 2,771,425 TOTAL INCREASE (DECREASE) IN NET ASSETS (3,897,680) (1,285,478) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 10,603,399 11,888,877 END OF PERIOD 6,705,719 10,603,399 Undistributed investment income--net 6,617 -- The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended December 31, -------------------------------- 2002 2001 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 174,994 223,519 Shares issued for dividends reinvested -- 266 Shares redeemed (349,506) (163,207) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (174,512) 60,578 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 98,115 265,143 Shares issued for dividends reinvested -- 8 Shares redeemed (39,948) (139,598) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 58,167 125,553 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.
Year Ended December 31, ------------------------------------------------------------------- INITIAL SHARES 2002 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.97 17.00 21.65 14.36 12.50 Investment Operations: Investment income (loss)--net .01(b) (.02)(b) .00(b,c) (.02)(b) (.01) Net realized and unrealized gain (loss) on investments (3.26) (5.00) (3.55) 8.73 1.87 Total from Investment Operations (3.25) (5.02) (3.55) 8.71 1.86 Distributions: Dividends from investment income--net -- (.01) -- -- -- Dividends from net realized gain on investments -- -- (1.10) (1.42) -- Total Distributions -- (.01) (1.10) (1.42) -- Net asset value, end of period 8.72 11.97 17.00 21.65 14.36 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (27.15) (29.56) (17.41) 60.69 14.88(d) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 1.50 1.50 1.50 .38(d) Ratio of net investment income (loss) to average net assets .06 (.13) .02 (.11) (.08)(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .51 .72 .57 2.27 .81(d) Portfolio Turnover Rate 226.63 201.61 171.34 190.80 29.25(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 5,103 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 $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended December 31, -------------------------------------------- SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): 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 (3.27) (4.95) -- Total from Investment Operations (3.26) (5.01) -- Distributions: Dividends from investment income--net -- (.01) -- Net asset value, end of period 8.72 11.98 17.00 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (27.21) (29.50) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 1.50 -- Ratio of net investment income (loss) to average net assets .05 (.46) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .76 1.05 -- Portfolio Turnover Rate 226.63 201.61 171.34 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 1,602 1,504 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the Founders 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. (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 Portfoli NOTES TO FINANCIAL STATEMENTS (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, 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 $908 during the period ended December 31, 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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $6,617, accumulated capital losses $6,024,266 and unrealized depreciation $1,099,331. In addition, the portfolio had $340,166 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, $390,202 of the carryover expires in fiscal 2008, $4,125,982 expires in fiscal 2009 and $1,508,082 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal years ended December 31, 2002 and December 31, 2001, respectively, were as follows: ordinary income $0 and $3,941. During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $1,123 and decreased net realized gain (loss) on investments by the same amount. Net assets were not affected by this reclassification. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 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, 2003, 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 December 31, 2002, Dreyfus waived receipt of fees of $49,087, 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 December 31, 2002, Service shares were charged $4,297 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 December 31, 2002, the portfolio was charged $152 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 December 31, 2002, amounted to $19,114,359 and $19,498,736, respectively. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) At December 31, 2002, the cost of investments for federal income tax purposes was $7,797,575; accordingly, accumulated net unrealized depreciation on investments was $1,100,078, consisting of $167,374 gross unrealized appreciation and $1,267,452 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Founders International Equity Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders International Equity Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2002 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders International Equity Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio IMPORTANT TAX INFORMATION (Unaudited) In accordance with federal tax law, the portfolio elects to provide each shareholder with their portion of the portfolio's foreign taxes paid and the income sourced from foreign countries. Accordingly, the portfolio hereby makes the following designations regarding its fiscal year ended December 31, 2002: --the total amount of taxes paid to foreign countries was $14,090. --the total amount of income sourced from foreign countries was $19,534. As required by federal tax law rules, shareholders will receive notification of their proportionate share of foreign taxes paid and foreign source income for the 2002 calendar year with Form 1099-DIV which will be mailed by January 31, 2003. BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (59) Chairman of the Board (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- Clifford L. Alexander (69) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- Lucy Wilson Benson (75) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980-Present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED) David W. Burke (66) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum; Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- Whitney I. Gerard (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- Arthur A. Hartman (76) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- George L. Perry (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 57 years old and has been an employee of Dreyfus since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 49 years old and has been an employee of Dreyfus since January 2000. Prior to joining Dreyfus, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 56 years old and has been an employee of Dreyfus since June 1977 STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 53 years old and has been an employee of Dreyfus since July 1980 JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 12 investment companies (comprised of 65 portfolios) managed by Dreyfus. He is 37 years old and has been an employee of Dreyfus since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 93 investment companies (comprised of 200 portfolios) managed by Dreyfus. He is 42 years old and has been an employee of Dreyfus since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 44 years old and has been an employee of Dreyfus since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of Dreyfus, and an officer of 18 investment companies (comprised of 77 portfolios) managed by Dreyfus. He is 34 years old and has been an employee of Dreyfus since November 1992. The Portfolio OFFICERS OF THE FUND (Unaudited) (CONTINUED) ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 38 years old and has been an employee of Dreyfus since October 1988. ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 35 years old and has been an employee of Dreyfus since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 48 years old and has been an employee of Dreyfus since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by Dreyfus. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc. 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. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 177AR1202 Dreyfus Investment Portfolios, Founders Passport Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 Statement of Investments 15 Statement of Assets and Liabilities 16 Statement of Operations 17 Statement of Changes in Net Assets 19 Financial Highlights 21 Notes to Financial Statements 26 Report of Independent Auditors 27 Important Tax Information 28 Board Members Information 30 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Passport Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Founders Passport Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In 2002, investors witnessed the third consecutive year of negative returns for the global stock markets. With broad measures of global stock market performance down since early 2000, this bear market has been driven by deteriorating business conditions in Europe and deflationary pressures in Japan. Despite recent financial crises in Latin America, the emerging markets generally fared better than the developed markets during the year. However, the market's disappointing start to the 21st century may be good news for today' s growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 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 12-month period ended December 31, 2002, Dreyfus Investment Portfolios, Founders Passport Portfolio produced total returns of -15.42% for both its Initial and Service shares.(1) In comparison, the portfolio's benchmark, the Morgan Stanley Capital International World ex U.S.A. Index, produced a total return of -15.80% for the same period.(2) The portfolio essentially matched the performance of its benchmark, which in turn outperformed most major U.S. stock market indexes in U.S. dollar terms. Still, total returns were negative due to generally weak global economic conditions and concerns about war in the Middle East. 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 international 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. What other factors influenced the portfolio's performance? All three of the major developed markets -- the U.S., Europe and Japan -- operated in weak economic environments during 2002. Because these markets tend to be interrelated, a sputtering U.S. market The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) had an adverse impact on stocks throughout the world. In Europe, stock market performance reflected the region's sluggish economy, particularly in Germany, Sweden and France. The European Central Bank reduced interest rates by 0.5 percentage points in November in an attempt to reignite growth. On another hopeful note, France cut taxes in October, which led to a rise in consumer spending. However, Germany raised taxes in response to certain European Monetary Union requirements. In this environment, the portfolio avoided the full brunt of Europe's declines by maintaining a lower percentage of its investments in European stocks than that of its benchmark. In contrast to the developed markets, emerging markets in Asia continued to post relatively strong growth. Taiwan and China reported a boom in exports, and Thailand has become a leader in automobile manufacturing. Companies such as Toyota, Ford Motor and Honda have been investing in Thailand and as a result have positively influenced the economy in Thailand, along with some of the portfolio' s holdings throughout the year. South Korea was performing well for most of the year, particularly among shipbuilders and cellular telephone component companies. However, in the fourth quarter South Korea stocks fell as soaring household debt mounted, concern grew over another round of crises in the financial industry and North Korea' s nuclear weapons program contributed to geopolitical instability late in the year. From a U.S. investor' s perspective, one of the most positive influences on international stock market performance was a weakening dollar relative to other major currencies. As corporate scandals shook confidence in the integrity of the U.S. markets, the euro and the yen appreciated against the U.S. dollar. When foreign currencies strengthen against the dollar, U.S. investors benefit, because a given foreign currency will buy more dollars, boosting investment returns. As a result, the portfolio's total return during the reporting period was higher than it would have been without taking the dollar's weakness into account. A further consequence of a weak dollar was a strong market for gold as investors sought a relatively safe haven from the reporting period's political and economic disruptions. Historically, gold has been viewed as an attractive investment during times of war, and rising tensions in the Middle East, South Asia and North Korea drove the price of gold and gold-mining stocks sharply higher during 2002. The portfolio's gold stock holdings, which comprised nearly 3% of total assets, benefited accordingly What is the portfolio's current strategy? Reflecting our view of their respective economic prospects, the portfolio has continued to emphasize emerging markets in Asia while de-emphasizing developed markets in Europe. Current investment themes include the introduction of a new generation of cell phones with such features as color screens and built-in cameras. In addition, our research indicates that companies with exposure to Asian manufacturing and consumption are likely to remain strong. As world trade recovers, we believe that shares of shipping companies may also benefit. However, we believe that global stock market volatility is likely to remain high as long as the crises in Iraq and North Korea persist. January 15, 2003 (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, 2003, 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 PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Founders Passport Portfolio Initial shares and Service shares and the Morgan Stanley Capital International World ex U.S. Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02 Inception From Date 1 Year Inception - ------------------------------------------------------------------------------- INITIAL SHARES 9/30/98 (15.42)% (2.77)% SERVICE SHARES 9/30/98 (15.42)% (2.77)% THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. PART OF THE PORTFOLIO'S RECENT PERFORMANCE IS ATTRIBUTABLE TO POSITIVE RETURNS FROM 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. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO ON 9/30/98 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD EX U.S. INDEX (THE "INDEX") ON THAT DATE. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS AN UNMANAGED INDEX OF GLOBAL STOCK MARKET PERFORMANCE, EXCLUDING THE U.S., CONSISTING SOLELY OF EQUITY SECURITIES AND INCLUDES NET DIVIDENDS REINVESTED AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio
STATEMENT OF INVESTMENTS December 31, 2002 COMMON STOCKS--88.2% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AUSTRALIA--.9% Emperor Mines 30,475 (a) 12,963 Origin Energy 44,225 91,833 104,796 AUSTRIA--.0% Wolford 300 (a) 2,948 BRAZIL--2.4% Brasil Telecom 19,075 63,260 Tele Centro Oeste Celular Participacoes, ADR 22,800 91,200 Unibanco, GDR 12,700 139,065 293,525 CANADA--8.0% Aur Resources 13,050 (a) 30,683 Bonavista Petroleum 1,500 (a) 32,359 Canadian 88 Energy 54,625 (a) 87,932 Creo 2,850 (a) 23,228 Eldorado Gold 120,650 (a) 158,277 IPSCO 3,250 32,564 Industrial-Alliance Life Insurance 2,450 61,316 LionOre Mining International 11,175 (a) 34,986 Mega Bloks 1,200 (a) 17,872 Mega Bloks 144A 12,575 (a,b) 187,282 Precision Drilling 1,000 (a) 32,290 RONA 12,600 108,201 Tesco 6,825 (a) 80,971 Wheaton River Minerals 84,375 (a) 78,605 966,566 CHINA--5.7% Anhui Conch Cement, Cl. H 182,000 61,262 AsiaInfo Holdings 12,900 (a) 81,786 BYD, Cl. H 92,500 186,222 China Oilfield Services 304,000 74,065 Hainan Meilan Airport 154,000 72,572 Jiangxi Copper, Cl. H 267,000 33,210 Shenzhen Expressway, Cl. H 260,000 51,677 Sinopec Zhenhai Refining and Chemical Co., Cl. H 118,000 29,657 Travelsky Technology, Cl. H 132,000 91,402 681,853 COMMON STOCKS (CONTINUED) Shares Value ($) - ----------------------------------------------------------------------------------------------------------------------------------- DENMARK--1.1% Radiometer, Cl. B 2,500 130,442 FINLAND--2.0% Comptel 75,675 81,033 Elcoteq Network, Cl. A 7,625 (a) 86,451 Perlos 12,350 78,049 245,533 FRANCE--2.3% Clarins 2,200 98,156 Gemplus International 48,275 (a) 50,679 Havas 10,775 41,853 MEDIDEP 3,050 (a) 49,149 NRJ 2,675 40,719 280,556 GERMANY--2.9% Escada 3,700 38,066 Evotec OAI 1 (a) 2 FJA 2,275 46,572 Puma 1,000 68,027 SGL Carbon 2,700 (a) 22,392 Stada Arzneimittel 2,275 90,994 Zapf Creation 2,800 77,895 343,948 GREECE--.6% Aktor S.A. Technical 12,075 73,016 HONG KONG--1.4% Bossini International 177,000 (a) 5,583 China Pharmaceutical Enterprise & Investment 380,000 68,218 Global Bio-chem Technology 156,000 41,508 QPL International 251,000 (a) 54,716 170,025 INDONESIA--.9% PT Astra International 296,000 (a) 104,179 IRELAND--.3% Paddy Power 7,475 39,864 ISRAEL--.3% BATM Advanced Communications 11,475 (a) 2,772 M-Systems Flash Disk Pioneers 5,050 (a) 36,915 39,687 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ----------------------------------------------------------------------------------------------------------------------------------- ITALY--4.1% Bulgari 33,825 160,503 Cairo Communication 3,175 66,662 Ericsson 1,000 20,849 Mondadori (Arnoldo) Editore 21,200 130,975 Navigazione Montanari 25,725 33,029 Tod's 2,700 86,649 498,667 JAPAN--9.6% ASICS 98,000 (a) 82,526 Cleanup 6,000 45,575 Don Quijote 500 45,852 ENPLAS 3,900 96,884 EZAKI GLICO 6,000 34,661 KURODA ELECTRIC 60 1,155 Milbon 2,580 61,703 Net One Systems 13 55,284 OILES 3,900 56,817 Pasona 26 (a) 47,949 RECRM RESEARCH 74 (a) 49,853 Rakuten 84 63,946 SHIMA SEIKI MANUFACTURING 1,900 39,680 SOHGO SECURITY SERVICES 4,700 66,493 STUDIO ALICE 4,550 126,442 TAKARA 6,000 52,547 Taito 127 105,771 Toyo Tire & Rubber 42,000 81,701 YOKOWO 6,800 36,935 1,151,774 MALAYSIA--1.6% APM Automotive 80,000 64,000 IGB 10,000 2,250 SP Setia 68,999 44,486 Transmile 68,800 44,177 YTL 49,000 40,747 195,660 MEXICO--.4% Grupo Financiero Banorte S.A. de C.V., Cl. O 17,625 43,298 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ NETHERLANDS--1.1% Equant 22,725 (a) 92,326 Eurocommercial Properties 1,650 34,643 126,969 NORWAY--1.0% Golar LNG 13,400 (a) 82,211 Schibsted 4,325 44,953 127,164 PAPUA NEW GUINEA--.8% Lihir Gold 125,025 (a) 100,766 PORTUGAL--.3% PT Multimedia-Servicos de Telecomunicacoes e Multimedia 3,275 (a) 34,450 SINGAPORE--2.9% Cycle & Carriage 31,662 62,065 Hyflux 77,000 49,277 Jurong Technologies Industrial 364,000 60,859 Neptune Orient Lines 263,000 (a) 139,498 Seksun 63,000 32,871 344,570 SOUTH KOREA--3.6% Baiksan OPC 5,140 29,773 Hanjin Shipping 25,760 133,573 Hanmi Pharmaceutical Industrial 1,240 19,655 Interpark 31,520 (a) 58,201 Kumho Electric 3,910 (a) 53,735 LG Electronics Investment 2,500 28,245 NHN 1,510 56,654 Samsung Heavy Industries 16,010 (a) 54,669 434,505 SPAIN--.4% Viscofan 6,925 47,036 SWEDEN--7.9% Allgon, Cl. B 12,075 (a) 16,690 Axfood 10,200 190,334 Capio 22,200 (a) 176,442 D. Carnegie & Co. 2,800 18,061 Eniro 28,400 179,921 Getinge, Cl. B 4,800 98,415 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ----------------------------------------------------------------------------------------------------------------------------------- SWEDEN (CONTINUED) Industriforvaltnings, Cl. B 9,100 91,193 LGP Telecom 17,150 (a) 70,326 Modern Times, Cl. B 1,500 (a) 12,181 SSAB Svenskt Stal 8,000 94,913 948,476 SWITZERLAND--3.7% Centerpulse 1,225 (a) 213,683 Centerpulse, ADR 860 (a) 14,904 Converium 3,150 152,758 Saurer 2,775 (a) 61,763 443,108 THAILAND--6.5% Aapico Hitech 61,200 (a) 44,697 Amata 68,950 30,374 BEC World 13,600 64,327 Central Pattana 23,300 29,172 Hemaraj Land and Development 348,425 (a) 40,392 Kiatnakin Finance 85,300 64,277 Lalin Property 186,600 (a) 113,569 Major Cineplex 74,600 (a) 140,102 Noble Development 327,500 (a) 68,340 PTT 117,300 114,907 Siam Panich Leasing 51,450 46,822 Thai Stanley Electric 9,400 29,859 786,838 UNITED KINGDOM--15.5% ARM 155,450 (a) 120,154 Aberdeen Asset Management 40,925 46,790 Autonomy 45,750 (a) 128,925 Berkeley 4,950 47,507 Burberry 28,425 102,760 Chloride 86,450 44,547 easyJet 20,475 (a) 90,340 COMMON STOCKS (CONTINUED) Shares Value ($) - ----------------------------------------------------------------------------------------------------------------------------------- UNITED KINGDOM (CONTINUED) First Choice Holidays 56,925 78,301 Future Network 30,350 (a) 26,880 HIT Entertainment 48,025 165,303 Helphire 2,875 (a) 8,241 ICAP 4,200 67,633 Intec Telecom Systems 119,700 (a) 38,551 Kingston Communications (HULL) 14,425 (a) 15,795 lastminute.com 12,175 (a) 20,064 LogicaCMG 22,614 54,623 NHP 102,309 (a) 176,116 NXT 32,275 (a) 25,726 New Look 5,100 19,546 Spectris 12,350 57,076 Spirent 164,150 44,275 Stagecoach 319,125 151,597 TTP Communications 86,125 (a) 99,300 Telewest Communications 1,497,350 (a) 48,224 VT 7,875 28,218 Wood (John) 39,575 102,442 Yule Catto & Co. 14,550 65,252 1,874,186 TOTAL COMMON STOCKS (cost $11,119,773) 10,634,405 - ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--1.1% - ------------------------------------------------------------------------------------------------------------------------------------ BRAZIL--1.0% Companhia Siderurgica de Tubarao 5,400 61,017 Usinas Siderurgicas de Minas Gerais 33,500 62,079 123,096 GERMANY--.1% Krones 125 5,735 TOTAL PREFERRED STOCKS (cost $128,343) 128,831 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) Principal SHORT-TERM INVESTMENTS--9.1% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER; Federal Farm Credit Bank .85%, 1/2/2003 (cost $1,099,974) 1,100,000 1,099,974 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (cost $12,348,090) 98.4% 11,863,210 CASH AND RECEIVABLES (NET) 1.6% 194,797 NET ASSETS 100.0% 12,058,007 (A) NON-INCOME PRODUCING. (B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT DECEMBER 31, 2002, THESE SECURITIES AMOUNTED TO $187,282 OR 1.6% OF NET ASSETS. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - ------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 12,348,090 11,863,210 Receivable for investment securities sold 650,332 Dividends receivable 16,582 Prepaid expenses 318 Due from The Dreyfus Corporation and affiliates 48,340 12,578,782 - -------------------------------------------------------------------------------- LIABILITIES ($): Cash overdraft due to Custodian 280,369 Payable for investment securities purchased 113,791 Payable for shares of Beneficial Interest redeemed 16,104 Accrued expenses 110,511 520,775 - -------------------------------------------------------------------------------- NET ASSETS ($) 12,058,007 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 30,996,684 Accumulated undistributed investment income--net 27,867 Accumulated net realized gain (loss) on investments (18,482,625) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions (483,919) - -------------------------------------------------------------------------------- NET ASSETS ($) 12,058,007 NET ASSET VALUE PER SHARE Initial Shares Service Shares - ------------------------------------------------------------------------------- Net Assets ($) 11,347,726 710,281 Shares Outstanding 1,142,141 71,455 - ------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 9.94 9.94 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2002 - ------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $27,526 foreign taxes withheld at source) 223,685 Interest 15,702 TOTAL INCOME 239,387 EXPENSES: Investment advisory fee--Note 3(a) 154,383 Custodian fees 312,205 Auditing fees 35,851 Prospectus and shareholders' reports 30,919 Legal fees 3,265 Shareholder servicing costs--Note 3(b) 2,408 Distribution fees--Note 3(b) 1,895 Trustees' fees and expenses--Note 3(c) 471 Loan commitment fees--Note 2 217 Miscellaneous 18,615 TOTAL EXPENSES 560,229 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertaking--Note 3(a) (328,654) NET EXPENSES 231,575 INVESTMENT INCOME--NET 7,812 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (1,877,825) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (276,239) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (2,154,064) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,146,252) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ---------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 7,812 48,468 Net realized gain (loss) on investments (1,877,825) (6,673,599) Net unrealized appreciation (depreciation) on investments (276,239) (1,523,458) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,146,252) (8,148,589) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (40,280) -- Service shares (1,859) -- TOTAL DIVIDENDS (42,139) -- - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 17,062,994 16,132,702 Service shares 330,979 1,838,982 Dividends reinvested: Initial shares 40,280 -- Service shares 1,859 -- Cost of shares redeemed: Initial shares (20,181,798) (17,840,283) Service shares (251,793) (1,020,540) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (2,997,479) (889,139) TOTAL INCREASE (DECREASE) IN NET ASSETS (5,185,870) (9,037,728) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 17,243,877 26,281,605 END OF PERIOD 12,058,007 17,243,877 Undistributed investment income--net 27,867 42,095 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended December 31, --------------------------------- 2002 2001 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 1,448,552 1,219,921 Shares issued for dividends reinvested 3,269 -- Shares redeemed (1,709,542) (1,367,363) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (257,721) (147,442) - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 29,099 146,100 Shares issued for dividends reinvested 151 -- Shares redeemed (22,007) (81,917) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 7,243 64,183 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.
Year Ended December 31, ----------------------------------------------------------------------- INITIAL SHARES 2002 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.78 16.99 23.82 14.46 12.50 Investment Operations: Investment income (loss)--net .01(b) .03(b) (.11)(b) (.10)(b) .00(c) Net realized and unrealized gain (loss) on investments (1.82) (5.24) (5.61) 11.04 1.97 Total from Investment Operations (1.81) (5.21) (5.72) 10.94 1.97 Distributions: Dividends from investment income--net (.03) -- -- -- (.00)(c) Dividends from net realized gain on investments -- -- (1.11) (1.58) (.01) Total Distributions (.03) -- (1.11) (1.58) (.01) Net asset value, end of period 9.94 11.78 16.99 23.82 14.46 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (15.42) (30.66) (25.76) 76.05 15.79(d) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 1.50 1.50 1.50 .38(d) Ratio of net investment income (loss) to average net assets .05 .24 (.47) (.60) .02(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 2.11 2.01 2.09 2.14 .30(d) Portfolio Turnover Rate 484.89 729.40 493.10 319.31 3.98(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 11,348 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 $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended December 31, ------------------------------------------------ SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.78 16.99 16.99 Investment Operations: Investment income (loss)--net .00(b,c) (.01)(b) -- Net realized and unrealized gain (loss) on investments (1.81) (5.20) -- Total from Investment Operations (1.81) (5.21) -- Distributions: Dividends from investment income--net (.03) -- -- Net asset value, end of period 9.94 11.78 16.99 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (15.42) (30.66) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.50 1.50 -- Ratio of net investment income (loss) to average net assets .03 (.12) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation 2.42 2.56 -- Portfolio Turnover Rate 484.89 729.40 493.10 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 710 757 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. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company, operating as a series company currently offering twelve series, including the Founders 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 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 The Portfoli NOTES TO FINANCIAL STATEMENTS (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, 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 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 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 $14 during the period ended December 31, 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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $32,210, accumulated capital losses $18,334,182 and unrealized depreciation $501,359. In addition, the portfolio had $135,346 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, $6,528,027 of the carryover expires in fiscal 2008, $9,960,725 expires in fiscal 2009 and $1,845,430 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal periods ended December 31, 2002 and December 31, 2001, respectively, were as follows: ordinary income $42,139 and $0. During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $20,099 and decreased net realized The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) gain (loss) on investments by the same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31 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, 2003, 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 December 31, 2002, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $328,654 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'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 December 31, 2002, service shares were charged $1,895 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 December 31, 2002, the portfolio was charged $153 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 December 31, 2002, amounted to $70,320,203 and $74,828,563, respectively. At December 31, 2002, the cost of investments for federal income tax purposes was $12,365,530; accordingly, accumulated net unrealized depreciation on investments was $502,320, consisting of $417,254 gross unrealized appreciation and $919,574 gross unrealized depreciation. The Portfolio REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Founders Passport Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders Passport Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2002 by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders Passport Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 IMPORTANT TAX INFORMATION (Unaudited) In accordance with federal tax law, the portfolio elects to provide each shareholder with their portion of the portfolio's foreign taxes paid and the income sourced from foreign countries. Accordingly, the portfolio hereby makes the following designations regarding its fiscal year ended December 31, 2002: --the total amount of taxes paid to foreign countries was $27,526. --the total amount of income sourced from foreign countries was $51,544. As required by federal tax law rules, shareholders will receive notification of their proportionate share of foreign taxes paid and foreign source income for the 2002 calendar year with Form 1099-DIV which will be mailed by January 31, 2003. The Portfolio BOARD MEMBERS INFORMATION (Unaudited) JOSEPH S. DIMARTINO (59) CHAIRMAN OF THE BOARD (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- CLIFFORD L. ALEXANDER (69) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- LUCY WILSON BENSON (75) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980-Present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 DAVID W. BURKE (66) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- WHITNEY I. GERARD (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ARTHUR A. HARTMAN (76) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- GEORGE L. PERRY (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. The Portfolio OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 57 years old and has been an employee of Dreyfus since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of Dreyfus, and an officer of 94 investment companies (comprised of 188 portfolios) managed by Dreyfus. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 49 years old and has been an employee of Dreyfus since January 2000. Prior to joining Dreyfus, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 56 years old and has been an employee of Dreyfus since June 1977 STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 53 years old and has been an employee of Dreyfus since July 1980 JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 12 investment companies (comprised of 65 portfolios) managed by Dreyfus. He is 37 years old and has been an employee of Dreyfus since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of Dreyfus, and an officer of 93 investment companies (comprised of 200 portfolios) managed by Dreyfus. He is 42 years old and has been an employee of Dreyfus since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 44 years old and has been an employee of Dreyfus since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of Dreyfus, and an officer of 18 investment companies (comprised of 77 portfolios) managed by Dreyfus. He is 34 years old and has been an employee of Dreyfus since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 38 years old and has been an employee of Dreyfus since October 1988. ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of Dreyfus, and an officer of 28 investment companies (comprised of 119 portfolios) managed by Dreyfus. He is 35 years old and has been an employee of Dreyfus since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of Dreyfus, and an officer of 95 investment companies (comprised of 204 portfolios) managed by Dreyfus. He is 48 years old and has been an employee of Dreyfus since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by Dreyfus. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc. The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Founders Passport Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Investment Portfolios, MidCap Stock Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 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 26 Report of Independent Auditors 27 Important Tax Information 28 Board Members Information 30 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, MidCap Stock Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, MidCap Stock Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In 2002, investors witnessed the third consecutive year of negative returns for the broad U.S. stock markets. Virtually every industry group, investment style and capitalization range, including midcap stocks, suffered losses in 2002, leaving investors few shelters from the storm. However, the market' s disappointing start to the 21st century may be good news for today' s growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 DISCUSSION OF PERFORMANCE John O'Toole, Portfolio Manager How did Dreyfus Investment Portfolios, MidCap Stock Portfolio perform relative to its benchmark? For the 12-month period ended December 31, 2002, the portfolio's Initial shares produced a -12.49% total return and its Service shares produced a -12.64% total return.(1) In comparison, the Standard & Poor's MidCap 400 Index (the "Index"), the portfolio's benchmark, returned -14.51% for the same period.(2) Most major stock market indices declined for the third year in a row. The midcap sector was no exception, although its decline was less pronounced than that of large-cap stocks. The portfolio produced higher returns than its benchmark, primarily because of its modest bias toward value-oriented stocks over growth stocks. 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? For most of the reporting period, investors avoided growth stocks because, in a struggling economy, they weren' t willing to pay a premium for future expectations of earnings growth. Instead, investors preferred value companies where earnings expectations and valuations were more modest. As a result, the portfolio's focus on value contributed positively to its performance relative to its benchmark, which does not favor a specific investment style. For example, we tended to avoid high-growth biotechnology stocks, investing instead in slower growing health insurance and generic pharmaceutical companies. Health insurers such as PacifiCare Health Systems and Oxford Health Plans experienced a strong pricing environment in 2002, bolstering profitability. Mylan Laboratories, a generic drug manufacturer, benefited from the public's desire to control health care costs with cheaper generics rather than brand name products. Midsize regional banks also saw improving results during the year by generally avoiding loans to borrowers that later declared bankruptcy, while lower interest rates reduced their deposit costs. Other strong performers included Garmin, a worldwide provider of navigation systems, most of which are enabled by global positioning system (GPS) technology, and Apollo Group, which through the University of Phoenix provides higher education to working adults. The portfolio' s results were negatively affected by economically sensitive companies in areas such as specialty chemicals and industrial manufacturers. In addition, companies that struggled with credit problems or were associated with bankrupt customers performed poorly. What is the portfolio's current strategy? We continue to remain focused on value stocks. As of December 31, 2002, we have taken notice that growth stocks generally performed better than value stocks during the fourth quarter of 2002 and, as a result, we may begin to shift the portfolio modestly towards growth companies to reflect what we believe to be attractive prices in that area if such a trend should continue. For the stock market to recover significantly, corporate capital spending must increase, particularly since consumer spending is showing signs of abating after a strong 2002. The last time capital spending boomed was in the late 1990s as companies readied for Y2K. More than three years have passed, suggesting that a new round of spending by the nation's corporations is more than past due as equipment becomes obsolete. We have started to position the portfolio to benefit from such a resumption of capital spending. January 15, 2003 (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, 2003, 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 PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, MidCap Stock Portfolio Initial shares and Service shares and the Standard & Poor's MidCap 400 Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02 Inception From Date 1 Year Inception - -------------------------------------------------------------------------------- INITIAL SHARES 5/1/98 (12.49)% (0.21)% SERVICE SHARES 5/1/98 (12.64)% (0.27)% THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO ON 5/1/98 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE STANDARD & POOR'S MIDCAP 400 INDEX (THE "INDEX") ON THAT DATE. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE PERFORMANCE FIGURES FOR EACH SHARE CLASS REFLECT CERTAIN EXPENSE REIMBURSEMENTS, WITHOUT WHICH THE PERFORMANCE OF EACH SHARE CLASS WOULD HAVE BEEN LOWER. IN ADDITION, THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES (AFTER ANY EXPENSE REIMBURSEMENTS). THE INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN INDEX MEASURING THE PERFORMANCE OF THE MIDSIZE COMPANY SEGMENT OF THE U.S. STOCK MARKET AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. The Portfolio
STATEMENT OF INVESTMENTS December 31, 2002 COMMON STOCKS--97.8% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL--12.5% Aztar 41,700 (a) 595,476 Bob Evans Farms 48,900 1,141,815 Borders Group 72,800 (a) 1,172,080 Brinker International 56,400 (a) 1,818,900 Furniture Brands International 34,400 (a) 820,440 GTECH Holdings 33,500 (a) 933,310 Gentex 56,000 (a) 1,771,840 International Game Technology 13,300 (a) 1,009,736 J. C. Penney (Holding Co.) 40,500 (b) 931,905 Jones Apparel Group 38,200 (a) 1,353,808 Magna International, Cl. A 16,200 909,630 Michaels Stores 67,900 (a) 2,125,270 Mohawk Industries 38,200 (a) 2,175,490 Neiman Marcus Group, Cl. A 29,000 (a) 881,310 Park Place Entertainment 183,900 (a) 1,544,760 Pier 1 Imports 59,300 1,122,549 Polaris Industries 23,600 1,382,960 Ross Stores 59,800 2,534,922 Staples 64,000 (a) 1,171,200 Whole Foods Market 29,500 (a) 1,555,535 Williams-Sonoma 59,500 (a,b) 1,615,425 Zale 33,100 (a) 1,055,890 29,624,251 CONSUMER STAPLES--4.2% Alberto-Culver, Cl. B 23,600 1,189,440 Bunge 51,200 1,231,872 Dial 51,200 1,042,944 Dole Food 51,100 1,664,838 Hershey Foods 21,600 1,456,704 J. M. Smucker 32,400 1,289,844 Pepsi Bottling Group 29,100 747,870 Sensient Technologies 58,000 1,303,260 9,926,772 ENERGY RELATED--9.8% AGL Resources 51,100 (b) 1,241,730 BJ Services 31,000 (a) 1,001,610 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY RELATED (CONTINUED) Black Hills 33,100 877,812 Devon Energy 19,900 913,410 ENSCO International 56,800 1,672,760 Energen 33,100 963,210 Equitable Resources 43,600 1,527,744 FMC Technologies 46,900 (a) 958,167 Helmerich & Payne 50,100 1,398,291 Houston Exploration 44,700 (a) 1,367,820 MDU Resources Group 25,500 658,155 Murphy Oil 30,600 1,311,210 Patina Oil & Gas 25,000 791,250 Questar 65,600 1,824,992 Tidewater 54,600 1,698,060 Valero Energy 45,500 1,680,770 Varco International 102,500 (a) 1,783,500 XTO Energy 61,700 1,523,990 23,194,481 HEALTH CARE--12.3% Apogent Technologies 78,300 (a) 1,628,640 Apria Healthcare Group 46,100 (a) 1,025,264 Beckman Coulter 31,100 918,072 Biosite 42,100 (a,b) 1,432,242 Caremark Rx 76,200 (a) 1,238,250 Charles River Laboratories International 31,200 (a) 1,200,576 Chiron 31,400 (a) 1,180,640 Coventry Health Care 42,200 (a) 1,225,066 First Health Group 66,100 (a) 1,609,535 Gilead Sciences 97,600 (a) 3,318,400 Health Net 85,600 (a) 2,259,840 Henry Schein 36,500 (a) 1,642,500 Hillenbrand Industries 23,600 1,140,116 ICN Pharmaceuticals 43,600 475,676 Millipore 27,500 (a) 935,000 Mylan Laboratories 69,900 2,439,510 Oxford Health Plans 57,500 (a,b) 2,095,875 STERIS 39,800 (a) 965,150 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE (CONTINUED) Sunrise Assisted Living 33,100 (a,b) 823,859 Varian Medical Systems 29,700 (a) 1,473,120 29,027,331 INTEREST SENSITIVE--19.5% Aetna 29,600 1,217,152 Associated Banc-Corp 68,100 2,311,314 Astoria Financial 69,300 1,881,495 Banknorth Group 97,700 2,208,020 Bear Stearns Cos. 22,400 1,330,560 Capital One Financial 25,700 (b) 763,804 City National 51,100 2,247,889 Commerce Bancorp 38,800 1,675,772 Compass Bancshares 72,500 2,267,075 Countrywide Financial 17,600 909,040 Dime Bancorp (Warrants) 19,900 (a) 2,408 Doral Financial 51,900 1,484,340 FTI Consulting 28,600 (a) 1,148,290 Federated Investors, Cl. B 46,000 1,167,020 First Tennessee National 39,900 (b) 1,434,006 First Virginia Banks 47,300 1,760,979 GreenPoint Financial 60,200 2,719,836 Hilb, Rogal & Hamilton 40,100 1,640,090 IPC Holdings 23,200 (a) 731,728 John Nuveen, Cl. A 44,600 1,130,610 Legg Mason 35,800 (b) 1,737,732 M&T Bank 14,600 1,158,510 MBIA 23,800 1,043,868 Marshall & Ilsley 61,900 1,694,822 New York Community Bancorp 49,700 1,435,336 North Fork Bancorporation 31,300 1,056,062 Old Republic International 52,400 1,467,200 PMI Group 65,700 1,973,628 Protective Life 36,400 1,001,728 Radian Group 54,700 2,032,105 RenaissanceRe Holdings 17,500 693,000 Wintrust Financial 30,200 945,864 46,271,283 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INTERNET RELATED--.8% Expedia, Cl. A 18,200 (a) 1,218,130 Overture Services 27,400 (a) 748,294 1,966,424 PRODUCER GOODS--11.9% American Power Conversion 43,300 (a) 655,995 Avery Dennison 22,900 1,398,732 Bemis 25,500 1,265,565 CSX 39,400 1,115,414 Cooper Industries, Cl. A 25,900 944,055 D. R. Horton 89,300 1,549,355 Eastman Chemical 25,500 937,635 Energizer Holdings 67,300 (a) 1,877,670 Harsco 36,500 1,163,985 Hughes Supply 26,000 710,320 ITT Industries 10,800 655,452 J.B. Hunt Transport Services 31,100 (a) 911,230 Lennar 39,300 2,027,880 Lubrizol 52,000 1,586,000 PPG Industries 17,100 857,565 Pactiv 66,100 (a) 1,444,946 Praxair 18,300 1,057,191 Precision Castparts 56,300 1,365,275 RPM International 105,500 1,612,040 Rayonier 28,800 1,303,200 Teleflex 29,000 1,243,810 Valspar 20,200 892,436 York International 60,200 1,539,314 28,115,065 SERVICES--9.9% Affiliated Computer Services, Cl. A 51,400 (a,b) 2,706,210 Apollo Group, Cl. A 29,000 (a,b) 1,276,000 DST Systems 39,800 (a) 1,414,890 Deluxe 30,800 1,296,680 Education Management 23,600 (a) 887,360 Entercom Communications 32,900 (a) 1,543,668 Jack Henry & Associates 47,300 569,492 Lee Enterprises 36,000 1,206,720 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SERVICES (CONTINUED) Moody's 15,300 631,737 Pharmaceutical Product Development 39,800 (a) 1,164,946 Rent-A-Center 18,200 (a) 909,090 Republic Services 100,200 (a) 2,102,196 SunGard Data Systems 64,700 (a) 1,524,332 Valassis Communications 36,500 (a) 1,074,195 Washington Post, Cl. B 3,700 2,730,600 Westwood One 63,700 (a) 2,379,832 23,417,948 TECHNOLOGY--12.1% Adobe Systems 34,900 869,359 Advanced Fibre Communications 84,900 (a) 1,416,132 Black Box 19,200 860,160 Cadence Design Systems 99,900 (a) 1,177,821 Cree 69,300 (a,b) 1,133,055 Diebold 49,000 2,019,780 Electronic Arts 24,400 (a) 1,214,388 FLIR Systems 26,200 (a) 1,278,560 Garmin 35,200 (a) 1,031,360 Integrated Circuit Systems 41,900 (a) 764,675 L-3 Communications Holdings 39,100 (a,b) 1,755,981 Lexmark International 12,700 (a) 768,350 Microchip Technology 112,400 2,748,180 Plantronics 29,700 (a) 449,361 QLogic 35,300 (a) 1,218,203 Reynolds & Reynolds, Cl. A 49,500 1,260,765 SanDisk 66,700 (a) 1,354,010 Semtech 49,000 (a) 535,080 Storage Technology 69,300 (a) 1,484,406 Sybase 72,800 (a) 975,520 Symantec 75,500 (a) 3,053,975 Varian Semiconductor Equipment Associates 22,500 (a) 534,622 Xilinx 32,300 (a) 665,380 28,569,123 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES--4.8% Alliant Energy 52,900 875,495 Energy East 72,100 1,592,689 Entergy 32,700 1,490,793 FirstEnergy 21,300 702,261 IDACORP 43,600 1,082,588 Level 3 Communications 109,600 (a,b) 537,040 Pinnacle West Capital 18,200 620,438 SCANA 65,600 2,030,976 Wisconsin Energy 100,300 2,527,560 11,459,840 TOTAL COMMON STOCKS (cost $234,091,011) 231,572,518 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--2.4% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT; Greenwich Capital Markets, Tri-Party Repurchase Agreement, 1.05%, dated 12/31/2002, due 1/2/2003, in the amount of $5,645,329 (fully collateralized by $3,365,000 U.S. Treasury Bonds, 11.25%, 2/15/2015, value $5,761,511) (cost $5,645,000) 5,645,000 5,645,000 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED--4.5% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANY; Dreyfus Institutional Preferred Money Market Fund (cost $10,613,628) 10,613,628 10,613,628 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $250,349,639) 104.7% 247,831,146 LIABILITIES, LESS CASH AND RECEIVABLES (4.7%) (11,124,217) NET ASSETS 100.0% 236,706,929 (A) NON-INCOME PRODUCING. (B) ALL OR A PORTION OF THESE SECURITIES ARE ON LOAN. AT DECEMBER 31, 2002, THE TOTAL MARKET VALUE OF THE PORTFOLIO'S SECURITIES ON LOAN IS $10,199,886 AND THE TOTAL MARKET VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS $10,613,628. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments--Note 1(b) (including securities loaned valued at $10,199,886) 250,349,639 247,831,146 Cash 51,990 Receivable for investment securities sold 3,932,839 Dividends and interest receivable 127,225 Prepaid expenses 1,739 251,944,939 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 162,565 Liability for securities loaned--Note 1(b) 10,613,628 Payable for investment securities purchased 3,941,656 Payable for shares of Beneficial Interest redeemed 450,325 Accrued expenses 69,836 15,238,010 - -------------------------------------------------------------------------------- NET ASSETS ($) 236,706,929 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 272,286,237 Accumulated undistributed investment income--net 19,570 Accumulated net realized gain (loss) on investments (33,080,385) Accumulated net unrealized appreciation (depreciation) on investments (2,518,493) - -------------------------------------------------------------------------------- NET ASSETS ($) 236,706,929 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 218,386,985 18,319,944 Shares Outstanding 18,142,725 1,524,752 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.04 12.02 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $3,845 foreign taxes withheld at source) 2,469,498 Interest 145,043 Income from securities lending 100,792 TOTAL INCOME 2,715,333 EXPENSES: Investment advisory fee--Note 3(a) 1,748,357 Prospectus and shareholders' reports 93,760 Professional fees 61,940 Custodian fees--Note 3(b) 50,662 Distribution fees--Note 3(b) 38,380 Shareholder servicing costs--Note 3(b) 24,926 Trustees' fees and expenses--Note 3(c) 1,857 TOTAL EXPENSES 2,019,882 Less--waiver of fees due to undertaking--Note 3(a) (15,122) NET EXPENSES 2,004,760 INVESTMENT INCOME--NET 710,573 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (23,480,437) Net unrealized appreciation (depreciation) on investments (13,210,329) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (36,690,766) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (35,980,193) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ----------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 710,573 294,464 Net realized gain (loss) on investments (23,480,437) (9,119,810) Net unrealized appreciation (depreciation) on investments (13,210,329) 8,706,299 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (35,980,193) (119,047) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (657,623) (291,394) Service shares (41,127) (11,519) TOTAL DIVIDENDS (698,750) (302,913) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 101,318,850 116,445,355 Service shares 13,400,255 11,203,275 Dividends reinvested: Initial shares 657,623 291,394 Service shares 41,127 11,519 Cost of shares redeemed: Initial shares (30,248,497) (11,777,128) Service shares (2,575,825) (1,744,659) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 82,593,533 114,429,756 TOTAL INCREASE (DECREASE) IN NET ASSETS 45,914,590 114,007,796 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 190,792,339 76,784,543 END OF PERIOD 236,706,929 190,792,339 Undistributed investment income--net 19,570 3,241 Year Ended December 31, ----------------------------------- 2002 2001 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 7,374,719 8,633,138 Shares issued for dividends reinvested 54,017 21,652 Shares redeemed (2,404,341) (910,014) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 5,024,395 7,744,776 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 1,006,141 842,364 Shares issued for dividends reinvested 3,385 856 Shares redeemed (193,139) (134,890) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 816,387 708,330 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.
Year Ended December 31, ---------------------------------------------------------------- INITIAL SHARES 2002 2001 2000 1999 1998(a) - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 13.80 14.29 13.44 12.16 12.50 Investment Operations: Investment income--net .04(b) .03(b) .05(b) .03(b) .02 Net realized and unrealized gain (loss) on investments (1.76) (.50) 1.05 1.28 (.34) Total from Investment Operations (1.72) (.47) 1.10 1.31 (.32) Distributions: Dividends from investment income--net (.04) (.02) (.03) (.03) (.02) Dividends from net realized gain on investments -- -- (.13) -- -- Dividends in excess of net realized gain on investments -- -- (.09) -- -- Total Distributions (.04) (.02) (.25) (.03) (.02) Net asset value, end of period 12.04 13.80 14.29 13.44 12.16 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%) (12.49) (3.26) 8.28 10.82 (2.53)(c) - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .85 .89 .98 .97 .67(c) Ratio of net investment income to average net assets .32 .24 .34 .26 .18(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- .06 .49 .60(c) Portfolio Turnover Rate 69.15 76.37 102.89 77.73 75.74(c) - --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 218,387 181,028 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) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
Year Ended December 31, --------------------------------------------- SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.78 14.29 14.29 Investment Operations: Investment income--net .02(b) .01(b) -- Net realized and unrealized gain (loss) on investments (1.75) (.50) -- Total from Investment Operations (1.73) (.49) -- Distributions: Dividends from investment income--net (.03) (.02) -- Net asset value, end of period 12.02 13.78 14.29 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (12.64) (3.36) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.00 1.00 -- Ratio of net investment income to average net assets .15 .07 -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .10 .17 -- Portfolio Turnover Rate 69.15 76.37 102.89 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 18,320 9,764 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering twelve series, including the MidCap Stock Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide investment results that are greater than the total return performance of publicly-traded common stocks of medium-size domestic companies in the aggregate, as represented by the Standard & Poor's MidCap 400 Index. The Dreyfus Corporation (the "Manager" ) serves as the portfolio's investment adviser. The Manager 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 the Manager, 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 $594 during the period ended December 31, 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 the Manager as shown in the portfolio's Statement of Investments. The portfolio will be entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction. 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 the Manager, subject to the seller's agreement to repurchase and the portfolio's agreement to resell such securities at a mutually agreed upon price. Securities purchased The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $19,570, accumulated capital losses $29,938,221 and unrealized depreciation $3,055,330. In addition, the portfolio had $2,605,327 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, $7,978,482 of the carryover expires in fiscal 2009 and $21,959,739 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal years ended December 31, 2002 and December 31, 2001, respectively, were as follows: ordinary income $698,750 and $302,913. During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $4,506 and decreased paid-in capital by the same amount. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 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 the Manager, 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. The Manager has agreed, from January 1, 2002 to December 31, 2003, 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 December 31, 2002, the Manager waived receipt of fees of $15,122, pursuant to the undertaking. The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended December 31, 2002, Service shares were charged $38,380 pursuant to the Plan. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $450 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $50,662 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 December 31, 2002, amounted to $240,408,273 and $155,575,146, respectively. At December 31, 2002, the cost of investments for federal income tax purposes was $250,886,476; accordingly, accumulated net unrealized depreciation on investments was $3,055,330, consisting of $14,997,837 gross unrealized appreciation and $18,053,167 gross unrealized depreciation. The Portfolio REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, MidCap Stock Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, MidCap Stock Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2002 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, MidCap Stock Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 IMPORTANT TAX INFORMATION (Unaudited) For federal tax purposes, the portfolio hereby designates 100% of the ordinary dividends paid during the fiscal year ended December 31, 2002 as qualifying for the corporate dividends received deduction. The Portfolio BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (59) Chairman of the Board (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- Clifford L. Alexander, Jr. (69) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- Lucy Wilson Benson (75) Board Member (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980- Present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps, Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 David W. Burke (66) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- Whitney I. Gerard (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chadbourne & Parke LLP, Partner NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- Arthur A. Hartman (76) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * First NIS Regional Fund (ING/Barings Management) and New Russia Fund, Chairman * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- George L. Perry (68) Board Member (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Brookings Institution, Economist and Senior Fellow OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. The Portfolio OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 57 years old and has been an employee of the Manager since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 49 years old and has been an employee of the Manager since January 2000. Prior to joining the Manager, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 53 years old and has been an employee of the Manager since July 1980. JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 12 investment companies (comprised of 65 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Manager since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 200 portfolios) managed by the Manager. He is 42 years old and has been an employee of the Manager since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of the Manager, and an officer of 18 investment companies (comprised of 77 portfolios) managed by the Manager. He is 34 years old and has been an employee of the Manager since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 38 years old and has been an employee of the Manager since October 1988. ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 35 years old and has been an employee of the Manager since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by the Manager. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc The Portfolio 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. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 174AR1202 Dreyfus Transfer, Inc. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 178AR1202 Dreyfus Investment Portfolios, Technology Growth Portfolio ANNUAL REPORT December 31, 2002 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 Portfolio Performance 8 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 14 Financial Highlights 16 Notes to Financial Statements 23 Report of Independent Auditors 24 Board Members Information 26 Officers of the Fund FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Technology Growth Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Investment Portfolios, Technology Growth Portfolio, covering the 12-month period from January 1, 2002 through December 31, 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. In 2002, investors witnessed the third consecutive year of negative returns for the U.S. stock market. Moreover, with the S&P 500 Index down dramatically since its peak in mid-2000, this bear market ranks as the worst since the 1970s. Virtually every industry group, capitalization range and investment style suffered losses in 2002, leaving investors few shelters from the storm. However, the market's disappointing start to the 21st century may be good news for today's growth-oriented investors as, historically, growth opportunities have generally been greatest when the economic news is bad, prices are down and investors shun stocks. At the same time, no one can say for sure what direction the markets will take or which investment style will prevail, which is why we continue to encourage you to maintain a long-term perspective and an ongoing dialogue with your financial advisor. Investors with the patience and discipline to weather today's market uncertainty may reap the potential benefits of the better economic times that we believe lie ahead. Thank you for your continued confidence and support. Sincerely, /s/Stephen E. Canter Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation January 15, 2003 DISCUSSION OF PERFORMANCE Mark Herskovitz, Primary Portfolio Manager How did Dreyfus Investment Portfolios, Technology Growth Portfolio perform relative to its benchmarks? For the 12-month period ended December 31, 2002, the portfolio's Initial shares produced a -39.41% total return, and its Service shares produced a -39.58% total return.(1) The portfolio's benchmarks, the Morgan Stanley High Technology 35 Index (the "MS High Tech 35 Index") and the Standard & Poor's 500 Composite Stock Price Index ("S& P 500 Index"), produced total returns of -43.11% and - -22.09%, respectively, over the same period.(2,3) Technology stocks continued to suffer from poor business fundamentals in a persistently weak economy. However, the rate of technology companies' earnings declines appears to have slowed, and technology stocks rallied near year-end, which we believe suggest that business fundamentals may be poised to improve. While we certainly are never satisfied with negative returns of this magnitude, the portfolio outperformed the MS High Tech 35 Index under difficult market conditions, which we attribute to our focus on high-quality businesses. What is the portfolio's investment approach? The portfolio seeks capital appreciation by investing 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. The more attractive sectors are overweighted. 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 The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) 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. 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? In addition to the adverse effects of a sluggish economy, which were particularly severe for many technology companies, the portfolio's holdings were hurt by negative investor sentiment during the reporting period. A number of high-profile corporate scandals and heightened tensions related to a possible war in Iraq caused many investors to shun growth-oriented stocks such as technology companies, in favor of relatively defensive investments. In this highly challenging investment environment, the portfolio's holdings of semiconductor manufacturers fared particularly poorly. Although we believe that holdings such as Taiwan Semiconductor and United Microelectronics will benefit over the long term from a trend toward greater outsourcing of microchip manufacturing, customer demand remained low in 2002, and their stock prices fell. On the other hand, some holdings fared relatively well. In the context of the 2002 stock market, however, performance could be measured by how limited a technology stock's losses were, not by how much it gained. Well-established, high-quality companies such as Dell Computer, Microsoft and eBay ranked among the portfolio's best performers. Dell saw its business grow in a shrinking market as it successfully launched new products. Microsoft' s enormous cash reserves of approximately $40 billion helped it withstand economic weakness. And eBay continued to attract new participants to its online auction markets. What is the portfolio's current strategy? We have continued to maintain the portfolio's focus on high-quality technology companies such as Cisco Systems, KLA-Tencor and Intel that we believe will emerge strongly from this period of protracted weakness. We have also identified a number of smaller businesses, including telecommunications provider UT Starcom, which we expect to benefit from domination of niche markets. As of year-end, we have seen some encouraging signs of renewed strength in a number of technology-related businesses. For example, it appears that many personal computers put into service before Y2K are now becoming obsolete, suggesting that demand for computer hardware may improve. We are also seeing the implementation of advances in cell phone technology that may require consumers to upgrade their handsets. While a return to the outsized gains of the late 1990s is highly unlikely, we are hopeful that cyclical developments such as these will translate into better performance for the portfolio in 2003. January 15, 2003 The portfolio's share price is likely to be more volatile than that of portfolios that do not concentrate in one sector. The technology sector involves special risks, such as the faster rate of change and obsolescence of technological advances, and has been among the most volatile segments of the market. (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 NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY HIGH TECHNOLOGY 35 INDEX IS AN UNMANAGED, EQUAL DOLLAR-WEIGHTED INDEX OF 35 STOCKS FROM THE ELECTRONICS-BASED SUBSECTORS. (3) SOURCE: LIPPER INC. -- REFLECTS 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 PORTFOLIO PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Technology Growth Portfolio Initial shares and Service shares with the Standard & Poor's 500 Composite Stock Price Index and the Morgan Stanley High Technology 35 Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 12/31/02 Inception From Date 1 Year Inception - -------------------------------------------------------------------------------- INITIAL SHARES 8/31/99 (39.41)% (20.72)% SERVICE SHARES 8/31/99 (39.58)% (20.89)% THE DATA FOR SERVICE SHARES PRIMARILY REPRESENTS THE RESULTS OF INITIAL SHARES. ACTUAL SERVICE SHARES' AVERAGE ANNUAL TOTAL RETURN AND HYPOTHETICAL GROWTH RESULTS WOULD HAVE BEEN LOWER. SEE NOTES BELOW. ((+)) SOURCE: LIPPER INC. ((+)(+)) SOURCE: BLOOMBERG L.P. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE GRAPH AND TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON PORTFOLIO DISTRIBUTIONS OR THE REDEMPTION OF PORTFOLIO SHARES. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. THE GRAPH COMPARES A $10,000 INVESTMENT MADE IN INITIAL AND SERVICE SHARES OF DREYFUS INVESTMENT PORTFOLIOS, TECHNOLOGY GROWTH PORTFOLIO ON 8/31/99 (INCEPTION DATE OF INITIAL SHARES) TO A $10,000 INVESTMENT MADE IN THE MORGAN STANLEY HIGH TECHNOLOGY 35 INDEX (THE "MS HIGH TECH 35 INDEX") AND THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX (THE "S&P 500 INDEX") ON THAT DATE. THE PORTFOLIO'S INITIAL SHARES ARE NOT SUBJECT TO A RULE 12B-1 FEE. THE PORTFOLIO'S SERVICE SHARES ARE SUBJECT TO A 0.25% ANNUAL RULE 12B-1 FEE. THE PERFORMANCE FIGURES FOR SERVICE SHARES REFLECT THE PERFORMANCE OF THE PORTFOLIO'S INITIAL SHARES FROM THEIR INCEPTION DATE THROUGH DECEMBER 30, 2000, AND THE PERFORMANCE OF THE PORTFOLIO'S SERVICE SHARES FROM DECEMBER 31, 2000 (INCEPTION DATE OF SERVICE SHARES) TO DECEMBER 31, 2002 (BLENDED PERFORMANCE FIGURES). THE BLENDED PERFORMANCE FIGURES HAVE NOT BEEN ADJUSTED TO REFLECT THE HIGHER OPERATING EXPENSES OF THE SERVICE SHARES. IF THESE EXPENSES HAD BEEN REFLECTED, THE BLENDED PERFORMANCE FIGURES WOULD HAVE BEEN LOWER. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE PORTFOLIO FEES AND EXPENSES. THE MS HIGH TECH 35 INDEX IS AN UNMANAGED, EQUAL DOLLAR-WEIGHTED INDEX OF 35 STOCKS FROM THE ELECTRONICS-BASED SUBSECTORS. THE S&P 500 INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. NEITHER OF THE FOREGOING INDICES TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. FURTHER INFORMATION RELATING TO PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT The Portfolio
December 31, 2002 STATEMENT OF INVESTMENTS COMMON STOCKS--94.3% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ BIOTECHNOLOGY--4.5% Amgen 25,700 (a) 1,242,338 Genentech 41,500 (a) 1,376,140 2,618,478 COMPUTER SERVICES--6.2% Automatic Data Processing 56,000 2,198,000 First Data 41,000 1,451,810 3,649,810 DATA STORAGE--6.7% EMC 163,000 (a) 1,000,820 Emulex 52,000 (a) 964,600 Network Appliance 133,500 (a) 1,335,000 QLogic 18,000 (a) 621,180 3,921,600 HARDWARE--8.0% Dell Computer 91,000 (a) 2,433,340 International Business Machines 13,000 1,007,500 Lexmark International 20,600 (a) 1,246,300 4,687,140 INTERNET--4.3% Apollo Group, Cl. A 25,700 (a) 1,130,800 eBay 20,600 (a,b) 1,397,092 2,527,892 NETWORKING--3.8% Cisco Systems 167,500 (a) 2,194,250 SEMICONDUCTORS--18.2% Intel 118,700 1,848,159 Linear Technology 77,500 1,993,300 Microchip Technology 52,500 1,283,625 STMicroelectronics, ADR 51,000 995,010 Taiwan Semiconductor 2,006,290 (a) 2,466,608 Texas Instruments 65,000 975,650 United Microelectronics, ADR 332,000 (a) 1,115,520 10,677,872 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SEMICONDUCTOR EQUIPMENT--6.1% Applied Materials 100,000 (a) 1,303,000 KLA-Tencor 33,500 (a) 1,184,895 Novellus Systems 37,500 (a) 1,053,000 3,540,895 SOFTWARE--23.8% Adobe Systems 38,500 959,035 BEA Systems 167,000 (a) 1,915,490 Electronic Arts 24,700 (a,b) 1,229,319 Microsoft 56,000 (a) 2,895,200 Oracle 174,000 (a) 1,879,200 PeopleSoft 49,000 (a) 896,700 Rational Software 137,500 (a) 1,428,625 Symantec 50,500 (a) 2,042,725 Take-Two Interactive Software 30,000 (a) 704,700 13,950,994 TELECOMMUNICATION EQUIPMENT--8.1% Harris 18,000 473,400 JDS Uniphase 125,000 (a) 308,750 Nokia Oyj, ADR 82,200 1,274,100 UTStarcom 136,000 (a) 2,696,880 4,753,130 UTILITIES--4.6% SBC Communications 54,000 1,463,940 Verizon Communications 31,700 1,228,375 2,692,315 TOTAL COMMON STOCKS (cost $70,953,656) 55,214,376 The Portfolio STATEMENT OF INVESTMENTS (CONTINUED) OTHER INVESTMENTS--8.3% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 1,619,906 (c) 1,619,906 Dreyfus Institutional Cash Advantage Plus Fund 1,619,906 (c) 1,619,906 Dreyfus Institutional Preferred Plus Money Market Fund 1,619,906 (c) 1,619,906 TOTAL OTHER INVESTMENTS (cost $4,859,718) 4,859,718 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--2.5% - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANY; Dreyfus Institutional Preferred Money Market Fund (cost $1,462,400) 1,462,400 1,462,400 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $77,275,774) 105.1% 61,536,494 LIABILITIES, LESS CASH AND RECEIVABLES (5.1%) (2,963,566) NET ASSETS 100.0% 58,572,928 (A) NON-INCOME PRODUCING. (B) A PORTION OF THESE SECURITIES ARE ON LOAN. AT DECEMBER 31, 2002, THE TOTAL MARKET VALUE OF THE PORTFOLIO'S SECURITIES ON LOAN IS $1,416,124 AND THE TOTAL MARKET VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS $1,462,400. (C) INVESTMENTS IN AFFILIATED MONEY MARKET FUNDS--SEE NOTE 3(D). SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES December 31, 2002 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments (including securities loaned valued at $1,416,124) 77,275,774 61,536,494 Cash 114,726 Cash denominated in foreign currencies 2,306 2,312 Dividends and interest receivable 15,836 Prepaid expenses 1,321 61,670,689 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 44,733 Payable for investment securities purchased 1,541,620 Liability for securities loaned--Note 1(c) 1,462,400 Payable for shares of Beneficial Interest redeemed 4,278 Accrued expenses 44,730 3,097,761 - -------------------------------------------------------------------------------- NET ASSETS ($) 58,572,928 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 199,266,527 Accumulated net realized gain (loss) on investments (124,954,325) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions (15,739,274) - -------------------------------------------------------------------------------- NET ASSETS ($) 58,572,928 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 52,785,888 5,787,040 Shares Outstanding 9,179,314 1,012,661 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 5.75 5.71 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Year Ended December 31, 2002 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $15,932 foreign taxes withheld at source) 177,666 Interest 93,953 Income from securities lending 8,227 TOTAL INCOME 279,846 EXPENSES: Investment advisory fee--Note 3(a) 584,402 Custodian fees--Note 3(b) 38,416 Prospectus and shareholders' reports 33,535 Professional fees 30,767 Distribution fees--Note 3(b) 17,373 Trustees' fees and expenses--Note 3(c) 1,006 Shareholder servicing costs--Note 3(b) 6,009 TOTAL EXPENSES 711,508 INVESTMENT (LOSS)--NET (431,662) - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions: Long transactions (36,204,082) Short sale transactions (22,829) Net realized gain (loss) on forward currency exchange contracts 212 NET REALIZED GAIN (LOSS) (36,226,699) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (5,065,380) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (41,292,079) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (41,723,741) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended December 31, ----------------------------------- 2002 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss)--Net (431,662) (173,536) Net realized gain (loss) on investments (36,226,699) (59,304,618) Net unrealized appreciation (depreciation) on investments (5,065,380) 10,806,122 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (41,723,741) (48,672,032) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 16,271,555 22,232,936 Service shares 3,358,265 9,773,243 Cost of shares redeemed: Initial shares (20,523,037) (18,579,292) Service shares (1,952,682) (1,159,311) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (2,845,899) 12,267,576 TOTAL INCREASE (DECREASE) IN NET ASSETS (44,569,640) (36,404,456) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 103,142,568 139,547,024 END OF PERIOD 58,572,928 103,142,568 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 2,099,395 2,121,700 Shares redeemed (2,930,315) (1,945,315) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (830,920) 176,385 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 418,682 995,519 Shares redeemed (268,398) (133,177) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 150,284 862,342 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Year Ended December 31, --------------------------------------------------------------- INITIAL SHARES 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.49 14.19 19.45 12.50 Investment Operations: Investment (loss)--net (.04)(b) (.02)(b) (.06)(b) (.02)(b) Net realized and unrealized gain (loss) on investments (3.70) (4.68) (5.18) 6.97 Total from Investment Operations (3.74) (4.70) (5.24) 6.95 Distributions: Dividends from net realized gain on investments -- -- (.02) -- Net asset value, end of period 5.75 9.49 14.19 19.45 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (39.41) (33.12) (26.98) 55.60(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .89 .87 .84 .36(c) Ratio of net investment (loss) to average net assets (.53) (.15) (.30) (.14)(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- -- .09(c) Portfolio Turnover Rate 91.47 86.25 121.88 20.01(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 52,786 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.
Year Ended December 31, --------------------------------------------- SERVICE SHARES 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.45 14.19 14.19 Investment Operations: Investment (loss)--net (.05)(b) (.05)(b) -- Net realized and unrealized gain (loss) on investments (3.69) (4.69) -- Total from Investment Operations (3.74) (4.74) -- Net asset value, end of period 5.71 9.45 14.19 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (39.58) (33.40) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.12 1.20 -- Ratio of net investment (loss) to average net assets (.77) (.60) -- Portfolio Turnover Rate 91.47 86.25 121.88 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 5,787 8,151 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company, operating as a series company currently offering twelve series, including the 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 (the "Manager") serves as the portfolio's investment adviser. The Manager 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 the Manager, 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 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 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 $153 during the period ended December 31, 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 (CONTINUED) 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 the Manager as shown in the portfolio's Statement of Investments. The portfolio will be entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction. 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. (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. At December 31, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $119,673,831 and unrealized depreciation $19,559,981. In addition, the portfolio had $1,459,787 of capital losses realized after October 31, 2002, which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2002. If not applied, $10,860,287 of the carryover expires in fiscal 2008, $68,467,967 expires in fiscal 2009 and $40,345,577 expires in fiscal 2010. During the period ended December 31, 2002, as a result of permanent book to tax differences, the portfolio increased accumulated undistributed investment income-net by $431,662, decreased accumulated net realized gain (loss) on investments by $1,121 and decreased paid-in capital by $430,541. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 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 the Manager, 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 December 31, 2002, Service shares were charged $17,373 pursuant to the Plan. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $205 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended December 31, 2002, the portfolio was charged $38,416 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 may invest 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. During the period ended December 31, 2002, the portfolio derived $82,360 in income from these investments, which is included in dividend income in the portfolio's Statement of Operations. (E) During the period ended December 31, 2002, the portfolio incurred total brokerage commissions of $312,726 of which $1,035 was paid to Harborside Plus Inc., a wholly-owned subsidiary of Mellon Financial Corporation. NOTE 4--Securities Transactions: The following summarizes the aggregate amount of purchases and sales of investment securities and securities sold short, excluding short-term securities and forward currency exchange contracts, during the period ended December 31, 2002: Purchases ($) Sales ($) - -------------------------------------------------------------------------------- Long transactions 66,772,447 62,270,260 Short sale transactions 583,162 560,333 TOTAL 67,355,609 62,830,593 The portfolio is engaged in short-selling which obligates the portfolio to replace the security borrowed by purchasing the security at current market value. The portfolio would incur a loss if the price of the security increases between the date of the short sale and the date on which the portfolio replaces the borrowed security. The portfolio would realize a gain if the price of the security declines between those dates. Until the portfolio replaces the borrowed security, the portfolio will maintain daily a segregated account with a broker or custodian of permissable liquid assets sufficient to cover its short position. At December 31, 2002, there were no securities sold short outstanding 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (CONTINUED) contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counter party nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. At December 31, 2002, there were no forward currency exchange contracts outstanding. At December 31, 2002, the cost of investments for federal income tax purposes was $81,096,475; accordingly, accumulated net unrealized depreciation on investments was $19,559,981, consisting of $2,035,365 gross unrealized appreciation and $21,595,346 gross unrealized depreciation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Investment Portfolios, Technology Growth Portfolio We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Technology Growth Portfolio (one of the funds comprising Dreyfus Investment Portfolios) as of December 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 2002 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Technology Growth Portfolio at December 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the indicated periods, in conformity with accounting principles generally accepted in the United States. New York, New York February 7, 2003 The Portfolio BOARD MEMBERS INFORMATION (Unaudited) JOSEPH S. DIMARTINO (59) CHAIRMAN OF THE BOARD (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Levcor International, Inc., an apparel fabric processor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191 -------------- CLIFFORD L. ALEXANDER (69) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-Present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70 -------------- LUCY WILSON BENSON (75) BOARD MEMBER (1998) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Benson and Associates, consultants to business and government (1980 - present) OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * The International Executive Services Corps., Director * Citizens Network for Foreign Affairs, Vice Chairman * Council of Foreign Relations, Member * Lafayette College Board of Trustees, Vice Chairman Emeritus NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44 DAVID W. BURKE (66) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * John F. Kennedy Library Foundation, Director * U.S.S. Constitution Museum, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87 -------------- WHITNEY I. GERARD (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Partner of Chadbourne & Parke LLP NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ARTHUR A. HARTMAN (76) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia Fund * Advisory Council Member to Barings-Vostok OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * Ford Meter Box Corporation, Board Member * APCO Associates, Inc., Senior Consultant NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- GEORGE L. PERRY (68) BOARD MEMBER (2003) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Economist and Senior Fellow at Brookings Institution OTHER BOARD MEMBERSHIPS AND AFFILIATIONS: * State Farm Mutual Automobile Association, Director * State Farm Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. The Portfolio OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 57 years old and has been an employee of the Manager since May 1995. STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002. Chief Investment Officer, Vice Chairman and a Director of the Manager, and an officer of 94 investment companies (comprised of 188 portfolios) managed by the Manager. Mr. Byers also is an Officer, Director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 49 years old and has been an employee of the Manager since January 2000. Prior to joining the Manager, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 53 years old and has been an employee of the Manager since July 1980. JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 12 investment companies (comprised of 65 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Manager since October 1990. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 200 portfolios) managed by the Manager. He is 42 years old and has been an employee of the Manager since October 1991. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director - Mutual Fund Accounting of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1985. ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Taxable Fixed Income Funds of the Manager, and an officer of 18 investment companies (comprised of 77 portfolios) managed by the Manager. He is 34 years old and has been an employee of the Manager since November 1992. ROBERT S. ROBOL, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 38 years old and has been an employee of the Manager since October 1988. ROBERT SVAGNA, ASSISTANT TREASURER SINCE DECEMBER 2002. Senior Accounting Manager - Equity Funds of the Manager, and an officer of 28 investment companies (comprised of 119 portfolios) managed by the Manager. He is 35 years old and has been an employee of the Manager since November 1990. KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 95 investment companies (comprised of 204 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since June 1993. WILLIAM GERMENIS, ANTI-MONEY LAUNDERING COMPLIANCE OFFICER SINCE SEPTEMBER 2002. Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 90 investment companies (comprised of 199 portfolios) managed by the Manager. He is 32 years old and has been an employee of the Distributor since October 1998. Prior to joining the Distributor, he was a Vice President of Compliance Data Center, Inc The Portfolio 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. 200 Park Avenue New York, NY 10166 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) 2003 Dreyfus Service Corporation 175AR1202 EX-99 3 graphs-172.txt TABLE FOR GRAPHS IN PRESIDNENT'S LETTER Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Core Bond Portfolio Initial shares and Service shares and the Merrill Lynch Domestic Master Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolios, Core Bond Portfolio Core Bond Portfolio Merrill Lynch PERIOD (Initial shares) (Service shares) Domestic Master Index * 5/1/00 10,000 10,000 10,000 12/31/00 10,861 10,861 10,956 12/31/01 11,355 11,346 11,868 12/31/02 12,116 12,116 13,103 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Core Value Portfolio Initial shares and Service shares and the Standard & Poor's 500/BARRA Value Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolios, PERIOD Core Value Portfolio Core Value Portfolio Standard & Poor's 500/ (Initial shares) (Service shares) BARRA Value Index * 5/1/98 10,000 10,000 10,000 12/31/98 9,441 9,441 10,160 12/31/99 11,304 11,304 11,452 12/31/00 12,667 12,667 12,149 12/31/01 12,404 12,404 10,726 12/31/02 9,516 9,513 8,489 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, MidCap Stock Portfolio Initial shares and Service shares and the Standard & Poor's MidCap 400 Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolios, Standard & Poor's PERIOD MidCap Stock Portfolio MidCap Stock Portfolio MidCap 400 Index * (Initial shares) (Service shares) 5/1/98 10,000 10,000 10,000 12/31/98 9,747 9,747 10,537 12/31/99 10,801 10,801 12,088 12/31/00 11,695 11,695 14,205 12/31/01 11,314 11,302 14,119 12/31/02 9,901 9,873 12,070 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Technology Growth Portfolio Initial shares and Service shares with the Standard & Poor's 500 Composite Stock Price Index and the Morgan Stanley High Technology 35 Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolios, Standard & Poor's 500 Morgan Stanley Technology Growth Portfolio Technology Growth Portfoli Composite Stock High Technology PERIOD (Initial shares) (Service shares) Price Index * 35 Index ** 8/31/99 10,000 10,000 10,000 10,000 12/31/99 15,560 15,560 11,172 15,431 12/31/00 11,362 11,362 10,155 11,215 12/31/01 7,599 7,567 8,949 8,533 12/31/02 4,604 4,572 6,972 4,854 * Source: Lipper Inc. ** Source: Bloomberg L.P.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Founders Growth Portfolio Initial shares and Service shares and the Standard & Poor's 500/BARRA Growth Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolios, Founders Growth Portfolio Founders Growth Portfolio Standard & Poor's 500 PERIOD (Initial shares) (Service shares) / BARRA Growth Index * 9/30/98 10,000 10,000 10,000 12/31/98 12,720 12,720 12,453 12/31/99 17,682 17,682 15,971 12/31/00 13,191 13,191 12,445 12/31/01 10,549 10,531 10,860 12/31/02 7,569 7,561 8,298 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Founders International Equity Portfolio Initial shares and Service shares and the Morgan Stanley Capital International World ex U.S. Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolio Morgan Stanley Founders International Founders International Capital International Equity Portfolio Equity Portfolio World ex U.S. Index * PERIOD (Initial shares) (Service shares) 9/30/98 10,000 10,000 10,000 12/31/98 11,488 11,488 12,046 12/31/99 18,460 18,460 15,410 12/31/00 15,246 15,246 13,350 12/31/01 10,739 10,748 10,493 12/31/02 7,823 7,823 8,835 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Founders Passport Portfolio Initial shares and Service shares and the Morgan Stanley Capital International World ex U.S. Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolios, Morgan Stanley Founders Passport Portfolio Founders Passport Portfolio Capital International PERIOD (Initial shares) (Service shares) World ex U.S. Index * 9/30/98 10,000 10,000 10,000 12/31/98 11,579 11,579 12,046 12/31/99 20,385 20,385 15,410 12/31/00 15,134 15,134 13,350 12/31/01 10,493 10,493 10,493 12/31/02 8,875 8,875 8,835 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Japan Portfolio Initial shares and Service shares and the Morgan Stanley Capital International Japan Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolios, Morgan Stanley Japan Portfolio Japan Portfolio Capital International PERIOD (Initial shares) (Service shares) Japan Index * 12/15/99 10,000 10,000 10,000 12/31/99 10,264 10,264 10,621 12/31/00 9,348 9,348 7,630 12/31/01 6,741 6,741 5,387 12/31/02 6,036 6,036 4,833 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Emerging Markets Portfolio Initial shares and Service shares and the Morgan Stanley Capital International Emerging Markets Free Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfoli Morgan Stanley Emerging Markets Portfolio Emerging Markets Portfolio Capital International PERIOD (Initial shares) (Service shares) Emerging Markets Free Index * 12/15/99 10,000 10,000 10,000 12/31/99 10,904 10,904 11,272 12/31/00 7,436 7,436 7,822 12/31/01 7,683 7,691 7,636 12/31/02 7,646 7,646 7,178 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Emerging Leaders Portfolio Initial shares and Service shares and the Russell 2000 Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolios, Emerging Leaders Portfolio Emerging Leaders Portfolio PERIOD (Initial shares) (Service shares) Russell 2000 Index * 12/15/99 10,000 10,000 10,000 12/31/99 10,752 10,752 11,132 12/31/00 14,161 14,161 10,796 12/31/01 15,398 15,382 11,065 12/31/02 12,340 12,299 8,798 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Founders Discovery Portfolio Initial shares and Service shares and the Russell 2000 Index EXHIBIT A:
Dreyfus Investment Portfolios, Dreyfus Investment Portfolios, PERIOD Founders Discovery Portfolio Founders Discovery Portfolio Russell 2000 Index * (Initial shares) (Service shares) 12/15/99 10,000 10,000 10,000 12/31/99 11,112 11,112 11,132 12/31/00 9,665 9,665 10,796 12/31/01 7,875 7,851 11,065 12/31/02 5,258 5,242 8,798 * Source: Lipper Inc.
Comparison of change in value of $10,000 investment in Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio and the Standard & Poor's SmallCap 600 Index EXHIBIT A: Dreyfus Investment Portfolios, Standard & Poor's PERIOD Small Cap Stock SmallCap 600 Index Portfolio Index * 5/1/02 10,000 10,000 6/30/02 9,080 9,090 9/30/02 7,352 7,398 12/31/02 7,675 7,762 * Source: Lipper Inc. -----END PRIVACY-ENHANCED MESSAGE-----