-----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, ObTHndDv5tpyKs1gW6mCWgRDsWNRqzE95BGmN0NHh/ge7BhYkZfqylnCB/L+fh99 Vq3UHegDAQiT06n98s4Gpg== 0001056707-03-000013.txt : 20030904 0001056707-03-000013.hdr.sgml : 20030904 20030904114834 ACCESSION NUMBER: 0001056707-03-000013 CONFORMED SUBMISSION TYPE: N-CSR/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030904 EFFECTIVENESS DATE: 20030904 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYFUS INVESTMENT PORTFOLIOS CENTRAL INDEX KEY: 0001056707 IRS NUMBER: 134000024 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-08673 FILM NUMBER: 03880758 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-CSR/A 1 coverpagencsr.txt SEMI-ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-8673 Dreyfus Investment Portfolios (Exact name of Registrant as specified in charter) c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 (Address of principal executive offices) (Zip code) Mark N. Jacobs, Esq. 200 Park Avenue New York, New York 10166 (Name and address of agent for service) Registrant's telephone number, including area code: (212) 922-6000 Date of fiscal year end: 12/31 Date of reporting period: 6/30/03 FORM N-CSR ITEM 1. REPORTS TO STOCKHOLDERS. DREYFUS INVESTMENT PORTFOLIOS, CORE BOND PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 15 Statement of Securities Sold Short 16 Statement of Assets and Liabilities 17 Statement of Operations 18 Statement of Changes in Net Assets 20 Financial Highlights 22 Notes to Financial Statements 33 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Bond Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Core Bond Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. 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. Bonds continued to rally during the first half of 2003, with prices driven higher by a combination of declining interest rates and improving investor sentiment. Most notably, corporate bonds rose sharply as companies paid down debt, trimmed expenses and adopted more rigorous standards of corporate governance in the wake of last year's high-profile accounting scandals. However, the bond market' s strong performance over the past several years has had a downside: yields on some types of bonds are hovering near historical lows. For many investors, maintaining a steady stream of current income has been a challenge. What should an income-oriented investor do now? While we believe that bonds continue to represent an important component of a well-balanced investment portfolio, your financial advisor may be in the best position to recommend the income strategies that are right for you in today's low interest-rate environment. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 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 six-month period ended June 30, 2003, the portfolio's Initial shares achieved a total return of 6.24% and its Service shares achieved a total return of 6.16% .(1) The portfolio produced aggregate income dividends of $0.254 per share and $0.254 per share for its Initial and Service shares, respectively. In comparison, the Lehman Brothers Aggregate Bond Index, the portfolio's current benchmark index, and the Merrill Lynch U.S. Domestic Master Index, the portfolio's previous benchmark index, produced total returns of 3.93% and 3.95%, respectively, for the same period.(2) The portfolio benefited during the reporting period from a rally among investment-grade corporate bonds, high-yield bonds, and inflation-protected securities. The portfolio' s overweight in investment-grade corporate bonds, high-yield bonds and inflation-protected securities, and its underweight position in mortgage-backed securities and U.S. government agency debentures, enabled it to provide higher returns than its benchmark 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 The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) 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 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? The portfolio was primarily affected by renewed strength in the corporate bond market, both investment-grade corporates as well as high-yield corporate bonds. When the reporting period began, corporate bonds had already begun to recover from a lengthy period of pronounced weakness as investors began to look forward to potentially stronger economic growth in 2003. Although the economy failed to gain momentum during the first quarter of 2003, investors apparently felt more comfortable investing in corporate bonds after many companies strengthened their balance sheets and reduced capital expenditures and debt. As a result of these influences, the difference in yields, or "spread," between corporate bonds and U.S. Treasury securities contracted, producing attractive levels of price appreciation among corporate bonds in general. In the second quarter, as the war in Iraq wound down and investors' attention shifted from geopolitics to economic fundamentals, many investors began to anticipate lower short-term interest rates. Indeed, near the end of the reporting period, the Federal Reserve Board reduced the federal funds rate by 25 basis points, driving interest rates to a 45-year low of 1%. As yields fell in anticipation of lower interest rates, bond prices generally rose. The portfolio was well-positioned for this constructive investment environment after beginning 2003 with heavier exposure to investment-grade corporate bonds as well as high-yield bonds relative to its benchmark. Our sector allocation strategy helped drive the portfolio's performance in other ways as well. For example, the portfolio's lighter than average exposure to mortgage-backed securities helped it avoid the brunt of weakness in the mortgage marketplace, which was caused by a surge in mortgage refinancing as interest rates continued to fall. Later in the reporting period, the portfolio's relatively light holdings of U.S. government agency debt helped protect it when questions arose about the management practices of the Federal Home Loan Mortgage Corporation, also known as "Freddie Mac." WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? We have begun to trim the portfolio's holdings of corporate bonds, because spreads recently have declined to levels that are below their historical averages. We also have taken profits in TIPS as they, in our opinion, have become richly valued. At the same time, because we are seeing signs that prepayment activity is abating, we have increased the portfolio's exposure to mortgage-backed securities. However, we continue to remain defensively positioned with regard to U.S. government agency debt, which we believe may continue to languish as Congressional and regulatory scrutiny of government-sponsored enterprises intensifies. July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, CORE BOND PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 LEHMAN BROTHERS AGGREGATE BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN INDEX OF CORPORATE, U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY DEBT INSTRUMENTS, MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES WITH AN AVERAGE MATURITY OF 1-10 YEARS. The Portfolio STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
Principal BONDS AND NOTES--97.9% Amount(a) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AIRCRAFT & AEROSPACE--.1% Continental Airlines, Pass-Through Ctfs., Ser. 1998-1, Cl. A, 6.648%, 2017 130,722 126,170 US Airways, Enhanced Equipment Notes, Ser. C, 8.93%, 2009 42,614 (b) 8,523 134,693 AGRICULTURE--.3% Bunge Ltd. Finance, Notes, 5.875%, 2013 315,000 (c) 325,578 ASSET-BACKED CTFS./CREDIT CARDS--.6% MBNA Credit Card Master Note Trust, Ser. 2002-C1, Cl. 6.8%, 2014 525,000 574,508 ASSET-BACKED CTFS./HOME EQUITY LOANS--.6% Conseco Finance Home Loan Trust, Ser. 2000-E, Cl. A5, 8.02%, 2031 350,000 378,756 Conseco Finance Securitizations, Ser. 2000-D, Cl. A3, 7.89%, 2018 31,187 31,503 The Money Store Home Equity Trust, Ser. 1998-B, Cl. AF8, 6.11%, 2010 113,141 117,037 527,296 AUTOMOTIVE--1.0% Ford Motor, Global Landmark Securities, 7.45%, 2031 90,000 82,675 General Motors, Deb., 8.375%, 2033 928,000 913,440 996,115 BANKING--2.0% Bayer Hypo-und Vereinsbank, Bonds, 8.741%, 2031 350,000 (c) 369,175 Capital One Bank, Notes, 6.5%, 2013 315,000 312,610 Capital One Financial, Notes, 7.25%, 2003 33,000 33,455 Dresdner Funding Trust I, Bonds, 8.151%, 2031 570,000 (c) 630,637 Sovereign Bancorp, Sr. Notes, 10.5%, 2006 473,000 568,734 1,914,611 Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CABLE/MEDIA--2.9% America Online, Conv. Sub. Notes, 0%, 2019 960,000 588,000 Clear Channel Communications, Notes, 4.25%, 2009 394,000 399,542 Comcast, Gtd. Sr. Notes, 6.5%, 2015 418,000 471,268 Cox Communications, Sr. Notes, 6.75%, 2011 249,000 290,882 Liberty Media, Notes, 7.875%, 2009 319,000 374,242 USA Interactive, Notes, 7%, 2013 327,000 377,312 Viacom, Bonds, 5.5%, 2033 317,000 316,284 2,817,530 CHEMICALS--.4% Avecia Group, Gtd. Sr. Notes, 11%, 2009 200,000 182,000 Lyondell Chemical, Sr. Secured Notes, 10.5%, 2013 200,000 (c) 201,000 383,000 COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--3.0% 1211 Finance, Ser. 2000-1211, Cl. A, 7.745%, 2035 1,100,000 (c) 1,335,984 CS First Boston Mortgage Securities, Ser. 1998-C1, Cl. C, 6.78%, 2040 441,000 506,149 Chase Commercial Mortgage Securities, Ser. 2001-245, Cl. A1, 6.173%, 2016 709,993 (c,d) 783,544 GS Mortgage Securities II, Ser. 2001-LIBA, Cl. C, 6.733%, 2016 269,000 (c) 293,146 2,918,823 COMMERCIAL SERVICES--.3% Cendant, Notes, 6.25%, 2010 215,000 239,496 FINANCIAL SERVICES--.9% Farmers Exchange Capital, Trust Surplus Note Securities, 7.05%, 2028 400,000 (c) 360,500 GMAC, Bonds, 8%, 2031 243,000 239,081 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL SERVICES (CONTINUED) General Electric Capital, Medium-Term Notes, Ser. A, 6.75%, 2032 214,000 251,149 850,730 FOOD & BEVERAGES--.4% Diageo Capital, Notes, 4.85%, 2018 416,000 430,711 FOREIGN/GOVERNMENTAL--.4% Province of Quebec, Deb., 3.3%, 2013 CAD 540,000 (e) 415,941 HEALTH CARE--.6% HCA, Notes, 6.25%, 2013 192,000 196,085 Manor Care, Notes, 6.25%, 2013 328,000 (c) 341,120 537,205 HOTELS--.1% Resorts International Hotel and Casino, First Mortgage, 11.5%, 2009 80,000 76,400 INSURANCE--1.6% Ace Capital Trust II, Gtd. Capital Securities, 9.7%, 2030 342,000 462,486 Fund American Cos., Notes, 5.875%, 2013 230,000 240,946 Markel, Notes, 6.8%, 2013 265,000 288,788 Metlife, Sr. Notes, 5.375%, 2012 105,000 113,345 QBE Insurance, Bonds, 5.647%, 2023 475,000 (c,d) 462,530 1,568,095 MANUFACTURING--.8% General Electric, Notes, 5%, 2013 450,000 476,223 Tyco International, Gtd. Notes, 5.8%, 2006 289,000 299,837 776,060 Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ METALS & MINING--1.0% Alcoa, Notes, 6%, 2012 376,000 424,255 Carpenter Technology, Sr. Notes, 6.625%, 2013 200,000 (c) 201,533 Placer Dome, Deb., Ser. B, 8.5%, 2045 265,000 321,412 947,200 OIL & GAS--.4% El Paso Production, Gtd. Sr. Notes, 7.75%, 2013 200,000 (c) 200,500 Petro-Canada, Deb., 7%, 2028 141,000 166,329 366,829 PAPER & FOREST PRODUCTS--.9% Inversiones CMPC, Notes, 4.875%, 2013 335,000 (c) 331,739 Rock-Tenn, Bonds, 5.625%, 2013 190,000 198,205 Weyerhaeuser, Notes, 6.75%, 2012 340,000 386,616 916,560 REAL ESTATE INVESTMENT TRUSTS--.2% New Plan Excel Realty Trust, Sr. Notes, 6.875%, 2004 175,000 183,967 RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--4.1% Bank of America Mortgage Securities, Ser. 2003-1, Cl. 2B4, 5.25%, 2018 148,182 (c) 135,609 Chase Mortgage Finance: Ser. 1999-S13, Cl. B4, 6.5%, 2014 185,385 (c) 187,893 Ser. 2003-S1, Cl. B3, 5.072%, 2018 345,622 (c) 323,373 Ser. 2003-S2, Cl. B3, 5%, 2018 271,975 (c) 249,837 Ser. 2003-S2, Cl. B4, 5%, 2018 135,493 (c) 108,079 Ser. 2003-S2, Cl. B5, 5%, 2018 272,931 (c) 84,827 Countrywide Home Loans: Ser. 2001-9, Cl. B3, 6.75%, 2031 610,350 (c) 631,415 Ser. 2002-26, Cl. B3, 5.5%, 2017 194,705 (c) 184,879 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ RESIDENTIAL MORTGAGE PASS-THROUGH CTFS. (CONTINUED) GE Capital Mortgage Services, Ser. 2000-8, Cl. B5, 7.5%, 2015 164,019 (c) 94,179 PNC Mortgage Securities, Ser. 1998-2, Cl. 5B5, 6.625%, 2028 563,064 577,759 Residential Funding Mortgage Securities I: Ser. 1999-S11, Cl. M3, 6.5%, 2029 714,173 757,168 Ser. 2001-S21, Cl. B2, 6.25%, 2016 106,248 104,878 Ser. 2003-S1, Cl. B1, 5%, 2018 297,422 (c) 267,866 Wells Fargo Mortgage Backed Securities, Ser. 2003-2, Cl. B5, 5.25%, 2018 346,134 (c) 281,652 3,989,414 RETAIL--.8% Sears Roebuck Acceptance, Notes, 7%, 2032 335,000 375,949 Toys R Us, Notes, 7.875%, 2013 320,000 344,822 720,771 STRUCTURED INDEX--8.2% JP Morgan HYDI-100, Linked Ctf. of Deposit, 6.4%, 2008 500,000 (c,f) 507,500 Morgan Stanley TRACERS: Ser. 2001-1, 7.252%, 2011 1,984,000 (c,f) 2,345,868 Ser. 2002-5, 6.799%, 2012 4,380,000 (c,f) 5,083,253 7,936,621 TECHNOLOGY--1.0% Cypress Semiconductor, Conv. Notes, 4%, 2005 212,000 213,590 IBM, Notes, 4.75%, 2012 400,000 421,226 International Rectifier, Conv. Notes, 4.25%, 2007 327,000 320,051 954,867 TELECOMMUNICATIONS--2.0% British Telecommunications, Notes, 8.125%, 2010 191,000 241,974 France Telecom, Notes, 7.75%, 2011 169,000 213,068 Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TELECOMMUNICATIONS (CONTINUED) Koninklijke KPN NV, Sr. Notes, 8%, 2010 211,000 261,658 Qwest: Bank Note, Ser. A, 5.97%, 2007 517,000 520,877 Bank Note, Ser. B, 5.97%, 2007 298,000 295,765 Verizon Florida, Deb., Ser. F, 6.125%, 2013 392,000 444,837 1,978,179 U.S. GOVERNMENT--24.1% U.S. Treasury Notes: 1.125%, 6/30/2005 4,543,000 4,527,386 1.25%, 5/31/2005 3,901,000 3,901,000 2%, 5/15/2006 6,698,000 6,771,263 3.25%, 5/31/2004 487,000 496,983 3.625%, 5/15/2013 2,630,000 2,653,012 5.75%, 8/15/2010 4,333,000 5,073,163 23,422,807 U.S. GOVERNMENT AGENCIES--.8% Tennessee Valley Authority, Valley Indexed Principal Securities, 3.375%, 1/15/2007 744,836 (g) 809,248 U.S. GOVERNMENT AGENCIES/MORTGAGE-BACKED--36.1% Federal Home Loan Mortgage Corp., Multiclass Mortgage Participation Ctfs., REMIC (Interest Only Obligation), Ser. 1999, Cl. PW, 7%, 8/15/2026 18,947 (h) 307 Federal National Mortgage Association: 5%, 9/1/2017 339,291 350,904 5.5%, 4/1/2033 269,651 279,256 6.2%, 1/1/2011 1,951,060 2,257,971 REMIC Trust, Gtd. Pass-Through Ctfs. (Interest Only Obligations): Ser. 2002-82, Cl. IB, 5.5%, 1/25/2021 4,443,865 (h) 124,911 Ser. 2002-92, Cl. IA, 5.5%, 5/25/2031 1,458,963 (h) 81,929 Government National Mortgage Association I: 5% 6,294,000 (i) 6,447,385 5.5% 20,291,000 (i) 21,128,004 5.5%, 4/15/2033 2,510,403 2,620,233 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCIES/MORTGAGE-BACKED (CONTINUED) Government National Mortgage Association II: 4%, 7/20/2030 74,888 77,313 6.5%, 5/20/2031-9/20/2031 1,110,173 1,160,131 7%, 7/20/2031 83,661 88,027 7.5%, 5/20/2031-8/20/2031 322,282 340,510 8%, 2/20/2034 23,671 25,321 34,982,202 UTILITIES/GAS & ELECTRIC--2.3% American Electric Power, Sr. Notes, 5.25%, 2015 166,000 167,751 CenterPoint Energy, Conv. Notes, 3.75%, 2008 264,000 (c) 274,560 CenterPoint Energy Houston, Refunding Mortgage, 5.7%, 2013 183,000 (c) 198,820 Duke Energy, First Mortgage, 3.75%, 2008 245,000 (c) 252,456 PPL Energy Supply, Conv. Sr. Notes, 2.625%, 2023 272,000 (c) 284,240 Public Service Colorado, First Mortgage, 4.875%, 2013 403,000 (c) 419,701 Teco Energy, Sr. Notes, 7.5%, 2010 315,000 322,875 Virginia Electric & Power, Sr. Notes, Ser. A, 4.75%, 2013 334,000 347,052 2,267,455 TOTAL BONDS AND NOTES (cost $92,968,709) 94,962,912 - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS--.1% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ OIL & GAS Exco Resources, (cost $122,820) 5,843 104,648 PREFERRED STOCKS--2.1% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AIRCRAFT & AEROSPACE--.4% Raytheon, Cum. Conv., $4.125 (units) 7,193 (j) 411,727 INSURANCE--.4% Travelers Property Casualty, Cum. Conv., $1.125 14,662 351,888 TELECOMMUNICATIONS--.1% Motorola, Cum. Conv., $3.50 (units) 3,253 (k) 106,048 UTILITIES/GAS & ELECTRIC--1.2% Ameren, Cum. Conv., $2.4375 (units) 5,139 (l) 146,050 Cinergy, Cum. Conv., $4.75 (units) 4,153 (m) 246,024 FPL Group, Cum. Conv., $4.25 (units) 10,133 (m) 604,231 Keyspan, Cum. Conv., $4.375 (units) 3,006 (n) 159,168 1,155,473 TOTAL PREFERRED STOCKS (cost $2,116,291) 2,025,136 - ------------------------------------------------------------------------------------------------------------------------------------ OTHER INVESTMENTS--16.3% - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 5,271,666 (o) 5,271,666 Dreyfus Institutional Cash Advantage Plus Fund 5,271,667 (o) 5,271,667 Dreyfus Institutional Preferred Plus Money Market Fund 5,271,667 (o) 5,271,667 TOTAL OTHER INVESTMENTS (cost $15,815,000) 15,815,000 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal SHORT-TERM INVESTMENTS--24.8% Amount(a) Value ($) - -----------------------------------------------------------------------------------------------------------------------------------= U.S. TREASURY BILLS: 1.04%, 7/3/2003 2,498,000 2,497,900 1.1%, 7/24/2003 1,585,000 1,584,223 1.14%, 8/28/2003 3,781,000 3,776,123 ..94%, 9/25/2003 5,241,000 5,230,623 ..78%, 10/23/2003 1,287,000 1,283,782 ..8%, 11/20/2003 1,287,000 1,282,174 ..84%, 12/11/2003 2,126,000 2,118,028 ..95%, 12/18/2003 6,321,000 6,293,314 TOTAL SHORT-TERM INVESTMENTS (cost $24,065,356) 24,066,167 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $135,088,176) 141.2% 136,973,863 LIABILITIES, LESS CASH AND RECEIVABLES (41.2%) (39,965,470) NET ASSETS 100.0% 97,008,393 (A) PRINCIPAL AMOUNT STATED IN U.S. DOLLARS UNLESS OTHERWISE NOTED. CAD--CANADIAN DOLLARS (B) NON-INCOME PRODUCING--SECURITY IN DEFAULT. (C) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2003, THESE SECURITIES AMOUNTED TO $17,752,993 OR 18.3% OF NET ASSETS. (D) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE. (E) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON CHANGES IN THE CANADIAN CONSUMER PRICE INDEX. (F) SECURITY LINKED TO A PORTFOLIO OF DEBT SECURITIES. (G) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON CHANGES IN THE CONSUMER PRICE INDEX. (H) NOTIONAL FACE AMOUNT SHOWN. (I) PURCHASED ON A FORWARD COMMITMENT BASIS. (J) WITH WARRANTS ATTACHED. (K) UNITS REPRESENT A CONTRACT TO PURCHASE SHARES OF COMMON STOCK FOR $50 ON NOVEMBER 16, 2004 AND A SENIOR NOTE WITH A PRINCIPAL AMOUNT OF $50. (L) UNITS REPRESENT A CONTRACT TO PURCHASE SHARES OF COMMON STOCK FOR $25 ON MAY 15, 2005 AND A SENIOR NOTE WITH A PRINCIPAL AMOUNT OF $25. (M) UNITS REPRESENT A CONTRACT TO PURCHASE SHARES OF COMMON STOCK FOR $50 ON FEBRUARY 16, 2005 AND A SENIOR NOTE WITH A PRINCIPAL AMOUNT OF $50. (N) UNITS REPRESENT A CONTRACT TO PURCHASE SHARES OF COMMON STOCK FOR $50 ON MAY 16, 2005 AND A SENIOR NOTE WITH A PRINCIPAL AMOUNT OF $50. (O) INVESTMENTS IN AFFILIATED MONEY MARKET MUTUAL FUNDS--SEE NOTE 3(D).
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF SECURITIES SOLD SHORT June 30, 2003 (Unaudited) Principal BONDS AND NOTES Amount ($) Value ($) - -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., 5.5% (proceeds $6,096,912) 5,883,000(a) 6,070,521 (A) SOLD ON A FORWARD COMMITMENT BASIS. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 135,088,176 136,973,863 Cash 1,042,514 Receivable for investment securities sold 6,476,194 Receivable from brokers for proceeds on securities sold short 6,096,912 Dividends and interest receivable 710,503 Receivable for shares of Beneficial Interest subscribed 129,660 Paydowns receivable 2,211 151,431,857 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 49,533 Payable for investment securities purchased 48,096,412 Securities sold short, at value (proceeds $6,096,912) --See Statement of Securities Sold Short 6,070,521 Payable for shares of Beneficial Interest redeemed 143,554 Payable for futures variation margin--Note 4 22,164 Unrealized depreciation on swaps--Note 4 5,984 Accrued expenses 35,296 54,423,464 - -------------------------------------------------------------------------------- NET ASSETS ($) 97,008,393 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 93,074,764 Accumulated distributions in excess of investment income--net (106,954) Accumulated net realized gain (loss) on investments 2,146,173 Accumulated net unrealized appreciation (depreciation) on investments 1,894,410 - -------------------------------------------------------------------------------- NET ASSETS ($) 97,008,393 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 36,059,621 60,948,772 Shares Outstanding 2,688,662 4,548,184 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 13.41 13.40 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 1,979,495 Cash dividends 122,014 TOTAL INCOME 2,101,509 EXPENSES: Investment advisory fee--Note 3(a) 282,919 Distribution fees--Note 3(b) 76,794 Auditing fees 23,175 Custodian fees--Note 3(b) 15,009 Prospectus and shareholders' reports 10,068 Legal fees 3,191 Trustees' fees and expenses--Note 3(c) 1,016 Miscellaneous 8,166 TOTAL EXPENSES 420,338 Less--waiver of fees due to undertaking--Note 3(a) (54,569) NET EXPENSES 365,769 INVESTMENT INCOME--NET 1,735,740 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions 4,665,954 Net realized gain (loss) on financial futures (539,601) Net realized gain (loss) on swap tansactions 18,108 Net realized gain (loss) on forward currency exchange contracts (170,754) NET REALIZED GAIN (LOSS) 3,973,707 Net unrealized appreciation (depreciation) on investments, securities sold short, foreign currency and swap transactions (including $122,750 net unrealized appreciation on financial futures) 31,052 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 4,004,759 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 5,740,499 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 1,735,740 3,816,929 Net realized gain (loss) on investments 3,973,707 (936,393) Net unrealized appreciation (depreciation) on investments 31,052 2,378,169 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,740,499 5,258,705 - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (688,202) (1,470,409) Service shares (1,156,250) (2,466,828) TOTAL DIVIDENDS (1,844,452) (3,937,237) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 4,711,768 12,327,742 Service shares 5,197,147 35,038,710 Dividends reinvested: Initial shares 688,202 1,470,409 Service shares 1,156,250 2,466,828 Cost of shares redeemed: Initial shares (4,627,468) (7,264,010) Service shares (5,646,989) (10,887,362) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 1,478,910 33,152,317 TOTAL INCREASE (DECREASE) IN NET ASSETS 5,374,957 34,473,785 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 91,633,436 57,159,651 END OF PERIOD 97,008,393 91,633,436 Undistributed (distributions in excess of ) investment income--net (106,954) 1,758 Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 363,219 972,479 Shares issued for dividends reinvested 52,709 116,120 Shares redeemed (353,476) (573,670) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 62,452 514,929 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 398,252 2,762,297 Shares issued for dividends reinvested 88,640 194,898 Shares redeemed (432,329) (865,805) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 54,563 2,091,390 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 ---------------------------------------------- INITIAL SHARES (Unaudited) 2002 2001(a) 2000(b) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.87 12.67 12.94 12.50 Investment Operations: Investment income--net .24(c) .61(c) .75(c) .50 Net realized and unrealized gain (loss) on investments .55 .21 (.18) .56 Total from Investment Operations .79 .82 .57 1.06 Distributions: Dividends from investment income--net (.25) (.62) (.72) (.50) Dividends from net realized gain on investments -- -- (.12) (.12) Total Distributions (.25) (.62) (.84) (.62) Net asset value, end of period 13.41 12.87 12.67 12.94 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 6.24(d) 6.70 4.55 8.61(d) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(e) .80 .80 .80(e) Ratio of net investment income to average net assets 3.72(e) 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 424.27(d) 653.12 654.39 953.66(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 36,060 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 $.04 AND DECREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 6.04% TO 5.71%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THESE CHANGES IN PRESENTATION. (B) FROM MAY 1, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED. (E) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended Year Ended December 31, June 30, 2003 ---------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001(a) 2000(b) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.87 12.66 12.93 12.93 Investment Operations: Investment income--net .24(c) .62(c) .70(c) -- Net realized and unrealized gain (loss) on investments .54 .21 (.13) -- Total from Investment Operations .78 .83 .57 -- Distributions: Dividends from investment income--net (.25) (.62) (.72) -- Dividends from net realized gain on investments -- -- (.12) -- Total Distributions (.25) (.62) (.84) -- Net asset value, end of period 13.40 12.87 12.66 12.93 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 6.16(d) 6.78 4.46 -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .80(e) .80 .80 -- Ratio of net investment income to average net assets 3.65(e) 4.82 5.77 -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .18(e) .20 .35 -- Portfolio Turnover Rate 424.27(d) 653.12 654.39 953.66(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 60,949 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. (E) ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company, operating as a series company currently offering 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 wholly-owned 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. Swap transactions are valued daily based upon quotations from market makers. 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) other than investments in securities at fiscal year end, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio receives net earnings credits based on available cash balances left on deposit. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code" ). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. On June 30, 2003, the Board of Trustees declared a cash dividend of $.032 and $.032 per share for Initial shares and Service shares, respectively, from undistributed investment income-net, payable on July 1, 2003 (ex-dividend date), to shareholders of record as of the close of business on June 30, 2003. (E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $1,609,283 available for federal income tax purposes 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 year ended December 31, 2002 was as follows: ordinary income $3,937,237. The tax character of current year distributions will be determined at the end of the current fiscal year. NOTE 2--BANK LINES OF CREDIT: The portfolio may borrow up to $5 million for leveraging purposes under a short-term unsecured line of credit and participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2003, 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, 2003 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 June 30, 2003, the Manager waived receipt of fees of $54,569, pursuant to the undertaking. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 June 30, 2003, Service shares were charged $76,794 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 June 30, 2003, the portfolio was charged $93 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $15,009 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"). Through December 31, 2002, each Board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. 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) Pursuant to an exemptive order from the Securities and Exchange Commission, the portfolio may invest its available cash balances in affiliated money market mutual funds as shown in the portfolio's Statement of Investments. Management fees are not charged to these accounts. During the period ended June 30, 2003, the portfolio derived $77,916 in income from these investments, which is included as dividend income in the portfolio's Statement of Operations. NOTE 4--SECURITIES TRANSACTIONS: The following summarizes the aggregate amount of purchases and sales (including paydowns) of investment securities and securities sold short, excluding short-term securities, financial futures, forward currency exchange contracts and swap transactions during the period ended June 30, 2003: Purchases ($) Sales ($) - -------------------------------------------------------------------------------- Long transactions 391,481,557 390,313,822 Short sale transactions -- 6,085,228 TOTAL 391,481,557 396,399,050 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. Securities sold short at June 30, 2003, and their related market values and proceeds are set forth in the Statement of Securities Sold Short. 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 June 30, 2003, there were no financial futures contracts outstanding. 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 June 30, 2003, there were no forward currency exchange contracts outstanding. The portfolio may enter into swap agreements to exchange the interest rate on, or return generated by, one nominal instrument for the return generated by another nominal instrument. Credit default swaps involve commitments to pay a fixed rate in exchange for payment if a credit event affecting a third party (the referenced company) occurs. Credit events may include a failure to pay interest, bankruptcy, or restructuring. Net periodic interest payments to be received or paid are accrued daily and are recorded in the Statement of Operations as an adjustment to interest income. Credit default swaps are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation in the Statement of Operations. The following summarizes credit default swaps entered into by the portfolio at June 30, 2003:
Unrealized Appreciation Notional Amount ($) Description (Depreciation) ($) - ------------------------------------------------------------------------------------------------------------------------------------ 350,000 Agreement with Merrill Lynch, 171 terminating June 20, 2008 to pay a fixed rate of .34% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Bear Stearns, 7.625%, 12/7/2009 350,000 Agreement with Merrill Lynch (159) terminating June 20, 2008 to pay a fixed rate of .36% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Bear Stearns, 7.625%, 12/7/2009 400,000 Agreement with Merrill Lynch (584) terminating September 20, 2008 to pay a fixed rate of .38% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Bear Stearns, 7.625%, 12/7/2009 1,100,000 Agreement with Merrill Lynch (1,096) terminating June 20, 2008 to pay a fixed rate of .29% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 o principal payment default of $10,000,000 on Bank of America, 6.25%, 4/15/2012 The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
Unrealized Appreciation Notional Amount ($) Description (Depreciation) ($) - ------------------------------------------------------------------------------------------------------------------------------------ 700,000 Agreement with Merrill Lynch 2,917 terminating June 20, 2008 to pay a fixed rate of .51% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Countrywide Home Loans, 5.625%, 7/15/2009 400,000 Agreement with Merrill Lynch 373 terminating September 20, 2008 to pay a fixed rate of .59% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Countrywide Home Loans, 5.625%, 7/15/2009 235,000 Agreement with Merrill Lynch 324 terminating June 20, 2008 to pay a fixed rate of .42% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Goldman Sachs, 6.6%, 1/15/2012 935,000 Agreement with Merrill Lynch 821 terminating June 20, 2008 to pay a fixed rate of .43% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Goldman Sachs, 6.6%, 1/15/2012 320,000 Agreement with Merrill Lynch (3,948) terminating June 20, 2008 to pay a fixed rate of 1.15% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Kroger, 5.5%, 2/1/2013 Unrealized Appreciation Notional Amount ($) Description (Depreciation) ($) - ------------------------------------------------------------------------------------------------------------------------------------ 320,000 Agreement with Merrill Lynch 310 terminating June 20, 2008 to pay a fixed rate of .93% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Safeway, 5.8%, 8/15/2012 640,000 Agreement with Merrill Lynch (5,101) terminating June 20, 2008 to pay a fixed rate of .57% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Target, 5.875%, 3/1/2012 700,000 Agreement with Merrill Lynch 347 terminating June 20, 2008 to pay a fixed rate of .54% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Washington Mutual, 5.625%, 1/15/2007 400,000 Agreement with Merrill Lynch (359) terminating September 20, 2008 to pay a fixed rate of .59% and receive if positive (pay if negative) the notional amount as a result of interest payment default totaling $1,000,000 or principal payment default of $10,000,000 on Washington Mutual, 5.625%, 1/15/2007
Realized gains and losses on maturity or termination of swaps are presented in the Statement of Operations. Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of the agreement and are generally limited to the amount of net payments to be received, if any, at the date of default. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) At June 30, 2003, accumulated net unrealized appreciation on investments was $1,885,687, consisting of $2,764,294 gross unrealized appreciation and $878,607 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. The Portfolio 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 165SA0603 DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 14 Financial Highlights 16 Notes to Financial Statements 21 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Value Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Core Value Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. Inside, you' ll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, Valerie J. Sill. The first half of 2003 was a time of long-awaited recovery for the U.S. stock market. Despite continued volatility leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the U.S. economy. Apparently, they liked what they saw. Despite current economic weakness, investors appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their equity exposure during the bear market. In contrast, we believe investors who avoided stocks may have missed the market' s recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2003 DISCUSSION OF PERFORMANCE Valerie J. Sill, Portfolio Manager How did Dreyfus Investment Portfolios, Core Value Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2003, Dreyfus Investment Portfolios, Core Value Portfolio produced total returns of 9.65% for its Initial shares and 9.46% for its Service shares.(1) In comparison, the portfolio's benchmark, the S& P 500/BARRA Value Index, produced a total return of 12.29% for the same period.(2) The stock market remained weak early in 2003 as investors remained concerned about a potential conflict in Iraq. Once a decision was made, and the war began, stocks rallied as investors began to anticipate a post-war economic recovery. The portfolio' s returns trailed the benchmark's return, primarily because the portfolio generally invested in relatively high-quality, value-oriented defensive stocks that performed less robustly than the overall stock market rally during the reporting period. 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 portfolio was favorably influenced by changes in investor sentiment after the start of the war in Iraq. As it became clearer that the war would end fairly quickly, investors turned more optimistic, and stocks rallied strongly. However, the stocks that led the rally were smaller, more speculative companies that had been beaten down severely in the bear market. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) Modest returns from the portfolio's blue-chip technology holdings were a primary reason for the portfolio's lagging relative performance. The portfolio's focus on established bellwether companies such as International Business Machines (IBM) and Microsoft helped stabilize results during the first part of the reporting period. However, these stocks posted relatively lackluster returns in the second quarter, when lower-quality stocks led the post-war rally. Investors appear to view IBM and Microsoft as stodgy corporations that are not likely to benefit as much as smaller companies when the economy recovers. We believe that they remain attractive investments because of their ability to produce earnings under a variety of economic conditions. We have identified a number of value-oriented opportunities among technology stocks that we believed were attractively priced relative to their earnings. A good example is leading microchip manufacturer Intel, whose shares have declined sharply over the past several years. Intel's stock price rebounded strongly during the first half of the reporting period as investors looked forward to an improved economy, and it ranked among the portfolio's best-performing stocks for the reporting period. In our view, companies that are relatively sensitive to economic changes should benefit from a more robust recovery. As a result, we recently added machinery manufacturer Deere & Co., capital goods producer Eaton and media giant Viacom to the fund. Greater investor optimism about the future also benefited Citigroup, which has interests in banking, insurance and investments. We believe that Citigroup became relatively inexpensive in the wake of 2002's Wall Street scandals, and it met our value criteria. Citigroup then gained value during the first half of the reporting period after investors began to see beyond the current economic malaise. Other portfolio holdings performed well because of circumstances affecting their individual businesses. For example, McDonald' s Corp. bounced back after a multiyear decline after new, healthier menu additions caused its restaurants' revenues to improve. WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? We believe that the portfolio is positioned to benefit from higher levels of economic growth over the next several quarters. In addition to Deere, Eaton and Viacom, we believe that other purchases during the reporting period, such as Automatic Data Processing, Goldman Sachs, Morgan Stanley and Koninklijke Philips Electronics, are also likely to benefit from stronger economic activity. These changes are consistent with our strategy of investing in large, value-oriented companies that have a catalyst in place to generate stock price appreciation. For many companies, that catalyst to greater profitability currently is an improving economy, stable interest rates and a continuation of low inflation. July 15, 2003 () THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 S&P 500/BARRA VALUE INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE STOCKS IN THE STANDARD & POOR'S 500 COMPOSITE PRICE INDEX ("S&P 500 INDEX") THAT HAVE LOW PRICE-TO-BOOK RATIOS. THE S&P 500 INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. The Portfolio STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--94.6% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ APPLIANCES & HOUSEHOLD DURABLES--.7% Sony, ADR 16,000 448,000 BANKING--13.6% American Express 20,500 857,105 Bank of America 13,600 1,074,808 Citigroup 75,900 3,248,520 Comerica 7,300 339,450 Fannie Mae 11,500 775,560 FleetBoston Financial 34,406 1,022,202 U.S. Bancorp 38,700 948,150 Wachovia 17,500 699,300 8,965,095 BASIC INDUSTRIES--3.2% Alcoa 26,000 663,000 International Paper 15,000 535,950 Praxair 15,500 931,550 2,130,500 BEVERAGES & TOBACCO--.7% Altria 10,300 468,032 BROKERAGE--8.7% Bear Stearns Cos. 4,600 333,132 Goldman Sachs 18,600 1,557,750 J.P. Morgan Chase & Co. 42,000 1,435,560 Lehman Brothers Holdings 15,500 1,030,440 Morgan Stanley 31,400 1,342,350 5,699,232 CAPITAL GOODS--12.3% Boeing 17,000 583,440 Corning 109,400 (a) 808,466 Deere & Co. 14,400 658,080 Eaton 8,700 683,907 Emerson Electric 17,400 889,140 Nokia, ADR 80,200 1,317,686 Pitney Bowes 10,900 418,669 Rockwell Collins 15,500 381,765 United Technologies 20,800 1,473,264 Xerox 83,400 (a) 883,206 8,097,623 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER DURABLES--3.1% Black & Decker 7,700 334,565 Koninklijke (Royal) Philips Electronics (New York Shares) 88,900 1,698,879 2,033,444 CONSUMER NON-DURABLES--3.3% H.J. Heinz 18,600 613,428 Kimberly-Clark 6,200 323,268 Loews 13,700 647,873 Nestle, ADR 11,800 611,019 2,195,588 CONSUMER SERVICES--12.0% Federated Department Stores 13,100 482,735 Gannett 13,700 1,052,297 Knight-Ridder 11,100 765,123 Liberty Media, Cl. A 159,064 (a) 1,838,780 McDonald's 73,200 1,614,792 Viacom, Cl. B 29,800 (a) 1,301,068 Walt Disney 43,700 863,075 7,917,870 DATA PROCESSING--1.0% Automatic Data Processing 18,900 639,954 ENERGY--10.3% Apache 4,800 312,288 BP, ADR 20,400 857,208 ConocoPhillips 13,867 759,911 Encana 17,094 655,897 Exxon Mobil 61,404 2,205,018 Royal Dutch Petroleum (New York Shares) 23,000 1,072,260 Schlumberger 18,800 894,316 6,756,898 HEALTH CARE--6.3% Aetna 9,000 541,800 Becton, Dickinson & Co. 18,300 710,955 C.R. Bard 6,700 477,777 Merck & Co. 16,200 980,910 Pfizer 41,620 1,421,323 4,132,765 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE--6.9% Allstate 31,800 1,133,670 American International Group 27,496 1,517,229 John Hancock Financial Services 22,700 697,571 Principal Financial Group 18,300 590,175 Travelers Property Casualty, Cl. A 39,000 620,100 4,558,745 TECHNOLOGY--6.4% Intel 69,100 1,436,174 International Business Machines 8,500 701,250 Microsoft 59,800 1,531,478 SunGard Data Systems 13,400 (a) 347,194 3Com 35,900 (a) 168,012 4,184,108 TELECOMMUNICATIONS--1.1% Sprint (FON Group) 27,000 388,800 Sprint (PCS Group) 57,100 (a) 328,325 717,125 TRANSPORTATION--1.1% Union Pacific 12,700 736,854 UTILITIES--3.9% BellSouth 43,600 1,161,068 Exelon 6,400 382,784 Verizon Communications 26,150 1,031,617 2,575,469 TOTAL COMMON STOCKS (cost $59,080,498) 62,257,302 PREFERRED STOCKS--2.0% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER SERVICES; News Corp, ADR (cost $1,182,067) 52,450 1,313,873 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--3.8% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTE; Federal Home Loan Bank, .95%, 7/1//2003 (cost $2,500,000) 2,500,000 2,500,000 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $62,762,565) 100.4% 66,071,175 LIABILITIES, LESS CASH AND RECEIVABLES (.4%) (262,809) NET ASSETS 100.0% 65,808,366 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 62,762,565 66,071,175 Cash 6,587 Dividends and interest receivable 68,721 66,146,483 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 47,352 Payable for shares of Beneficial Interest redeemed 226,530 Payable for investment securities purchased 33,445 Accrued expenses and other liabilities 30,790 338,117 - -------------------------------------------------------------------------------- NET ASSETS ($) 65,808,366 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 76,206,092 Accumulated undistributed investment income--net 301,600 Accumulated net realized gain (loss) on investments (14,007,936) Accumulated net unrealized appreciation (depreciation) on investments 3,308,610 - -------------------------------------------------------------------------------- NET ASSETS ($) 65,808,366 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 27,683,315 38,125,051 Shares Outstanding 2,292,496 3,158,134 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.08 12.07 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $15,162 foreign taxes witheld at source) 576,434 Interest 13,648 TOTAL INCOME 590,082 EXPENSES: Investment advisory fee--Note 3(a) 227,700 Distribution fees--Note 3(b) 43,100 Auditing fees 17,388 Prospectus and shareholders' reports 7,621 Custodian fees--Note 3(b) 4,754 Legal fees 4,128 Shareholder servicing costs--Note 3(b) 3,303 Trustees' fees and expenses--Note 3(c) 800 Miscellaneous 2,420 TOTAL EXPENSES 311,214 Less--waiver of fees due to undertaking--Note 3(a) (22,996) NET EXPENSES 288,218 INVESTMENT INCOME--NET 301,864 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (1,726,138) Net unrealized appreciation (depreciation) on investments 7,110,783 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 5,384,645 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 5,686,509 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 301,864 416,814 Net realized gain (loss) on investments (1,726,138) (11,139,001) Net unrealized appreciation (depreciation) on investments 7,110,783 (6,808,564) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,686,509 (17,530,751) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (98,342) (281,596) Service shares (130,102) (230,189) TOTAL DIVIDENDS (228,444) (511,785) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 929,619 6,631,731 Service shares 3,306,161 22,995,663 Dividends reinvested: Initial shares 98,342 281,596 Service shares 130,102 230,189 Cost of shares redeemed: Initial shares (2,992,192) (7,854,362) Service shares (1,902,317) (2,525,634) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (430,285) 19,759,183 TOTAL INCREASE (DECREASE) IN NET ASSETS 5,027,780 1,716,647 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 60,780,586 59,063,939 END OF PERIOD 65,808,366 60,780,586 Undistributed investment income--net 301,600 228,180 Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 82,763 507,506 Shares issued for dividends reinvested 9,106 21,783 Shares redeemed (272,321) (642,363) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (180,452) (113,074) - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 295,800 1,741,452 Shares issued for dividends reinvested 12,047 17,931 Shares redeemed (170,589) (214,858) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 137,258 1,544,525 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 -------------------------------------------------------------------------- INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.06 14.54 15.10 13.97 11.72 12.50 Investment Operations: Investment income--net .06(b) .09(b) .12(b) .17(b) .07(b) .07 Net realized and unrealized gain (loss) on investments 1.00 (3.46) (.45) 1.50 2.24 (.77) Total from Investment Operations 1.06 (3.37) (.33) 1.67 2.31 (.70) Distributions: Dividends from investment income--net (.04) (.11) (.01) (.16) (.06) (.08) Dividends from net realized gain on investments -- -- (.22) (.38) -- -- Total Distributions (.04) (.11) (.23) (.54) (.06) (.08) Net asset value, end of period 12.08 11.06 14.54 15.10 13.97 11.72 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 9.65(c) (23.29) (2.08) 12.06 19.73 (5.59)(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .44(c) .88 .96 .97 1.00 .67(c) Ratio of net investment income to average net assets .52(c) .69 .83 1.19 .56 .62(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- .02 .07 .50 .74(c) Portfolio Turnover Rate 32.59(c) 65.72 65.13 110.74 97.14 47.37(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 27,683 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.
Six Months Ended Year Ended December 31, June 30, 2003 --------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.07 14.54 15.09 15.09 Investment Operations: Investment income--net .05(b) .08(b) .08(b) -- Net realized and unrealized gain (loss) on investments .99 (3.45) (.40) -- Total from Investment Operatons 1.04 (3.37) (.32) -- Distributions: Dividends from investment income--net (.04) (.10) (.01) -- Dividends from net realized gain on investments -- -- (.22) -- Total Distributions (.04) (.10) (.23) -- Net asset value, end of period 12.07 11.07 14.54 15.09 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 9.46(c) (23.31) (2.08) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .50(c) 1.00 1.00 -- Ratio of net investment income to average net assets .46(c) .62 .61 -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .06(c) .13 .27 -- Portfolio Turnover Rate 32.59(c) 65.72 65.13 110.74 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 38,125 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. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company operating as a series company currently offering 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 wholly-owned 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. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) terms of the custody agreement, the portfolio received net earnings credits of $11 during the period ended June 30, 2003 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $10,613,425 available for federal income tax purposes 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 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2002 was as follows: ordinary income $511,785. The tax character of current year distributions will be determined at the end of the current fiscal year. NOTE 2--BANK LINE OF CREDIT: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemp- tions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2003, 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, 2003 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 June 30, 2003, the Manager waived receipt of fees of $22,996, pursuant to the undertaking. (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2003, Service shares were charged $43,100 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 June 30, 2003, the portfolio was charged $90 pursuant to the transfer agency agreement. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $4,754 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"). Through December 31, 2002, each Board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2003, amounted to $19,148,838 and $20,605,382, respectively. At June 30, 2003, accumulated net unrealized appreciation on investments was $3,308,610, consisting of $5,144,004 gross unrealized appreciation and $1,835,394 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. 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 172SA0603 DREYFUS INVESTMENT PORTFOLIOS, EMERGING LEADERS PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 9 Statement of Assets and Liabilities 10 Statement of Operations 11 Statement of Changes in Net Assets 12 Financial Highlights 14 Notes to Financial Statements 19 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover THE PORTFOLIO Dreyfus Investment Portfolios, Emerging Leaders Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Emerging Leaders Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. Inside, you' ll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio managers, Paul Kandel and Hilary Woods. The first half of 2003 was a time of long-awaited recovery for the U.S. stock market. Despite continued volatility leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the U.S. economy. Apparently, they liked what they saw. Despite current economic weakness, investors appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their equity exposure during the bear market. In contrast, we believe investors who avoided stocks may have missed the market' s recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 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 six-month period ended June 30, 2003, Dreyfus Investment Portfolios, Emerging Leaders Portfolio produced total returns of 17.31% for its Initial shares and 17.16% for its Service shares.(1) This compares with a total return of 17.88% for the portfolio's benchmark, the Russell 2000 Index (the "Index"), for the same period.(2) We attribute these returns to a sharp upturn in stock market performance that occurred during the second half of the reporting period. Successful U.S. and U.K. military action in Iraq, along with prospects for improving economic growth in 2003, increased investor optimism. While most market sectors enjoyed strong gains as a result of these circumstances, the small-cap stock universe on which the portfolio focuses performed exceptionally well. The portfolio roughly matched its benchmark' s return on the strength of particularly good stock selections in the technology and producer durables areas, which largely compensated for disappointments in health care and energy. The Russell 2000 Index performance was dominated by micro-cap, unprofitable, low- priced stocks, thus making it difficult for the fund managers, who focus on more liquid profitable companies, to match the Index performance. 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 The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) market), value-oriented stocks (those that appear underpriced according to a number of financial measurements) and stocks that exhibit both growth and value characteristics. We typically sell a stock when the reasons for buying it no longer apply or when the company begins to show deteriorating fundamentals or poor relative performance. WHAT OTHER FACTORS INFLUENCED THE PORTFOLIO'S PERFORMANCE? The technology sector produced a significant percentage of the market's overall gains. Some of the market's highest flyers were previously beaten-down stocks of companies that had suspect fundamentals and lack of visibility but were driven upward by an increase in investor appetite for risk. The portfolio avoided such stocks, maintaining its disciplined investment approach and thereby limiting its risks. The portfolio instead was invested in companies that we believed to be industry leaders with strong management teams, many of which, in our view, began the reporting period selling at compellingly attractive valuations. Some of the portfolio's top performers, such as enterprise software developer MicroStrategy and storage system vendor McDATA, were longer-term holdings established before the reporting period began. Others, such as semiconductor maker GlobespanVirata, were established during the reporting period. Our stock selection process also produced attractive results in the producer durables area. Once again, holdings encompassed a diverse group of investments, including trailer manufacturer Wabash National, construction machinery manufacturer Terex, homebuilder Toll Brothers, and mining machinery producer Joy Global. The portfolio' s producer durables investments outperformed its benchmark' s producer durables group. Strong stock selections in the utilities area further boosted the portfolio' s performance relative to its benchmark. Telecommunications service provider Time Warner Telecom, benefited from increased capital spending on telecommunications. Traditional dividend-paying gas and electric utility stocks, such as El Paso Electric and Western Gas Resources, rose as a result of favorable changes to the tax laws. On the other hand, the portfolio underperformed its benchmark in health care and energy, although it achieved positive total returns in both areas. In health care, the portfolio was underweight in biotechnology stocks and was hurt by its exposure to the drugs/pharmaceuticals sector, most of which failed to meet our investment criteria. In addition, one sizeable holding, First Horizon Pharmaceutical, declined sharply after failing to meet earnings expectations. In energy, the portfolio's individual stock selections failed to include a few particularly strong stocks that raised the average return for the Index. WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? As of the end of the reporting period, we are concerned that the market's recent climb may not be fully supported by economic fundamentals. We are cautiously seeking investment opportunities among companies that are likely to benefit from gradually improving economic conditions. Accordingly, as of the end of the reporting period the portfolio maintains relatively heavy exposure to energy stocks, which we believe are positioned to benefit from a tightening supply-and-demand situation. The portfolio holds relatively few positions in consumer discretionary and financial services stocks, both of which we believe could be adversely affected by flat or rising interest rates. July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, EMERGING LEADERS PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 RUSSELL 2000 INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. The Portfolio STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--94.9% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AUTOS & TRANSPORTS--3.7% Goodyear Tire & Rubber Co. 54,500 286,125 Kansas City Southern 25,000 (a) 300,750 OMI 60,000 (a) 369,600 956,475 CONSUMER--16.1% American Italian Pasta Co., Cl. A 9,000 (a) 374,850 Argosy Gaming 18,500 (a) 386,835 DeVry 17,500 (a) 407,575 Emmis Communications, Cl. A 15,500 (a) 355,725 Entercom Communications 6,500 (a) 318,565 Fossil 16,500 (a) 388,740 Hot Topic 14,000 (a) 376,740 Linens 'n Things 16,300 (a) 384,843 Mandalay Resort 12,500 398,125 Smithfield Foods 17,000 (a) 389,640 Talbots 12,500 368,125 4,149,763 ENERGY--6.4% Grant Prideco 27,500 (a) 323,125 McMoRan Exploration 28,000 (a) 311,920 Rowan Cos. 15,000 (a) 336,000 Tom Brown 12,500 (a) 347,375 Unit 16,500 (a) 345,015 1,663,435 FINANCIAL SERVICES--15.5% Arch Capital Group 12,500 (a) 434,125 Bank United (CPR) 1,400 (a) 112 Doral Financial 8,500 379,525 GBC Bancorp 10,500 403,200 Global Payments 12,000 426,000 Hilb, Rogal and Hamilton 8,000 272,320 Max Re Capital 21,000 314,370 Montpelier Re Holdings 12,500 (a) 395,000 Riggs National 25,000 380,500 Seacoast Financial Services 16,500 326,700 Texas Regional Bancshares, Cl. A 8,770 304,319 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL SERVICES (CONTINUED) Webster Financial 9,500 359,100 3,995,271 HEALTH CARE--13.6% Andrx 20,000 (a) 398,000 Apria Healthcare Group 13,500 (a) 335,880 Axcan Pharma 27,000 (a) 338,850 Edwards Lifesciences 11,500 (a) 369,610 Mid Atlantic Medical Services 7,500 (a) 392,250 NDCHealth 15,000 275,250 Renal Care Group 10,000 (a) 352,100 SICOR 18,000 (a) 366,120 Sierra Health Services 17,500 (a) 350,000 Telik 20,000 (a) 321,400 3,499,460 MATERIALS & PROCESSING--8.5% Agnico-Eagle Mines 33,000 382,800 Airgas 18,500 309,875 Allegheny Technologies 59,000 389,400 Crown 50,000 (a) 357,000 OM Group 26,000 382,980 Olin 22,000 376,200 2,198,255 PRODUCER DURABLES--8.9% AGCO 21,500 (a) 367,220 Joy Global 28,000 (a) 413,560 MasTec 62,500 (a) 360,000 Terex 21,000 (a) 409,920 URS 20,000 (a) 389,200 United Defense Industries 14,000 (a) 363,160 2,303,060 TECHNOLOGY--16.6% Ask Jeeves 27,500 (a) 378,125 DoubleClick 37,500 (a) 346,875 Exar 22,500 (a) 356,175 GlobespanVirata 54,500 (a) 449,625 Integrated Circuit Systems 12,000 (a) 377,160 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) McDATA, Cl. B 30,500 (a) 442,250 MicroStrategy, Cl. A 11,000 (a) 400,730 NetIQ 25,000 (a) 386,500 Roxio 55,000 (a) 367,950 Skyworks Solutions 48,500 (a) 328,345 Wireless Facilities 37,500 (a) 446,250 4,279,985 UTILITIES--5.6% El Paso Electric 30,000 (a) 369,900 Time Warner Telecom, Cl. A 57,500 (a) 366,275 Westar Energy 21,000 340,830 Western Gas Resources 9,000 356,400 1,433,405 TOTAL COMMON STOCKS (cost $21,534,147) 24,479,109 - ------------------------------------------------------------------------------------------------------------------------------------ OTHER INVESTMENTS--9.0% - ------------------------------------------------------------------------------------------------------------------------------------ REGULATED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 775,666 (b) 775,666 Dreyfus Institutional Cash Advantage Plus Fund 775,667 (b) 775,667 Dreyfus Institutional Preferred Plus Money Market Fund 775,667 (b) 775,667 TOTAL OTHER INVESTMENTS (cost $2,327,000) 2,327,000 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $23,861,147) 103.9% 26,806,109 LIABILITIES, LESS CASH AND RECEIVABLES (3.9%) (1,009,321) NET ASSETS 100.0% 25,796,788 (A) NON-INCOME PRODUCING. (B) INVESTMENTS IN AFFILIATED MONEY MARKET MUTUAL FUNDS--SEE NOTE 3(D).
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 23,861,147 26,806,109 Cash 4,457 Receivable for shares of Beneficial Interest subscribed 138,298 Dividends 14,025 26,962,889 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 24,622 Payable for investment securities purchased 1,114,157 Payable for shares of Beneficial Interest redeemed 5,547 Accrued expenses 21,775 1,166,101 - -------------------------------------------------------------------------------- NET ASSETS ($) 25,796,788 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 25,466,517 Accumulated investment (loss)--net (88,225) Accumulated net realized gain (loss) on investments (2,526,466) Accumulated net unrealized appreciation (depreciation) on investments 2,944,962 - -------------------------------------------------------------------------------- NET ASSETS ($) 25,796,788 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 13,346,702 12,450,086 Shares Outstanding 766,181 718,134 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 17.42 17.34 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: CASH DIVIDENDS 55,595 EXPENSES: Investment advisory fee--Note 3(a) 99,798 Auditing fees 18,122 Distribution fees--Note 3(b) 13,219 Prospectus and shareholders' reports 7,347 Custodian fees--Note 3(b) 2,048 Shareholder servicing costs--Note 3(b) 1,282 Legal fees 992 Trustees' fees and expenses--Note 3(c) 607 Miscellaneous 405 TOTAL EXPENSES 143,820 INVESTMENT (LOSS)--NET (88,225) - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 1,286,527 Net unrealized appreciation (depreciation) on investments 2,419,194 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 3,705,721 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,617,496 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss)--net (88,225) (134,613) Net realized gain (loss) on investments 1,286,527 (2,725,341) Net unrealized appreciation (depreciation) on investments 2,419,194 (2,551,899) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 3,617,496 (5,411,853) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 1,380,665 7,099,782 Service shares 2,199,278 8,328,068 Cost of shares redeemed: Initial shares (1,663,844) (5,168,938) Service shares (1,145,061) (1,476,905) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 771,038 8,782,007 TOTAL INCREASE (DECREASE) IN NET ASSETS 4,388,534 3,370,154 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 21,408,254 18,038,100 END OF PERIOD 25,796,788 21,408,254 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 84,403 404,268 Shares redeemed (111,533) (329,243) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (27,130) 75,025 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 140,533 493,678 Shares redeemed (73,381) (98,214) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 67,152 395,464 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 ------------------------------------------------------ INITIAL SHARES (Unaudited) 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.85 18.53 17.05 13.44 12.50 Investment Operations: Investment income (loss)--net (.05)(b) (.09)(b) (.08)(b) (.09)(b) .01 Net realized and unrealized gain (loss) on investments 2.62 (3.59) 1.57 4.30 .93 Total from Investment Operations 2.57 (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 17.42 14.85 18.53 17.05 13.44 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 17.31(c) (19.86) 8.74 31.70 7.52(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .58(c) 1.17 1.46 1.50 .07(c) Ratio of net investment income (loss) to average net assets (.34)(c) (.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 65.15(c) 127.24 175.21 234.94 1.79(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 13,347 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.
Six Months Ended Year Ended December 31, June 30, 2003 ------------------------------------------------ SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.79 18.51 17.05 17.05 Investment Operations: Investment (loss)--net (.07)(b) (.13)(b) (.08)(b) -- Net realized and unrealized gain (loss) on investments 2.62 (3.59) 1.55 -- Total from Investment Operations 2.55 (3.72) 1.47 -- Distributions: Dividends from net realized gain on investments -- -- (.01) -- Net asset value, end of period 17.34 14.79 18.51 17.05 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 17.16(c) (20.04) 8.62 -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .71(c) 1.43 1.50 -- Ratio of net investment (loss) to average net assets (.46)(c) (.79) (.49) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- .30 -- Portfolio Turnover Rate 65.15(c) 127.24 175.21 234.94 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 12,450 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. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering 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 wholly-owned 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. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ offering closing price. 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $3,508,038 available for federal income tax purposes 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. NOTE 2--BANK LINE OF CREDIT: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2003, 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, 2003 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 June 30, 2003, there was no expense reimbursement pursuant to the undertaking (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2003, Service shares were charged $13,219 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 June 30, 2003, the portfolio was charged $57 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $2,048 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"). Through December 31, 2002, each board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. 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) Pursuant to an exemptive order from the Securities and Exchange Commission, the portfolio invests its available cash balances in affiliated money market mutual funds as shown in the portfolio's Statement of Investments. Management fees are not charged to these accounts. During the period ended June 30, 2003, the portfolio derived $4,391 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, during the period ended June 30, 2003, amounted to $14,200,526 and $14,414,436, respectively. At June 30, 2003, accumulated net unrealized appreciation on investments was $2,944,962, consisting of $3,500,365 gross unrealized appreciation and $555,403 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. 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 192SA0603 DREYFUS INVESTMENT PORTFOLIOS, EMERGING MARKETS PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 16 Financial Highlights 18 Notes to Financial Statements 25 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover THE PORTFOLIO Dreyfus Investment Portfolios, Emerging Markets Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Emerging Markets Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. 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. The first half of 2003 was a time of long-awaited recovery for international stocks. Despite continued volatility and lackluster economic conditions leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the global economy. Apparently, they liked what they saw. Despite current economic weakness, investors in many parts of the world appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for international stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their international equity exposure during the bear market. In contrast, investors who avoided international stocks may have missed the market' s recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2003 DISCUSSION OF PERFORMANCE D. Kirk Henry, Portfolio Manager HOW DID DREYFUS INVESTMENT PORTFOLIOS, EMERGING MARKETS PORTFOLIO PERFORM RELATIVE TO ITS BENCHMARK? For the six-month period ended June 30, 2003, the portfolio produced total returns of 15.79% for its Initial shares and 15.89% 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 16.13% total return for the same period.(2) We attribute the portfolio's and the market's returns to improving global economic conditions and the settling of geopolitical tensions as the war with Iraq came to an end. We are also pleased that the portfolio was able to produce returns in line with that of its benchmark, primarily because of the success of our country allocation and stock selection strategies. 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. The portfolio closed to new investors on July 17, 2003. When selecting stocks, we seek to identify potential investments through extensive quantitative and portfolio 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? During the reporting period, a swift resolution to the war with Iraq helped improve sentiment among U.S. businesses and consumers, which, in turn, helped fuel a rally across many of the world's equity markets. Stocks in the emerging markets continued to fare better than those in the developed markets, chiefly because many developing countries have spent the past several years strengthening their domestic economies. As a result, emerging-market economies have become less susceptible to the effects of global economic weakness on exporters. The portfolio's exposure to companies in India represented a large positive contributor to its performance. We believe that India stocks have been undervalued relative to companies in other Asian markets. India is home to one of the world's largest middle class populations, and the country has a highly educated workforce and low labor costs. The portfolio's best performing India stocks during the reporting period were Reliance Industries, a conglomerate; Gail India, a major gas distributor; and the State Bank of India. In addition, the portfolio's investments in a tobacco company, an auto and scooter manufacturer and an automobile engineering firm also helped fuel returns In South Africa, strong consumer spending helped boost returns, where a food and beverage company, a grocery chain and a financial services company benefited from a stronger rand currency and improved consumer confidence levels. The portfolio's basic materials stocks held up relatively well throughout the reporting period. For example, we initiated a position in a major resource company in South Africa, primarily because we decided to postpone investing in mining stocks until after gold prices had corrected from the highs they maintained for much of the reporting period. Other basic materials stocks that performed well included an aluminum company in China and India, and a cement company in Mexico and India. On the other hand, the portfolio's relative performance was hurt by its limited exposure to Russian oil stocks, whose prices rose dramatically due to higher oil prices. In addition, the portfolio' s relative returns were hindered by its relatively light exposure to certain pharmaceutical companies, which benefited from market share gains and favorable patent rulings. WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? In our view, stocks in the emerging markets remain attractively valued relative to their counterparts in more developed markets. At the same time, demographic changes in many developing countries are leading to greater local demand for goods and services. We believe that this trend is likely to benefit consumer-oriented companies at the same time that it enhances the stability of local economies and markets. In today's low-growth, low-inflation environment, we believe that no single industry sector or country is likely to dominate for long periods of time. As a result, in our view, the ability to identify individual companies across all regions and industry sectors should remain key to successful investing in the emerging markets. July 15, 2003 () THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, EMERGING MARKETS PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 OR 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 STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--91.0% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ BRAZIL--6.2% Banco Itau, ADR 2,580 87,462 Companhia Brasileira de Distribuicao Grupo Pao de Acucar, ADR 1,600 24,544 Companhia de Saneamento Basico do Estado de Sao Paulo 2,260 81,944 Empresa Brasileira de Aeronautica, ADR 4,580 87,478 Petroleo Brasileiro, ADR 10,440 206,295 Tele Celular Sul Participacoes, ADR 3,900 32,487 Tele Norte Leste Participacoes, ADR 5,000 58,400 Telecomunicacoes Brasileiras, ADR (PFD Block) 3,600 99,180 Ultrapar Participacoes, ADR 3,700 34,114 711,904 CHINA--2.4% PetroChina, Cl. H 141,000 42,490 Quingling Motors, Cl. H 322,000 49,549 Shangdong International Power Development, Cl. H 284,000 81,029 Sinopec Shanghai Petrochemical, Cl. H 200,000 38,982 Sinopec Yizheng Chemical Fibre, Cl. H 430,000 61,205 273,255 CROATIA--.7% Pliva d.d., GDR 5,900 (a) 81,420 CZECH REPUBLIC--.5% CEZ 14,700 56,444 EGYPT--1.0% Commercial International Bank, GDR 7,700 (a) 47,355 Orascom Construction Industries 2,613 20,928 Suez Cement, GDR 6,032 (a,b) 43,249 111,532 HONG KONG--4.5% CNOOC 20,000 29,493 China Mobile (Hong Kong) 88,500 208,812 China Mobile (Hong Kong), ADR 7,700 90,629 China Resources Enterprise 124,500 107,763 Shanghai Industrial 50,000 70,527 507,224 HUNGARY--2.6% EGIS 950 32,393 Gedeon Richter 1,100 77,651 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ HUNGARY (CONTINUED) MOL Magyar Olaj-es Gazipari 4,400 96,096 Magyar Tavkozlesi 15,300 52,368 OTP Bank 4,000 (b) 38,673 297,181 INDIA--9.8% Bajaj Auto, GDR 4,300 (a,b) 52,030 Gail India, GDR 5,700 (a) 80,370 Hindalco Indusries, GDR 5,700 (a) 91,912 ICICI Bank, ADR 12,150 (b) 88,331 ITC, GDR 6,400 (a) 110,400 Mahanagar Telephone Nigam, ADR 40,500 194,400 Mahindra & Mahindra, GDR 9,050 (a) 27,512 Reliance Industries, GDR 18,750 (a) 272,813 Satyam Computer Services, ADR 7,650 75,964 State Bank of India, GDR 2,700 (a) 55,350 Tata Engineering & Locomotive, GDR 16,600 (a,b) 70,816 1,119,898 INDONESIA--2.4% PT Gudang Garam 60,000 74,182 PT Indofood Sukses Makmur 685,000 70,576 PT Indonesian Satellite 41,000 43,733 PT Telekomunikasi Indonesia 158,000 88,576 277,067 ISRAEL--1.1% Bank Hapoalim 43,450 (b) 92,224 Check Point Software Technologies 700 (b) 13,685 Supersol 9,500 23,020 128,929 MALAYSIA--3.1% Commerce Asset 66,000 60,095 Genting 22,000 86,842 Malaysia International Shipping 40,000 79,474 Sime Darby 90,500 121,460 347,871 MEXICO--9.7% Apasco 5,600 43,312 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ MEXICO (CONTINUED) Cemex 20,188 90,051 Coca-Cola Femsa, ADR 4,200 (b) 90,300 Consorcio ARA 19,600 (b) 38,930 Controladora Comercial Mexicana 114,500 76,611 Desc, Ser. B 157,600 60,343 Grupo Aeroportuario del Sureste, ADR 4,000 58,520 Grupo Continental 48,200 75,435 Grupo Financiero BBVA Bancomer, Cl. B 79,000 (b) 66,772 Kimberly-Clark de Mexico, Cl. A 79,100 212,003 Telefonos de Mexico, ADR 9,400 295,348 1,107,625 PHILIPPINES--1.3% ABS-CBN Broadcasting 53,200 (b) 18,160 Bank of the Philippine Islands 74,960 64,494 Manila Electric, Cl. B 92,000 (b) 25,381 Philippine Long Distance Telephone, ADR 3,700 (b) 39,100 147,135 POLAND--3.8% Bank Przemyslowo-Handlowy PBK 1,075 74,999 KGHM Polska Miedz 41,341 (b) 152,164 Polski Koncern Naftowy Orlen 21,000 102,073 Telekomunikacja Polska 22,201 78,014 Telekomunikacja Polska, GDR 7,000 24,829 432,079 RUSSIA--1.9% LUKOIL, ADR 2,750 217,250 SOUTH AFRICA--9.7% ABSA 14,500 68,164 Aveng 24,500 28,843 Bidvest 21,400 123,104 Imperial 9,000 (b) 64,535 Metro Cash and Carry 229,399 (b) 70,891 Nampak 84,162 136,798 Nedcor 17,839 213,591 Sasol 18,000 201,191 Shoprite 75,000 64,214 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SOUTH AFRICA (CONTINUED) Steinhoff International 61,313 54,136 Tiger Brands 9,600 85,276 1,110,743 SOUTH KOREA--15.3% CJ 1,600 69,653 Cheil Communications 400 39,347 Hyundai Mobis 450 11,547 Hyundai Motor 2,300 60,846 Hyundai Motor, GDR 5,100 (a) 32,844 KT, ADR 7,700 151,767 KT&G, GDR 11,800 (a) 97,350 Kookmin Bank 800 24,110 Kookmin Bank, ADR 5,985 181,046 Korea Electric Power 1,600 25,316 Korea Electric Power, ADR 32,000 285,120 Korea Exchange Bank Credit Services 8,629 (b) 57,141 LG Card 1,875 27,391 POSCO 700 72,666 POSCO, ADR 4,400 115,236 SK Telecom 400 68,313 SK Telecom, ADR 1,500 28,290 Samsung 16,000 95,638 Samsung Electronics, GDR 1,310 (a) 193,880 Samsung SDI 400 30,306 Samsung SDI, GDR 4,000 (a) 75,800 1,743,607 TAIWAN--8.5% Accton Technology 71,734 55,004 Advanced Semiconductor Engineering 101,190 (b) 60,316 Advanced Semiconductor Engineering, ADR 2,818 (b) 8,257 Asustek Computer 36,000 91,146 Elan Microelectronics 72,872 61,570 Nan Ya Plastics 50,341 54,623 Quanta Computer 46,000 95,168 SinoPac 333,404 (b) 122,036 Taiwan Cellular 151,260 (b) 109,856 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TAIWAN (CONTINUED) United Microelectronics 295,900 (b) 190,931 United Microelectronics, ADR 9,000 (b) 33,750 Yageo 320,280 (b) 86,186 968,843 THAILAND--2.6% Charoen Pokphand Foods 250,000 28,867 Kasikornbank 90,000 (b) 83,927 PTT Exploration and Production 16,700 63,880 Siam Commercial Bank 108,000 (b) 92,373 Siam Makro 28,000 23,117 292,164 TURKEY--.3% Hurriyet Gazetecilik ve Matbaacilik 16,820,000 (b) 29,051 UNITED KINGDOM--3.6% Anglo American 16,826 257,600 Dimension Data 78,500 (b) 28,259 Old Mutual 87,900 127,298 413,157 TOTAL COMMON STOCKS (cost $9,120,177) 10,374,379 - ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--2.1% - ------------------------------------------------------------------------------------------------------------------------------------ BRAZIL: Companhia de Tecidos Norte de Minas 1,250 87,117 Companhia Energetica de Minas Gerais 10,746 99,676 Telecomunicacoes de Sao Paulo 2,600 30,201 Telemig Celular Participacoes 22,000 23,077 TOTAL PREFERRED STOCKS (cost $253,705) 240,071 OTHER INVESTMENTS--1.8% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 66,666 (c) 66,666 Dreyfus Institutional Cash Advantage Plus Fund 66,667 (c) 66,667 Dreyfus Institutional Preferred Plus Money Market Fund 66,667 (c) 66,667 TOTAL OTHER INVESTMENTS (cost $200,000) 200,000 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $9,573,882) 94.9% 10,814,450 CASH AND RECEIVABLES (NET) 5.1% 585,219 NET ASSETS 100.0% 11,399,669 (A) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2003, THESE SECURITIES AMOUNTED TO $1,333,101 OR 11.7% OF NET ASSETS. (B) NON-INCOME PRODUCING. (C) INVESTMENTS IN AFFILIATED MONEY MARKETS MUTUAL FUNDS--SEE NOTE 3(D). SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 9,573,882 10,814,450 Cash 97,102 Cash denominated in foreign currencies 569,131 572,297 Receivable for investment securities sold 61,576 Dividends and interest receivable 46,920 Receivable for shares of Beneficial Interest subscribed 39,443 Net unrealized appreciation on forward currency exchange contracts--Note 4 901 11,632,689 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 2,225 Payable for investment securities purchased 150,834 Payable for shares of Beneficial Interest redeemed 28,533 Accrued expenses and other liabilities 51,428 233,020 - -------------------------------------------------------------------------------- NET ASSETS ($) 11,399,669 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 10,942,633 Accumulated undistributed investment income--net 64,941 Accumulated net realized gain (loss) on investments (851,695) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions 1,243,790 - -------------------------------------------------------------------------------- NET ASSETS ($) 11,399,669 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 10,026,124 1,373,545 Shares Outstanding 927,179 126,945 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 10.81 10.82 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: CASH DIVIDENDS (net of $13,347 foreign taxes withheld at source) 164,633 EXPENSES: Investment advisory fee--Note 3(a) 62,320 Auditing fees 25,885 Custodian fees 22,291 Prospectus and shareholders' reports 12,860 Shareholder servicing costs--Note 3(b) 8,342 Distribution fees--Note 3(b) 1,487 Legal fees 1,178 Trustees' fees and expenses--Note 3(c) 625 Registration fees 28 Miscellaneous 415 TOTAL EXPENSES 135,431 Less--waiver of fees due to undertaking--Note 3(a) (35,719) NET EXPENSES 99,712 INVESTMENT INCOME--NET 64,921 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (482,935) Net realized gain (loss) on forward currency exchange contracts 3,744 NET REALIZED GAIN (LOSS) (479,191) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 1,961,946 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,482,755 NET INREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,547,676 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 64,921 104,676 Net realized gain (loss) on investments (479,191) 44,651 Net unrealized appreciation (depreciation) on investments 1,961,946 (686,383) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,547,676 (537,056) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (11,713) (81,609) Service shares (1,679) (10,086) TOTAL DIVIDENDS (13,392) (91,695) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 9,579,115 66,624,961 Service shares 306,877 1,341,355 Dividends reinvested: Initial shares 11,713 81,609 Service shares 1,679 10,086 Cost of shares redeemed: Initial shares (10,028,317) (62,714,092) Service shares (236,659) (381,270) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (365,592) 4,962,649 TOTAL INCREASE (DECREASE) IN NET ASSETS 1,168,692 4,333,898 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 10,230,977 5,897,079 END OF PERIOD 11,399,669 10,230,977 Undistributed investment income--net 64,941 13,412 Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 1,033,104 6,693,123 Shares issued for dividends reinvested 1,315 8,663 Shares redeemed (1,082,046) (6,325,253) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (47,627) 376,533 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 31,966 133,481 Shares issued for dividends reinvested 188 1,071 Shares redeemed (24,967) (38,255) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 7,187 96,297 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 ---------------------------------------------------- INITIAL SHARES (Unaudited) 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.35 9.48 9.23 13.63 12.50 Investment Operations: Investment income--net .06(b) .11(b) .15(b) .04(b) .02 Net realized and unrealized gain (loss) on investments 1.41 (.15) .16 (4.37) 1.11 Total from Investment Operations 1.47 (.04) .31 (4.33) 1.13 Distributions: Dividends from investment income--net (.01) (.09) (.06) (.06) -- Dividends from net realized gain on investments -- -- -- (.01) -- Total Distributions (.01) (.09) (.06) (.07) -- Net asset value, end of period 10.81 9.35 9.48 9.23 13.63 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 15.79(c) (.48) 3.32 (31.81) 9.04(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .99(c) 1.96 2.00 2.00 .09(c) Ratio of net investment income to average net assets .65(c) 1.16 1.70 .36 .18(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .34(c) .87 3.40 1.86 1.51(c) Portfolio Turnover Rate 33.92(c) 76.18 119.06 123.49 .43(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 10,026 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.
Six Months Ended Year Ended December 31, June 30, 2003 ---------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.35 9.49 9.23 9.23 Investment Operations: Investment income--net .06(b) .08(b) .16(b) -- Net realized and unrealized gain (loss) on investments 1.42 (.13) .16 -- Total from Investment Operations 1.48 (.05) .32 -- Distributions: Dividends from investment income--net (.01) (.09) (.06) -- Net asset value, end of period 10.82 9.35 9.49 9.23 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 15.89(c) (.59) 3.43 -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .99(c) 1.97 2.00 -- Ratio of net investment income to average net assets .66(c) .84 1.74 -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .47(c) 1.01 3.64 -- Portfolio Turnover Rate 33.92(c) 76.18 119.06 123.49 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 1,374 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. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering 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 wholly-owned 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. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. 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 receives net earnings credits based on available cash balances left on deposit. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $208,290 available for federal income tax purposes to be applied against future net securities profits, if any, realized prior to liquidation date. See Note 5. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2002 was as follows: ordinary income $91,695. The tax character of current year distributions will be determined by the liquidation date. NOTE 2--BANK LINE OF CREDIT: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2003, 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, 2003 to on or about November 14, 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 June 30, 2003, the Manager waived receipt of fees and assumed expenses of the portfolio of $35,719, pursuant to the undertaking. (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2003, Service shares were charged $1,487 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 June 30, 2003, the portfolio was charged $94 pursuant to the transfer agency agreement. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Through December 31, 2002, each board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. 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) Pursuant to an exemptive order from the Securities and Exchange Commission, the portfolio may invest its available cash balances in affiliated money market mutual funds as shown in the portfolio's Statement of Investments. Management fees are not charged to these accounts. During the period ended June 30, 2003, the portfolio derived $856 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 June 30, 2003, amounted to $3,292,968 and $3,759,113, respectively. The portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the portfolio is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counterparty nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. The following summarizes open forward currency exchange contracts at June 30, 2003:
Foreign Forward Currency Currency Unrealized Exchange Contracts Amounts Cost ($) Value ($) Appreciation ($) - ------------------------------------------------------------------------------------------------------------------------------------ PURCHASES: Brazilian Real, expiring 7/1/2003 171,511 59,677 60,370 693 Hungarian Forint expiring 7/2/2003 3,368,305 14,493 14,538 45 South African Rand, expiring 7/2/2003 166,429 22,102 22,265 163 TOTAL 901
At June 30, 2003, accumulated net unrealized appreciation on investments was $1,240,568, consisting of $1,675,000 gross unrealized appreciation and $434,432 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) NOTE 5--SUBSEQUENT EVENT: At a meeting of the Board of Trustees of Dreyfus Investment Portfolios held on July 17, 2003, the Board approved a proposal to liquidate the Emerging Markets Portfolio (the "Portfolio" ), distribute the Portfolio's assets to Portfolio shareholders and close out Portfolio shareholder accounts. The liquidation is expected to occur on or about November 14, 2003. Accordingly, effective as of the close of business on July 17, 2003, the Portfolio was closed to any investments for new accounts. PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. The Portfolio 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 191SA0603 DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS DISCOVERY PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 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 24 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover THE PORTFOLIO Dreyfus Investment Portfolios, Founders Discovery Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Founders Discovery Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. Inside, you' ll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Robert Ammann, CFA, of Founders Asset Management LLC, the portfolio's sub-investment adviser. The first half of 2003 was a time of long-awaited recovery for the U.S. stock market. Despite continued volatility leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the U.S. economy. Apparently, they liked what they saw. Despite current economic weakness, investors appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their equity exposure during the bear market. In contrast, we believe investors who avoided stocks may have missed the market' s recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 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 six-month period ended June 30, 2003, the portfolio produced a total return of 11.91% for its Initial shares and a total return of 11.94% for its Service shares.(1) In comparison, the Russell 2000 Index (the "Index"), the portfolio' s benchmark, produced a total return of 17.88% , for the same period.(2) Since 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, which produced a total return of 19.33% for the reporting period.(3) We attribute the portfolio's performance to a reduction in geopolitical concerns and an increase in economic optimism during the second half of the reporting period. The portfolio produced lower returns than its benchmark, in part due to the Index's greatest returns coming from smaller, less liquid stocks in which it has proven difficult for the portfolio to establish meaningful positions. The portfolio was also affected by a relatively high cash position and various asset allocation and stock selection factors. 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. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) Rather than utilizing a "top-down" approach to stock selection, which relies on forecasting stock market trends, we focus on a "bottom-up" approach in which stocks are chosen according to their own individual merits. Stock selection is made on a company-by-company basis, with particular emphasis on companies that we believe are well-managed and well-positioned within their industries WHAT OTHER FACTORS INFLUENCED THE PORTFOLIO'S PERFORMANCE? The opening of the reporting period saw depressed investor optimism and dampened consumer spending, precipitated mostly by the geopolitical uncertainty that blanketed the market. The market began to rally in March as investor optimism increased with the move toward a resolution in the Iraqi conflict. This rally proved sustainable through the remainder of the reporting period, buoyed primarily by a fairly strong first-quarter earnings-reporting season where many companies met or exceeded expectations. Low interest rates, shareholder-friendly tax legislation and continued evidence that the U.S. economy is showing modest improvements added fuel to the market rally. The recent market rally has been characterized by many of the smallest market capitalization companies, or micro-cap stocks, showing the greatest strength. This micro-cap bias can be seen when comparing the returns of the stocks in the Russell 2000 Growth Index broken into quintiles by market cap. During this period, the largest capitalization companies within the Russell 2000 Growth Index posted a return of 14.90%, while the smallest quintile stocks produced a 32.66% return.(4) We find it difficult to take meaningful positions in many of these small companies as liquidity often prevents us from building a meaningful position. The portfolio' s slightly higher than normal cash position also dampened returns that the portfolio might have otherwise seen in the strong market environment. Cash averaged around 14.9% during the reporting period, which is somewhat higher than the preferred 5%-10% range. The portfolio's underweighted position in the information technology sector hindered relative performance despite strong performance from some holdings. Technology distributor Tech Data Corporation fell early in the reporting period after revising downward their 2003 fiscal year earnings guidance and announcing a large acquisition. Cree, a LED (light emitting diode) company, performed poorly due to pending litigation with a former founder. Other weak contributors within the technology sector included Fairchild Semiconductor International, Emulex, and Brooks Automation. An underweighted position in the telecommunications services sector also impaired the portfolio' s absolute performance. Boston Communications Group suffered due to concerns over the renewal of a large customer contract. Relative returns among the portfolio's energy holdings also did not keep pace with the Index because of lagging returns from National Oilwell, Pioneer Natural Resources and Quicksilver Resources. Several holdings within the industrials sector, including holdings such as education-related stocks Corinthian Colleges, Education Management, Strayer Education and Career Education Corporation performed well relative to the portfolio's benchmark. Each company translated strong enrollment trends into strong earnings growth and were significant contributors to the portfolio's performance. Additionally, Stericycle, Inc., a medical waste management company, performed well as it continued to benefit from steady customer demand and increased opportunities for value-added service offerings. Among the more economically sensitive areas within the industrials sector, the portfolio saw strong performance in holdings such as air freight and logistics companies Pacer International and UTI Worldwide, which posted strong returns resulting from increased shipping activity associated with stronger global economic activity. Other more economically sensitive holdings that also did well during the reporting period include J.B. Hunt Transport Services and Jacobs Engineering Group. Strong stock selection in the consumer discretionary sector aided portfolio performance. Some of the significant contributors to performance were Movie Gallery, the video rental chain, which rebounded sharply following last year's concerns over possible weaknesses. Auto parts retailer Advance Auto Parts also performed well bolstered by strong sales, earnings results and increased interest in the company's potential to expand margins over time. Harman International Industries, The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) an audio and electronics provider to consumers and automobile Original Equipment Manufacturer (OEM) markets, rose sharply as strong earnings results were led by the automotive OEM' s adoption of Harman's newer infotainment solutions. Ruby Tuesday also performed well following resolution of uncertainty about accounting changes as well as strong early results from a new menu. Finally, Leapfrog Enterprises, an educational toy company, excelled as strong product adoption by consumers led to increased retail shelf space and strong earnings growth. A weak performer for the portfolio in this sector was Alloy, a teen direct marketing and media company that declined after announcing an earnings shortfall due to unexpected higher fulfillment costs and more promotional activity. The portfolio benefited from several performers in the health care sector despite a few select disappointments. Select Medical, a long-term acute care hospital and outpatient rehabilitation services company, Taro Pharmaceuticals Industries, a generic drug company, Integra LifeSciences Holdings, a life and neurosciences company, and Odyssey HealthCare, a hospice care provider, contributed positively to the portfolio' s performance. The largest negative contribution came from contract pharmacy services company Accredo Health, which fell sharply as it lowered expectations due to product competition and acquisition integration challenges. Nurse-staffing organization AMN Health Services declined as demand for temporary staffing slowed. Research models company Charles River Laboratories International lagged after slightly lowering earnings guidance early in the year. The market's rotation into more economically sensitive holdings within the health care sector and lagging performance due to slowing admission trends also caused the hospital sub-sector to fare poorly. Another contributor to relative performance was the portfolio's underweighted position in the weak performing financials sector. Our relatively poor stock selection in holdings such as La Quinta and Arthur J. Gallagher & Co. were more than overcome by our overall underweighting of this weak performing sector. Additional hindrances to performance included poor stock selection within the consumer staples sector with holdings such as Manhattan-based drug retailer Duane Reade, which was negatively impacted by a weakened New York economy. WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? As we move into the second half of 2003, our strategy remains consistent. We strongly believe a focus on valuation is of great importance. We will continue to employ our bottom-up research process to seek companies we believe are capable of posting strong future earnings growth at attractive valuations. July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS DISCOVERY PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 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. (4) SOURCE: FACTSET RESEARCH SYSTEMS INC.; FRANK RUSSELL COMPANY, PRUDENTIAL SECURITIES. The Portfolio STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--91.4% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AEROSPACE & DEFENSE--.7% ManTech International, Cl. A 5,330 (a) 102,229 AIR FREIGHT & LOGISTICS--2.0% Pacer International 10,440 (a) 196,898 UTI Worldwide 2,510 78,287 275,185 APPAREL, ACCESSORIES & LUXURY GOODS--1.3% Columbia Sportswear 3,330 (a) 171,195 BANKS--.7% Southwest Bancorporation of Texas 2,930 (a) 95,254 BROADCASTING & CABLE TV--1.5% Radio One, Cl. D 11,660 (a) 207,198 CASINOS & GAMING--1.5% Boyd Gaming 12,080 (a) 208,501 COMMERCIAL SERVICES--4.8% Corinthian Colleges 2,940 (a) 142,796 Education Management 4,650 (a) 247,287 FTI Consulting 2,635 (a) 65,796 Kroll 5,500 (a) 148,830 Strayer Education 560 44,492 649,201 COMMUNICATIONS EQUIPMENT--6.5% Avocent 6,880 (a) 205,918 Emulex 1,380 (a) 31,423 Harris 4,966 149,228 NetScreen Technologies 6,950 (a) 156,723 Polycom 5,830 (a) 80,804 Powerwave Technologies 13,160 (a) 82,513 SafeNet 1,590 (a) 44,488 Stratex Networks 41,992 (a) 134,374 885,471 CONSTRUCTION & ENGINEERING--1.8% Jacobs Engineering Group 5,960 (a) 251,214 CONSUMER ELECTRONICS--1.9% Harman International Industries 3,300 261,162 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ DISTILLERS & VINTNERS--.7% Constellation Brands, Cl. A 3,190 (a) 100,166 ELECTRICAL COMPONENTS & EQUIPMENT--.9% AMETEK 3,400 124,610 ELECTRONIC EQUIPMENT MANUFACTURERS--1.5% Aeroflex 11,180 (a) 86,533 Coherent 2,030 (a) 48,578 FLIR Systems 2,470 (a) 74,471 209,582 ENVIRONMENTAL SERVICES--2.4% Stericycle 7,370 (a) 283,598 Waste Connections 1,110 (a) 38,906 322,504 FOOD DISTRIBUTORS--.4% United Natural Foods 1,790 (a) 50,371 GENERAL MERCHANDISE STORES--.8% Tuesday Morning 4,130 (a) 108,619 HEALTH CARE--15.0% ALARIS Medical Systems 11,050 (a) 143,097 AMERIGROUP 5,830 (a) 216,876 Bio-Rad Laboratories, Cl. A 1,820 (a) 100,737 Community Health Systems 2,020 (a) 39,249 Cooper Cos. 2,050 71,279 Fisher Scientific International 7,760 (a) 270,824 Henry Schein 3,030 (a) 158,590 Integra LifeSciences Holdings 6,540 (a) 172,525 Mettler-Toledo International 2,190 (a) 80,264 Odyssey Healthcare 4,275 (a) 158,175 Omnicare 5,670 191,589 PacifiCare Health Systems 1,290 (a) 63,636 Patterson Dental 1,412 (a) 64,077 ResMed 3,340 (a) 130,928 Select Medical 7,540 (a) 187,218 2,049,064 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ HOME FURNISHINGS--.7% Furniture Brands International 3,790 (a) 98,919 HOTELS, RESORTS & CRUISE LINES--1.1% Choice Hotels International 2,520 (a) 68,821 Fairmont Hotels & Resorts 3,570 83,538 152,359 HOUSEHOLD PRODUCTS--1.0% Dial 6,680 129,926 INSURANCE BROKERS--1.2% Platinum Underwriters Holdings 6,030 163,654 LEISURE PRODUCTS--3.1% Leapfrog Enterprises 7,180 (a) 228,396 Polaris Industries 3,140 192,796 421,192 OIL & GAS--5.0% CARBO Ceramics 1,770 65,844 National-Oilwell 10,874 (a) 239,228 Pioneer Natural Resources 3,080 (a) 80,388 Pride International 3,420 (a) 64,364 Quicksilver Resources 1,790 (a) 42,871 Superior Energy Services 11,520 (a) 109,210 Tidewater 2,820 82,823 684,728 PACKAGED FOODS & MEATS--1.1% American Italian Pasta, Cl. A 3,490 (a) 145,359 PHARMACEUTICALS--6.7% Andrx 7,960 (a) 158,404 K-V Pharmaceutical, Cl. A 1,790 (a) 49,762 MGI Pharma 1,760 (a) 45,109 Medicis Pharmaceutical, Cl. A 4,880 276,696 Pharmaceutical Resources 1,690 (a) 82,235 SICOR 5,966 (a) 121,348 Taro Pharmaceutical Industries 3,400 (a) 186,592 920,146 PUBLISHING--.7% Getty Images 2,300 (a) 94,990 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ RESTAURANTS--3.5% Krispy Kreme Doughnuts 2,730 (a) 112,421 RARE Hospitality International 3,510 (a) 114,707 Ruby Tuesday 9,960 246,311 473,439 RETAIL--.2% Whole Foods Market 630 (a) 29,944 SEMICONDUCTORS & EQUIPMENT--3.1% Brooks Automation 8,409 (a) 95,358 Cree 2,190 (a) 35,653 Entegris 8,120 (a) 109,133 FEI 5,260 (a) 98,678 Fairchild Semiconductor International 3,050 (a) 39,010 Semtech 2,990 (a) 42,578 420,410 SOFTWARE--5.9% ANSYS 1,600 (a) 49,760 Cadence Design Systems 3,920 (a) 47,275 Documentum 2,740 (a) 53,896 FileNET 4,110 (a) 74,144 Hyperion Solutions 2,390 (a) 80,686 Macrovision 5,726 (a) 114,062 NetIQ 7,040 (a) 108,838 Reynolds & Reynolds, Cl. A 1,680 47,981 Secure Computing 6,261 (a) 54,658 Sonic Solutions 9,350 (a) 80,597 United Online 3,660 (a) 92,744 804,641 SPECIALTY CHEMICALS--.5% Valspar 1,520 64,174 SPECIALTY STORES--8.4% Advance Auto Parts 4,300 (a) 261,870 Cost Plus 4,050 (a) 144,423 Finish Line, Cl. A 3,440 (a) 76,402 Hollywood Entertainment 10,960 (a) 188,512 Movie Gallery 8,850 (a) 163,282 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SPECIALTY STORES (CONTINUED) PETCO Animal Supplies 3,280 (a) 71,307 Rent-A-Center 1,000 (a) 75,810 Tractor Supply 3,380 (a) 161,395 1,143,001 TECHNOLOGY DISTRIBUTORS--.5% Insight Enterprises 6,258 (a) 62,955 TRADING COMPANIES & DISTRIBUTORS--.8% Fastenal 3,070 104,196 TRUCKING--2.8% J.B. Hunt Transport Services 1,790 (a) 67,573 Werner Enterprises 5,570 118,084 Yellow 8,730 (a) 202,100 387,757 WIRELESS TELECOMMUNICATION SERVICES--.7% Boston Communications Group 5,620 (a) 96,271 TOTAL COMMON STOCKS (cost $11,023,419) 12,469,587 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--8.9% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTE; Federal National Mortgage Association, .77%, 7/1/2003 (cost $1,216,000) 1,216,000 1,216,000 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $12,239,419) 100.3% 13,685,587 LIABILITIES, LESS CASH AND RECEIVABLES (.3%) (43,802) NET ASSETS 100.0% 13,641,785 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 12,239,419 13,685,587 Cash 160,674 Receivable for investment securities sold 180,525 Receivable for shares of Beneficial Interest subscribed 87,327 Dividends receivable 791 14,114,904 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 14,754 Payable for investment securities purchased 431,608 Payable for shares of Beneficial Interest redeemed 652 Accrued expenses 26,105 473,119 - -------------------------------------------------------------------------------- NET ASSETS ($) 13,641,785 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 23,688,229 Accumulated investment (loss)--net (67,411) Accumulated net realized gain (loss) on investments (11,425,201) Accumulated net unrealized appreciation (depreciation) on investments 1,446,168 - -------------------------------------------------------------------------------- NET ASSETS ($) 13,641,785 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 11,017,025 2,624,760 Shares Outstanding 1,502,560 359,159 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 7.33 7.31 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 10,070 Cash dividends (net of $17 foreign taxes withheld at source) 8,045 TOTAL INCOME 18,115 EXPENSES: Investment advisory fee--Note 3(a) 51,729 Auditing fees 21,868 Prospectus and shareholders' reports 9,231 Custodian fees--Note 3(b) 9,200 Distribution fees--Note 3(b) 2,951 Legal fees 1,145 Trustees' fees and expenses--Note 3(c) 594 Shareholder servicing costs--Note 3(b) 575 Loan commitment fees--Note 2 48 Miscellaneous 442 TOTAL EXPENSES 97,783 Less--waiver of fees due to undertaking--Note 3(a) (12,257) NET EXPENSES 85,526 INVESTMENT (LOSS)--NET (67,411) - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (1,013,196) Net unrealized appreciation (depreciation) on investments 2,460,830 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,447,634 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,380,223 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss)--net (67,411) (148,257) Net realized gain (loss) on investments (1,013,196) (3,820,832) Net unrealized appreciation (depreciation) on investments 2,460,830 (1,623,887) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,380,223 (5,592,976) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 1,937,074 2,309,288 Service shares 119,675 1,553,261 Cost of shares redeemed: Initial shares (905,227) (3,717,669) Service shares (140,035) (655,833) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 1,011,487 (510,953) TOTAL INCREASE (DECREASE) IN NET ASSETS 2,391,710 (6,103,929) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 11,250,075 17,354,004 END OF PERIOD 13,641,785 11,250,075 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 289,309 295,747 Shares redeemed (141,992) (445,294) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 147,317 (149,547) - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 18,205 182,820 Shares redeemed (21,763) (85,758) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (3,558) 97,062 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 -------------------------------------------------- INITIAL SHARES (Unaudited) 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 6.55 9.81 12.04 13.89 12.50 Investment Operations: Investment income (loss)--net (.04)(b) (.08)(b) (.08)(b) (.08)(b) .01 Net realized and unrealized gain (loss) on investments .82 (3.18) (2.15) (1.71) 1.38 Total from Investment Operations .78 (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 7.33 6.55 9.81 12.04 13.89 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 11.91(c) (33.23) (18.52) (13.02) 11.12(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(c) 1.34 1.39 1.41 .07(c) Ratio of net investment income (loss) to average net assets (.58)(c) (1.06) (.77) (.60) .06(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .08(c) .05 .11 .52 1.45(c) Portfolio Turnover Rate 68.93(c) 132.08 106.00 123.96 7.49(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 11,017 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.
Six Months Ended Year Ended December 31, June 30, 2003 --------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 6.53 9.78 12.04 12.04 Investment Operations: Investment (loss)--net (.04)(b) (.09)(b) (.09)(b) -- Net realized and unrealized gain (loss) on investments .82 (3.16) (2.17) -- Total from Investment Operations .78 (3.25) (2.26) -- Net asset value, end of period 7.31 6.53 9.78 12.04 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 11.94(c) (33.23) (18.77) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(c) 1.46 1.49 -- Ratio of net investment (loss) to average net assets (.59)(c) (1.17) (1.02) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .20(c) .18 .28 -- Portfolio Turnover Rate 68.93(c) 132.08 106.00 123.96 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 2,625 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. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company, operating as a series company currently offering 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 wholly-owned 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 wholly-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. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $107 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) during the period ended June 30, 2003 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $9,743,310 available for federal income tax purposes 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 of the carryover expires in fiscal 2009 and $3,800,802 expires in fiscal 2010. NOTE 2--BANK LINE OF CREDIT: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2003, 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, 2003 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 June 30, 2003, Dreyfus waived receipt of fees of $12,257 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% $100 million to $1 billion . . . . . . . . . . . . .20 of 1% $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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) are payable without regard to actual expenses incurred. During the period ended June 30, 2003, Service shares were charged $2,951 pursuant to the Plan. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $99 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $9,200 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"). Through December 31, 2002, each Board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2003, amounted to $8,044,322 and $6,993,706, respectively. At June 30, 2003, accumulated net unrealized appreciation on investments was $1,446,168, consisting of $2,200,627 gross unrealized appreciation and $754,459 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ----------------------------------- To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. 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 193SA0603 DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 15 Financial Highlights 17 Notes to Financial Statements 23 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Growth Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Founders Growth Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, John Jares, CFA, of Founders Asset Management LLC, the portfolio's sub-investment adviser. The first half of 2003 was a time of long-awaited recovery for the U.S. stock market. Despite continued volatility leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the U.S. economy. Apparently, they liked what they saw. Despite current economic weakness, investors appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their equity exposure during the bear market. In contrast, we believe investors who avoided stocks may have missed the market's recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 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 six-month period ended June 30, 2003, the portfolio produced total returns of 15.05% for its Initial Shares and 15.06% for its Service shares.(1) In contrast, the Standard & Poor's 500 BARRA Growth Index (the "Index"), the portfolio's benchmark, produced a total return of 11.25% for the same period.(2) War-related concerns created widespread uncertainty in the stock market during the first half of the reporting period, and the war's successful resolution sparked a strong rally during the second half. The portfolio's returns were higher than the return of its benchmark, primarily because of our emphasis on companies that we believed would do well in the event of a successful outcome of the war. 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. WHAT OTHER FACTORS INFLUENCED THE PORTFOLIO'S PERFORMANCE? A powerful stock market rally began in March 2003 as the U.S. went to war with Iraq, removing investor uncertainty that had lingered for months. Although the U.S. economy remained sluggish, investors looked beyond prevailing weakness, anticipating stronger corporate profits in the second half of 2003. In addition, low interest rates con- The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) tinued to spur consumer spending on big-ticket consumer items, such as housing and automobiles, as well as discretionary items, including consumer electronics and leisure. For example, shares of Royal Caribbean, a travel and leisure company, had been beaten down by terrorism fears and concerns that people might not travel if the war went poorly. By mid-March, the stock appeared to us to be inexpensive, yet the company continued to post strong profits. We purchased the stock, and it gained value when the war's outcome became clearer. Another beneficiary of a "post-war bounce" was Best Buy, a specialty retailer of consumer electronics. Prior to the war, investors appeared to be wary of investing in consumer discretionary stocks, primarily because of the fear that the Federal Reserve Board might not reduce interest rates enough to continue to stimulate the economy if a negative war outcome resulted in more unemployment. The war outcome was positive, and the company continued to post strong profits, benefiting its stock price. As investor optimism took hold, the biotechnology and medical products industry groups posted strong gains. Boston Scientific, a leading manufacturer of medical devices used in cardiology, interventional radiology and neurovascular procedures, announced particularly strong results. The company's drug-coated cardiovascular devices will make prior technologies obsolete, leaving little competition in the category. Another strong performer was Teva Pharmaceutical Industries, which focuses on less expensive generic drugs that compete favorably against brand-name products. Of course, some of the portfolio' s holdings produced disappointing returns during the reporting period. Among them were basic materials holdings, such as Air Products and Chemicals, a supplier of industrial gas and related industrial process equipment, which experienced sluggish demand. We were also disappointed by BMC Software, which did not meet revenue growth targets. On the other hand, the portfolio' s second best performer was VERITAS Software, suggesting that business success during the reporting period was often company-specific rather than industry-wide. A final reason the portfolio outperformed its benchmark was its higher than average cash position prior to the war, when stock prices generally declined. Cash peaked at 18% of the portfolio's assets in February, but declined to 6% by the start of the war in March as we put assets to work in stocks that we believed would benefit from a favorable war outcome. WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? The portfolio's longstanding strategy is to favor shares of attractively priced companies that are likely to exhibit profit growth exceeding Wall Street's expectations. In light of the prospect of improving economic conditions, we currently are emphasizing economically sensitive companies, such as industrial concerns, that we believe are likely to do well as the recovery gains momentum. In addition, we have found opportunities in companies that, in our view, are likely to benefit from improving employment trends, such as newspapers, restaurants, retailers and travel firms. Finally, companies with relatively high-energy needs, such as transportation companies, may benefit from a drop in fuel prices. July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--87.4% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AIRLINES--1.9% Delta Air Lines 6,087 89,357 Northwest Airlines 9,760 (a) 110,190 Southwest Airlines 12,132 208,671 408,218 APPLICATION SOFTWARE--.4% PeopleSoft 4,659 (a) 81,952 ASSET MANAGEMENT & CUSTODY BANKS--2.3% Bank of New York Co. 2,189 62,934 Janus Capital Group 15,946 261,514 SEI Investments 5,269 168,608 493,056 BIOTECHNOLOGY--1.6% Amgen 3,025 (a) 200,981 Gilead Sciences 2,597 (a) 144,341 345,322 BROADCASTING & CABLE TV--2.3% Clear Channel Communications 2,578 (a) 109,282 Comcast, Cl. A 8,665 (a) 249,812 Cox Communications, Cl. A 3,716 (a) 118,540 477,634 CASINOS & GAMING--.3% MGM MIRAGE 2,152 (a) 73,555 COMMUNICATIONS EQUIPMENT--.9% Cisco Systems 11,627 (a) 194,055 COMPUTER & ELECTRONICS RETAIL--2.2% Best Buy Co. 10,457 (a) 459,271 COMPUTER HARDWARE--1.8% International Business Machines 4,478 369,435 CONSUMER FINANCE--1.8% MBNA 18,330 381,997 DATA PROCESSING & OUTSOURCED SERVICES--2.7% First Data 6,934 287,345 Fiserv 7,551 (a) 268,891 556,236 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED BANKS--3.5% Bank of America 5,068 400,524 Wells Fargo & Co. 6,570 331,128 731,652 DIVERSIFIED COMMERCIAL SERVICES--1.1% Cendant 12,121 (a) 222,057 DIVERSIFIED FINANCIAL SERVICES--1.1% Citigroup 5,618 240,450 DRUG RETAIL--.2% Walgreen 1,402 42,200 EXCHANGE TRADED FUNDS--4.9% SPDRs 10,465 1,022,012 FOOD RETAIL--1.0% Safeway 10,333 (a) 211,413 GAS UTILITIES--1.0% Kinder Morgan 4,040 220,786 GENERAL MERCHANDISE STORES--1.5% Wal-Mart Stores 5,958 319,766 HEALTHCARE DISTRIBUTORS--1.8% Caremark Rx 6,483 (a) 166,483 Express Scripts 3,108 (a) 212,339 378,822 HEALTHCARE EQUIPMENT--1.2% Boston Scientific 4,140 (a) 252,954 HOME IMPROVEMENT RETAIL--1.2% Home Depot 7,460 247,075 HOTELS, RESORTS & CRUISE LINES--.2% Carnival 1,423 46,262 HOUSEHOLD PRODUCTS--2.5% Colgate-Palmolive 5,041 292,126 Procter & Gamble 2,581 230,174 522,300 IT CONSULTING & SERVICES--1.4% Accenture, Cl. A 15,735 (a) 284,646 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIAL CONGLOMERATES--4.4% General Electric 26,611 763,204 Ingersoll-Rand, Cl. A 1,322 62,557 3M 748 96,477 922,238 INDUSTRIAL GASES--1.3% Air Products and Chemicals 1,295 53,872 Praxair 3,487 209,569 263,441 INDUSTRIAL MACHINERY--.7% Illinois Tool Works 2,384 156,986 INTEGRATED OIL & GAS--.4% Exxon Mobil 2,622 94,156 INTEGRATED TELECOMMUNICATION SERVICES--.5% SBC Communications 3,912 99,952 INVESTMENT BANKING & BROKERAGE--1.6% Goldman Sachs Group 2,051 171,771 Morgan Stanley 3,758 160,655 332,426 LEISURE FACILITIES--1.9% Royal Caribbean Cruises 16,932 392,145 MOVIES & ENTERTAINMENT--3.7% AOL Time Warner 8,350 (a) 134,351 Viacom, Cl. B 7,774 (a) 339,413 Walt Disney 15,498 306,086 779,850 MULTI-LINE INSURANCE--.7% American International Group 2,657 146,613 OIL & GAS DRILLING--.4% GlobalSantaFe 1,946 45,419 Nabors Industries 1,205 (a) 47,658 93,077 OIL & GAS EQUIPMENT & SERVICES--1.8% BJ Services 1,430 (a) 53,425 Smith International 9,002 (a) 330,733 384,158 PERSONAL PRODUCTS--2.8% Estee Lauder Cos., Cl. A 17,469 585,736 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICALS--6.1% Forest Laboratories 1,225 (a) 67,069 Johnson & Johnson 4,287 221,638 Merck & Co. 4,180 253,099 Pfizer 11,916 406,931 Teva Pharmaceutical Industries, ADR 4,100 233,413 Wyeth 2,164 98,570 1,280,720 PUBLISHING--1.2% Tribune 5,124 247,489 RAILROADS--1.0% Canadian National Railway 2,077 100,236 Union Pacific 1,760 102,115 202,351 SEMICONDUCTOR EQUIPMENT--1.8% KLA-Tencor 3,179 (a) 147,791 Novellus Systems 6,455 (a) 236,389 384,180 SEMICONDUCTORS--4.0% Altera 3,292 (a) 53,989 Broadcom, Cl. A 1,455 (a) 36,244 Intel 13,501 280,605 Linear Technology 7,537 242,767 Marvell Technology Group 1,670 (a) 57,398 Maxim Integrated Products 2,880 98,467 Xilinx 2,357 (a) 59,656 829,126 SOFT DRINKS--1.8% Coca-Cola 6,123 284,168 Coca-Cola Enterprises 4,648 84,362 368,530 SPECIALTY STORES--1.4% Tiffany & Co. 8,745 285,787 SYSTEMS SOFTWARE--9.1% Adobe Systems 7,960 255,277 BMC Software 15,079 (a) 246,240 Microsoft 34,509 883,776 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SYSTEMS SOFTWARE (CONTINUED) Oracle 20,973 (a) 252,095 VERITAS Software 9,267 (a) 265,685 1,903,073 TOTAL COMMON STOCKS (cost $16,237,458) 18,335,160 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--12.9% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTE; Federal National Mortgage Association .77%, 7/1/2003 (cost $2,702,000) 2,702,000 2,702,000 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $18,939,458) 100.3% 21,037,160 LIABILITIES, LESS CASH AND RECEIVABLES (.3%) (60,298) NET ASSETS 100.0% 20,976,862 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 18,939,458 21,037,160 Cash 4,736 Receivable for investment securities sold 178,718 Dividends receivable 12,776 Receivable for shares of Beneficial Interest subscribed 8,491 21,241,881 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 15,557 Payable for shares of Beneficial Interest redeemed 110,223 Payable for investment securities purchased 106,240 Accrued expenses 32,999 265,019 - -------------------------------------------------------------------------------- NET ASSETS ($) 20,976,862 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 39,445,245 Accumulated investment income--net 1,321 Accumulated net realized gain (loss) on investments (20,567,406) Accumulated net unrealized appreciation (depreciation) on investments 2,097,702 - -------------------------------------------------------------------------------- NET ASSETS ($) 20,976,862 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 15,214,888 5,761,974 Shares Outstanding 1,566,805 594,205 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 9.71 9.70 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $124 foreign taxes withheld at source) 85,596 Interest 9,172 TOTAL INCOME 94,768 EXPENSES: Investment advisory fee--Note 3(a) 70,085 Auditing fees 15,033 Custodian fees--Note 3(b) 7,453 Prospectus and shareholders' reports 6,955 Distribution fees--Note 3(b) 5,679 Shareholder servicing costs--Note 3(b) 1,149 Trustees' fees and expenses--Note 3(c) 534 Loan commitment fees--Note 2 81 Miscellaneous 732 TOTAL EXPENSES 107,701 Less--waiver of fees due to undertaking--Note 3(a) (14,254) NET EXPENSES 93,447 INVESTMENT INCOME--NET 1,321 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (498,348) Net unrealized appreciation (depreciation) on investments 3,122,447 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,624,099 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,625,420 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net 1,321 (17,553) Net realized gain (loss) on investments (498,348) (5,372,612) Net unrealized appreciation (depreciation) on investments 3,122,447 (2,834,277) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,625,420 (8,224,442) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (15,843) Service shares -- (3,788) TOTAL DIVIDENDS -- (19,631) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 625,692 692,907 Service shares 1,227,231 3,124,265 Dividends reinvested: Initial shares -- 15,843 Service shares -- 3,788 Cost of shares redeemed: Initial shares (1,832,771) (5,262,139) Service shares (443,819) (1,309,317) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (423,667) (2,734,653) TOTAL INCREASE (DECREASE) IN NET ASSETS 2,201,753 (10,978,726) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 18,775,109 29,753,835 END OF PERIOD 20,976,862 18,775,109 Undistributed investment income--net 1,321 -- The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 66,699 67,093 Shares issued for dividends reinvested -- 1,334 Shares redeemed (211,142) (533,187) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (144,443) (464,760) - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 129,568 286,912 Shares issued for dividends reinvested -- 319 Shares redeemed (49,380) (126,016) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 80,188 161,215 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 ------------------------------------------------------------------- INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 8.44 11.77 14.73 19.87 15.90 12.50 Investment Operations: Investment income (loss)--net .00(b,c) (.01)(b) .01(b) .02(b) (.02)(b) .01 Net realized and unrealized gain (loss) on investments 1.27 (3.31) (2.96) (5.03) 5.79 3.39 Total from Investment Operations 1.27 (3.32) (2.95) (5.01) 5.77 3.40 Distributions: Dividends from investment income--net -- (.01) (.01) -- (.01) -- Dividends from net realized gain on investments -- -- -- (.13) (1.79) -- Total Distributions -- (.01) (.01) (.13) (1.80) -- Net asset value, end of period 9.71 8.44 11.77 14.73 19.87 15.90 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 15.05(d) (28.25) (20.03) (25.40) 39.01 27.20(d) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .50(d) 1.00 .99 .97 1.00 .25(d) Ratio of net investment income (loss) to average net assets .01(d) (.08) .08 .11 (.11) .05(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .05(d) .09 .10 .11 1.33 .31(d) Portfolio Turnover Rate 58.71(d) 165.08 180.84 171.96 115.08 75.65(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 15,215 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) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended Year Ended December 31, June 30, 2003 ---------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 8.43 11.76 14.73 14.73 Investment Operations: Investment income (loss)--net .00(b,c) (.01)(b) (.00)(b,d) -- Net realized and unrealized gain (loss) on investments 1.27 (3.31) (2.96) -- Total from Investment Operations 1.27 (3.32) (2.96) -- Distributions: Dividends from investment income--net -- (.01) (.01) -- Net asset value, end of period 9.70 8.43 11.76 14.73 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 15.06(e) (28.21) (20.16) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .50(e) 1.00 1.00 -- Ratio of net investment income (loss) to average net assets .01(e) (.06) (.01) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .17(e) .34 .40 -- Portfolio Turnover Rate 58.71(e) 165.08 180.84 171.96 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 5,762 4,333 4,147 --(f) (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 $.01 PER SHARE. (D) AMOUNT REPRESENTS LESS THAN ($.01) PER SHARE. (E) NOT ANNUALIZED. (F) AMOUNT REPRESENTS LESS THAN $1,000.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company operating as a series company currently offering 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 wholly-owned 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 wholly-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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. 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 $49 during the period ended June 30, 2003, 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $18,890,182 available for federal income tax purposes 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 year ended December 31, 2002 was as follows: ordinary income $19,631. The tax character of current year distributions, if any, will be determined at the end of the current fiscal year. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 June 30, 2003, 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, 2003 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 June 30, 2003, Dreyfus waived receipt of fees of $14,254, 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% $100 million to $1 billion . . . . . . . . . . . . .20 of 1% $1 billion to $1.5 billion . . . . . . . . . . . . .16 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .10 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2003, Service shares were charged $5,679 pursuant to the Plan. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $77 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $7,453 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"). Through December 31, 2002, each board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2003, amounted to $10,054,242 and $11,141,449, respectively. At June 30, 2003, accumulated net unrealized appreciation on investments was $2,097,702, consisting of $2,370,926 gross unrealized appreciation and $273,224 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. The Portfolio NOTES FOR MORE INFORMATION DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO 200 Park Avenue New York, NY 10166 INVESTMENT ADVISER The Dreyfus Corporation 200 Park Avenue New York, NY 10166 SUB-INVESTMENT ADVISER Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 CUSTODIAN Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 TRANSFER AGENT & DIVIDEND DISBURSING AGENT Dreyfus Transfer, Inc. 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 176SA0603 DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 15 Financial Highlights 17 Notes to Financial Statements 23 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover THE PORTFOLIO Dreyfus Investment Portfolios, Founders International Equity Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Founders International Equity Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio managers, Remi J. Browne, CFA, and Daniel B. LeVan, CFA, of Founders Asset Management LLC, the portfolio's sub-investment adviser. The first half of 2003 was a time of long-awaited recovery for international stocks. Despite continued volatility and lackluster economic conditions leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the global economy. Apparently, they liked what they saw. Despite current economic weakness, investors in many parts of the world appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for international stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their international equity exposure during the bear market. In contrast, investors who avoided international stocks may have missed the market' s recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2003 DISCUSSION OF PERFORMANCE Remi J. Browne, CFA, and Daniel B. LeVan, CFA, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders International Equity Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2003, the portfolio produced total returns of 6.88% for its Initial shares and 6.88% for its Service shares.(1) This compares with a 10.25% total return produced by the portfolio's benchmark, the Morgan Stanley Capital International World ex U.S. Index, for the same period.(2) We attribute the portfolio' s performance to improvements in the global stock markets, especially during the second half of the reporting period, when rising expectations of an economic recovery and the success of major combat operations in Iraq fueled investors' optimism. However, the portfolio's returns trailed the return of its benchmark, primarily because it was not invested in the lower-quality companies that led the market's advance. Instead, we preferred to focus on what we believe to be high-quality companies with sustainable earnings growth. We are pleased to announce that on March 6, 2003, Remi Browne and Daniel LeVan became the portfolio' s primary managers. The portfolio's investment objective and policies remain the same. 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 expanding volumes, increasing margins, or new product development. 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 is 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 we determine that circumstances have changed and it will not achieve the growth in earnings we had anticipated, or when valuation becomes stretched. WHAT OTHER FACTORS INFLUENCED THE PORTFOLIO'S PERFORMANCE? Equity markets around the world declined during the first quarter of 2003, chiefly in response to weak economic fundamentals and building tensions in Iraq. Continental Europe experienced the most severe declines, with equity markets in France, Germany, Belgium and the Netherlands falling sharply. However, the equity markets began to improve during the second calendar quarter, as the situation in Iraq moved quickly toward a resolution. In this environment, many of the stocks that had been most heavily punished over the last three years led the charge, with technology and financial stocks producing some of the greatest returns. Within the technology group, the portfolio enjoyed successes with its holdings in German-based SAP, a multinational software company with a leading position in the enterprise software business. The company has been slowly gaining market share over its competitors by expanding its operations in the U.S. and reducing costs. As for financial stocks, several banks reported strong returns for the portfolio, including Royal Bank of Scotland, one of the portfolio's top ten holdings. From a country-allocation perspective, strong stock selections within Canada, the United Kingdom and Italy added most to performance, while investments in Hong Kong, Japan and Switzerland generally detracted from returns. We have made several changes to the portfolio since assuming management responsibility in March 2003. We sold many of the portfolio's holdings, replacing them with what we believed to be companies with higher expected earnings growth rates relative to their valuations. In effect, we have moved the portfolio away from the more traditional defensive sectors, choosing instead to concentrate on stocks that are more growth-oriented. In addition, we increased the number of holdings from 56 to 117 by the end of March, which is where the portfolio stands as of the end of the reporting period. WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? Our strategy is to look for companies with increasing business momentum and strong underlying growth relative to their valuations. We are finding more stocks that match those characteristics and are favoring those most sensitive to an upturn. This is increasing our confidence that the recent rally will be sustainable. As of the end of the reporting period, the largest portions of the portfolio's assets were invested in the United Kingdom and Japan, which comprised approximately 25% and 18% of the total portfolio, respectively. The next largest country representations were Germany, France and Switzerland, with between 6% and 7% of the portfolio's assets. The smallest areas of concentration for the portfolio were Italy and Sweden, at approximately 3% each. July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 DAILY AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD EX U.S. INDEX IS AN UNMANAGED INDEX OF GLOBAL STOCK MARKET PERFORMANCE, EXCLUDING THE U.S., CONSISTING SOLELY OF EQUITY SECURITIES. The Portfolio STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--94.5% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AUSTRALIA--2.9% Boral 9,800 33,333 Lion Nathan 12,800 46,118 QBE Insurance Group 11,900 74,552 Seven Network 11,000 35,123 189,126 AUSTRIA--.5% OMV 250 30,060 BELGIUM--.6% Delhaize 1,280 38,984 CANADA--4.9% Biovail 753 (a) 35,436 Canadian Tire, Cl. A 1,600 38,493 Cognos 1,500 (a) 40,496 Fortis 950 41,491 Kingsway Financial Services 3,600 (a) 43,571 Nortel Networks 10,900 (a) 29,370 Metro, Cl. A 2,600 37,819 Penn West Petroleum 1,500 (a) 48,301 314,977 DENMARK--1.7% Jyske Bank 1,100 (a) 44,418 TDC 2,200 65,861 110,279 FINLAND--.6% Nokia 2,300 37,906 FRANCE--6.8% BNP Paribas 1,701 86,507 Cap Gemini 1,900 (a) 67,519 Orange 10,300 (a) 91,506 PSA Peugeot Citroen 1,300 63,200 Sanofi-Synthelabo 1,150 67,407 Societe Generale, Cl. A 550 34,893 Total 211 31,913 442,945 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ GERMANY--7.7% Altana 900 56,373 BASF 1,700 72,389 Continental 1,900 39,918 Deutsche Telekom 2,200 (a) 33,527 E.ON 1,400 71,843 Metro 1,070 34,076 SAP 1,300 152,397 ThyssenKrupp 3,400 38,998 499,521 GREECE--1.0% Alpha Bank 3,700 64,552 HONG KONG--2.4% Cheung Kong 11,100 66,756 Henderson Investment 39,000 37,508 Hutchison Whampoa 8,000 48,728 152,992 IRELAND--1.8% Anglo Irish Bank 8,400 74,144 DCC 3,300 44,374 118,518 ITALY--3.1% Banca Intesa 15,580 49,868 Eni 2,000 30,273 Parmalat Finanziaria 21,900 68,965 Saipem 6,900 51,705 200,811 JAPAN--18.1% BANDAI 800 30,602 CANON 2,000 92,040 CITIZEN ELECTRONICS 1,200 52,518 DAI NIPPON PRINTING 4,000 42,429 KDDI 13 50,489 KEYENCE 400 73,499 KIRIN BEVERAGE 2,000 30,134 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ JAPAN (CONTINUED) KIRIN BREWERY 4,000 28,197 Mitsubishi 8,000 55,658 Mitsubishi Tokyo Financial 9 40,817 Mitsui Fudosan 8,000 51,249 NIPPON TELEGRAPH AND TELEPHONE 15 59,008 NISSAN MOTOR 9,900 94,924 NOK 2,000 33,308 Nisshin Seifun 4,000 28,497 ONO PHARMACEUTICAL 2,000 62,140 PIONEER 1,500 33,826 SUZUKEN 1,300 30,945 Seino Transportation 5,000 28,689 Sharp 6,000 77,224 Sumitomo Electric Industries 5,000 36,624 Sumitomo Mitsui Financial 20 43,765 Takeda Chemical Industries 2,700 99,900 1,176,482 NETHERLANDS--2.5% ABN AMRO 1,300 24,877 Hunter Douglas 800 26,664 Koninklijke (Royal) KPN 8,100 (a) 57,438 Wereldhave 800 50,339 159,318 NORWAY--.6% ProSafe 2,000 36,248 SINGAPORE--1.0% Fraser & Neave 5,500 26,867 Keppel 14,100 39,245 66,112 SPAIN--4.2% ACS 1,600 68,314 Endesa 4,259 71,367 Inmobiliaria Urbis 4,382 33,793 Repsol YPF 4,300 69,781 Viscofan 4,200 32,728 275,983 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SWEDEN--3.3% Getinge, Cl. B 1,600 42,484 Skandinaviska Enskilda Banken 3,000 30,551 Tele2, Cl. B 1,900 (a) 70,630 TeliaSonera 17,000 70,523 214,188 SWITZERLAND--6.1% Actelion 460 (a) 30,678 Ciba Specialty Chemicals 480 (a) 29,102 Logitech International 1,700 (a) 63,852 Micronas Semiconductor 2,700 (a) 54,499 Novartis 3,030 120,080 Saurer 1,100 (a) 30,092 Serono, Cl. B 48 28,250 UBS 658 36,658 393,211 UNITED KINGDOM--24.7% Alliance & Leicester 2,200 30,222 AstraZeneca 1,400 56,307 BP 19,553 136,002 BT 23,000 77,562 Barclays 7,369 54,884 Barratt Developments 4,800 34,320 Bradford & Bingley 7,300 37,968 British Airways 9,800 (a) 24,573 Cairn Energy 6,900 (a) 35,403 Galen 6,200 53,360 GlaxoSmithKline 4,455 90,178 HBOS 9,700 125,947 Imperial Tobacco 1,700 30,472 J Sainsbury 7,500 31,530 Johnston Press 5,300 37,995 Kelda 5,300 37,672 Land Securities 2,900 37,510 Northern Rock 7,500 88,506 Reckitt Benckiser 4,075 74,999 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) Royal Bank of Scotland 4,215 118,596 Shell Transport & Trading 9,100 60,246 Shire Pharmaceuticals 5,200 (a) 34,426 Standard Chartered 7,218 87,926 Vodafone 103,350 202,700 1,599,304 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $5,293,328) 94.5% 6,121,517 CASH AND RECEIVABLES (NET) 5.5% 357,714 NET ASSETS 100.0% 6,479,231 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 5,293,328 6,121,517 Cash 255,661 Receivable for investment securities sold 139,884 Receivable for shares of Beneficial Interest subscribed 121,585 Dividends receivable 11,541 Due from The Dreyfus Corporation and affiliates 1,281 6,651,469 - -------------------------------------------------------------------------------- LIABILITIES ($): Payable for investment securities purchased 124,180 Payable for shares of Beneficial Interest redeemed 11,386 Accrued expenses and other liabilities 36,672 172,238 - -------------------------------------------------------------------------------- NET ASSETS ($) 6,479,231 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 13,565,154 Accumulated undistributed investment income--net 58,003 Accumulated net realized gain (loss) on investments (7,972,426) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions 828,500 - -------------------------------------------------------------------------------- NET ASSETS ($) 6,479,231 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 4,818,552 1,660,679 Shares Outstanding 517,382 178,228 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 9.31 9.32 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $12,745 foreign taxes withheld at source) 102,481 Interest 1,140 TOTAL INCOME 103,621 EXPENSES: Investment advisory fee--Note 3(a) 30,677 Custodian fees 18,083 Auditing fees 13,241 Prospectus and shareholders' reports 8,129 Trustees' fees and expenses--Note 3(c) 4,178 Shareholder servicing costs--Note 3(b) 3,995 Distribution fees--Note 3(b) 1,860 Legal fees 739 Loan commitment fees--Note 2 28 Miscellaneous 2,229 TOTAL EXPENSES 83,159 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertaking--Note 3(a) (37,116) NET EXPENSES 46,043 INVESTMENT INCOME--NET 57,578 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (1,590,447) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 1,910,284 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 319,837 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 377,415 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 57,578 5,494 Net realized gain (loss) on investments (1,590,447) (1,268,084) Net unrealized appreciation (depreciation) on investments 1,910,284 (1,548,573) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 377,415 (2,811,163) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (4,665) -- Service shares (1,527) -- TOTAL DIVIDENDS (6,192) -- - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 66,413 1,670,744 Service shares 201,154 1,034,932 Dividends reinvested: Initial shares 4,665 -- Service shares 1,527 -- Cost of shares redeemed: Initial shares (635,744) (3,403,241) Service shares (235,726) (388,952) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (597,711) (1,086,517) TOTAL INCREASE (DECREASE) IN NET ASSETS (226,488) (3,897,680) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 6,705,719 10,603,399 END OF PERIOD 6,479,231 6,705,719 Undistributed investment income--net 58,003 6,617 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 7,694 174,994 Shares issued for dividends reinvested 576 -- Shares redeemed (76,270) (349,506) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (68,000) (174,512) - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 22,447 98,115 Shares issued for dividends reinvested 189 -- Shares redeemed (28,157) (39,948) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (5,521) 58,167 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, Six Months Ended ----------------------------------------------------------------- June 30, 2003 INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 8.72 11.97 17.00 21.65 14.36 12.50 Investment Operations: Investment income (loss)--net .08(b) .01(b) (.02)(b) .00(b,c) (.02)(b) (.01) Net realized and unrealized gain (loss) on investments .52 (3.26) (5.00) (3.55) 8.73 1.87 Total from Investment Operations .60 (3.25) (5.02) (3.55) 8.71 1.86 Distributions: Dividends from investment income--net (.01) -- (.01) -- -- -- Dividends from net realized gain on investments -- -- -- (1.10) (1.42) -- Total Distributions (.01) -- (.01) (1.10) (1.42) -- Net asset value, end of period 9.31 8.72 11.97 17.00 21.65 14.36 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%) 6.88(d) (27.15) (29.56) (17.41) 60.69 14.88(d) - ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(d) 1.50 1.50 1.50 1.50 .38(d) Ratio of net investment income (loss) to average net assets .93(d) .06 (.13) .02 (.11) (.08)(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .57(d) .51 .72 .57 2.27 .81(d) Portfolio Turnover Rate 103.10(d) 226.63 201.61 171.34 190.80 29.25(d) - ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 4,819 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 $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended Year Ended December 31, June 30, 2003 ------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 8.72 11.98 17.00 17.00 Investment Operations: Investment income (loss)--net .08(b) .01(b) (.06)(b) -- Net realized and unrealized gain (loss) on investments .53 (3.27) (4.95) -- Total from Investment Operations .61 (3.26) (5.01) -- Distributions: Dividends from investment income--net (.01) -- (.01) -- Net asset value, end of period 9.32 8.72 11.98 17.00 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 6.88(c) (27.21) (29.50) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(c) 1.50 1.50 -- Ratio of net investment income (loss) to average net assets .94(c) .05 (.46) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .70(c) .76 1.05 -- Portfolio Turnover Rate 103.10(c) 226.63 201.61 171.34 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 1,661 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. (C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company, operating as a series company currently offering 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 wholly-owned 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 wholly-owned subsidiary of Mellon. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) sales price on the national securities market. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. 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 $556 during the period ended June 30, 2003, 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles (E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $6,024,266 available for federal income tax purposes 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. During the period ended December 31, 2002, the portfolio did not pay distributions. The tax character of current year distributions will be determined at the end of the current fiscal year. NOTE 2--BANK LINE OF CREDIT: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2003, the portfolio did not borrow under the Facility. NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates: (A) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of 1% of the value of the portfolio's average daily net assets and is payable monthly. Dreyfus had agreed, from January 1, 2003 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 June 30, 2003, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $37,116, 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% $100 million to $1 billion . . . . . . . . . . . . .30 of 1% $1 billion to $1.5 billion . . . . . . . . . . . . .26 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1% (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2003, Service shares were charged $1,860 pursuant to the Plan. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $76 pursuant to the transfer agency agreement. (C) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Through December 31, 2002, each Board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2003, amounted to $6,164,025 and $6,759,548, respectively. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) At June 30, 2003, accumulated net unrealized appreciation on investments was $828,189, consisting of $895,818 gross unrealized appreciation and $67,629 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. The Portfolio NOTES FOR MORE INFORMATION DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL Equity Portfolio 200 Park Avenue New York, NY 10166 INVESTMENT ADVISER The Dreyfus Corporation 200 Park Avenue New York, NY 10166 SUB-INVESTMENT ADVISER Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 CUSTODIAN The Bank of New York 100 Church Street New York, NY 10286 TRANSFER AGENT & Dividend Disbursing Agent Dreyfus Transfer, Inc. 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 177SA0603 DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 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 27 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Passport Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Founders Passport Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. 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. The first half of 2003 was a time of long-awaited recovery for international stocks. Despite continued volatility and lackluster economic conditions leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the global economy. Apparently, they liked what they saw. Despite current economic weakness, investors in many parts of the world appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for international stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their international equity exposure during the bear market. In contrast, investors who avoided international stocks may have missed the market' s recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 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 six-month period ended June 30, 2003, the portfolio produced total returns of 22.60% for its Initial shares and 22.60% for its Service shares.(1) This compares with a 10.25% total return produced by the portfolio's benchmark, the Morgan Stanley Capital International World ex U.S. Index ("MSCI World ex-US Index"), for the same period.(2) The portfolio significantly outperformed its benchmark, the MSCI World ex-US Index. This is largely due to the fact that the benchmark is predominantly comprised of large-cap stocks which, as a whole did not reap as many gains as small-cap stocks did in the first half of the year. In addition, our ability to invest in emerging-market countries helped boost the portfolio's overall return, as the emerging markets outperformed the developed markets. 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 the portfolio manager believes have fundamental strengths that indicate the potential for growth in earnings. The portfolio is a broadly diversified portfolio and currently holds more than 100 stocks across many industries and many countries. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) 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? Uncertainty hovered over the international stock markets during the first quarter of 2003 while the United States and the United Kingdom prepared for war in Iraq. Corporate spending remained sluggish, and several industries continued to struggle with excess inventories and high debt burdens. Consumer spending fared slightly better. However, as the conflict in Iraq moved toward resolution, investors worldwide began to regain confidence, and to anticipate a second-half recovery. By mid-March, markets were recovering in North America, Europe and Latin America. Many Asian markets initially lagged due to the outbreak of Severe Acute Respiratory Syndrome ("SARS"), but rebounded by the end of April. On a more specific level, many investors were reassured that a series of tax cuts implemented by President Bush and his cabinet would boost chances of a domestic recovery, which in turn could benefit the global economic picture. Furthermore, Greenspan provided us with an additional domestic interest-rate cut aimed at encouraging borrowing and providing insurance against deflationary pressure. The European Central Bank also eased their rates because there was a decline in inflation and the economic boost was needed. Our research approach led us to uncover many strong performers across various countries and market sectors. For instance, we saw a compelling global theme emerge during the reporting period. A number of Internet companies began exhibiting signs of both strong growth and profitability due to either the filling of a niche market, or performing what are fast becoming necessary public services. The portfolio purchased shares in several Internet service companies in Europe and Asia, which have performed well during the reporting period. We were perhaps most pleased with the portfolio' s second largest holding, lastminute.com, a website in the United Kingdom that offers consumers last minute opportunities for travel and entertainment. In the consumer discretionary sector, Puma, the German-based footwear and apparel manufacturer, contributed favorable results to the portfolio due to its continued strong performance. Puma has been a very popular brand among the trendsetters for quite some time now. It is also the portfolio's largest holding. The portfolio was also positively impacted by our exposure to emerging markets. As of June 30, 2003, about 20% of the portfolio's holdings were in emerging markets. Our ability to invest in such markets boosted the portfolio's overall performance, as these markets experienced an exceptional first half. Changes in currency exchange rates also contributed positively to the portfolio' s performance during the reporting period, with most major world currencies gaining against the U.S. dollar. Finally, we have increased the portfolio's weighting in Japan to a level that will enable us to take advantage of the macro and micro virtues in the Japanese market. On the macro front, Japan is exiting a 13-year The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) period of deflation. Unemployment is falling, jobs are being created, and households are spending. On the micro front, small companies have restructured, paid down debt and moved production to low-cost countries. Much of the media focus has been on the large-cap sector in Japan, which still faces many challenges because many of its constituents are distressed banks and large companies involved in the onerous task of unwinding cross-share holdings. Meanwhile, their small-cap counterparts have few of these ills and outperformed during the reporting period. A slight detractor to the portfolio's performance was the SARS epidemic in Asia. The portfolio avoided industries and regions most likely to be affected by the outbreak. However, some stocks in Hong Kong and Taiwan were still portfolio holdings at the onset of the SARS outbreak. Sectors sensitive to the effects of a travel advisory to the Asian region, such as airlines, sold off at the onset. Additionally, bad timing on some technology purchases also hindered performance WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? As we prepare for the final six months of 2003, we remain consistent in our investment strategy and process. We will continue to use our growth-focused investment research process in seeking out small-capitalization international companies with strong growth potential. Please note that on or about November 14, 2003, the portfolio will be liquidated and assets distributed to its shareholders, and portfolio shareholder accounts will be closed. July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--92.9% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AUSTRALIA--1.0% David Jones 81,750 72,537 Kingsgate Consolidated 31,275 61,808 134,345 AUSTRIA--.4% Schoeller-Bleckmann Oilfield Equipment 5,650 57,143 Wolford 300 (a) 3,417 60,560 BELGIUM--1.2% Banque Nationale de Belgique 25 107,143 Exmar 1,850 (a) 63,276 170,419 CANADA--5.9% ATS Automation Tooling Systems 15,525 (a) 136,759 CoolBrands International 15,550 (a) 154,821 Great Northern Exploration 6,975 (a) 20,653 Hip Interactive 19,925 (a) 23,894 Hockey Co. 8,075 96,417 Home Capital Group, Cl. B 4,550 69,047 Mega Bloks 6,900 (a,b) 107,262 Sierra Wireless 17,350 (a) 107,241 Total Energy Services 31,225 (a) 62,408 Wi-LAN 19,475 (a) 36,041 814,543 CHINA--1.4% Angang New Steel, Cl. H 290,000 64,334 Dongfang Electrical Machinery, Cl. H 296,000 (a) 54,278 Maanshan Iron and Steel, Cl. H 426,000 72,107 190,719 FINLAND--.2% Aldata Solution 12,050 (a) 20,912 FRANCE--4.5% Camaieu 1,200 68,130 Entenial 1,350 56,011 Euro Disney 92,000 (a) 62,384 Eurotunnel 79,000 (a) 58,109 Financiere Marc de Lacharriere 1,650 45,512 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ FRANCE (CONTINUED) Genesys 5,275 (a) 26,069 Gifi 1,500 71,372 ILOG 7,100 (a) 58,589 Ipsos 1,100 68,332 Leon de Bruxelles 99,025 (a) 26,176 Silicon-On-Insulator Technologies 13,825 (a) 82,305 622,989 GERMANY--5.1% ADVA AG Optical Networking 14,775 (a) 50,263 comdirect bank 9,250 (a) 70,165 ELMOS Semiconductor 7,825 (a) 60,165 Evotec OAI 1 (a) 6 Grenkeleasing 2,500 47,409 Leoni 1,400 69,349 Puma 2,500 246,237 QSC 34,850 (a) 67,690 Techem 7,800 (a) 95,920 707,204 GREECE--1.3% Autohellas 10,500 68,062 EYDAP Athens Water Supply and Sewage 14,550 70,568 Germanos 2,650 44,162 182,792 HONG KONG--1.1% Asia Aluminum 578,000 76,341 GZI Transport 128,000 25,113 Hongkong.com 688,000 (a) 57,345 158,799 INDONESIA--1.1% PT Bank Mandiri 1,082,500 88,568 PT United Tractors 1,105,500 (a) 63,650 152,218 ISRAEL--1.3% BATM Advanced Communications 191,875 (a) 64,308 Emblaze Systems 63,700 (a) 113,337 177,645 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ITALY--1.3% Amplifon 3,375 63,521 Lottomatica 5,775 101,815 Marzotto 1,500 10,085 175,421 JAPAN--28.1% ACCESS 3 (a) 60,135 Chugoku Marine Paints 20,000 68,487 DAIKI ALUMINIUM INDUSTRY 22,000 65,598 DAINIPPON SCREEN MANUFACTURING 15,000 (a) 73,666 DENKI KOGYO 36,000 96,517 DISCO 3,500 134,762 Dr. Ci:Labo 7 35,664 EPCO 5 25,892 en-japan 24 110,248 FUJI MACHINE 9,400 109,129 GLORY 1,400 31,103 G-mode 22 56,043 Gigno System Japan 30 60,887 Global Media Online 11,500 62,048 INVOICE 32 67,619 ISHIHARA SANGYO KAISHA 28,000 47,473 ISUZU MOTORS 48,000 (a) 70,960 Index 6 35,029 Internet Initiative Japan, ADR 8,400 (a) 36,624 JGC 10,000 67,485 JOINT 10,700 72,924 Japan Retail Fund 12 62,942 Japan Wind Development 19 134,252 KENWOOD 70,000 (a) 197,611 KURODA ELECTRIC 1,660 37,712 KYOWA EXEO 22,000 77,909 Kyosan Electric Manufacturing 23,000 67,811 MEISEI INDUSTRIAL 49,000 103,132 NACHI-FUJIKOSHI 76,000 140,282 NAKANISHI 2,000 66,483 NETMARKS 25 65,773 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ JAPAN (CONTINUED) NIDEC COPAL 2,400 37,885 New Japan Radio 11,000 83,054 Nippon Light Metal 91,000 134,528 Nippon Sheet Glass 16,000 48,108 Nippon Yakin Kogyo 55,500 (a) 84,828 OKINAWA CELLULAR TELEPHONE 31 92,951 OMC Card 23,000 (a) 70,500 Oki Electric Industry 24,000 (a) 68,955 Okura Industrial 14,000 65,715 PLANT 100 1,294 PRESS KOGYO 44,000 (a) 67,251 RYOHIN KEIKAKU 1,700 43,732 SANYO SHOKAI 10,000 60,636 SHIBAURA MECHATRONICS 13,000 (a) 67,970 STUDIO ALICE 2,800 60,803 Sanrio 10,200 63,212 Sodick Plustech 20 48,442 Sparx Asset Management 8 50,180 Sumikin Bussan 69,000 (a) 78,376 Sumitomo Titanium 800 9,455 TAKARA 10,000 63,560 TAMURA 16,000 52,785 TOSEI ENGINEERING 2,000 20,362 TOYO KANETSU 62,000 (a) 74,568 Toho Zinc 48,000 68,554 WACOM 2 40,424 3,900,328 LUXEMBOURG--1.4% Gemplus International 42,275 (a) 57,818 Millicom International Cellular 5,300 (a) 138,372 196,190 MALAYSIA--3.3% CIMB 185,000 148,000 Glomac 165,600 73,213 Malaysian Pacific Industries 20,000 75,790 Palmco 32,100 50,262 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ MALAYSIA (CONTINUED) Scomi 39,000 50,905 Symphony House 206,100 66,711 464,881 NETHERLANDS--.7% Exact 4,175 (a) 67,033 Imtech 1,825 33,832 100,865 NORWAY--1.6% Golar LNG 15,200 (a) 157,722 Schibsted 4,875 67,447 225,169 PHILIPPINES--1.5% Ayala Land 1,275,000 143,084 Filinvest Land 3,499,100 (a) 66,756 209,840 SINGAPORE--3.2% CSE Global 274,000 74,706 Federal International 194,000 45,731 First Engineering 387,000 143,985 Jaya 152,000 32,377 MFS Technology 258,000 70,344 Magnecomp International 260,000 (a) 73,104 440,247 SOUTH KOREA--4.2% Daewoo Shipbuilding & Marine Engineering 8,320 (a) 70,349 Digital Chosun 46,450 (a) 56,385 Dongwon F&B 2,450 70,762 Hanil Cement 1,100 44,111 Hanjin Shipping 7,880 64,782 Hankook Tire 14,620 72,090 HiSmarTech 4,010 31,120 KH Vatec 1,040 94,902 Kumho Electric 2,760 71,628 576,129 SWITZERLAND--.5% Valora 325 66,562 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ THAILAND--7.7% AEON Thana Sinsap 36,200 120,409 Aapico Hitech 23,400 38,083 Banpu 48,200 51,819 Dynasty Ceramic 113,600 35,627 Electricity Generating 47,950 63,227 Electricity Generating, NVDR 8,000 10,549 Italian-Thai Development 208,400 (a) 165,868 National Finance 375,550 134,730 Sino Thai Engineering & Construction 621,400 (a) 97,440 Thai Stanley Electric 15,425 73,295 Thoresen Thai Agencies 270,000 49,073 Tipco Asphalt 66,100 (a) 55,358 Total Access Communication 77,000 (a) 102,410 Vanachai 337,300 70,922 1,068,810 UNITED KINGDOM--14.9% ARM 42,225 (a) 46,824 Acambis 12,850 (a) 78,479 Antisoma 81,625 (a) 60,713 Bloomsbury Publishing 18,600 72,344 Bookham Technology 14,700 (a) 20,194 Burberry 10,825 44,433 Collins Stewart Tullett 8,725 60,651 DeVere 11,600 68,445 Dialog Semiconductor 54,850 (a) 100,232 Easynet 9,775 (a) 20,323 ebookers 8,400 (a) 62,146 HIT Entertainment 25,175 103,010 Hiscox 45,450 122,616 Incepta 236,725 60,729 Intec Telecom Systems 178,850 (a) 74,004 lastminute.com 70,125 (a) 202,531 Liontrust Asset Management 9,075 62,333 Marconi Warrants 46,876 (a) 13,197 Marylebone Warwick Balfour 35,275 (a) 35,614 Merant 12,325 (a) 26,927 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) NDS Group, ADR 9,725 (a) 150,640 SSL International 30,425 (a) 147,544 SkyePharma 83,500 (a) 96,050 Taylor Nelson Sofres 43,450 120,816 Wilson Connolly 22,075 67,957 Wimpey (George) 13,600 66,403 Wood (John) 30,025 89,450 2,074,605 TOTAL COMMON STOCKS (cost $12,471,741) 12,892,192 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--9.3% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTE; Federal National Mortgage Association .77%, 7/1/2003 (cost $1,300,000) 1,300,000 1,300,000 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $13,771,741) 102.2% 14,192,192 LIABILITIES, LESS CASH AND RECEIVABLES (2.2%) (310,658) NET ASSETS 100.0% 13,881,534 (A) NON-INCOME PRODUCING. (B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THIS SECURITY MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2003, THIS SECURITY AMOUNTED TO $107,262 OR .8% OF NET ASSETS.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 13,771,741 14,192,192 Cash 69,690 Cash denominated in foreign currencies 15 15 Receivable for investment securities sold 913,745 Receivable for shares of Beneficial Interest subscribed 31,265 Dividends receivable 26,761 Due from The Dreyfus Corporation and affiliates 5,568 15,239,236 - -------------------------------------------------------------------------------- LIABILITIES ($): Payable for investment securities purchased 1,226,122 Payable for shares of Beneficial Interest redeemed 12,822 Accrued expenses 118,758 1,357,702 - -------------------------------------------------------------------------------- NET ASSETS ($) 13,881,534 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 30,375,339 Accumulated undistributed investment income--net 84,684 Accumulated net realized gain (loss) on investments (17,000,140) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions 421,651 - -------------------------------------------------------------------------------- NET ASSETS ($) 13,881,534 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 13,043,989 837,545 Shares Outstanding 1,073,864 68,922 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.15 12.15 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $14,773 foreign taxes withheld at source) 173,210 Interest 4,914 TOTAL INCOME 178,124 EXPENSES: Investment advisory fee--Note 3(a) 59,380 Custodian fees 103,745 Auditing fees 13,322 Shareholder servicing costs--Note 3(b) 12,463 Prospectus and shareholders' reports 6,856 Legal fees 1,577 Distribution fees--Note 3(b) 895 Trustees' fees and expenses--Note 3(c) 608 Loan commitment fees--Note 2 51 Miscellaneous 4,799 TOTAL EXPENSES 203,696 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertakings--Note 3(a) (114,626) NET EXPENSES 89,070 INVESTMENT INCOME--NET 89,054 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions 1,483,674 Net realized gain (loss) on forward currency exchange contracts (1,189) NET REALIZED GAIN (LOSS) 1,482,485 Net unrealized appreciation (depreciation) on investments and foreign currency transactions 905,570 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,388,055 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,477,109 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 89,054 7,812 Net realized gain (loss) on investments 1,482,485 (1,877,825) Net unrealized appreciation (depreciation) on investments 905,570 (276,239) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,477,109 (2,146,252) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (30,274) (40,280) Service shares (1,963) (1,859) TOTAL DIVIDENDS (32,237) (42,139) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 635,566 17,062,994 Service shares 95,176 330,979 Dividends reinvested: Initial shares 30,274 40,280 Service shares 1,963 1,859 Cost of shares redeemed: Initial shares (1,264,267) (20,181,798) Service shares (120,057) (251,793) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (621,345) (2,997,479) TOTAL INCREASE (DECREASE) IN NET ASSETS 1,823,527 (5,185,870) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 12,058,007 17,243,877 END OF PERIOD 13,881,534 12,058,007 Undistributed investment income--net 84,684 27,867 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 54,560 1,448,552 Shares issued for dividends reinvested 3,150 3,269 Shares redeemed (125,987) (1,709,542) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (68,277) (257,721) - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 8,448 29,099 Shares issued for dividends reinvested 204 151 Shares redeemed (11,185) (22,007) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (2,533) 7,243 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 ------------------------------------------------------------------------ INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.94 11.78 16.99 23.82 14.46 12.50 Investment Operations: Investment income (loss)--net .08(b) .01(b) .03(b) (.11)(b) (.10)(b) .00(c) Net realized and unrealized gain (loss) on investments 2.16 (1.82) (5.24) (5.61) 11.04 1.97 Total from Investment Operations 2.24 (1.81) (5.21) (5.72) 10.94 1.97 Distributions: Dividends from investment income--net (.03) (.03) -- -- -- (.00)(c) Dividends from net realized gain on investments -- -- -- (1.11) (1.58) (.01) Total Distributions (.03) (.03) -- (1.11) (1.58) (.01) Net asset value, end of period 12.15 9.94 11.78 16.99 23.82 14.46 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 22.60(d) (15.42) (30.66) (25.76) 76.05 15.79(d) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(d) 1.50 1.50 1.50 1.50 .38(d) Ratio of net investment income (loss) to average net assets .74(d) .05 .24 (.47) (.60) .02(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .95(d) 2.11 2.01 2.09 2.14 .30(d) Portfolio Turnover Rate 370.47(d) 484.89 729.40 493.10 319.31 3.98(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 13,044 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 $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended Year Ended December 31, June 30, 2003 ------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.94 11.78 16.99 16.99 Investment Operations: Investment income (loss)--net .08(b) .00(b,c) (.01)(b) -- Net realized and unrealized gain (loss) on investments 2.16 (1.81) (5.20) -- Total from Investment Operations 2.24 (1.81) (5.21) -- Distributions: Dividends from investment income--net (.03) (.03) -- -- Net asset value, end of period 12.15 9.94 11.78 16.99 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 22.60(d) (15.42) (30.66) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(d) 1.50 1.50 -- Ratio of net investment income (loss) to average net assets .76(d) .03 (.12) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.09(d) 2.42 2.56 -- Portfolio Turnover Rate 370.47(d) 484.89 729.40 493.10 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 838 710 757 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. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company, operating as a series company currently offering 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 wholly-owned 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 wholly-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 (Unaudited) (CONTINUED) sales price on the national securities market. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. 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 $80 during the period ended June 30, 2003 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles (E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $18,334,182 available for federal income tax purposes to be applied against future net securities profits, if any, realized prior to liquidation date. See Note 5. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2002 was as follows: ordinary income $42,139. The tax character of current year distributions will be determined by liquidation date. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 June 30, 2003, 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, 2003 to on or about November 14, 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 June 30, 2003, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $114,626 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% $100 million to $1 billion . . . . . . . . . . . . .30 of 1% $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 June 30, 2003, service shares were charged $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 June 30, 2003, the portfolio was charged $76 pursuant to the transfer agency agreement (C) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Through December 31, 2002, each Board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. 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 (Unaudited) (CONTINUED) NOTE 4--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2003, amounted to $40,566,821 and $40,828,360, respectively. At June 30, 2003, accumulated net unrealized appreciation on investments was $420,451, consisting of $878,840 gross unrealized appreciation and $458,389 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). NOTE 5--SUBSEQUENT EVENT: At a meeting of the Board of Trustees of Dreyfus Investment Portfolios held on July 17, 2003, the Board approved a proposal to liquidate the Founders Passport Portfolio (the "Portfolio" ), distribute the Portfolio's assets to Portfolio shareholders and close out Portfolio shareholder accounts. The liquidation is expected to occur on or about November 14, 2003. Accordingly, effective as of the close of business on July 17, 2003, the Portfolio was closed to any investments for new accounts. PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows:
Shares ------------------------------------------------ Votes For Authority Withheld ------------------------------------------------- To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758
Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. The Portfolio NOTES FOR MORE INFORMATION Dreyfus Investment Portfolios, Founders Passport Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. 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 178SA0603 DREYFUS INVESTMENT PORTFOLIOS, JAPAN PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 9 Statement of Assets and Liabilities 10 Statement of Operations 11 Statement of Changes in Net Assets 13 Financial Highlights 15 Notes to Financial Statements 21 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover THE PORTFOLIO Dreyfus Investment Portfolios, Japan Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Japan Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Miki Sugimoto. The first half of 2003 was a time of long-awaited recovery for international stocks. Despite continued volatility and lackluster economic conditions leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the global economy. Apparently, they liked what they saw. Despite current economic weakness, investors in many parts of the world appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for international stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their international equity exposure during the bear market. In contrast, investors who avoided international stocks may have missed the market's recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2003 DISCUSSION OF PERFORMANCE Miki Sugimoto, Portfolio Manager How did Dreyfus Investment Portfolios, Japan Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2003, the portfolio produced total returns of 9.31% for its Initial shares and 9.17% for its Service shares.(1 )In comparison, the total return of the Morgan Stanley Capital International (MSCI) Japan Index, the portfolio's benchmark, was 2.92% for the same period.(2) We attribute the portfolio's performance to a strong improvement in investor sentiment during the second half of the reporting period. The swift conclusion of major combat operations in Iraq and a corresponding upturn in U.S. stocks helped drive Japanese stocks sharply higher. This rally compensated for stock market declines that occurred during the first three months of the year. The portfolio produced higher returns than its benchmark, primarily because of its relatively defensive positioning during the first half of the reporting period and above-average performance from its financial services stocks 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 out The Portfoli DISCUSSION OF PERFORMANCE (CONTINUED) looks 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 the first three months of 2003, the Japanese economy remained mired in recession, driving most stocks lower. Although the portfolio lost ground along with the overall market, due primarily to poor performance among holdings in the financial sector, we offset some of those losses by emphasizing defensive stocks in other areas. Relatively strong performers included companies with exposure to the fast-growing Chinese market, such as marine transporter Nippon Yusen Kabushiki Kaisha, and basic materials companies, such as steel exporter JFE Holdings. The portfolio also cushioned early losses by investing in higher-yielding real estate stocks and several technology companies, such as sound-chip maker Yamaha, that produce specific products for which demand continued to grow. As more encouraging events began to unfold on the global and domestic scene in March and April 2003, we shifted some of the portfolio's assets into more aggressive stocks. We sold some high-yield and defensive holdings, and we added computer gaming stocks, such as CAPCOM, and software stocks, such as FUJI SOFT ABC. These investments performed strongly during the second half of the reporting period. In mid-May, the Japanese government pledged an injection of liquidity for troubled Resona Bank (which the portfolio did not own). Following this news, we also added to the portfolio's holdings in the hard-hit financial area. Top performers included UJF Holdings, one of Japan's largest banks, as well as several non-bank financial companies, such as MATSUI SECURITIES and ACOM. WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? As of the end of the reporting period, we have identified a number of Japanese stocks that appear to us to offer reasonably good opportunities for growth. Despite ongoing economic difficulties, new policies regarding Japanese taxation of capital gains and dividends have made certain stock investments potentially more profitable for local investors. We believe that financial stocks, while still facing difficulties, are available at attractively low valuations and appear likely to benefit from government support. Finally, the improving outlook for economic growth in the United States, Japan's largest trading partner, may lead to better business conditions for Japanese exporters. While we remain wary of the uncertainties in the Japanese economy, we have positioned the portfolio cautiously to benefit from the more encouraging trends that recently have emerged. In particular, as of the end of the reporting period, the portfolio holds a relatively heavy position in financial stocks. We have found individual investment opportunities in most other industry groups as well. However, the portfolio maintains relatively light exposure to automobile stocks, where, in our view, growth opportunities are not as attractive as in other areas of the market. We would like to take this opportunity to notify shareholders at this time that the portfolio will be liquidated on or about November 14, 2003, and its assets distributed to shareholders. July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, JAPAN PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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: BLOOMBERG L.P. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) JAPAN INDEX IS A MARKET CAPITALIZATION INDEX OF JAPANESE COMPANIES BASED ON MSCI-SELECTED CRITERIA. The Portfolio STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--98.6% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ BASIC MATERIALS--9.7% Chugoku Marine Paints 9,000 30,819 JFE Holdings 2,700 40,591 KANEKA 7,000 43,264 Shin-Etsu Chemical 1,100 37,668 Shiseido 3,000 29,241 181,583 CAPITAL GOODS--.7% MODEC 1,500 12,528 COMMUNICATIONS--9.6% CAPCOM 3,700 38,258 FUJI SOFT ABC 2,100 37,622 JAPAN TELECOM HOLDINGS 11 33,534 NIPPON TELEGRAPH AND TELEPHONE 10 39,338 NTT DoCoMo 14 30,402 179,154 CONSTRUCTION/PROPERTY--9.7% Daiwa House Industry 3,000 20,696 Japan Real Estate Investment 5 27,061 Japan Retail Fund Investment 9 47,206 KYOWA EXEO 12,000 42,496 Nippon Building Fund 8 43,899 181,358 CONSUMER--13.2% BANDAI 700 26,777 Bunka Shutter 9,000 26,760 HANKYU DEPARTMENT STORES 6,000 35,029 LAWSON 1,000 27,562 NISSAN MOTOR 4,900 46,982 Tostem Inax Holding 3,000 43,348 YAMAHA 3,000 41,243 247,701 FINANCIAL--16.8% ACOM 1,680 60,897 AIFUL 900 38,487 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL (CONTINUED) Bank of Yokohama 9,000 29,466 LOPRO 5,400 17,995 MATSUI SECURITIES 3,800 38,879 Promise 1,100 41,251 Sumitomo Mitsui Financial Group 14 30,636 UJF Holdings 38 (a) 55,859 313,470 PHARMACEUTICAL--3.0% Eisai 1,700 35,071 TERUMO 1,300 21,661 56,732 SERVICES--17.9% Aoi Advertising Promotion 300 1,496 Columbia Music Entertainment 37,000 (a) 44,500 DAIICHIKOSHO 900 27,963 DOSHISHA 2,000 31,404 KURODA ELECTRIC 1,300 29,533 MEITEC 1,200 36,582 MITSUI & CO. 6,000 30,168 Mitsubishi 6,000 41,744 NAMCO 2,300 36,806 NICHII GAKKAN 50 2,506 RESORTTRUST 1,300 22,693 SOHGO SECURITY SERVICES 2,400 29,005 334,400 TECHNOLOGY--11.7% ALPS ELECTRIC 3,000 38,537 CANON 1,000 46,020 Hitachi 4,000 17,005 KONICA 3,000 34,252 OLYMPUS OPTICAL 3,000 62,265 ROHM 200 21,866 219,945 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TRANSPORTATION--4.9% Mitsui O.S.K. Lines 16,000 48,776 Nippon Yusen Kabushiki Kaisha 11,000 42,997 91,773 UTILITIES--1.4% Chubu Electric Power 1,400 25,608 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $1,682,807) 98.6% 1,844,252 CASH AND RECEIVABLES (NET) 1.4% 25,960 NET ASSETS 100.0% 1,870,212 (A) NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 1,682,807 1,844,252 Cash 29,892 Cash denominated in foreign currencies 5,669 5,669 Dividends receivable 1,007 Due from The Dreyfus Corporation and affiliates 11,578 1,892,398 - -------------------------------------------------------------------------------- LIABILITIES ($): Payable for shares of Beneficial Interest redeemed 226 Accrued expenses and other liabilities 21,960 22,186 - -------------------------------------------------------------------------------- NET ASSETS ($) 1,870,212 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 2,903,304 Accumulated distributions in excess of investment income--net (21,545) Accumulated net realized gain (loss) on investments (1,172,979) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions 161,432 - -------------------------------------------------------------------------------- NET ASSETS ($) 1,870,212 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 1,738,071 132,141 Shares Outstanding 227,147 17,265 - ------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 7.65 7.65 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $1,498 foreign taxes withheld at source) 13,476 Interest 101 TOTAL INCOME 13,577 EXPENSES: Investment advisory fee--Note 3(a) 8,471 Auditing fees 15,123 Prospectus and shareholders' reports 11,139 Custodian fees 3,547 Trustees' fees and expenses--Note 3(c) 637 Shareholder servicing costs--Note 3(b) 597 Legal fees 193 Distribution fees--Note 3(b) 149 Miscellaneous 1,699 TOTAL EXPENSES 41,555 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertakings--Note 3(a) (28,743) NET EXPENSES 12,812 INVESTMENT INCOME--NET 765 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (149,229) Net realized gain (loss) on forward currency exchange contracts (21) NET REALIZED GAIN (LOSS) (149,250) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 307,035 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 157,785 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 158,550 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income (loss)--net 765 (10,759) Net realized gain (loss) on investments (149,250) (430,125) Net unrealized appreciation (depreciation) on investments 307,035 234,252 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 158,550 (206,632) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (388) (56,580) Service shares (29) (228) TOTAL DIVIDENDS (417) (56,808) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 100,695 788,140 Service shares 1,538 145,325 Dividends reinvested: Initial shares 388 56,580 Service shares 29 228 Cost of shares redeemed: Initial shares (104,196) (700,043) Service shares (1,743) (18,751) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (3,289) 271,479 TOTAL INCREASE (DECREASE) IN NET ASSETS 154,844 8,039 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 1,715,368 1,707,329 END OF PERIOD 1,870,212 1,715,368 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 14,862 97,926 Shares issued for dividends reinvested 57 7,282 Shares redeemed (15,281) (87,957) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (362) 17,251 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 223 19,169 Shares issued for dividends reinvested 4 29 Shares redeemed (250) (2,660) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (23) 16,538 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 ----------------------------------------------------- INITIAL SHARES (Unaudited) 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 7.01 8.09 11.22 12.84 12.50 Investment Operations: Investment income (loss)--net .00(b,c) (.05)(b) (.07)(b) (.08)(b) .00(b,c) Net realized and unrealized gain (loss) on investments .64 (.76) (3.06) (1.06) .34 Total from Investment Operations .64 (.81) (3.13) (1.14) .34 Distributions: Dividends from investment income--net (.00)(c) (.27) -- (.05) -- Dividends from net realized gain on investments -- -- -- (.43) -- Total Distributions (.00)(c) (.27) -- (.48) -- Net asset value, end of period 7.65 7.01 8.09 11.22 12.84 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 9.31(d) (10.45) (27.90) (8.92) 2.64(d) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .75(d) 1.50 1.50 1.50 .07(d) Ratio of net investment income (loss) to average net assets .04(d) (.62) (.74) (.80) .03(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.67(d) 2.94 2.88 1.90 1.35(d) Portfolio Turnover Rate 89.45(d) 217.25 160.78 378.54 -- - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 1,738 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 $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended Year Ended December 31, June 30, 2003 --------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 7.01 8.09 11.22 11.22 Investment Operations: Investment income (loss)--net .00(b,c) (.04)(b) (.07)(b) -- Net realized and unrealized gain (loss) on investments .64 (.77) (3.06) -- Total from Investment Operations .64 (.81) (3.13) -- Distributions: Dividends from investment income--net (.00)(c) (.27) -- -- Net asset value, end of period 7.65 7.01 8.09 11.22 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 9.17(d) (10.45) (27.90) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .75(d) 1.50 1.50 -- Ratio of net investment income (loss) to average net assets .04(d) (.57) (.78) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.85(d) 4.10 3.29 -- Portfolio Turnover Rate 89.45(d) 217.25 160.78 378.54 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 132 121 6 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act" ), as an open-end management investment company operating as a series company currently offering 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 wholly-owned subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Newton Capital Management Limited ("Newton"), serves as the portfolio's sub-investment adviser. Newton is an affiliate of Dreyfus. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. As of June 30, 2003, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 172,511 Initial shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. 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 $101 during the period ended June 30, 2003, 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $888,739 available for federal income tax purposes to be applied against future net securities profits, if any, realized prior to liquidation date. See Note 5. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2002, was as follows: ordinary income $56,808. The tax character of current year distributions, will be determined by the liquidation date. 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2003, 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, 2003 to on or about November 14, 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 June 30, 2003, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $28,743, 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% $100 million to $1 billion . . . . . . . . . . . . .30 of 1% $1 billion to $1.5 billion . . . . . . . . . . . . .26 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2003, Service shares were charged $149 pursuant to the Plan. The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $125 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"). Through December 31, 2002, each board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward currency exchange contracts, during the period ended June 30, 2003, amounted to $1,489,967 and $1,515,253, 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. The Portfoli NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 June 30, 2003, there were no open forward currency exchange contracts outstanding. At June 30, 2003, accumulated net unrealized appreciation on investments was $161,445, consisting of $235,469 gross unrealized appreciation and $74,024 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). NOTE 5--SUBSEQUENT EVENT: At a meeting of the Board of Trustees of Dreyfus Investment Portfolios held on July 17, 2003, the Board approved a proposal to liquidate the Japan Portfolio (the "Portfolio"), distribute the Portfolio's assets to Portfolio shareholders and close out Portfolio shareholder accounts. The liquidation is expected to occur on or about November 14, 2003. Accordingly, effective as of the close of business on July 17, 2003, the Portfolio was closed to any investments for new accounts. PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. The Portfolio FOR MORE INFORMATION DREYFUS INVESTMENT PORTFOLIOS, JAPAN PORTFOLIO 200 Park Avenue New York, NY 10166 INVESTMENT ADVISER The Dreyfus Corporation 200 Park Avenue New York, NY 10166 SUB-INVESTMENT ADVISER Newton Capital Management Limited 71 Queen Victoria Street London, EC4V 4DR England CUSTODIAN Bank of New York 100 Church Street New York, NY 10286 TRANSFER AGENT & DIVIDEND DISBURSING AGENT Dreyfus Transfer, Inc. 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 189SA0603 DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 16 Financial Highlights 18 Notes to Financial Statements 24 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover THE PORTFOLIO Dreyfus Investment Portfolios, MidCap Stock Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, MidCap Stock Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, John O'Toole. The first half of 2003 was a time of long-awaited recovery for the U.S. stock market. Despite continued volatility leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the U.S. economy. Apparently, they liked what they saw. Despite current economic weakness, investors appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their equity exposure during the bear market. In contrast, we believe investors who avoided stocks may have missed the market's recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2003 DISCUSSION OF PERFORMANCE John O'Toole, Portfolio Manager How did Dreyfus Investment Portfolios, MidCap Stock Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2003, the portfolio's Initial shares produced a total return of 11.80% , and its Service shares produced a total return of 11.74%.(1) This compares with the total return of 12.41% provided by the portfolio's benchmark, the Standard & Poor's MidCap 400 Index, for the same period.(2 ) These returns reflect a volatile market environment in which investor sentiment shifted sharply in favor of stocks as the war in Iraq came to an end. Midcap stock returns were in line with those of their large-cap counterparts, and the portfolio roughly matched the performance of its benchmark. Although the portfolio suffered a few individual disappointments among consumer cyclical stocks, these were offset by the portfolio's relatively strong gains in the technology and financial sectors. WhAT IS THE PORTFOLIO'S INVESTMENT APPROACH? The portfolio invests 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 on 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 input based on 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? Stock prices generally declined during the commencement of the reporting period as investors weighed the uncertainties of a struggling economy and the impending conflict in Iraq. However, stocks rallied strongly from mid-March through the end of the reporting period, once a decision was made by the U.S. and the U.K. on the war in Iraq. Investors also became more optimistic about the economy, encouraged by the Bush Administration' s stimulative fiscal policies and expectations. These policies began to affect the economy in late June, along with further interest-rate reductions by the Federal Reserve Board. During the second half of the reporting period, markets were led upward by relatively speculative, lower-quality technology issues. Nevertheless, virtually all stock sectors and industry sectors benefited to some degree from the market's upturn. The portfolio enjoyed its strongest gains from investments in what we believed to be sound, reasonably priced technology companies. While such investments failed to rise as sharply as some other fundamentally weaker technology stocks, they enabled the portfolio to participate in the market's rise while avoiding many of the risks associated with more speculative names. Top-performing holdings during the reporting period included consumer-oriented technology companies, such as SanDisk, the nation's leading supplier of flash data storage products; semiconductor manufacturers, such as QLogic; and Internet access providers, such as United Online. The portfolio's investment strategy also proved effective in identifying several financial services stocks that performed better than the averages. Some holdings, such as Doral Financial, benefited from high levels of mortgage refinancing driven by declining short-term interest rates. Others, such as health insurer Aetna, produced better than expected earnings by managing costs while effectively exercising their pricing power. Finally, in the health care area, where biotechnology stocks provided a potent boost to the market's performance, holdings such as Gilead Sciences enabled the portfolio to share in the sector's broad rise. On the other hand, some of the portfolio's investments proved disappointing. In particular, returns suffered from unfortunate timing in the purchase and sale of certain retailing stocks, such as Abercrombie & Fitch and J. C. Penney What is the portfolio's current strategy? We remain focused on midcap stocks, which we believe are stocks with greater opportunities for capital appreciation than large-cap stocks, and lower risks of failure than small-cap stocks. Within the midcap marketplace, the portfolio's assets generally are balanced between value and growth stocks. Our company-by-company stock selection process has identified roughly equivalent investment opportunities among various growth- and value-oriented issues in today's market. July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--97.7% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL--12.7% Abercrombie & Fitch, Cl. A 51,100 (a) 1,451,751 Aztar 43,100 (a) 694,341 Bob Evans Farms 50,500 1,395,315 Borders Group 75,200 (a) 1,324,272 Brinker International 58,200 (a) 2,096,364 Chico's FAS 55,300 (a) 1,164,065 Claire's Stores 63,300 1,605,288 Coach 59,100 (a) 2,939,634 Columbia Sportswear 24,300 (a) 1,249,263 GTECH Holdings 34,600 1,302,690 Gentex 57,800 (a) 1,769,258 J. C. Penney (Holding Co.) 41,900 (b) 706,015 Magna International, Cl. A 16,700 1,123,409 Michaels Stores 59,200 2,253,152 Mohawk Industries 38,700 (a) 2,149,011 Pier 1 Imports 83,300 1,699,320 Ross Stores 61,700 2,637,058 Ruby Tuesday 48,100 1,189,513 Superior Industries International 22,700 946,590 Whole Foods Market 29,900 (a) 1,421,147 Williams-Sonoma 67,700 (a,b) 1,976,840 Zale 34,100 (a) 1,364,000 34,458,296 CONSUMER STAPLES--2.8% Alberto-Culver, Cl. B 24,300 (b) 1,241,730 Dial 52,900 1,028,905 Fresh Del Monte Produce 28,300 727,027 J. M. Smucker 32,800 1,308,392 Pactiv 68,200 (a) 1,344,222 Pepsi Bottling Group 30,000 600,600 Sensient Technologies 59,900 1,366,319 7,617,195 ENERGY RELATED--8.5% Energen 34,100 1,135,530 Equitable Resources 21,800 888,132 FMC Technologies 93,900 (a) 1,976,595 Houston Exploration 46,100 (a) 1,599,670 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY RELATED (CONTINUED) Oil States International 121,600 (a) 1,471,360 Patina Oil & Gas 46,250 1,486,937 Pioneer Natural Resources 90,300 (a) 2,356,830 Questar 67,700 2,265,919 Sunoco 22,800 860,472 Unit 57,000 (a) 1,191,870 Valero Energy 89,000 3,233,370 Varco International 105,800 (a) 2,073,680 XTO Energy 130,800 2,630,388 23,170,753 HEALTH CARE--13.8% Applera--Applied Biosystems Group 71,000 1,351,130 Apria Healthcare Group 67,600 (a) 1,681,888 Beckman Coulter 45,800 1,861,312 Chiron 32,400 (a) 1,416,528 Coventry Health Care 43,600 (a) 2,012,576 First Health Group 68,200 (a) 1,882,320 Gilead Sciences 88,400 (a) 4,913,272 Health Net 88,400 (a) 2,912,780 Henry Schein 37,700 (a) 1,973,218 Hillenbrand Industries 24,300 1,225,935 ICN Pharmaceuticals 104,600 1,753,096 Millipore 39,300 (a) 1,743,741 Mylan Laboratories 84,600 2,941,542 Oxford Health Plans 59,400 (a) 2,496,582 STERIS 66,800 (a) 1,542,412 Sunrise Senior Living 34,100 (a,b) 763,158 Techne 52,300 (a) 1,586,782 Universal Health Services, Cl. B 33,200 (a) 1,315,384 Varian Medical Systems 38,800 (a) 2,233,716 37,607,372 INTEREST SENSITIVE--18.7% Aetna 30,100 1,812,020 Affiliated Managers Group 16,600 (a) 1,011,770 Bear Stearns Cos.. 23,100 1,672,902 City National 52,000 2,317,120 Commerce Bancorp 57,000 2,114,700 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST SENSITIVE (CONTINUED) Countrywide Financial 18,100 1,259,217 Dime Bancorp (Warrants) 19,900 (a) 2,985 Doral Financial 53,600 2,393,240 Everest Re Group 27,900 2,134,350 Fidelity National Financial 95,250 2,929,890 First American 80,600 2,123,810 First Tennessee National 41,100 1,804,701 GreenPoint Financial 62,100 3,163,374 Hilb, Rogal & Hamilton 40,800 1,388,832 IPC Holdings 36,700 1,229,450 Marshall & Ilsley 63,900 1,954,062 Mercantile Bankshares 40,900 1,610,642 National Commerce Financial 117,300 2,602,887 New Century Financial 22,800 995,220 New York Community Bancorp 68,400 1,989,756 Nuveen Investments 46,000 1,253,040 Old Republic International 77,100 2,642,217 Popular 39,400 1,520,446 Principal Financial Group 40,700 1,312,575 RenaissanceRe Holdings 27,400 1,247,248 South Financial Group 66,800 1,558,444 Sovereign Bancorp 110,200 1,724,630 TCF Financial 53,700 2,139,408 Wintrust Financial 31,200 923,520 50,832,456 INTERNET RELATED--1.8% Check Point Software Technologies 61,400 (a) 1,200,370 E*TRADE Group 263,400 (a) 2,238,900 United Online 61,200 (a,b) 1,550,808 4,990,078 PRODUCER GOODS--12.0% American Power Conversion 62,000 966,580 Bemis 26,300 1,230,840 C.H. Robinson Worldwide 48,200 1,713,992 Cooper Industries, Cl. A 26,800 1,106,840 Cytec Industries 46,400 (a) 1,568,320 Energizer Holdings 69,500 (a) 2,182,300 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS (CONTINUED) Fluor 39,100 1,315,324 Harsco 37,700 1,359,085 Hovnanian Enterprises, Cl. A 21,900 (a) 1,291,005 Hughes Supply 26,900 933,430 ITT Industries 18,000 1,178,280 Landstar System 13,300 (a) 835,905 Lennar, Cl. A 39,800 2,845,700 Lubrizol 53,700 1,664,163 MDU Resources Group 26,300 880,787 Monsanto 37,800 817,992 PPG Industries 17,600 893,024 Phelps Dodge 20,700 (a) 793,638 Precision Castparts 58,100 1,806,910 Rayonier 44,550 1,470,150 Sigma-Aldrich 28,500 1,544,130 SurModics 32,500 (a,b) 991,250 Timken 48,400 847,484 Werner Enterprises 44,900 951,880 York International 61,000 1,427,400 32,616,409 SERVICES--10.7% Apollo Group, Cl. A 29,900 (a,b) 1,846,624 ChoicePoint 56,600 (a) 1,953,832 Corinthian Colleges 52,400 (a) 2,545,068 Cox Radio, Cl. A 51,800 (a) 1,197,098 Deluxe 31,800 1,424,640 Entercom Communications 33,900 (a) 1,661,439 FTI Consulting 43,650 (a,b) 1,089,940 FactSet Research Systems 34,000 1,497,700 Jack Henry & Associates 48,800 868,152 Moody's 15,800 832,818 Pharmaceutical Product Development 41,000 (a) 1,177,930 Rent-A-Center 18,700 (a) 1,417,647 Republic Services 103,500 (a) 2,346,345 SunGard Data Systems 66,800 (a) 1,730,788 Valassis Communications 62,900 (a) 1,617,788 Washington Post, Cl. B 3,200 2,345,280 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SERVICES (CONTINUED) WebMD 121,300 (a) 1,313,679 Westwood One 65,800 (a) 2,232,594 29,099,362 TECHNOLOGY--12.7% ADTRAN 29,900 (a) 1,533,571 Adobe Systems 21,000 673,470 Advanced Fibre Communications 87,700 (a) 1,426,879 Avid Technology 38,500 (a) 1,350,195 Cree 71,500 (a,b) 1,164,020 Electronic Arts 25,200 (a) 1,864,548 FLIR Systems 25,400 (a) 765,810 Garmin 34,800 (a) 1,387,476 Integrated Circuit Systems 43,300 (a) 1,360,919 Lexmark International 13,100 (a) 927,087 MEMC Electronic Materials 95,900 (a) 939,820 McDATA, Cl. A 101,300 (a) 1,486,071 Microchip Technology 68,100 1,677,303 Plantronics 71,800 (a) 1,555,906 QLogic 36,500 (a) 1,764,045 Reynolds & Reynolds, Cl. A 51,100 1,459,416 SanDisk 109,800 (a) 4,430,430 Semtech 50,600 (a) 720,544 Storage Technology 92,400 (a) 2,378,376 Symantec 17,100 (a) 750,006 Take-Two Interactive Software 35,300 (a) 1,000,402 UTStarcom 43,400 (a) 1,543,738 Western Digital 178,100 (a) 1,834,430 Zebra Technologies, Cl. A 9,400 (a) 706,786 34,701,248 UTILITIES--4.0% Hawaiian Electric Industries 43,600 1,999,060 Level 3 Communications 192,700 (a) 1,279,528 Pepco Holdings 112,300 2,151,668 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (CONTINUED) SCANA 67,700 2,320,756 Wisconsin Energy 103,600 3,004,400 10,755,412 TOTAL COMMON STOCKS (cost $236,423,375) 265,848,581 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--2.2% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT; Greenwich Capital Markets, Tri-Party Repurchase Agreement, 1.10%, dated 6/30/2003, due 7/1/2003, in the amount of $6,049,185 (fully collateralized by $4,260,000 U.S. Treasury Bonds, 7.875%, 2/15/2021, value $6,175,629) (cost $6,049,000) 6,049,000 6,049,000 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED--2.5% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANY; Dreyfus Institutional Preferred Money Market Fund (cost $6,878,256) 6,878,256 6,878,256 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $249,350,631) 102.4% 278,775,837 LIABILITIES, LESS CASH AND RECEIVABLES (2.4%) (6,540,417) NET ASSETS 100.0% 272,235,420 (A) NON-INCOME PRODUCING. (B) ALL OR A PORTION OF THESE SECURITIES ARE ON LOAN. AT JUNE 30, 2003, THE TOTAL MARKET VALUE OF THE PORTFOLIO'S SECURITIES ON LOAN IS $6,658,051 AND THE TOTAL MARKET VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS $6,878,256. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited)
Cost Value - --------------------------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments (including securities loaned, valued at $6,658,051)--Note 1(b) 249,350,631 278,775,837 Cash 754,858 Dividends and interest receivable 130,401 Receivable for shares of Beneficial Interest subscribed 243 Prepaid expenses 8,461 279,669,800 - --------------------------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 181,331 Liability for securities loaned--Note 1(b) 6,878,256 Payable for shares of Beneficial Interest redeemed 329,330 Accrued expenses 45,463 7,434,380 - --------------------------------------------------------------------------------------------------- NET ASSETS ($) 272,235,420 - --------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 279,788,770 Accumulated undistributed investment income--net 406,346 Accumulated net realized gain (loss) on investments (37,384,902) Accumulated net unrealized appreciation (depreciation) on investments 29,425,206 - --------------------------------------------------------------------------------------------------- Net Assets ($) 272,235,420
NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 238,503,205 33,732,215 Shares Outstanding 17,715,333 2,512,274 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 13.46 13.43 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $847 foreign taxes withheld at source) 1,312,634 Income from securities lending 76,405 Interest 28,133 TOTAL INCOME 1,417,172 EXPENSES: Investment advisory fee--Note 3(a) 900,032 Professional fees 41,613 Distribution fees--Note 3(b) 28,901 Prospectus and shareholders' reports 21,672 Custodian fees--Note 3(b) 11,005 Shareholder servicing costs--Note 3(b) 8,077 Trustees' fees and expenses--Note 3(c) 1,572 Registration fees 84 Miscellaneous 3,560 TOTAL EXPENSES 1,016,516 Less--waiver of fees due to undertaking--Note 3(a) (7,610) NET EXPENSES 1,008,906 INVESTMENT INCOME--NET 408,266 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (4,304,517) Net unrealized appreciation (depreciation) on investments 31,943,699 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 27,639,182 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 28,047,448 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 408,266 710,573 Net realized gain (loss) on investments (4,304,517) (23,480,437) Net unrealized appreciation (depreciation) on investments 31,943,699 (13,210,329) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 28,047,448 (35,980,193) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (19,487) (657,623) Service shares (2,003) (41,127) TOTAL DIVIDENDS (21,490) (698,750) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 13,909,379 101,318,850 Service shares 13,712,896 13,400,255 Dividends reinvested: Initial shares 19,487 657,623 Service shares 2,003 41,127 Cost of shares redeemed: Initial shares (18,801,039) (30,248,497) Service shares (1,340,193) (2,575,825) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 7,502,533 82,593,533 TOTAL INCREASE (DECREASE) IN NET ASSETS 35,528,491 45,914,590 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 236,706,929 190,792,339 END OF PERIOD 272,235,420 236,706,929 Undistributed investment income--net 406,346 19,570 Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 1,127,519 7,374,719 Shares issued for dividends reinvested 1,660 54,017 Shares redeemed (1,556,571) (2,404,341) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (427,392) 5,024,395 - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 1,097,894 1,006,141 Shares issued for dividends reinvested 171 3,385 Shares redeemed (110,543) (193,139) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 987,522 816,387 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 ------------------------------------------------------------------------ INITIAL SHARES (Unaudited) 2002 2001 2000 1999 1998(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.04 13.80 14.29 13.44 12.16 12.50 Investment Operations: Investment income--net .02(b) .04(b) .03(b) .05(b) .03(b) .02 Net realized and unrealized gain (loss) on investments 1.40 (1.76) (.50) 1.05 1.28 (.34) Total from Investment Operations 1.42 (1.72) (.47) 1.10 1.31 (.32) Distributions: Dividends from investment income--net (.00)(c) (.04) (.02) (.03) (.03) (.02) Dividends from net realized gain on investments -- -- -- (.13) -- -- Dividends in excess of net realized gain on investments -- -- -- (.09) -- -- Total Distributions (.00)(c) (.04) (.02) (.25) (.03) (.02) Net asset value, end of period 13.46 12.04 13.80 14.29 13.44 12.16 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 11.80(d) (12.49) (3.26) 8.28 10.82 (2.53)(d) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .41(d) .85 .89 .98 .97 .67(d) Ratio of net investment income to average net assets .18(d) .32 .24 .34 .26 .18(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- -- .06 .49 .60(d) Portfolio Turnover Rate 42.36(d) 69.15 76.37 102.89 77.73 75.74(d) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 238,503 218,387 181,028 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) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended Year Ended December 31, June 30, 2003 --------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.02 13.78 14.29 14.29 Investment Operations: Investment income--net .01(b) .02(b) .01(b) -- Net realized and unrealized gain (loss) on investments 1.40 (1.75) (.50) -- Total from Investment Operations 1.41 (1.73) (.49) -- Distributions: Dividends from investment income--net (.00)(c) (.03) (.02) -- Net asset value, end of period 13.43 12.02 13.78 14.29 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 11.74(d) (12.64) (3.36) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .49(d) 1.00 1.00 -- Ratio of net investment income to average net assets .08(d) .15 .07 -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .03(d) .10 .17 -- Portfolio Turnover Rate 42.36(d) 69.15 76.37 102.89 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 33,732 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. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company, operating as a series company currently offering 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 wholly-owned 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. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. 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 $120 during the period ended June 30, 2003 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. (d) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $29,938,221 available for federal income tax purposes 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 year ended December 31, 2002 was as follows: ordinary income $698,750. The tax character of current year distributions will be determined at the end of the current fiscal year. NOTE 2--BANK LINE OF CREDIT: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2003, 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, 2003 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 June 30, 2003, the Manager waived receipt of fees of $7,610, 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2003, Service shares were charged $28,901 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 June 30, 2003, the portfolio was charged $319 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $11,005 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"). Through December 31, 2002, each Board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2003, amounted to $107,872,236 and $101,234,016, respectively. At June 30, 2003, accumulated net unrealized appreciation on investments was $29,425,206, consisting of $38,191,805 gross unrealized appreciation and $8,766,599 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. 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 174SA0603 DREYFUS INVESTMENT PORTFOLIOS, SMALL CAP STOCK INDEX PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 24 Statement of Financial Futures 25 Statement of Assets and Liabilities 26 Statement of Operations 27 Statement of Changes in Net Assets 28 Financial Highlights 29 Notes to Financial Statements 34 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover THE PORTFOLIO Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. Inside, you' ll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio managers, Steven Falci and Thomas Durante. The first half of 2003 was a time of long-awaited recovery for the U.S. stock market. Despite continued volatility leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the U.S. economy. Apparently, they liked what they saw. Despite current economic weakness, investors appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their equity exposure during the bear market. In contrast, we believe investors who avoided stocks may have missed the market's recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 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? For the six-month period ended June 30, 2003, the portfolio's Service shares produced a total return of 12.63% .(1) In comparison, the Standard & Poor's SmallCap 600 Index ("S&P 600 Index"), produced a 13.30% return for the same period.(2,3) We attribute the portfolio's performance to an improvement in investor sentiment after the success of the war in Iraq. The portfolio's strongest returns during the reporting period stemmed from homebuilders, banks and thrifts, medical products firms, electronic equipment companies and specialty retailers. The difference in returns was primarily due to the sampling strategy, transaction costs and other portfolio operating expenses. 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 invests in a representative sample of stocks included in the S&P 600 Index and in futures whose performance is related to the S&P 600 Index. The portfolio's investments are selected by a "sampling" process based on market capitalization, industry representation and other means. By using this sampling process, the portfolio typically will not invest in all 600 stocks in the S&P 600 Index. However, at times, the portfolio may be fully invested in all of the stocks that comprise the S&P 600 Index. Under these circumstances, the portfolio maintains approximately the same weighting for each stock as the S&P 600 Index does. The S&P 600 Index is composed of 600 domestic stocks with market capitalizations ranging between $20 million and $3 billion, depending on S& P 600 Index composition. Each stock is weighted by its market The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) capitalization, which means larger companies have greater representation in the S& P 600 Index than smaller ones. The portfolio may also invest in stock futures as a substitute for the sale or purchase of securities. What other factors influenced the portfolio's performance? During the reporting period, many investors had curtailed their investments in stocks, primarily due to the uncertainties surrounding the war with Iraq. However, once the outcome of the war was decided, investors felt more comfortable putting some of their cash to work in the stock market. As investors turned their attention from the war to economic and business fundamentals, homebuilding stocks resumed their rise in value. Smaller banks and thrifts also flourished, albeit to a lesser degree because of the high demand for new homes and historically low mortgage rates. Smaller banks and thrifts tend to be focused on traditional commercial and retail banking in their local markets versus their large-cap counterparts, whose businesses include overseas markets and asset management divisions. Another best-performing area within the S&P 600 Index, and also the portfolio, was medical products, which consists of companies that make surgical and medical devices and equipment for hospitals and in products used by consumers. Some of the strongest returns of the reporting period came from companies that make products for reconstructive surgery, dental equipment, contact lenses and products that help treat sleep disorders. In the technology sector, electronic equipment companies posted attractive returns, primarily due to greater consumer demand for products such as flat screen televisions, wireless networking equipment and global positioning systems. A diversified group of specialty retail stocks also reported strong returns, including numerous automotive supply stores, a few general merchandisers, a jewelry chain and several low-end discounters. Defense stocks generally posted disappointing returns after the fighting subsided in Iraq and amid delays in the space shuttle program. Heavy machinery stocks also disappointed, as did several transportation firms, including trucking and freight companies. WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? As an index fund, our strategy remains the same: to attempt to replicate the return of the S&P 600 Index. While we are pleased with the S&P 600 Index's and the portfolio's returns during the reporting period, we continue to believe it is especially important during volatile times to diversify across many industry sectors and stocks to mitigate losses in any particular sector or holding. In our view, broadly diversified index funds continue to represent a prudent choice for the core of most investors' equity portfolios. July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, SMALL CAP STOCK INDEX PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. (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 UNDERTAKING IN EFFECT THAT MAY BE EXTENDED, TERMINATED OR MODIFIED AT ANY TIME. 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 SMALLCAP 600 INDEX IS A BROAD-BASED INDEX AND A WIDELY ACCEPTED, UNMANAGED INDEX OF OVERALL SMALL-CAP STOCK MARKET PERFORMANCE. (3) "STANDARD & POOR'S," "S&P," "S&P SMALLCAP 600" AND "STANDARD & POOR'S SMALLCAP 600" ARE TRADEMARKS OF THE MCGRAW-HILL COMPANIES, INC., AND HAVE BEEN LICENSED FOR USE BY THE FUND. THE FUND IS NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY STANDARD & POOR'S AND STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING THE ADVISABILITY OF INVESTING IN THE PORTFOLIO. The Portfolio STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--99.9% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ALCOHOL & TOBACCO--.1% DIMON 11,000 78,760 CONSUMER CYCLICAL--18.7% AFC Enterprises 6,900 (a) 112,056 A.T. Cross, Cl. A 3,200 (a) 19,008 Action Performance Cos. 3,500 66,500 Advanced Marketing Services 4,200 54,600 Albany International, Cl. A 8,000 219,200 Angelica 2,600 44,070 AnnTaylor Stores 11,250 (a) 325,687 Applica 5,000 42,500 Arctic Cat 5,500 105,380 Argosy Gaming 7,200 (a) 150,552 Ashworth 1,500 (a) 10,635 Atlantic Coast Airlines Holdings 10,200 (a) 137,598 Aztar 9,300 (a) 149,823 Bally Total Fitness Holdings 8,000 (a) 72,240 Bassett Furniture 1,800 23,904 Brown Shoe 4,500 134,100 Burlington Coat Factory Warehouse 10,700 191,530 CEC Entertainment 6,600 (a) 243,738 CPI 2,000 35,300 Casey's General Stores 11,900 168,266 Cato, Cl. A 6,200 130,696 Children's Place Retail Stores 5,200 (a) 103,272 Christopher & Banks 6,000 (a) 221,940 Coachmen Industries 4,000 47,800 Concord Camera 3,000 (a) 21,270 Cost Plus 5,000 (a) 178,300 Department 56 3,600 (a) 55,188 Dress Barn 6,900 (a) 87,423 Duane Reade 4,000 (a) 59,000 Enesco Group 3,000 (a) 22,200 Ethan Allen Interiors 8,700 305,892 Fedders 4,000 12,280 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL (CONTINUED) Footstar 4,100 (a) 53,300 Fossil 10,700 (a) 252,092 Fred's 6,200 230,516 GenCorp 10,000 88,900 Genesco 5,200 (a) 92,040 Goody's Family Clothing 7,500 64,875 Great Atlantic & Pacific 8,400 (a) 73,920 Group 1 Automotive 4,800 (a) 155,568 Gymboree 7,100 (a) 119,138 Haggar 400 5,000 Hancock Fabrics 5,000 80,750 Harman International Industries 7,800 617,292 Haverty Furniture 6,000 105,000 Hot Topic 7,400 (a) 199,134 Huffy 600 (a) 4,200 IHOP 5,000 157,850 Insight Enterprises 8,200 (a) 82,492 Interface, Cl. A 8,000 37,120 Intermet 4,700 15,839 J. Jill Group 4,700 (a) 79,148 JAKKS Pacific 5,400 (a) 71,766 Jack in the Box 8,700 (a) 194,010 Jo-Ann Stores, Cl. A 5,100 (a) 129,030 K-Swiss 4,100 141,532 K2 6,900 (a) 84,525 Kellwood 6,700 211,921 La-Z Boy 13,300 297,654 Landry's Restaurants 6,700 158,120 Linens 'n Things 9,700 (a) 229,017 Lone Star Steakhouse & Saloon 5,300 115,381 Men's Wearhouse 9,500 (a) 207,575 Mesa Air Group 10,800 (a) 86,400 Midas 1,800 (a) 21,816 Monaco Coach 5,900 (a) 90,447 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL (CONTINUED) Movie Gallery 7,600 (a) 140,220 NBTY 16,000 (a) 336,960 National Presto Industries 2,000 63,200 Nautica Enterprises 7,900 (a) 101,357 Nautilus Group 7,700 95,480 O'Charleys 4,900 (a) 105,497 O'Reilly Automotive 13,000 (a) 434,070 OshKosh B'Gosh 3,100 83,700 Oshkosh Truck 4,500 266,940 Oxford Industries 2,100 87,192 P.F. Chang's China Bistro 6,000 (a) 295,260 Pacific Sunwear of California 12,350 (a) 297,512 Panera Bread, Cl. A 7,100 (a) 284,000 Papa John's International 4,300 (a) 120,615 Pep Boys-Manny, Moe & Jack 13,100 176,981 Phillips-Van Heusen 7,200 98,136 Pinnacle Entertainment 4,300 (a) 29,240 Polaris Industries 5,500 337,700 Prime Hospitality 11,800 (a) 79,178 Quicksilver 12,900 (a) 212,721 RARE Hospitality International 5,400 (a) 176,472 Russ Berrie & Co. 5,300 193,503 Russell 8,600 163,400 Ryan's Family Steak House 10,900 (a) 152,600 SCP Pool 5,800 (a) 199,520 Salton 2,500 (a) 22,550 School Specialty 5,000 (a) 142,300 ShopKo Stores 6,300 (a) 81,900 Shuffle Master 4,300 (a) 126,377 SkyWest 13,900 264,934 Sonic 9,100 (a) 231,413 Standard Motor Products 3,100 34,410 Steak n Shake 6,400 (a) 97,600 Stein Mart 7,000 (a) 41,930 Stride Rite 10,400 102,544 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER CYCLICAL (CONTINUED) Sturm Ruger 7,100 71,000 TBC 5,400 (a) 102,870 Thor Industries 7,200 293,904 Too 7,400 (a) 149,850 Toro 6,000 238,500 Tower Automotive 8,000 (a) 29,280 Tractor Supply 4,500 (a) 214,875 Triarc 5,000 (a) 149,950 Ultimate Electronics 2,000 (a) 25,640 Urban Outfitters 5,000 (a) 179,500 WMS Industries 5,700 (a) 88,863 Wabash National 6,900 (a) 96,807 Wet Seal, Cl. A 4,650 (a) 49,662 Winnebago Industries 4,500 170,550 Wolverine World Wide 10,500 202,230 Zale 8,200 (a) 328,000 16,174,209 CONSUMER STAPLES--2.7% American Italian Pasta, Cl. A 4,000 (a) 166,600 Coca-Cola Bottling 2,300 125,580 Corn Products International 9,000 270,270 Delta & Pine Land 8,600 189,028 Flowers Foods 11,400 225,264 Hain Celestial Group 7,300 (a) 116,727 International Multifoods 4,700 (a) 107,677 J & J Snack Foods 2,500 (a) 79,075 Lance 7,400 67,562 Libbey 3,400 77,180 Nash Finch 3,100 51,615 Nature's Sunshine Products 3,000 24,030 Performance Food Group 10,400 (a) 384,800 Ralcorp Holdings 7,000 (a) 174,720 United Natural Foods 4,000 (a) 112,560 WD-40 4,400 125,620 2,298,308 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY--8.0% American States Water 2,950 80,535 Atmos Energy 12,000 297,600 Atwood Oceanics 2,400 (a) 65,160 Cabot Oil & Gas 8,100 223,641 Cal Dive International 9,500 (a) 207,100 Carbo Ceramics 3,900 145,080 Cascade Natural Gas 2,000 38,200 Cimarex Energy 10,300 (a) 244,625 Dril-Quip 3,300 (a) 60,060 Energen 8,700 289,710 Evergreen Resources 4,900 (a) 266,119 Frontier Oil 6,500 98,800 Hydril 5,300 (a) 144,425 Laclede Group 5,000 134,000 NUI 4,000 62,080 New Jersey Resources 6,700 237,850 Newfield Exploration 13,500 (a) 506,926 Northwest Natural Gas 6,500 177,125 NorthWestern 4,900 9,800 Nuevo Energy 4,800 (a) 83,760 Oceaneering International 5,900 (a) 150,745 Patina Oil & Gas 8,494 273,074 Piedmont Natural Gas 8,000 310,480 Plains Resources 6,000 (a) 84,900 Prima Energy 3,400 (a) 70,992 Remington Oil & Gas 6,800 (a) 124,984 St. Mary Land & Exploration 7,200 196,560 Southern Union 15,885 (a) 266,392 Southwest Gas 7,100 150,378 Southwestern Energy 9,700 (a) 145,597 Spinnaker Exploration 7,000 (a) 183,400 Stone Energy 6,500 (a) 272,480 Swift Energy 5,000 (a) 55,000 TETRA Technologies 3,600 (a) 106,740 Tom Brown 9,300 (a) 258,447 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ENERGY (CONTINUED) UGI 10,450 331,265 Unit 11,400 (a) 238,374 Veritas DGC 7,100 (a) 81,650 Vintage Petroleum 13,100 147,768 W-H Energy Services 6,600 (a) 128,568 6,950,390 HEALTH CARE--11.2% Accredo Health 10,200 (a) 222,360 Advanced Medical Optics 7,700 (a) 131,285 Alpharma, Cl. A 12,300 265,680 American Healthways 4,000 (a) 144,480 American Medical Systems Holdings 7,900 (a) 133,273 Amerigroup 5,000 (a) 186,000 AmSurg 4,700 (a) 143,350 ArQule 3,000 (a) 12,600 ArthroCare 4,200 (a) 70,392 Biosite 3,800 (a) 182,780 CIMA Labs 3,400 (a) 91,426 CONMED 7,400 (a) 135,124 Cephalon 12,800 (a) 526,848 Cooper Cos. 7,300 253,821 CryoLife 4,500 (a) 46,575 Curative Health Services 3,200 (a) 54,400 Datascope 4,200 124,026 Diagnostic Products 7,100 291,455 Enzo Biochem 7,325 (a) 157,634 Haemonetics 6,400 (a) 119,680 Hologic 4,500 (a) 59,310 Hooper Holmes 11,400 73,416 ICU Medical 3,800 (a) 118,370 IDEXX Laboratories 8,500 (a) 285,090 IMPATH 2,400 (a) 33,936 INAMED 5,200 (a) 279,188 Integra LifeSciences Holdings 6,100 (a) 160,918 Invacare 7,300 240,900 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE (CONTINUED) MGI Pharma 6,000 (a) 153,780 Medicis Pharmaceutical, Cl. A 6,300 357,210 Mentor 11,200 217,056 Mid Atlantic Medical Services 11,400 (a) 596,220 Noven Pharmaceuticals 4,300 (a) 44,032 Orthodontic Centers of America 13,500 (a) 108,135 Osteotech 4,200 (a) 57,078 Owens & Minor 8,300 185,505 Pediatrix Medical Group 6,100 (a) 217,465 PolyMedica 3,000 137,370 Possis Medical 4,500 (a) 61,740 Priority Healthcare, Cl. B 10,300 (a) 191,065 Province Healthcare 12,200 (a) 135,054 Regeneron Pharmaceuticals 11,800 (a) 185,850 RehabCare Group 4,200 (a) 61,530 Renal Care Group 12,000 (a) 422,520 ResMed 7,500 (a) 294,000 Respironics 8,000 (a) 300,160 Savient Pharmaceuticals 14,000 (a) 64,960 Sierra Health Services 6,800 (a) 136,000 Sola International 6,600 (a) 114,840 Sunrise Senior Living 6,200 (a) 138,756 Sybron Dental Specialties 9,400 (a) 221,840 Techne 9,700 (a) 294,298 Theragenics 6,500 (a) 27,950 US Oncology 23,500 (a) 173,665 Viasys Healthcare 6,500 (a) 134,550 Vital Signs 3,300 85,668 9,662,614 INTEREST SENSITIVE--14.5% Anchor Bancorp Wisconsin 5,900 140,951 BankUnited Financial, Cl. A 6,900 (a) 139,035 Boston Private Financial Holdings 4,400 92,752 Capital Automotive 8,400 235,116 Cash America International 6,200 81,964 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST SENSITIVE (CONTINUED) Centene 2,800 (a) 108,920 Chittenden 9,200 251,620 Colonial Properties Trust 5,800 204,102 Commercial Federal 10,700 226,840 Community First Bankshares 8,900 242,970 Cullen/Frost Bankers 12,400 398,040 Delphi Financial Group, Cl. A 5,000 234,000 Dime Community Bancshares 6,300 160,335 Downey Financial 6,400 264,320 East West Bancorp 5,900 213,226 Essex Property Trust 4,800 274,800 Financial Federal 3,700 (a) 90,280 First Bancorp 9,850 270,383 First Midwest Bancorp 11,400 328,434 First Republic Bank 3,800 (a) 101,080 FirstFed Financial 4,500 (a) 158,805 Flagstar Bancorp 15,000 366,750 Fremont General 19,000 260,300 GBC Bancorp 2,300 88,320 Gables Residential Trust 5,500 166,265 Glenborough Realty Trust 7,200 137,880 Hilb, Rogal & Hamilton 8,200 279,128 Hudson United Bancorp 10,700 365,405 Irwin Financial 7,100 183,890 Jefferies Group 6,100 303,719 Kilroy Realty 6,200 170,500 LandAmerica Financial Group 4,300 204,250 MAF Bancorp 5,500 203,885 NCO Group 5,000 (a) 89,550 New Century Financial 6,200 270,630 Philadelphia Consolidated Holding 4,800 (a) 193,920 Presidential Life 5,500 77,605 Provident Bankshares 6,400 162,624 RLI 6,100 200,690 Raymond James Financial 11,000 363,550 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST SENSITIVE (CONTINUED) Republic Bancorp 13,100 175,802 Riggs National 6,800 103,496 SWS Group 4,500 90,675 Seacoast Financial Services 6,200 122,760 Selective Insurance Group 6,100 152,805 Shurgard Storage Centers, Cl. A 8,300 274,564 South Financial Group 11,500 268,295 Southwest Bancorporation of Texas 7,400 (a) 240,574 Staten Island Bancorp 13,400 261,032 Sterling Bancshares 11,300 147,804 Stewart Information Services 4,900 (a) 136,465 Susquehanna Bancshares 9,600 224,160 Trustco Bank 18,800 208,304 UCBH Holdings 9,200 263,856 UICI 11,900 (a) 179,333 United Bankshares 10,400 297,960 Washington Federal 16,910 391,128 Waypoint Financial 8,300 149,732 Whitney Holding 9,500 303,715 Wintrust Financial 4,200 124,320 Zenith National Insurance 5,100 145,350 12,568,964 INTERNET--.2% Netegrity 4,100 (a) 23,944 PC-Tel 4,300 (a) 50,998 Verity 9,300 (a) 117,738 192,680 PRODUCER GOODS & SERVICES--20.3% A. Schulman 7,400 118,844 A.M. Castle 1,300 (a) 8,515 A.O. Smith 7,400 208,310 AAR 4,600 32,476 Acuity Brands 10,600 192,602 Alliant Techsystems 9,500 (a) 493,145 Apogee Enterprises 7,500 67,650 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) Applied Industrial Technologies 5,000 105,500 AptarGroup 8,700 313,200 Arch Chemicals 6,000 114,600 Arkansas Best 6,100 145,119 Baldor Electric 8,500 175,100 Barnes Group 5,000 108,800 Belden 6,500 103,285 Brady, Cl. A 5,800 193,430 Briggs & Stratton 5,600 282,800 Brooks Automation 6,300 (a) 71,442 Buckeye Technologies 4,700 (a) 31,960 Building Materials Holding 4,000 59,240 Butler Manufacturing 1,700 28,101 C&D Technologies 6,500 93,340 CUNO 4,300 (a) 155,316 Cable Design Technologies 10,500 (a) 75,075 Cambrex 6,100 140,422 Caraustar Industries 3,900 (a) 31,239 Century Aluminum 5,400 37,962 Chesapeake 4,100 89,585 Clarcor 6,400 246,720 Cleveland-Cliffs 2,900 (a) 51,765 Commercial Metals 6,900 122,751 Commonwealth Industries 4,800 22,656 Cubic 6,800 151,096 Curtiss-Wright 2,700 170,640 DRS Technologies 5,200 (a) 145,184 Deltic Timber 3,000 85,350 EDO 4,600 81,420 ElkCorp 3,900 87,750 Emcor Group 3,600 (a) 177,696 Engineered Support Systems 4,150 173,677 Fleetwood Enterprises 6,300 (a) 46,620 Florida Rock Industries 7,200 297,216 Forward Air 5,400 (a) 136,998 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) Gardner Denver 4,200 (a) 85,932 Georgia Gulf 7,900 156,420 Graco 11,250 360,000 Griffon 7,900 (a) 126,400 H.B. Fuller 7,000 154,140 Heartland Express 11,900 (a) 264,775 Hughes Supply 5,800 201,260 IDEX 8,400 304,416 IMCO Recycling 3,600 (a) 23,904 Insituform Technologies, Cl. A 6,500 (a) 114,920 Intermagnetics General 3,700 (a) 73,408 InVision Technologies 4,100 (a) 101,885 Ionics 4,100 (a) 91,717 JLG Industries 9,800 66,640 Kaman, Cl. A 5,900 68,971 Kansas City Southern 14,400 (a) 173,232 Kaydon 7,200 149,760 Kirby 5,200 (a) 146,640 Knight Transportation 9,400 (a) 234,060 Landstar System 4,200 (a) 263,970 Lawson Products 2,700 74,355 Lennox International 13,100 168,597 Lindsay Manufacturing 3,000 69,660 Lone Star Technologies 6,200 (a) 131,316 Lydall 3,500 (a) 37,450 M.D.C. Holdings 6,950 335,546 MacDermid 8,000 210,400 Manitowoc 6,200 138,260 Massey Energy 16,600 218,290 Maverick Tube 10,000 (a) 191,500 Milacron 3,600 17,604 Mueller Industries 8,800 (a) 238,568 Myers Industries 7,375 70,062 NVR 1,750 (a) 719,250 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) OM Group 5,100 75,123 Offshore Logistics 6,200 (a) 134,850 Omnova Solutions 5,000 (a) 20,200 Penford 2,300 25,691 PolyOne 16,500 73,425 Pope & Talbot 2,400 26,520 Quaker Chemical 2,800 70,140 Quanex 4,600 136,712 RTI International Metals 6,500 (a) 70,395 Regal Beloit 6,000 114,600 Reliance Steel & Aluminum 7,900 163,530 Roadway 4,400 125,532 Robins & Myers 3,200 59,200 Rock-Tenn, Cl. A 8,100 137,295 Rogers 3,800 (a) 126,540 Ryerson Tull 6,200 54,436 Ryland Group 6,100 423,340 SPS Technologies 3,200 (a) 86,528 Schweitzer-Mauduit International 4,400 106,216 Scotts, Cl. A 7,700 (a) 381,150 Seacor Smit 4,000 (a) 145,960 Shaw Group 7,200 (a) 86,760 Simpson Manufacturing 5,900 (a) 215,940 Skyline 2,000 60,000 Standard Pacific 7,300 242,068 Standex International 3,400 71,400 Steel Dynamics 11,400 (a) 156,180 Steel Technologies 4,000 40,440 Stewart & Stevenson Services 7,000 110,250 SurModics 4,700 (a) 143,350 Technitrol 8,300 124,915 Teledyne Technologies 8,700 (a) 113,970 Texas Industries 4,800 114,240 Thomas Industries 4,100 110,905 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS & SERVICES (CONTINUED) Timken 20,400 357,204 Tredegar 8,600 128,914 Triumph Group 4,000 (a) 112,680 URS 8,400 (a) 163,464 USF 5,500 148,335 United Stationers 7,900 (a) 285,743 Universal Forest Products 4,100 85,854 Valmont Industries 6,900 135,309 Watsco 7,200 119,232 Watts Industries, Cl. A 6,800 121,380 Wellman 8,900 99,680 Wolverine Tube 1,200 (a) 6,864 Woodward Governor 3,000 129,000 Yellow 6,200 (a) 143,530 17,442,895 SERVICES--8.4% ABM Industries 12,500 192,500 ADVO 4,800 (a) 213,120 Aaron Rents 5,600 144,704 Administaff 4,000 (a) 41,200 American Management Systems 9,900 (a) 141,372 Arbitron 7,100 (a) 253,470 Armor Holdings 6,900 (a) 92,460 BARRA 4,800 (a) 171,360 Boston Communications Group 4,100 (a) 70,233 Bowne & Co. 7,900 102,937 CACI International, Cl. A 7,400 (a) 253,820 CDI 5,200 (a) 134,992 Central Parking 6,400 79,104 Ciber 14,500 (a) 101,790 Consolidated Graphics 3,800 (a) 86,944 eFunds 11,600 (a) 133,748 4Kids Entertainment 3,500 (a) 65,100 FactSet Research Systems 8,100 356,805 G & K Services, Cl. A 5,000 148,000 Global Payments 8,900 315,950 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SERVICES (CONTINUED) Heidrick & Struggles International 3,400 (a) 42,908 ITT Educational Services 11,400 (a) 333,450 Information Holdings 5,000 (a) 91,250 Insurance Auto Auction 3,100 (a) 38,936 John H. Harland 6,900 180,504 Kroll 9,400 (a) 254,364 Labor Ready 10,200 (a) 73,134 MAXIMUS 5,300 (a) 146,439 MICROS Systems 4,200 (a) 138,516 Marcus 7,900 118,105 MemberWorks 3,300 (a) 65,175 Mobile Mini 3,100 (a) 50,623 NDCHealth 7,900 144,965 New England Business Service 3,300 99,000 PAREXEL International 7,000 (a) 97,650 PRG-Schultz International 11,900 (a) 70,210 Paxar 10,400 (a) 114,400 Pegasus Solutions 4,200 (a) 68,250 Pharmaceutical Product Development 13,500 (a) 387,855 Pre-Paid Legal Services 4,500 (a) 110,385 Regis 10,900 316,645 Roto-Rooter 2,800 106,932 Sourcecorp 3,800 (a) 82,080 Spherion 13,300 (a) 92,435 Standard Register 6,900 113,712 StarTek 3,700 (a) 97,310 Tetra Tech 13,000 (a) 222,690 Thomas Nelson 4,100 (a) 51,250 Volt Information Sciences 4,700 (a) 64,155 Waste Connections 6,300 (a) 220,815 Watson Wyatt & Company Holdings 8,400 (a) 194,712 7,288,464 TECHNOLOGY--14.4% ANSYS 4,000 (a) 124,400 ATMI 8,000 (a) 199,760 Actel 6,100 (a) 125,050 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) Adaptec 22,500 (a) 175,050 Advanced Energy Industries 6,300 (a) 89,775 Aeroflex 14,500 (a) 112,230 Allen Telecom 8,400 (a) 138,768 Alliance Semiconductor 3,000 (a) 14,520 Analogic 3,600 175,536 Anixter International 9,200 (a) 215,556 Artesyn Technologies 7,500 (a) 42,075 AstroPower 3,000 (a) 9,870 Audiovox, Cl. A 6,200 (a) 69,378 Avid Technology 7,200 (a) 252,504 Axcelis Technologies 20,800 (a) 127,296 BEI Technologies 4,400 52,800 Bel Fuse, Cl. B 3,100 70,990 Bell Microproducts 5,000 (a) 21,350 Benchmark Electronics 6,500 (a) 199,940 Black Box 5,000 181,000 C-COR.net 9,000 (a) 44,100 CTS 8,200 85,690 Captaris 7,400 (a) 25,308 Carreker 4,000 (a) 18,320 Catapult Communications 2,500 (a) 26,550 Cerner 8,800 (a) 201,960 Checkpoint Systems 8,400 (a) 118,860 Cognex 10,100 (a) 225,735 Coherent 6,000 (a) 143,580 Cohu 4,800 74,880 Coinstar 5,800 (a) 109,388 Concord Communications 4,000 (a) 54,920 Cymer 7,600 (a) 239,856 DSP Group 7,000 (a) 150,710 Dendrite International 9,900 (a) 127,512 Digi Inernational 500 (a) 2,875 Dionex 5,400 (a) 214,650 DuPont Photomasks 4,500 (a) 84,735 ESS Technology 10,800 (a) 105,300 Electro Scientific Industries 5,100 (a) 77,316 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) Esterline Technologies 5,400 (a) 94,014 Exar 10,000 (a) 158,300 FEI 7,300 (a) 136,948 FLIR Systems 8,500 (a) 256,275 FileNet 8,900 (a) 160,556 Gerber Scientific 6,000 (a) 39,960 Global Imaging Systems 5,700 (a) 132,012 Harmonic 9,000 (a) 36,630 Helix Technology 5,900 78,057 Hutchinson Technology 6,700 (a) 220,363 Hyperion Solutions 9,200 (a) 310,592 Imagistics International 4,600 (a) 118,680 Input/Output 11,900 (a) 64,022 Inter-Tel 6,500 137,930 Itron 5,400 (a) 116,424 JDA Software Group 6,700 (a) 74,973 Keithley Instruments 4,000 57,800 Kopin 18,100 (a) 110,772 Kronos 5,100 (a) 259,131 Kulicke & Soffa Industries 9,800 (a) 62,622 MRO Software 5,700 (a) 49,191 Manhattan Associates 6,800 (a) 176,596 MapInfo 2,200 (a) 15,686 Meade Instruments 5,000 (a) 16,000 Mercury Computer Systems 5,800 (a) 105,328 Methode Electronics, Cl. A 9,800 105,350 Microsemi 7,500 (a) 120,000 Midway Games 7,200 (a) 26,136 NYFIX 5,500 (a) 34,925 Network Equipment Technologies 4,400 (a) 37,048 Park Electrochemical 4,800 95,760 Pericom Semiconductor 6,000 (a) 55,800 Phoenix Technologies 5,000 (a) 28,250 Photon Dynamics 3,100 (a) 85,653 Photronics 7,800 (a) 136,110 Pinnacle Systems 15,200 (a) 162,640 Pioneer-Standard Electronics 8,900 75,472 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) Planar Systems 3,400 (a) 66,504 Power Integrations 7,300 (a) 177,536 Progress Software 8,700 (a) 180,351 Radiant Systems 6,200 (a) 41,788 RadiSys 4,000 (a) 52,800 Rainbow Technologies 8,300 (a) 69,803 Roper Industries 7,200 267,840 Roxio 2,500 (a) 16,725 Rudolph Technologies 4,000 (a) 63,840 SBS Technologies 4,500 (a) 44,240 SCM Microsystems 1,800 (a) 9,828 SPSS 4,500 (a) 75,330 Serena Software 10,600 (a) 221,328 Skyworks Solutions 32,000 (a) 216,640 Standard Microsystems 5,000 (a) 75,850 Supertex 4,000 (a) 73,480 Symmetricom 11,000 (a) 48,400 Systems & Computer Technology 7,600 (a) 68,400 TALX 3,800 85,842 THQ 8,300 (a) 149,400 Take-Two Interactive Software 10,600 (a) 300,404 Three-Five Systems 3,000 (a) 20,700 Tollgrade Communications 3,600 (a) 67,140 Trimble Navigation 8,000 (a) 183,440 Ultratech 5,000 (a) 92,450 Varian Semiconductor Equipment Associates 8,200 (a) 244,032 Veeco Instruments 7,300 (a) 124,319 ViaSat 6,000 (a) 86,040 Vicor 10,000 (a) 96,000 Websense 4,700 (a) 73,602 X-Rite 5,600 55,496 Zebra Technologies, Cl. A 7,700 (a) 578,963 Zix 400 (a) 1,508 12,412,118 UTILITIES--1.4% Avista 12,400 175,460 CH Energy Group 4,100 184,500 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (CONTINUED) Central Vermont Public Service 2,800 54,740 Cleco 12,000 207,840 El Paso Electric 11,700 (a) 144,261 General Communication, Cl. A 13,600 (a) 117,776 Green Mountain Power 1,100 22,000 Metro One Telecommunications 2,400 (a) 12,384 UIL Holdings 3,800 154,090 UniSource Energy 8,300 156,040 1,229,091 TOTAL COMMON STOCKS (cost $75,590,504) 86,298,493 - ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--3.3% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT--3.0% Greenwich Capital Markets, Tri-Party Repurchase Agreement, 1.10%, dated 6/30/2003, due 7/1/2003 in the amount of $2,585,203 (fully collateralized by $2,520,000 of various U.S. Government Agency Obligations, value $2,640,323) 2,585,124 2,585,124 U.S. TREASURY BILLS--.3% ..74%, 8/7/2003 75,000 (b) 74,941 1.07%, 8/14/2003 100,000 (b) 99,906 1.175%, 8/28/2003 40,000 (b) 39,948 ..88%, 10/2/2003 55,000 (b) 54,876 269,671 TOTAL SHORT-TERM INVESTMENTS (cost $2,854,732) 2,854,795 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $78,445,236) 103.2% 89,153,288 LIABILITIES, LESS CASH AND RECEIVABLES (3.2%) (2,757,794) NET ASSETS 100.0% 86,395,494 (A) NON-INCOME PRODUCING. (B) PARTIALLY HELD BY THE BROKER IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN FINANCIAL FUTURES POSITIONS. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
STATEMENT OF FINANCIAL FUTURES June 30, 2003 (Unaudited)
Market Value Unrealized Covered (Depreciation) Contracts by Contracts ($) Expiration at 6/30/2003 ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL FUTURES LONG Russell 2000 1 224,200 September 2003 (1,925)
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments--Note 1(b) 78,445,236 89,153,288 Cash 428,346 Receivable for investment securities sold 1,131,095 Receivable for shares of Beneficial Interest subscribed 140,203 Dividends and interest receivable 51,985 Receivable for futures variation margin--Note 4 2,021 90,906,938 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 40,903 Payable for investment securities purchased 4,156,579 Payable for shares of Beneficial Interest redeemed 313,962 4,511,444 - -------------------------------------------------------------------------------- NET ASSETS ($) 86,395,494 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 80,805,516 Accumulated undistributed investment income--net 116,313 Accumulated net realized gain (loss) on investments (5,232,462) Accumulated net unrealized appreciation (depreciation) on investments [including ($1,925) net unrealized (depreciation) on financial futures] 10,706,127 - -------------------------------------------------------------------------------- NET ASSETS ($) 86,395,494 - -------------------------------------------------------------------------------- SHARES OUTSTANDING (unlimited number of $.001 par value shares of Beneficial Interest authorized) 8,009,945 NET ASSET VALUE, offering and redemption price per share ($) 10.79 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $164 foreign taxes withheld at source) 279,341 Interest 9,042 TOTAL INCOME 288,383 EXPENSES: Investment advisory fee--Note 3(a) 99,933 Distribution fees--Note 3(b) 71,381 Interest expense--Note 2 581 TOTAL EXPENSES 171,895 INVESTMENT INCOME--NET 116,488 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (869,867) Net realized gain (loss) on financial futures 167,205 NET REALIZED GAIN (LOSS) (702,662) Net unrealized appreciation (depreciation) on investments [including ($1,925) net unrealized depreciation on financial futures] 9,419,240 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 8,716,578 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 8,833,066 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002(a) - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 116,488 64,341 Net realized gain (loss) on investments (702,662) (4,532,676) Net unrealized appreciation (depreciation) on investments 9,419,240 1,286,887 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 8,833,066 (3,181,448) - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): INVESTMENT INCOME--NET (1,129) (60,511) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold 67,836,016 86,649,964 Dividends reinvested 1,129 60,511 Cost of shares redeemed (32,367,384) (41,374,720) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 35,469,761 45,335,755 TOTAL INCREASE (DECREASE) IN NET ASSETS 44,301,698 42,093,796 - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 42,093,796 -- END OF PERIOD 86,395,494 42,093,796 Undistributed investment income--net 116,313 954 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): Shares sold 6,900,551 8,535,211 Shares issued for dividends reinvested 124 6,251 Shares redeemed (3,282,834) (4,149,358) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 3,617,841 4,392,104 (A) FROM MAY 1, 2002 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2002. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002(a) - -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 9.58 12.50 Investment Operations: Investment income--net .02(b) .03(b) Net realized and unrealized gain (loss) on investments 1.19 (2.94) Total from Investment Operations 1.21 (2.91) Distributions: Dividends from investment income--net (.00)(c) (.01) Net asset value, end of period 10.79 9.58 - -------------------------------------------------------------------------------- TOTAL RETURN (%) 12.63(d) (23.25)(d) - -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .30(d) .40(d) Ratio of net investment income to average net assets .20(d) .27(d) Portfolio Turnover Rate 25.20(d) 117.52(d) - -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 86,395 42,094 (A) FROM MAY 1, 2002 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2002. (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. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company, operating as a series company currently offering twelve series, including the Small Cap Stock Index 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 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 wholly-owned 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 June 30, 2003, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 801,191 shares of the portfolio. The portfolio accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. Securities not listed on an exchange or the national securities market, or securities for which there The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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. 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 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles (d) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $64,060 available for federal income tax purposes 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 year ended December 31, 2002 was as follows: ordinary income $60,511. The tax character of current year distributions will be determined at the end of the current fiscal year. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the 'Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. The average daily amount of borrowings outstanding under the Facility during the period ended June 30, 2003 was approximately $70,700, with a related weighted average annualized interest rate of 1.66%. 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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 June 30, 2003, the portfolio was charged $71,381 pursuant to the Plan. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Through December 31, 2002, each Board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the portfolio increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. The Chairman of the Board receives an additional 25% of such compensation. Subject to the portfolio's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities and financial futures, during the period ended June 30, 2003, amounted to $50,395,302 and $14,549,662, 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 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. Contracts open at June 30, 2003, are set forth in the Statement of Financial Futures. At June 30, 2003, accumulated net unrealized appreciation on investments was $10,708,052, consisting of $11,822,190 gross unrealized appreciation and $1,114,138 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------ Votes For Authority Withheld ------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. NOTES FOR MORE INFORMATION DREYFUS INVESTMENT PORTFOLIOS, SMALL CAP STOCK INDEX PORTFOLIO 200 Park Avenue New York, NY 10166 INVESTMENT ADVISER The Dreyfus Corporation 200 Park Avenue New York, NY 10166 CUSTODIAN Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 TRANSFER AGENT & Dividend Disbursing Agent Dreyfus Transfer, Inc. 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 410SA0603 DREYFUS INVESTMENT PORTFOLIOS, TECHNOLOGY GROWTH PORTFOLIO SEMIANNUAL REPORT June 30, 2003 YOU, YOUR ADVISOR AND DREYFUS A MELLON FINANCIAL COMPANY The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus portfolio are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus portfolio. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO - ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 9 Statement of Assets and Liabilities 10 Statement of Operations 11 Statement of Changes in Net Assets 12 Financial Highlights 14 Notes to Financial Statements 20 Proxy Results FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover THE PORTFOLIO Dreyfus Investment Portfolios, Technology Growth Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: This semiannual report for Dreyfus Investment Portfolios, Technology Growth Portfolio covers the six-month period from January 1, 2003, through June 30, 2003. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the primary portfolio manager, Mark Herskovitz. The first half of 2003 was a time of long-awaited recovery for the U.S. stock market. Despite continued volatility leading up to the war in Iraq, stocks began to rally as the fighting wound down and investors turned their attention back to the prospects for the U.S. economy. Apparently, they liked what they saw. Despite current economic weakness, investors appear to be focused on the possibility of better economic times ahead. If these trends persist, 2003 could mark the first positive calendar year for stocks since 1999. In our view, investors who have the potential to benefit most are those who steadfastly maintained their equity exposure during the bear market. In contrast, we believe investors who avoided stocks may have missed the market' s recent gains, a timely reminder that patience, discipline and a long-term perspective are fundamental principles that may lead to successful investing. Thank you for your continued confidence and support. Sincerely, /S/STEPHEN E. CANTER Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2003 DISCUSSION OF PERFORMANCE Mark Herskovitz, Primary Portfolio Manager How did Dreyfus Investment Portfolios, Technology Growth Portfolio perform relative to its benchmarks? For the six-month period ended June 30, 2003, the portfolio's Initial shares produced a 24.87% total return, and its Service shares produced a 24.69% 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 27.74% and 11.75% , respectively, over the same period.(2,3) The portfolio and the stock market's technology sector benefited from improving investor sentiment during the reporting period. As attention shifted from the war in Iraq to the possibility of greater economic growth, stocks rallied strongly. Technology stocks produced particularly strong gains as investors flocked to the most beaten down shares. The portfolio's returns outperformed that of the S&P 500 Index, but underperformed that of the MS High Tech 35 Index, primarily because of our focus on higher-quality stocks at a time when more speculative technology companies produced greater gains. 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 identify the stocks of what we believe are leading technology companies for the portfolio. Many of those stocks are considered core holdings that we believe will 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? Technology stocks tend to be more economically sensitive than many other types of stocks. They rallied particularly strongly as investors' economic expectations improved. In addition, technology stocks rebounded sharply during the market rally because they had declined so severely in the bear market, and many investors took advantage of what they considered to be attractive prices. In this economic environment, we continue to focus on leading, high-quality technology companies that we believe are able to withstand periods of weakness. We have seen little evidence that business fundamentals have improved for the technology sector, and we refrained from shifting assets to more speculative stocks. While this relatively cautious posture may have held back returns during the reporting period, we believe that it remains a prudent long-term approach. Despite our cautious stance, the portfolio received strong performance contributions from several subsectors in the technology sector. The portfolio's relatively heavy exposure to information technology stocks boosted returns, led by billing outsourcer Amdocs. Computer peripheral manufacturers, such as EMC Corp., Western Digital and Network Appliance, performed well. Semiconductor stocks, such as Linear Technologies, Intel and NVIDIA, also produced solid gains. However, the strongest contributions to the portfolio's relative performance came from telecommunications equipment companies, including longstanding fund holding UTStarcom. On the other hand, the portfolio received disappointing results from the Internet sector, largely because it was not invested in some of the more speculative stocks that performed particularly well despite what we regarded as unfavorable fundamentals. Similarly, the fund's consumer discretionary stocks lagged the returns because the portfolio did not own one of the largest stocks in the sector. WHAT IS THE PORTFOLIO'S CURRENT STRATEGY? While we remain focused primarily on leader companies in the technology sector, we have begun to explore opportunities in more non-traditional areas. For example, we recently established a position in biotechnology leader Genentech. Although traditionally considered part of the health care sector, we believe that companies such as Genentech feature some of the characteristics of successful technology companies, including fundamentally strong growth and innovations in new product development stemming from scientific advances July 15, 2003 THE PORTFOLIO IS ONLY AVAILABLE AS A FUNDING VEHICLE UNDER VARIOUS LIFE INSURANCE POLICIES OR VARIABLE ANNUITY CONTRACTS ISSUED BY INSURANCE COMPANIES. INDIVIDUALS MAY NOT PURCHASE SHARES OF THE PORTFOLIO DIRECTLY. A VARIABLE ANNUITY IS AN INSURANCE CONTRACT ISSUED BY AN INSURANCE COMPANY THAT ENABLES INVESTORS TO ACCUMULATE ASSETS ON A TAX-DEFERRED BASIS FOR RETIREMENT OR OTHER LONG-TERM GOALS. THE INVESTMENT OBJECTIVE AND POLICIES OF DREYFUS INVESTMENT PORTFOLIOS, TECHNOLOGY GROWTH PORTFOLIO MADE AVAILABLE THROUGH INSURANCE PRODUCTS MAY BE SIMILAR TO OTHER FUNDS/PORTFOLIOS MANAGED OR ADVISED BY DREYFUS. HOWEVER, THE INVESTMENT RESULTS OF THE PORTFOLIO MAY BE HIGHER OR LOWER THAN, AND MAY NOT BE COMPARABLE TO, THOSE OF ANY OTHER DREYFUS FUND/PORTFOLIO. 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 DAILY AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. The Portfolio STATEMENT OF INVESTMENTS June 30, 2003 (Unaudited)
COMMON STOCKS--94.6% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ BIOTECHNOLOGY--4.8% Amgen 27,200 (a) 1,807,168 Genentech 27,200 (a) 1,961,664 3,768,832 COMPUTER SEVICES--3.8% Automatic Data Processing 35,000 1,185,100 First Data 43,000 1,781,920 2,967,020 DATA STORAGE--9.8% EMC 171,500 (a) 1,795,605 Emulex 70,000 (a) 1,593,900 Network Appliance 140,000 (a) 2,269,400 QLogic 19,000 (a) 918,270 Western Digital 110,100 (a) 1,134,030 7,711,205 HARDWARE--5.8% Dell Computer 95,500 (a) 3,052,180 International Business Machines 18,500 1,526,250 4,578,430 HEALTH CARE--2.0% Zimmer Holdings 35,900 (a) 1,617,295 INTERNET--3.1% Apollo Group, Cl. A 15,500 (a) 957,280 eBay 14,300 (a) 1,489,774 2,447,054 NETWORKING--3.7% Cisco Systems 175,500 (a) 2,929,095 PHARMACEUTICAL--2.1% Teva Pharmaceutical Industries, ADR 29,000 1,650,970 SEMICONDUCTORS--16.8% Intel 124,500 2,587,608 Linear Technology 47,000 1,513,870 Microchip Technology 85,000 (b) 2,093,550 NVIDIA 74,000 (a) 1,702,740 STMicroelectronics, ADR 53,500 1,112,265 Taiwan Semiconductor 1,400,000 (a) 2,309,028 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ SEMICONDUCTORS (CONTINUED) Texas Instruments 68,000 1,196,800 United Microelectronics, ADR 200,000 (a) 750,000 13,265,861 SEMICONDUCTOR EQUIPMENT--7.0% Applied Materials 105,000 (a) 1,665,300 KLA-Tencor 35,500 (a) 1,650,395 Novellus Systems 39,500 (a) 1,446,529 Teradyne 45,000 (a) 778,950 5,541,174 SOFTWARE--18.7% Adobe Systems 41,000 1,314,870 BEA Systems 143,500 (a) 1,558,410 Business Objects, ADR 66,500 (a) 1,459,675 Electronic Arts 26,000 (a) 1,923,740 Microsoft 54,500 1,395,745 Oracle 135,000 (a) 1,622,700 PeopleSoft 51,000 (a) 897,090 SAP, ADR 52,500 1,534,050 Symantec 34,000 (a) 1,491,240 VERITAS Software 52,800 (a) 1,513,776 14,711,296 TELECOMMUNICATION EQUIPMENT--13.4% ADTRAN 32,500 (a) 1,666,925 Amdocs 69,000 (a) 1,656,000 Corning 154,000 (a) 1,138,060 Inter-Tel 10,000 212,200 JDS Uniphase 153,500 (a) 538,785 Nokia Oyj, ADR 86,000 1,412,980 UTStarcom 112,000 (a,b) 3,983,840 10,608,790 UTILITIES--3.6% SBC Communications 56,500 1,443,575 Verizon Communications 34,800 1,372,860 2,816,435 TOTAL COMMON STOCKS (cost $71,583,527) 74,613,457 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) OTHER INVESTMENTS--6.5% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANIES: Dreyfus Institutional Cash Advantage Fund 1,693,573 (c) 1,693,573 Dreyfus Institutional Cash Advantage Plus Fund 1,693,573 (c) 1,693,573 Dreyfus Institutional Preferred Plus Money Market Fund 1,693,572 (c) 1,693,572 TOTAL OTHER INVESTMENTS (cost $5,080,718) 5,080,718 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--5.9% - ------------------------------------------------------------------------------------------------------------------------------------ REGISTERED INVESTMENT COMPANY; Dreyfus Institutional Preferred Money Market Fund (cost $4,677,650) 4,677,650 4,677,650 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $81,341,895) 107.0% 84,371,825 LIABILITIES, LESS CASH AND RECEIVABLES (7.0%) (5,496,153) NET ASSETS 100.0% 78,875,672 (A) NON-INCOME PRODUCING. (B) ALL OR A PORTION OF THESE SECURIIES ARE ON LOAN. AT JUNE 30, 2003, THE TOTAL MARKET VALUE OF THE PORTFOLIO'S SECURITIES ON LOAN IS $4,489,371 AND THE TOTAL MARKET VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS $4,677,650. (C) INVESTMENTS IN AFFILIATED MONEY MARKET MUTUAL FUNDS--SEE NOTE 3(D).
STATEMENT OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments (including securities loaned valued at $4,489,371)--Note 1(c) 81,341,895 84,371,825 Cash 54,985 Receivable for investment securities sold 808,208 Receivable for shares of Beneficial Interest subscribed 17,534 Dividends and interest receivable 12,338 Prepaid expenses 4,348 85,269,238 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 54,049 Liabilities for securities loaned--Note 1(c) 4,677,650 Payable for investment securities purchased 1,346,900 Payable for shares of Beneficial Interest redeemed 286,343 Accrued expenses 28,624 6,393,566 - -------------------------------------------------------------------------------- NET ASSETS ($) 78,875,672 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 204,986,841 Accumulated investment (loss)--net (133,440) Accumulated net realized gain (loss) on investments (129,007,659) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions 3,029,930 - -------------------------------------------------------------------------------- NET ASSETS ($) 78,875,672 NET ASSET VALUE PER SHARE Initial Shares Service Shares - -------------------------------------------------------------------------------- Net Assets ($) 70,897,758 7,977,914 Shares Outstanding 9,880,542 1,120,308 - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 7.18 7.12 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $6,996 foreign taxes withheld at source) 158,212 Income from securities lending 3,019 TOTAL INCOME 161,231 EXPENSES: Investment advisory fee--Note 3(a) 239,572 Professional fees 17,587 Prospectus and shareholders' reports 16,415 Custodian fees--Note 3(b) 8,198 Distribution fees--Note 3(b) 7,980 Shareholder servicing costs--Note 3(b) 2,327 Trustees' fees and expenses--Note 3(c) 1,316 Miscellaneous 1,276 TOTAL EXPENSES 294,671 INVESTMENT (LOSS)--NET (133,440) - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (4,053,334) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 18,769,204 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 14,715,870 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 14,582,430 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2003 Year Ended (Unaudited) December 31, 2002 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss)--Net (133,440) (431,662) Net realized gain (loss) on investments (4,053,334) (36,226,699) Net unrealized appreciation (depreciation) on investments 18,769,204 (5,065,380) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 14,582,430 (41,723,741) - -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 12,755,246 16,271,555 Service shares 4,192,484 3,358,265 Cost of shares redeemed: Initial shares (7,647,566) (20,523,037) Service shares (3,579,850) (1,952,682) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 5,720,314 (2,845,899) TOTAL INCREASE (DECREASE) IN NET ASSETS 20,302,744 (44,569,640) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 58,572,928 103,142,568 END OF PERIOD 78,875,672 58,572,928 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 1,953,800 2,099,395 Shares redeemed (1,252,572) (2,930,315) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 701,228 (830,920) - -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 648,242 418,682 Shares redeemed (540,595) (268,398) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 107,647 150,284 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements.
Six Months Ended Year Ended December 31, June 30, 2003 ------------------------------------------------------------------- INITIAL SHARES (Unaudited) 2002 2001 2000 1999(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 5.75 9.49 14.19 19.45 12.50 Investment Operations: Investment (loss)--net (.01)(b) (.04)(b) (.02)(b) (.06)(b) (.02)(b) Net realized and unrealized gain (loss) on investments 1.44 (3.70) (4.68) (5.18) 6.97 Total from Investment Operations 1.43 (3.74) (4.70) (5.24) 6.95 Distributions: Dividends from net realized gain on investments -- -- -- (.02) -- Net asset value, end of period 7.18 5.75 9.49 14.19 19.45 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 24.87(c) (39.41) (33.12) (26.98) 55.60(c) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .45(c) .89 .87 .84 .36(c) Ratio of net investment (loss) to average net assets (.19)(c) (.53) (.15) (.30) (.14)(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- -- -- .09(c) Portfolio Turnover Rate 23.68(c) 91.47 86.25 121.88 20.01(c) - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 70,898 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.
Six Months Ended Year Ended December 31, June 30, 2003 ------------------------------------------- SERVICE SHARES (Unaudited) 2002 2001 2000(a) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 5.71 9.45 14.19 14.19 Investment Operations: Investment (loss)--net (.02)(b) (.05)(b) (.05)(b) -- Net realized and unrealized gain (loss) on investments 1.43 (3.69) (4.69) -- Total from Investment Operations 1.41 (3.74) (4.74) -- Net asset value, end of period 7.12 5.71 9.45 14.19 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 24.69(c) (39.58) (33.40) -- - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .57(c) 1.12 1.20 -- Ratio of net investment (loss) to average net assets (.32)(c) (.77) (.60) -- Portfolio Turnover Rate 23.68(c) 91.47 86.25 121.88 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 7,978 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. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio
NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--Significant Accounting Policies: Dreyfus Investment Portfolios (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company, operating as a series company, currently offering 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 wholly-owned 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. Effective April 14, 2003, the portfolio began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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. 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles (E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The portfolio has an unused capital loss carryover of $119,673,831 available for federal income tax purposes 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. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2003, 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 Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2003, Service shares were charged $7,980 pursuant to the Plan. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (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 June 30, 2003, the portfolio was charged $101 pursuant to the transfer agency agreement. The portfolio compensates Mellon under a custody agreement for providing custodial services for the portfolio. During the period ended June 30, 2003, the portfolio was charged $8,198 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"). Through December 31, 2002, each Board member who is not an "affiliated person" as defined in the Act received an annual fee of $25,000 and an attendance fee of $4,000 for each in-person meeting and $500 for telephone meetings. Effective January 1, 2003, the number of funds in the Fund Group comprising the fund increased, and the annual fee was increased to $60,000 while the attendance fee was increased to $7,500 for each in-person meeting. These fees are allocated among the funds in the Fund Group in proportion to each fund's relative net assets. 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) Pursuant to an exemptive order from the Securities and Exchange Commission, the portfolio may invest its available cash balances in affiliated money market mutual funds as shown in the portfolio's Statement of Investments. Management fees are not charged to these accounts. During the period ended June 30, 2003, the portfolio derived $18,350 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, during the period ended June 30, 2003, amounted to $19,197,390 and $14,514,922, respectively. At June 30, 2003, accumulated net unrealized appreciation on investments was $3,029,930, consisting of $10,309,733 gross unrealized appreciation and $7,279,803 gross unrealized depreciation. At June 30, 2003, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio PROXY RESULTS (Unaudited) Dreyfus Investment Portfolios held a special meeting of shareholders on December 18, 2002. The proposal considered at the meeting, and the results, are as follows: Shares ------------------------------------------ Votes For Authority Withheld ------------------------------------------ To elect additional Trustees: David W. Burke 52,619,411 1,551,548 Whitney I. Gerard 52,648,375 1,522,584 Arthur A. Hartman 52,520,433 1,650,526 George L. Perry 52,560,201 1,610,758 Joseph S. DiMartino, Clifford L. Alexander, Jr. and Lucy Wilson Benson continued as Trustees of the fund after the shareholder meeting. 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 175SA0603 ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes to the Registrant's internal controls over financial reporting that occurred during the Registrant's most recently ended fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Dreyfus Investment Portfolios By: /S/STEPHEN E. CANTER ----------------------- Stephen E. Canter Chief Executive Officer Date: September 3, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /S/STEPHEN E. CANTER ----------------------- Stephen E. Canter Chief Executive Officer Date: September 3, 2003 By: /S/JAMES WINDELS ----------------------- James Windels Chief Financial Officer Date: September 3, 2003 EXHIBIT INDEX (a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT) (b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT) EX-99.CERT 3 ncsr302certs.txt CERTIFICATION REQUIRED BY RULE 30A-2 [EX-99.CERT] Exhibit (a)(2) SECTION 302 CERTIFICATIONS I, Stephen E. Canter, certify that: 1. I have reviewed this report on Form N-CSR of Dreyfus Investment Portfolios; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: /S/STEPHEN E. CANTER ----------------------- Stephen E. Canter Chief Executive Officer Date: September 3, 2003 SECTION 302 CERTIFICATIONS I, James Windels, certify that: 1. I have reviewed this report on Form N-CSR of Dreyfus Investment Portfolios; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: /S/JAMES WINDELS ----------------------- James Windels Chief Financial Officer Date: September 3, 2003 EX-99.906CERT 4 ncsr906cert.txt CERTIFICATION REQUIRED BY SECTION 906 [EX-99.906 CERT] Exhibit (b) SECTION 906 CERTIFICATIONS In connection with this report on Form N-CSR for the Registrant as furnished to the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. By: /S/STEPHEN E. CANTER ----------------------- Stephen E. Canter Chief Executive Officer Date: August 14, 2003 By: /S/JAMES WINDELS ----------------------- James Windels Chief Financial Officer Date: August 14, 2003 THIS CERTIFICATE IS FURNISHED PURSUANT TO THE REQUIREMENTS OF FORM N-CSR AND SHALL NOT BE DEEMED "FILED" FOR PURPOSES OF SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934, OR OTHERWISE SUBJECT TO THE LIABILITY OF THAT SECTION, AND SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE EXCHANGE ACT OF 1934. -----END PRIVACY-ENHANCED MESSAGE-----