N-30D 1 lp1-172.txt SEMI-ANNUAL REPORT Dreyfus Investment Portfolios, Core Bond Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 15 Statement of Financial Futures 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 FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Bond Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We are pleased to present this semiannual report for Dreyfus Investment Portfolios, Core Bond Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. 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. While the first half of 2001 was difficult for the U.S. economy, we have recently seen signs that economic improvement may be in sight. The Federal Reserve Board' s aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth, as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth later this year. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE Michael Hoeh, Portfolio Manager Dreyfus Taxable Fixed Income Team How did Dreyfus Investment Portfolios, Core Bond Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, the portfolio's Initial shares produced a total return of 3.08% and its Service shares produced a total return of 3.00% and aggregate income dividends of $0.3540 for Initial shares and $0.3540 for Service shares.(1) In comparison, the portfolio's benchmark, the Merrill Lynch Domestic Master Index, produced a total return of 3.40% for the same period.(2) We attribute the portfolio's positive performance to our sector allocation and security selection strategies. Improving prices for investment-grade corporate bonds drove performance. The portfolio benefited from attractive returns from inflation-protected securities, such as those issued by the U.S. Treasury and its agencies. What is the portfolio's investment approach? The portfolio seeks to maximize total return through both capital appreciation and current income. The portfolio invests at least 65% of its assets in investment-grade fixed-income securities, which include U.S. Treasury securities, U.S. Government agency securities, corporate bonds, foreign bonds, mortgage- and asset-backed securities, convertible securities and preferred stocks. The portfolio may invest up to 35% of its assets in bonds rated below investment-grade credit quality, also known as high yield securities. Our investment approach emphasizes: * FUNDAMENTAL ECONOMIC ANALYSIS. Our review of U.S. economic conditions helps us establish the portfolio's average duration, which is a measure of sensitivity to interest-rate changes. If interest rates appear to be rising, we will generally reduce the portfolio's average duration to keep cash available for the purchase of higher yielding securities The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) 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 the issuers. What other factors influenced the portfolio's performance? When the reporting period began, the U.S. economy was showing signs of weakness. In response, the Federal Reserve Board (the "Fed") embarked on an aggressive campaign to stimulate growth and avoid a recession, reducing short-term interest rates by a total of 2.75 percentage points over the reporting period. With yields on U.S. Government securities at very low levels and stock prices falling, many investors turned to investment-grade corporate bonds for competitive returns. This demand for high quality corporate bonds caused the prices of these bonds to rise. Because the portfolio generally emphasized investment-grade corporate bonds, it benefited greatly from the rally in that sector during the reporting period. The performance of bonds issued by high quality industrial companies was particularly attractive during the second half of the reporting period. We believe investors saw signs that economic recovery, if not imminent, was on the horizon. In anticipation of that recovery, investors bid up the prices of bonds issued by companies with strong balance sheets and positive cash flow. The portfolio' s performance also benefited from bonds issued by U.S. and foreign banks as their cost of funds fell faster than the rates they charge borrowers, thereby boosting profitability. On the other hand, the portfolio held relatively few corporate bonds rated below investment grade, which helped the portfolio's performance when prices of securities generally declined during the reporting period. In other areas of the bond market, we gradually reduced the portfolio's exposure to U.S. Treasury securities by locking in profits as interest rates fell. We also reduced the portfolio' s holdings of inflation-indexed Treasuries when energy prices began to moderate and we believed that inflationary pressures had dissipated. What is the portfolio's current strategy? With short-term interest rates at low levels, we believe that the Fed is near the end of its current cycle of easing interest rates. Accordingly, we have continued to shift the portfolio's emphasis to bonds that we believe can benefit from strong growth in the U.S. economy. For example, we have very recently increased the portfolio's holdings of commercial and residential mortgage-backed securities, which currently offer attractive yields and, in our opinion, should receive price support from a healthy real estate market and improving consumer credit. In addition, we have recently taken profits in some high quality corporate bonds, redeploying those assets to corporate bonds that are rated just below investment grade. We believe these securities reached such low price levels by the end of the reporting period that, in our view, the potential for higher prices currently outweighs the likelihood of further price declines. However, even with modestly greater exposure to lower rated bonds, we believe the portfolio' s overall credit quality remains firmly within the investment-grade range. July 16, 2001 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MERRILL LYNCH DOMESTIC MASTER INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. TREASURY AND AGENCY, AND MORTGAGE AND INVESTMENT-GRADE CORPORATE SECURITIES WITH MATURITIES GREATER THAN OR EQUAL TO ONE YEAR. The Portfolio STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) Principal BONDS AND NOTES--92.8% Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AIRCRAFT AND AEROSPACE--1.6% BE Aerospace, Sr. Sub. Notes, 8.875%, 2011 102,000 (b) 101,490 Goodrich (B.F.) Notes, 7%, 2038 301,000 256,670 Northrop-Grumman, Deb., 9.375%, 2024 96,000 103,025 U.S. Airways, Notes, 8.93%, 2008 43,583 42,340 503,525 ASSET-BACKED CTFS.--6.7% Conseco Finance Securitizations: Ser. 2000-6, Cl. A1, 6.43%, 2032 220,484 223,553 Ser. 2000-B, Cl. AF4, 7.87%, 2031 270,000 283,331 Ser. 2000-D, Cl. A3, 7.89%, 2018 350,000 365,586 Ser. 2001-1, Cl. A1B, 5.01%, 2032 161,156 161,256 Ser. 2001-A, Cl. IIA2, 6.52%, 2032 470,000 479,038 Residential Asset Securities, Ser. 2001-KS1, Cl. AI1, 5.593%, 2016 221,618 222,172 The Money Store Home Equity Trust, Ser. 1998-B, Cl. AF8, 6.11%, 2010 200,000 202,096 Union Acceptance Corp. Securitization Owner Trust, Ser. 2000-D, Cl. A4, 6.89%, 2007 121,000 125,206 2,062,238 AUTOMOTIVE--.4% American Axle & Manufacturing, Sr. Sub. Notes, 9.75%, 2009 64,000 64,640 Federal-Mogul, Notes, 7.875%, 2010 74,000 11,100 United Rentals, Sr. Notes, 10.75%, 2008 36,000 (b) 37,440 113,180 BANKING--.7% Sanwa Bank, Sub. Notes, 7.4%, 2011 236,000 227,991 CABLE TELEVISION--1.3% Adelphia Communications: Sr. Notes, 8.125%, 2003 36,000 35,640 Sr. Notes, 10.25%, 2011 67,000 66,330 Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CABLE TELEVISION (CONTINUED) CSC Holdings, Notes, 7.625%, 2011 203,000 (b) 193,988 Charter Communications Holdings, Sr. Discount Notes, 11.75%, 2011 174,000 (b) 101,790 397,748 COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--11.0% COMM, Ser. 2000-FL2A, Cl. E, 7.61%, 2003 100,000 (b,c) 100,576 CS First Boston Mortgage Securities: Ser. 1998-C1, Cl. A1A, 6.26%, 2040 531,477 537,913 Ser. 1998-C1, Cl. C, 6.78%, 2009 441,000 438,993 Chase Manhattan Bank-First Union National Bank, Ser. 1999-1, Cl. A1C, 7.134%, 2031 522,841 540,866 GE Capital Commercial Mortgage, Ser. 2001-1, Cl. A1, 6.079%, 2033 394,453 391,063 GS Mortgage Securities II, Ser. 2001-LIB, Cl. C, 6.733%, 2011 269,000 262,380 Prudential Securities Secured Financing, Ser. 1999-C2, Cl. A1, 6.955%, 2031 179,866 185,345 TIAA CMBS I Trust Commercial Mortgage, Ser. 1999-1, Cl. A, 7.17%, 2032 540,985 (b) 557,756 TrizecHahn Office Properties Trust, Ser. 2001-TZH, Cl. A2, 6.093%, 2016 369,000 (b) 364,849 3,379,741 CONSUMER--.2% Sleepmaster, Sr. Sub. Notes, Ser. B, 11%, 2009 121,000 69,575 ENVIRONMENTAL--.4% Allied Waste North America, Sr. Sub. Notes, 10%, 2009 123,000 126,998 FINANCIAL SERVICES--1.4% Capital One Financial, Notes, 7.25%, 2003 53,000 53,214 Conseco Finance, Sr. Sub. Notes, 10.25%, 2002 90,000 87,750 Meridian Funding, Floating Rate Notes, Ser. 2000-E 4.181%, 2005 (Insured; MBIA) 100,000 (b,c) 100,181 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL SERVICES (CONTINUED) Tiers-MIR-2001-14, Collateral Trust Bonds, 7.2%, 2004 182,000 (b) 181,505 422,650 FOREIGN--4.7% British Telecommunications, Bonds, 8.625%, 2030 177,000 193,670 Cable & Wireless Optus Finance Property, Notes, 8%, 2010 113,000 (b) 120,870 Federative Republic of Brazil, Notes, 11%, 2040 220,000 163,570 Gulf Canada Resources, Notes, 7.125%, 2011 129,000 132,638 Metronet Communications, Sr. Discount Notes, 0/9.95%, 2008 92,000 (c,d) 77,851 Marconi, Bonds, 8.375%, 2030 230,000 193,092 Petro-Canada, Deb., 7.875%, 2026 239,000 249,444 Telus: Notes, 7.5%, 2007 66,000 67,448 Notes, 8%, 2011 231,000 236,535 1,435,118 HOTELS AND MOTELS--.4% Hilton Hotels, Notes, 7.625%, 2008 113,000 110,349 INDUSTRIAL--.7% Case: Notes, 6.25%, 2003 41,000 35,975 Notes, 7.25%, 2016 119,000 83,099 Case Credit: Notes, 6.125%, 2003 20,000 18,000 Notes, 6.75%, 2007 25,000 19,245 Terex, Sr. Sub. Notes, 10.375%, 2011 58,000 (b) 60,030 216,349 Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE--.3% Trenwick Capital Trust I, Gtd. Capital Securities, 8.82%, 2037 108,000 88,776 MEDICAL SUPPLIES--.3% Johnson & Johnson, Deb., 8.72%, 2024 95,000 104,710 MINING AND METALS--1.6% Neenah: Sr. Sub. Notes, Ser. B, 11.125%, 2007 19,000 10,331 Sr. Sub. Notes, Ser. F, 11.125%, 2007 38,000 20,662 Newmont Mining, Notes, 8.625%, 2011 183,000 180,990 Phelps Dodge, Sr. Notes, 9.5%, 2031 277,000 272,060 484,043 OIL AND GAS--1.5% Anderson Exploration, Notes, 6.75%, 2011 128,000 126,332 Chesapeake Energy, Sr. Notes, 8.125%, 2011 269,000 (b) 252,860 Ocean Energy, Sr. Sub. Notes, Ser. B, 8.875%, 2007 75,000 78,563 R & B Falcon, Sr. Notes, Ser. B, 7.375%, 2018 7,000 6,945 464,700 PAPER PRODUCTS--.5% Georgia Pacific: Notes, 7.5%, 2006 43,000 43,264 Notes, 8.125%, 2011 68,000 67,980 Notes, 8.875%, 2031 57,000 57,219 168,463 REAL ESTATE INVESTMENT TRUSTS--2.4% Crescent Real Estate Equities, Notes, 7%, 2002 100,000 99,758 Federal Realty Investment Trust, Medium-Term Notes, 6.74%, 2004 150,000 150,932 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUSTS (CONTINUED) New Plan Excel Realty Trust, Sr. Notes, 6.875%, 2004 175,000 174,840 Spieker Properties, Notes, 6.875%, 2005 300,000 303,828 729,358 RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--6.6% Bank of America Large Loan, Ser. 2001-1166, Cl. C, 4.833%, 2005 250,000 250,000 Bank of America Mortgage Securities, Ser. 2001-C, Cl. A1, 4.958%, 2031 500,000 499,997 Chase Mortgage Finance, Ser. 1999-S13, Cl. B4, 6.5%, 2014 208,457 (b) 168,730 GE Capital Mortgage Services, Ser. 2000-8, Cl. B5, 7.5%, 2015 180,767 (b) 67,486 Green Tree Home Improvement Loan Trust, Ser. 1997-A, Cl. HEA6, 7.16%, 2028 341,294 349,210 Residential Funding Mortgage Securities I, Ser. 1999-S11, Cl. M3, 6.5%, 2029 732,700 680,338 2,015,761 TECHNOLOGY--.6% Computer Sciences, Notes, 6.75%, 2006 134,000 132,875 Hewlett-Packard, Conv. Liquid Yield Option Notes, 0%, 2017 92,000 50,370 183,245 TELECOMMUNICATION--3.6% American Tower, Sr. Notes, 9.375%, 2009 86,000 (b) 80,625 Crown Castle International, Sr. Notes, 9.375%, 2011 203,000 (b) 184,222 Global Crossing Holdings: Sr. Notes, 8.7%, 2007 248,000 (b) 189,720 Sr. Notes, 9.5%, 2009 50,000 39,375 Lucent Technologies, Deb., 6.45%, 2029 95,000 54,940 Nextel Communications: Sr. Notes, 9.5%, 2011 78,000 61,328 Sr. Serial Redeemable Notes, 9.375%, 2009 222,000 176,490 Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ TELECOMMUNICATION (CONTINUED) Nortel Networks, Notes, 6.125%, 2006 23,000 19,871 Tritel PCS, Sr. Sub. Notes, 10.375%, 2011 256,000 235,520 Williams Communications Group, Sr. Notes, 10.875%, 2009 154,000 63,140 1,105,231 U.S. GOVERNMENTS--18.5% U. S. Treasury Bonds: 5.375%, 2/15/2031 2,218,000 2,103,285 6.25%, 5/15/2030 558,000 591,915 U. S. Treasury Notes: 4.625%, 5/15/2006 1,369,000 1,350,601 5.75%, 11/15/2005 877,000 903,310 6.5%, 10/15/2006 685,000 728,744 5,677,855 U.S. GOVERNMENT AGENCIES--1.5% Tennessee Valley Authority, Valley Indexed Principal Securities, 3.375%, 1/15/2007 431,000 (e) 478,519 U.S. GOVERNMENT AGENCIES/MORTGAGE-BACKED--19.1% Federal Home Loan Banks, Bonds, 4.75%, 6/28/2004 685,000 679,863 Federal Home Loan Mortgage Corp., REMIC Trust, Gtd. Pass-Through Ctfs. (Interest Only Obligations): Ser. 1992, Cl. PG, 7%, 4/15/2014 392,853 (f) 12,416 Ser. 1999, Cl. PW, 7%, 8/15/2026 123,874 (f) 22,211 Ser. 2067, Cl. PI, 6.5%, 1/15/2024 170,000 (f) 42,837 Ser. 2113, Cl. MI, 6.5%, 4/15/2024 622,559 (f) 83,157 Federal National Mortgage Association: Medium-Term Notes, 6.5%, 7/10/2002 AUD 1,000,000 516,919 Notes, 6.25%, 2/1/2011 15,000 14,946 Government National Mortgage Association II: 6%, 7/20/2030 175,314 178,053 6.5% 2,465,000 (g) 2,432,647 7% 372,500 (g) 374,605 7.5% 1,337,500 (g) 1,368,011 8%, 2/20/2034 131,565 136,005 5,861,670 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES-ELECTRIC--4.2% AES: Sr. Notes, 8.75%, 2002 85,000 86,275 Sr. Notes, 9.375%, 2010 65,000 65,975 Sr. Notes, 8.875%, 2011 50,000 49,125 Calpine, Sr. Notes, 8.5%, 2011 278,000 268,431 Calpine Canada Energy Finance, Sr. Notes, 8.5%, 2008 68,000 66,381 Exelon Generation, Sr. Notes, 6.95%, 2011 118,000 (b) 117,452 Long Island Lighting, Deb., 8.2%, 2023 131,000 133,134 Mission Energy Holding, Sr. Secured Notes, 13.5%, 2008 176,000 (b) 174,240 TXU, Sr. Notes, 6.375%, 2006 126,000 124,622 TXU Electric Capital V, Gtd. Capital Securities, 8.175%, 2037 202,000 199,447 1,285,082 UTILITIES-TELEPHONE--2.6% AT&T: Notes, 6%, 2009 116,000 108,600 Notes, 6.5%, 2029 187,000 160,137 AT&T Wireless, Sr. Notes, 8.75%, 2031 416,000 (b) 433,364 SBC Communications, Notes, 5.75%, 2006 90,000 89,260 791,361 TOTAL BONDS AND NOTES (cost $28,638,453) 28,504,236 ------------------------------------------------------------------------------------------------------------------------------------ OTHER SECURITIES--3.6% ------------------------------------------------------------------------------------------------------------------------------------ BANKING--3.3% Abbey National Capital Trust I, Gtd. Non-Cumulative Trust Preferred Securities, 8.963%, 6/30/2030 391,000 (h,i) 438,870 BNP Paribas Capital Trust, Non-Cumulative Preferred Securities, 9.003%, 10/27/2010 121,000 (b,h,i) 132,707 Principal OTHER SECURITIES (CONTINUED) Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ BANKING (CONTINUED) Barclays Bank, Step-Up Callable Perpetual Reserve Capital Instruments, 7.375%, 12/15/2011 122,000 (b,h,i) 121,432 Dresdner Funding Trust I, Non-Cumulative Silent Partnership Ctfs., 8.151%, 6/30/2029 326,000 (b,h) 334,386 1,027,395 FINANCE--.3% ING Capital Funding Trust III, Non-Cumulative Gtd. Trust Preferred Securities, 8.439%, 12/21/2010 90,000 (h,i) 95,668 TOTAL OTHER SECURITIES (cost $1,097,226) 1,123,063 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--1.7% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ OIL AND GAS--.4% Exco Resources, Cum. Conv., $1.05 6,043 115,421 TELECOMMUNICATION--1.3% Global Crossing, Cum. Conv., $17.50 160 15,180 MediaOne Group, Cum. Conv., $3.633 6,825 391,585 406,765 TOTAL PREFERRED STOCKS (cost $698,490) 522,186 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--6.9% Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER--5.8% Equilon Enterprises, 4.15%, 7/2/2001 1,000,000 999,885 Philip Morris Cos., 4.13%, 7/2/2001 785,000 784,910 1,784,795 U.S. GOVERNMENTS--.3% U. S. Treasury Bills: 4.825%, 7/12/2001 6,000 (j) 5,995 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal SHORT-TERM INVESTMENTS (CONTINUED) Amount(a) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENTS (CONTINUED) U. S. Treasury Bills (continued): 4.92%, 7/26/2001 10,000 (j) 9,978 5.85%, 8/30/2001 35,000 (j) 34,799 4.42%, 9/13/2001 30,000 (j) 29,785 80,557 U.S. GOVERNMENT AGENCIES--.8% Federal Farm Credit Banks, Discount Notes, 3.94%, 7/2/2001 245,000 244,973 TOTAL SHORT-TERM INVESTMENTS (cost $2,110,325) 2,110,325 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $32,544,494) 105.0% 32,259,810 LIABILITIES, LESS CASH AND RECEIVABLES (5.0%) (1,530,387) NET ASSETS 100.0% 30,729,423 (A) PRINCIPAL AMOUNT STATED IN U. S. DOLLARS UNLESS OTHERWISE NOTED. AUD - AUSTRALIAN DOLLARS (B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2001, THESE SECURITIES AMOUNTED TO $4,177,699 OR 13.6% OF NET ASSETS. (C) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE. (D) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON BECOMES EFFECTIVE. (E) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON CHANGES TO THE CONSUMER PRICE INDEX. (F) NOTIONAL FACE AMOUNT SHOWN. (G) PURCHASED ON A FORWARD COMMITMENT BASIS. (H) THE STATED INTEREST RATE IS IN EFFECT UNTIL A SPECIFIED DATE AT WHICH TIME THE INTEREST RATE BECOMES SUBJECT TO PERIODIC CHANGE. (I) DATE SHOWN REPRESENTS EARLIEST DATE THE ISSUER MAY REDEEM THE SECURITY. (J) HELD BY A BROKER AS COLLATERAL FOR OPEN FINANCIAL FUTURES POSITIONS. SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF FINANCIAL FUTURES June 30, 2001 (Unaudited) Unrealized Market Value Appreciation Covered by (Depreciation) Contracts Contracts ($) Expiration at 6/30/2001 ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL FUTURES LONG U.S. Treasury 20 Year Bonds 13 1,304,063 September 2001 (3,938) FINANCIAL FUTURES SHORT U.S. Treasury 5 Year Notes 19 1,963,531 September 2001 3,047 U.S. Treasury 10 Year Notes 12 1,236,187 September 2001 2,922 2,031 SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 32,544,494 32,259,810 Cash 891,061 Receivable for investment securities sold 7,903,725 Interest receivable 366,285 Receivable for futures variation margin--Note 4(a) 5,767 Prepaid expenses 4,152 41,430,800 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 2,751 Payable for investment securities purchased 10,664,270 Accrued expenses 34,356 10,701,377 -------------------------------------------------------------------------------- NET ASSETS ($) 30,729,423 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 30,473,321 Accumulated undistributed investment income--net 113,077 Accumulated net realized gain (loss) on investments and financial futures 425,964 Accumulated net unrealized appreciation (depreciation) on investments (including $2,031 net unrealized appreciation on financial futures--Note 4(b) (282,939) -------------------------------------------------------------------------------- NET ASSETS ($) 30,729,423 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 23,232,589 7,496,834 Shares Outstanding 1,783,221 575,699 ------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 13.03 13.02 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 633,670 Cash dividends 13,797 TOTAL INCOME 647,467 EXPENSES: Investment advisory fee--Note 3(a) 59,689 Prospectus and shareholders' reports 18,981 Custodian fees--Note 3(b) 17,896 Professional fees 13,503 Registration fees 4,498 Distribution fees--Note 3(b) 2,357 Trustees' fees and expenses--Note 3(c) 153 Shareholder servicing costs --Note 3(b) 41 Miscellaneous 4,874 TOTAL EXPENSES 121,992 Less--waiver of fees due to undertaking--Note 3(a) (42,406) NET EXPENSES 79,586 INVESTMENT INCOME--NET 567,881 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 204,108 Net realized gain (loss) on financial futures 77,458 NET REALIZED GAIN (LOSS) 281,566 Net unrealized appreciation (depreciation) on investments (including $2,031 net unrealized appreciation on financial futures) (371,997) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (90,431) NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 477,450 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a)(b) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 567,881 291,671 Net realized gain (loss) on investments 281,566 238,983 Net unrealized appreciation (depreciation) on investments (371,997) 87,976 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 477,450 618,630 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (412,036) (293,574) Service shares (39,783) -- Net realized gain on investments: Initial shares -- (94,585) TOTAL DIVIDENDS (451,819) (388,159) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 16,468,769 16,414,812 Service shares 7,650,322 500 Dividends reinvested: Initial shares 412,036 388,159 Service shares 39,783 -- Cost of shares redeemed: Initial shares (5,741,797) (4,985,468) Service shares (173,795) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 18,655,318 11,818,003 TOTAL INCREASE (DECREASE) IN NET ASSETS 18,680,949 12,048,474 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 12,048,474 -- END OF PERIOD 30,729,423 12,048,474 Undistributed (Distributions in excess of) investment income--net 113,077 (1,903) Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a)(b) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 1,259,748 1,291,834 Shares issued for dividends reinvested 31,508 30,526 Shares redeemed (439,396) (390,999) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 851,860 931,361 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 585,921 39 Shares issued for dividends reinvested 3,049 -- Shares redeemed (13,310) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 575,660 39 (A) FROM MAY 1, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000. (B) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001(d) Year Ended INITIAL SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 12.94 12.50 Investment Operations: Investment income--net .36 .50 Net realized and unrealized gain (loss) on investments .03 .56 Total from Investment Operations .39 1.06 Distributions: Dividends from investment income--net (.30) (.50) Dividends from net realized gain on investments -- (.12) Total Distributions (.30) (.62) Net asset value, end of period 13.03 12.94 -------------------------------------------------------------------------------- TOTAL RETURN (%) 6.21(b) 8.61(c) -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .80(b) .80(b) Ratio of net investment income to average net assets 5.72(b) 6.24(b) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .38(b) 1.10(b) Portfolio Turnover Rate 561.07(c) 953.66(c) -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 23,233 12,048 (A) FROM MAY 1, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000. (B) ANNUALIZED. (C) NOT ANNUALIZED. (D) 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 PREMIUM ON DEBT SECURITIES. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED JUNE 30, 2001 WAS TO DECREASE NET INVESTMENT INCOME PER SHARE BY $.01, INCREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY $.01, AND DECREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 5.93% TO 5.72%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. SEE NOTES TO FINANCIAL STATEMENTS. Six Months Ended June 30, 2001(d) Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 12.93 12.93 Investment Operations: Investment income--net .32 -- Net realized and unrealized gain (loss) on investments .07 -- Total from Investment Operations .39 -- Distributions: Dividends from investment income--net (.30) -- Net asset value, end of period 13.02 12.93 -------------------------------------------------------------------------------- TOTAL RETURN (%) 6.05(b) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .80(b) -- Ratio of net investment income to average net assets 5.64(b) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .86(b) Portfolio Turnover Rate 561.07(c) 953.66(c) -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 7,497 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) ANNUALIZED. (C) NOT ANNUALIZED. (D) 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 PREMIUM ON DEBT SECURITIES. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED JUNE 30, 2001 WAS TO DECREASE NET INVESTMENT INCOME PER SHARE BY $.00, INCREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY $.00, AND DECREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 5.86% TO 5.64%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO JANUARY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. 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 ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (excluding short-term investments, other than U.S. Treasury Bills, and financial futures) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgement of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Short-term investments, excluding U.S. Treasury Bills, are carried at amortized cost, which approximates value. Financial futures are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount 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. (c) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid monthly. Dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) On June 29, 2001, the Board of Trustees declared a cash dividend of .057 per share from undistributed investment income-net payable on July 2, 2001 (ex-dividend date) to shareholders of record as of the close of business on June 29, 2001. (d) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2--Bank Line of Credit: The portfolio 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, 2001, the portfolio did not borrow under either line of credit. NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .60 of 1% of the value of the portfolio's average daily net assets and is payable monthly. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class exclusive of 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, 2001, Dreyfus waived receipt of fees of $42,406, 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, 2001, Service shares were charged $2,357 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, 2001, the portfolio was charged $40 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, 2001, the portfolio was charged $17,896 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. 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: (a) The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities and financial futures during the period ended June 30, 2001, amounted to $124,579,884 and $106,087,808, respectively. The fund may invest in financial futures contracts in order to gain exposure to or protect against changes in the market. The fund is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments in financial futures require the fund to "mark to market" on a daily basis, which reflects the change in market value of the contracts at the close of each day' s trading. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses. When the contracts are closed, the fund recognizes a realized gain or loss. These investments require initial margin deposits with a broker, which consist of cash or cash equivalents, up to approximately 10% of the contract amount. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Contracts open at June 30, 2001, are set forth in the Statement of Financial Futures. The fund may purchase or sell financial futures contracts and options on such futures contracts for the purpose of hedging the market risk on existing securities or the intended purchase of securities. (b) At June 30, 2001, accumulated net unrealized depreciation on investments and financial futures was $282,939, consisting of $266,182 gross unrealized appreciation and $549,121 gross unrealized depreciation. At June 30, 2001, 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--Change in Accounting Principle: As required, effective January 1, 2001, the portfolio has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies amortizing discount or premium on debt securities on a scientific basis. Prior to January 1, 2001, the portfolio did not amortize premiums on debt securities and amortized discount on a straight line basis. The cumulative effect of this accounting change had no impact on total net assets of the portfolio, but resulted in a $1,082 reduction in accumulated undistributed investment income-net and a corresponding $1,082 increase in accumulated net unrealized appreciation (depreciation) , based on securities held by the portfolio on January 1, 2001. The effect of this change for the period ended June 30, 2001 was to decrease net investment income by $21,011, increase net unrealized appreciation (depreciation) by $11,804 and increase net realized gains (losses) by $9,207. The statement of changes in net assets and financial highlights for the prior periods have not been restated to reflect this change in presentation. The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Core Bond Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 165SA0601 ================================================================================ Dreyfus Investment Portfolios, Core Value Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 14 Financial Highlights 16 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Core Value Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We are pleased to present this semiannual report for Dreyfus Investment Portfolios, Core Value Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Valerie J. Sill. While the first half of 2001 was difficult for the U.S. economy, we have recently seen signs that economic improvement may be in sight. The Federal Reserve Board' s aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth, as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth later this year. In our view, the implications of this economic scenario may be positive for the stock market. Better economic times generally tend to lead to increased sales and profits for many companies, especially those that are sensitive to changes in the economic cycle. A stronger economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies whose valuations dropped during the recent economic downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE Valerie J. Sill, Portfolio Manager How did Dreyfus Investment Portfolios, Core Value Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, Dreyfus Investment Portfolios, Core Value Portfolio produced total returns of -0.73% for its Initial shares and -0.60% for its Service shares.(1) In comparison, the portfolio's benchmark, the S& P 500/BARRA Value Index, produced a total return of -2.50 for the same period.(2) We are pleased that the portfolio produced only a very modest loss in a highly challenging market environment. We attribute the fund's relatively strong performance primarily to our stock selection strategy, which emphasized companies with steady earnings that stood out in an environment of generally lower corporate profits. What is the portfolio's investment approach? The portfolio invests primarily in large-cap companies that are considered undervalued based on traditional measures, such as price-to-earnings ratios. In choosing stocks, we use a "bottom-up" stock selection approach, focusing on individual companies, rather than a "top-down" approach that forecasts market trends. We also focus on a company's relative value, financial strength, sales and earnings momentum and likely catalysts that could ignite the stock price. What other factors influenced the portfolio's performance? The value style of investing generally performed better than the growth style during the reporting period. Value investors seek underpriced companies that have historically produced slow but steady earnings growth. In a weak economic environment, value stocks are often seen as "defensive." If they report disappointing earnings, their stock prices generally tend not to depreciate as much as prices of growth stocks with higher valuations. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) Value stocks exist in every industry, even in growth-oriented sectors, such as technology. Indeed, two of the portfolio's best performers during the reporting period were International Business Machines and Apple Computer, which we believe became value investments after steep declines in their stock prices. Because of its diversified product offerings, International Business Machines continued to post strong earnings in the face of a slowdown in worldwide technology spending. The portfolio purchased Apple Computer' s shares when its stock price was depressed. The portfolio enjoyed significant appreciation when the company made an excellent comeback with new product offerings, as well as refinements to its highly successful iMac brand. Johnson & Johnson, the giant health care company, saw its shares decline in early 2001 when it acquired Alza Corp., a pharmaceutical company focusing on therapies for cancer and the central nervous system. The stock price of an acquiring company often declines temporarily, because investors fear a decline in earnings while the new company is being assimilated. However, Johnson & Johnson' s shares rebounded when it became apparent that the company was well positioned to offer improved distribution for Alza's products. In financial services, Washington Mutual defied the poor performance of its industry group, posting strong returns for the period. The company, a leading banking institution that has grown through major acquisitions, continued to post earnings that beat Wall Street expectations. In a declining interest-rate environment, bank stocks usually perform well, because the cost of funds declines faster than lending rates, thus boosting profit margins. However, investors were equally concerned during the first half of 2001 about the impact of the economic slowdown on bank customers and their ability to repay their loans. As a result, with the exception of such stocks as Washington Mutual, the financial services group provided disappointing returns for the portfolio. Indeed, lower short-term interest rates prompted many investors to purchase shares of economically cyclical stocks during the reporting period, such as retailers. Circuit City Group, Federated Department Stores and Office Depot were good performers during the period, as investors also reacted to the prospect of federal income tax refund checks percolating through the economy. The transportation sector was also strong, benefiting such railroad stocks as Canadian Pacific, one of the portfolio's top performers. What is the portfolio's current strategy? As of the end of the reporting period, the portfolio's positions in health care and consumer products were overweighted relative to its benchmark. Because many of these products are necessities, consumer products companies, such as detergent makers, and health care stocks, such as pharmaceutical concerns, often prosper regardless of the economic environment. On the other hand, the portfolio decreased its holdings in basic industries, electric utilities and energy stocks, because many of those stock prices reached our selling targets. These portfolio shifts reflect our continuing search for undervalued stocks regardless of industry or sector of the market. July 16, 2001 (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 ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS THE REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500/BARRA VALUE INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE STOCKS IN THE STANDARD & POOR'S 500 COMPOSITE PRICE INDEX ("S&P 500 INDEX") THAT HAVE LOW PRICE-TO-BOOK RATIOS. THE S&P 500 INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. The Portfolio STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) COMMON STOCKS--94.8% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ APPLIANCES & HOUSEHOLD DURABLES--1.5% Koninklijke (Royal) Philips Electronics (New York Shares) 22,500 594,675 BANKING--14.5% American Express 17,100 663,480 Citigroup 31,800 1,680,312 Fannie Mae 10,700 911,105 First Union 11,300 394,822 FleetBoston Financial 17,506 690,612 Golden State Bancorp 9,200 283,360 Washington Mutual 20,850 782,917 Wells Fargo 5,200 241,436 5,648,044 BASIC INDUSTRIES--3.7% Air Products & Chemicals 5,700 260,775 Dow Chemical 10,360 344,470 E.I. dupont deNemours & Co. 9,951 480,036 Georgia-Pacific 7,500 253,875 International Paper 3,200 114,240 1,453,396 BROKERAGE--6.7% Goldman Sachs Group 3,100 265,980 J.P. Morgan Chase & Co. 25,250 1,126,150 Morgan Stanley Dean Witter & Co. 10,500 674,415 Stilwell Financial 16,200 543,672 2,610,217 CAPITAL GOODS--10.3% Boeing 11,000 611,600 Eaton 2,900 203,290 Pitney Bowes 15,600 657,072 Rockwell International 10,500 400,260 TRW 5,600 229,600 Tyco International 10,200 555,900 United Technologies 11,800 864,468 Waste Management 14,800 456,136 3,978,326 CONSUMER DURABLES--.5% Ford Motor 7,514 184,469 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER NON-DURABLES--3.4% Clorox 10,800 365,580 Kimberly-Clark 5,800 324,220 Kraft Foods, Cl. A 7,640 (a) 236,840 Procter & Gamble 6,100 389,180 1,315,820 CONSUMER SERVICES--8.2% Circuit City Group 11,000 198,000 Federated Department Stores 11,100 (a) 471,750 First Data 1,400 89,950 Knight-Ridder 6,700 397,310 McDonald's 18,300 495,198 Office Depot 55,700 (a) 578,166 RadioShack 13,700 417,850 Walt Disney 18,500 534,465 3,182,689 ENERGY--9.5% BP Amoco, ADS 14,100 702,885 Conoco, Cl. B 25,284 730,708 Cooper Cameron 2,800 (a) 156,240 Exxon Mobil 12,652 1,105,152 Halliburton 8,800 313,280 Sunoco 9,500 347,985 Williams Cos. 10,000 329,500 3,685,750 FOOD & HOUSEHOLD PRODUCTS--1.9% Unilever, N.V. (New York Shares) 12,300 732,711 HEALTH CARE--9.5% American Home Products 5,600 327,264 Bausch & Lomb 8,300 300,792 Guidant 9,900 (a) 356,400 Johnson & Johnson 23,000 1,150,000 Merck & Co. 11,300 722,183 Schering-Plough 9,300 337,032 Wellpoint Health Networks 5,300 (a) 499,472 3,693,143 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE--8.1% Allstate 14,400 633,456 American International Group 7,096 610,256 CIGNA 1,900 182,058 John Hancock Financial Services 9,400 378,444 Lincoln National 9,900 512,325 Marsh & McLennan Cos. 3,900 393,900 MetLife 14,000 433,720 3,144,159 TECHNOLOGY--6.4% Apple Computer 9,400 (a) 218,550 Computer Associates International 9,200 331,200 Computer Sciences 8,800 (a) 304,480 Electronic Data Systems 7,000 437,500 Hewlett-Packard 13,750 393,250 International Business Machines 5,100 576,300 KPMG Consulting 8,500 (a) 130,475 3COM 21,600 (a) 102,600 2,494,355 TELECOMMUNICATIONS--1.3% Cable & Wireless, ADR 5,700 102,600 Sprint (FON Group) 19,600 418,656 521,256 TRANSPORTATION--2.6% Canadian Pacific 22,600 875,750 Southwest Airlines 6,550 121,109 996,859 UTILITIES--6.7% CMS Energy 24,500 682,325 Entergy 11,000 422,290 NiSource 25,300 691,449 Reliant Resources 6,300 (a) 155,610 Verizon Communications 9,250 494,875 WorldCom 8,900 (a) 126,380 WorldCom - MCI Group 356 5,732 2,578,661 TOTAL COMMON STOCKS (cost $34,761,475) 36,814,530 PREFERRED STOCKS--1.5% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER SERVICES; News Corp, ADR (cost $489,661) 17,350 562,140 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--3.6% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCY DISCOUNT NOTES; Student Loan Marketing Association, 3.94%, 7/2/2001 (cost $1,399,847) 1,400,000 1,399,847 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $36,650,983) 99.9% 38,776,517 CASH AND RECEIVABLES (NET) .1% 50,969 NET ASSETS 100.0% 38,827,486 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 36,650,983 38,776,517 Cash 329,652 Receivable for investment securities sold 379,091 Dividends receivable 30,576 Prepaid expenses 12,939 39,528,775 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 21,181 Payable for investment securities purchased 651,962 Payable for shares of Beneficial Interest redeemed 6,992 Accrued expenses and other liabilities 21,154 701,289 -------------------------------------------------------------------------------- NET ASSETS ($) 38,827,486 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 36,775,377 Accumulated undistributed investment income--net 151,538 Accumulated net realized gain (loss) on investments (224,963) Accumulated net unrealized appreciation (depreciation) on investments--Note 4 2,125,534 -------------------------------------------------------------------------------- NET ASSETS ($) 38,827,486 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 32,606,550 6,220,936 Shares Outstanding 2,212,359 421,647 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 14.74 14.75 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $3,635 foreign taxes withheld at source) 270,990 Interest 32,312 TOTAL INCOME 303,302 EXPENSES: Investment advisory fee--Note 3(a) 117,279 Auditing fees 12,833 Prospectus and shareholders' reports 11,780 Custodian fees--Note 3(b) 9,527 Legal fees 4,528 Registration fees 3,911 Distribution fees--Note 3(b) 2,859 Trustees' fees and expenses--Note 3(c) 247 Miscellaneous 2,832 TOTAL EXPENSES 165,796 Less--waiver of fees due to undertaking--Note 3(a) (22,165) NET EXPENSES 143,631 INVESTMENT INCOME--NET 159,671 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (27,501) Net unrealized appreciation (depreciation) on investments (367,817) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (395,318) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (235,647) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) ------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 159,671 224,850 Net realized gain (loss) on investments (27,501) 801,415 Net unrealized appreciation (depreciation) on investments (367,817) 1,343,901 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (235,647) 2,370,166 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (11,915) (220,384) Service shares (872) -- Net realized gain on investments: Initial shares (432,914) (510,084) Service shares (31,706) -- TOTAL DIVIDENDS (477,407) (730,468) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 11,230,588 14,417,156 Service shares 6,475,736 500 Dividends reinvested: Initial shares 444,829 730,468 Service shares 32,578 -- Cost of shares redeemed: Initial shares (2,250,115) (8,233,492) Service shares (290,182) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 15,643,434 6,914,632 TOTAL INCREASE (DECREASE) IN NET ASSETS 14,930,380 8,554,330 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 23,897,106 15,342,776 END OF PERIOD 38,827,486 23,897,106 Undistributed investment income--net 151,538 4,654 Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 750,929 1,000,641 Shares issued for dividends reinvested 32,257 50,772 Shares redeemed (153,894) (566,926) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 629,292 484,487 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 439,211 33 Shares issued for dividends reinvested 2,363 -- Shares redeemed (19,960) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 421,614 33 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ----------------------------------------- INITIAL SHARES (Unaudited) 2000 1999 1998(a) --------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 15.10 13.97 11.72 12.50 Investment Operations: Investment income--net .07(b) .17(b) .07(b) .07 Net realized and unrealized gain (loss) on investments (.20) 1.50 2.24 (.77) Total from Investment Operations (.13) 1.67 2.31 (.70) Distributions: Dividends from investment income--net (.01) (.16) (.06) (.08) Dividends from net realized gain on investments (.22) (.38) -- -- Total Distributions (.23) (.54) (.06) (.08) Net asset value, end of period 14.74 15.10 13.97 11.72 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%) (.73)(c) 12.06 19.73 (5.59)(c) --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .49(c) .97 1.00 .67(c) Ratio of net investment income to average net assets .48(c) 1.19 .56 .62(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .02(c) .07 .50 .74(c) Portfolio Turnover Rate 28.84(c) 110.74 97.14 47.37(c) --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 32,607 23,897 15,343 5,959 (A) FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 15.09 15.09 Investment Operations: Investment income--net .05(b) -- Net realized and unrealized gain (loss) on investments (.16) -- Total from Investment Operations (.11) -- Distributions: Dividends from investment income--net (.01) -- Dividends from net realized gain on investments (.22) -- Total Distributions (.23) -- Net asset value, end of period 14.75 15.09 -------------------------------------------------------------------------------- TOTAL RETURN (%) (.60)(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .51(c) -- Ratio of net investment income to average net assets .35(c) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .19(c) -- Portfolio Turnover Rate 28.84(c) 110.74 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 6,221 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 ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $805 during the period ended June 30, 2001 based on avail- The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) able cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2001, the portfolio did not borrow under the line of credit. NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .75 of 1% of the value of the portfolio's average daily net assets and is payable monthly. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither, class exclusive of 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, 2001, Dreyfus waived receipt of fees of $22,165, 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, 2001, Service shares were charged $2,859 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, 2001, the portfolio was charged $36 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, 2001, the portfolio was charged $9,527 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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, 2001, amounted to $23,627,149 and $8,746,607, respectively. At June 30, 2001, accumulated net unrealized appreciation on investments was $2,125,534, consisting of $3,331,287 gross unrealized appreciation and $1,205,753 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). For More Information Dreyfus Investment Portfolios, Core Value Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 172SA0601 ================================================================================ Dreyfus Investment Portfolios, Emerging Leaders Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 14 Financial Highlights 16 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Emerging Leaders Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We are pleased to present this semiannual report for Dreyfus Investment Portfolios, Emerging Leaders Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. 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. While the first half of 2001 was difficult for the U.S. economy, we have recently seen signs that economic improvement may be in sight. The Federal Reserve Board's aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth, as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth later this year. In our view, the implications of this economic scenario may be positive for the stock market. Better economic times generally tend to lead to increased sales and profits for many companies, especially those that are sensitive to changes in the economic cycle. A stronger economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies whose valuations dropped during the recent economic downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE Paul Kandel and Hilary Woods, Portfolio Managers How did Dreyfus Investment Portfolios, Emerging Leaders Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, Dreyfus Investment Portfolios, Emerging Leaders Portfolio produced total returns of 8.33% for its Initial shares and 8.27% for its Service shares.(1) This compares with a total return of 6.94% for the portfolio's benchmark, the Russell 2000 Index (the "Index"), for the same period.(2) We attribute the portfolio's performance to a market environment that generally favored small-cap companies. The portfolio outperformed its benchmark by successfully employing a disciplined, blended growth-and-value investment approach, which identified attractive investment opportunities, particularly within the health care, utilities and transport industry groups. What is the portfolio's investment approach? The portfolio seeks capital growth by investing in a diversified group of small-cap companies with total market values of $2.0 billion or less at the time of purchase. We focus primarily on companies we believe are emerging leaders in their respective industries. The companies in which we invest offer products, processes or services that we believe enhance their prospects for future earnings or revenue growth. Using fundamental research, we look for stocks with dominant positions in major product lines, sustained records of achievement and strong balance sheets. We also base investment decisions on the expected impact of changes in a company's management or organizational structure. Our investment approach targets growth-oriented stocks (those companies with earnings that are expected to grow faster than the overall market), value-oriented stocks (those that appear underpriced according to a number of financial measurements) and stocks that exhibit both growth and value characteristics. We typically sell a stock when The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) the reasons for buying it no longer apply, or when the company begins to show deteriorating fundamentals or poor relative performance. What other factors influenced the portfolio's performance? The slowing U.S. economy created a challenging investment climate for most equity markets during the reporting period. However, while broad market indices, such as the S& P 500 Index and the Dow Jones Industrial Average, suffered declines, the Russell 2000 Index rose. That's because many of the small-cap stocks that make up the Index offered investors greater prospects for growth at lower price/earnings ratios than did the majority of larger company stocks. Small-cap stocks also benefited from declining interest rates, which made it easier for small companies to gain cost-effective access to business capital. The portfolio capitalized on these favorable conditions in several industry groups. In health care, the portfolio achieved its strongest results and also significantly outperformed the Index during the reporting period. Those gains resulted from exceptionally good stock selections among innovative drug companies, such as SICOR; hospital groups, such as LifePoint Hospitals; medical device manufacturers, such as ESC Medical Systems; and biotech companies, such as XOMA. In all, health care holdings provided roughly half of the portfolio's total positive return. The portfolio also delivered significantly better results than the Index in two other key areas. In utilities, the portfolio generated strong returns while the Index remained relatively unchanged, largely due to a better than 100% advance in coal producer Arch Coal. In autos and transports, the portfolio also significantly outperformed the Index, driven by a broad group of holdings, including trucker Knight Transportation and auto parts maker American Axle. Of course, not all of the portfolio's investments performed as well as the stocks mentioned above during the reporting period. Most technology stocks declined during the reporting period, with the portfolio's holdings in the area falling more than those of the Index. Reduced earnings expectations at a variety of companies -- including outsourcing man- ufacturer DDi, Internet security provider Netegrity and electronic component maker Aeroflex -- caused the portfolio's results to lag. The portfolio also lost ground compared to the Index in the consumer area, as its holdings did not keep pace with those of the Index. What is the portfolio's current strategy? As of the end of the reporting period, the portfolio holds a smaller percentage of consumer-related stocks than the Index, primarily because of declining consumer spending levels. The portfolio also holds relatively small positions in financial and technology stocks, where we see the potential for continued weakness. On the other hand, we are holding relatively large positions in energy, where we see opportunities for earnings growth, and in materials and processing, where we believe industry fundamentals are likely to benefit from strength in the global economy. July 16, 2001 (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, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK MARKET PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. The Portfolio STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) COMMON STOCKS--97.9% Shares Value($) ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL SERVICES--1.4% Henry Schein 3,500 (a) 133,875 CONSUMER NON-DURABLES--2.8% Cott 13,500 (a) 149,040 Smithfield Foods 2,700 (a) 108,810 257,850 CONSUMER SERVICES--5.6% Emmis Communications, Cl. A 4,000 (a) 123,000 Entercom Communications 2,500 (a) 134,025 Martha Stewart Living Omnimedia, Cl. A 5,900 (a) 136,290 Six Flags 6,000 (a) 126,240 519,555 ELECTRONIC TECHNOLOGY--13.9% Alliant Techsystems 1,400 (a) 125,860 Catapult Communications 5,000 (a) 112,500 Cognex 4,300 (a) 145,555 Elantec Semiconductor 4,500 (a) 152,055 Harris 4,700 127,887 Micrel 3,000 (a) 99,000 Pixelworks 5,000 (a) 178,700 TranSwitch 13,500 (a) 148,500 Veeco Instruments 2,500 (a) 99,375 Virata 9,000 (a) 106,650 1,296,082 ENERGY MINERALS--6.3% Arch Coal 5,600 144,872 Cabot Oil & Gas, Cl. A 3,600 87,840 Meridian Resource 17,700 (a) 126,909 Newpark Resources 10,000 (a) 111,000 Torch Offshore 11,500 (a) 114,425 585,046 FINANCE--17.7% AmeriCredit 3,200 (a) 166,240 Annuity and Life Re Holdings 3,700 132,275 Bank United, CPR 1,400 (a) 462 Brown & Brown 2,600 109,174 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCE (CONTINUED) Commerce Bancorp 1,800 126,180 Cullen/Frost Bankers 3,500 118,475 First Midwest Bancorp 4,000 123,400 Harbor Florida Bancshares 7,500 143,625 Horace Mann Educators 6,300 135,765 Jefferies Group 3,500 113,400 New York Community Bancorp 3,000 112,950 OceanFirst Financial 5,200 134,888 Southwest Bancorporation of Texas 3,500 (a) 105,735 Staten Island Bancorp 4,800 133,680 1,656,249 HEALTH SERVICES--4.3% Beverly Enterprises 13,400 (a) 143,380 Cobalt 17,500 122,500 Renal Care Group 4,000 (a) 131,560 397,440 HEALTH TECHNOLOGY--6.3% ESC Medical Systems 4,500 (a) 129,825 SICOR 7,500 (a) 173,250 United Surgical Partners International 6,000 (a) 144,000 XOMA 8,500 (a) 145,010 592,085 INDUSTRIAL SERVICES--1.7% Superior Energy Services 9,300 (a) 73,470 Universal Compression Holdings 3,000 (a) 85,200 158,670 NON-ENERGY MINERALS--3.7% Bethlehem Steel 40,000 (a) 80,800 Century Aluminum 8,500 136,340 Minerals Technologies 3,000 128,760 345,900 PROCESS INDUSTRIES--4.8% Casella Waste Systems, Cl.A 12,500 (a) 156,250 Ivex Packaging 8,300 (a) 157,700 Valspar 3,700 131,350 445,300 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER MANUFACTURING--6.5% Circor International 8,000 144,400 Hexcel 12,500 (a) 159,375 MagneTek 10,500 (a) 131,250 Silgan Holdings 9,500 (a) 166,820 601,845 RETAIL TRADE--4.1% Genesco 3,900 (a) 131,040 99 (CENTS) Only Stores 4,500 (a) 134,775 Pier 1 Imports 10,000 115,000 380,815 TECHNOLOGY SERVICES--13.9% Agile Software 7,500 (a) 127,500 Global Payments 4,800 144,480 Insight Communications, Cl. A 5,000 (a) 125,000 LifePoint Hospitals 3,700 (a) 163,836 Midway Games 9,100 (a) 168,350 National Data 4,500 145,800 Netegrity 4,000 (a) 120,000 PC Connection 8,500 (a) 136,000 Serena Software 4,500 (a) 163,530 1,294,496 TRANSPORTATION--2.9% Frontline, ADR 5,700 97,470 Knight Transportation 8,500 (a) 174,675 272,145 UTILITIES--2.0% Cleco 3,600 81,900 Western Gas Resources 3,200 104,320 186,220 TOTAL COMMON STOCKS (cost $7,589,532) 9,123,573 Principal SHORT-TERM INVESTMENTS--10.2% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. TREASURY BILLS: 3.46%, 8/9/2001 151,000 150,461 3.47%, 9/6/2001 472,000 468,908 3.40%, 9/20/2001 339,000 336,458 TOTAL SHORT-TERM INVESTMENTS (cost $955,797) 955,827 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $8,545,329) 108.1% 10,079,400 LIABILITIES, LESS CASH AND RECEIVABLES (8.1%) (752,963) NET ASSETS 100.0% 9,326,437 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 8,545,329 10,079,400 Cash 193,267 Dividends receivable 1,466 Prepaid expenses 2,254 10,276,387 -------------------------------------------------------------------------------- LIABILITES ($): Due to The Dreyfus Corporation and affiliates 11,662 Payable for investment securities purchased 925,018 Accrued expenses 13,270 949,950 -------------------------------------------------------------------------------- NET ASSETS ($) 9,326,437 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 7,912,309 Accumulated investment (loss) (21,092) Accumulated net realized gain (loss) on investments (98,851) Accumulated net unrealized appreciation (depreciation) on investments--Note 4(b) 1,534,071 -------------------------------------------------------------------------------- NET ASSETS ($) 9,326,437 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 8,390,839 935,598 Shares Outstanding 454,526 50,697 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 18.46 18.45 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends 19,557 Interest 11,061 TOTAL INCOME 30,618 EXPENSES: Investment advisory fee--Note 3(a) 30,921 Auditing fees 14,237 Prospectus and shareholders' reports 13,563 Custodian fees--Note 3(b) 4,249 Legal fees 1,339 Registration fees 722 Distribution fees--Note 3(b) 313 Interest expense--Note 2 175 Trustees' fees and expenses--Note 3(c) 90 Shareholder servicing costs--Note 3(b) 30 Miscellaneous 478 TOTAL EXPENSES 66,117 Less--waiver of fees due to undertaking--Note 3(a) (14,407) NET EXPENSES 51,710 INVESTMENT (LOSS) (21,092) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments: Long transactions 163,243 Short sale transactions (19,220) NET REALIZED GAIN (LOSS) 144,023 Net unrealized appreciation (depreciation) on investments 417,006 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 561,029 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 539,937 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (21,092) (19,854) Net realized gain (loss) on investments 144,023 (24,957) Net unrealized appreciation (depreciation) on investments 417,006 964,346 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 539,937 919,535 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (960) Net realized gain on investments: Initial shares (3,153) (190,979) Service shares (82) -- TOTAL DIVIDENDS (3,235) (191,939) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 4,938,884 4,189,282 Service shares 909,982 500 Dividends reinvested: Initial shares 3,153 191,939 Service shares 82 -- Cost of shares redeemed: Initial shares (2,964,357) (1,356,378) Service shares (778) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 2,886,966 3,025,343 TOTAL INCREASE (DECREASE) IN NET ASSETS 3,423,668 3,752,939 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 5,902,769 2,149,830 END OF PERIOD 9,326,437 5,902,769 Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 282,232 258,367 Shares issued for dividends reinvested 196 12,391 Shares redeemed (174,112) (84,548) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 108,316 186,210 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 50,708 29 Shares issued for dividends reinvested 5 -- Shares redeemed (45) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 50,668 29 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ---------------------- INITIAL SHARES (Unaudited) 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 17.05 13.44 12.50 Investment Operations: Investment income (loss)--net (.05)(b) (.09)(b) .01 Net realized and unrealized gain (loss) on investments 1.47 4.30 .93 Total from Investment Operations 1.42 4.21 .94 Distributions: Dividends from investment income--net -- (.01) -- Dividends from net realized gain on investments (.01) (.59) -- Total Distributions (.01) (.60) -- Net asset value, end of period 18.46 17.05 13.44 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 8.33(c) 31.70 7.52(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .75(c) 1.50 .07(c) Ratio of net investment income (loss) to average net assets (.31)(c) (.59) .04(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .20(c) .70 1.25(c) Portfolio Turnover Rate 131.28(c) 234.94 1.79(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 8,391 5,902 2,150 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 17.05 17.05 Investment Operations: Investment (loss) (.04)(b) -- Net realized and unrealized gain (loss) on investments 1.45 -- Total from Investment Operations 1.41 -- Distributions: Dividends from net realized gain on investments (.01) -- Net asset value, end of period 18.45 17.05 -------------------------------------------------------------------------------- TOTAL RETURN (%) 8.27(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .75(c) -- Ratio of net investment (loss) to average net assets (.24)(c) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .42(c) -- Portfolio Turnover Rate 131.28(c) 234.94 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 936 1 (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 1999. (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 Emerging Leaders Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $855 during the period ended June 30, 2001 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gain. (e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. The average daily amount of borrowings outstanding during the period ended June 30, 2001 was approximately $6,100, with a related weighted average annualized interest rate of 5.80%. NOTE 3-Investment Advisory Fee and Other Transactions with Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .90 of 1% of the value of the portfolio's average daily net assets and is payable monthly. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of 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, 2001, Dreyfus waived receipt of fees of $14,407, 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, 2001, Service shares were charged $313 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, 2001, the portfolio was charged $36 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, 2001, the portfolio was charged $4,249 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) NOTE 4--Securities Transactions: (a) The following summarizes the aggregate amount of purchases and sales of investment securities and securities sold short, excluding short-term securities, during the period ended June 30, 2001. Purchases Sales -------------------------------------------------------------------------------- Long transactions 11,592,128 8,756,558 Short sale transactions 164,985 145,765 TOTAL 11,757,113 8,902,323 The portfolio is engaged in short-selling which obligates the portfolio to replace the security borrowed by purchasing the security at current market value. The portfolio would incur a loss if the price of the security increases between the date of the short sale and the date on which the portfolio replaces the borrowed security. The portfolio would realize a gain if the price of the security declines between those dates. Until the portfolio replaces the borrowed security, the portfolio will maintain daily a segregated account with a broker or custodian of permissable liquid assets sufficient to cover its short position. At June 30, 2001, there were no securities sold short outstanding. (b) At June 30, 2001, accumulated net unrealized appreciation on investments was $1,534,071, consisting of $1,731,993 gross unrealized appreciation and $197,922 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). For More Information Dreyfus Investment Portfolios, Emerging Leaders Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 192SA0601 ================================================================================ Dreyfus Investment Portfolios, Emerging Markets Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 15 Financial Highlights 17 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Emerging Markets Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Emerging Markets Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. 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. While the first half of 2001 was difficult for the U.S. economy, weakness in many international economies was not as severe. What's more, we have recently seen signs that economic improvement in the U.S. may be in sight, which could lead to better conditions in Europe as well. The Federal Reserve Board's aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the U.S. economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth in the U.S., as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth in the U.S. later this year, and in Europe soon thereafter. Japan's economy remains mired in recession, however, despite the recent election of a reform-minded prime minister. In our view, the implications of this economic scenario may be positive for certain sectors of the international stock markets, especially for global companies that rely on exports to the United States. A stronger global economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies that were severely punished during the recent downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE D. Kirk Henry, Portfolio Manager How did Dreyfus Investment Portfolios, Emerging Markets Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, Dreyfus Investment Portfolios, Emerging Markets Portfolio produced a total return of 2.71% for its Initial shares and 2.71% for its Service shares.(1) This compares with the -1.78% total return provided by the portfolio's benchmark, the Morgan Stanley Capital International Emerging Markets Free Index ("MSCI EMF Index"), for the same period.(2) We attribute the market's and portfolio's performance to a difficult but improving investment environment during the reporting period. Stocks in many emerging market countries have recently rebounded, posting much better returns in the first half of 2001 than during the second half of 2000. We were also pleased that our individual stock selection strategy enabled the portfolio to produce modestly higher returns than the MSCI EMF Index. What is the portfolio's investment approach? The portfolio seeks long-term capital growth by investing primarily in the stocks of companies organized, or with a majority of their assets or business, in emerging market countries. Normally, the portfolio will not invest more than 25% of its total assets in the securities of companies in any single emerging market country. Effective January 1, 2001, the portfolio has employed a value-oriented investment approach. Previously, the portfolio had been managed using a growth-oriented approach. When selecting stocks, we seek to identify potential investments through extensive quantitative and fundamental research. This The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) approach emphasizes individual stock selection rather than economic or industry trends and focuses on three key factors: *VALUE -- how a stock is valued relative to its intrinsic worth based on traditional value measures; *BUSINESS HEALTH -- overall efficiency and profitability as measured by return on assets and return on equity; and *BUSINESS MOMENTUM -- the presence of a catalyst that potentially will trigger a price increase near or midterm. What other factors influenced the portfolio's performance? As shareholders may remember from the last report, the portfolio shifted its strategy from a growth-oriented to a value-oriented approach at the beginning of 2001. The management team worked very diligently in the first two weeks of this year to replace the portfolio' s approximately 50 growth stocks with value stocks. The benefits of this change were realized almost immediately because of the market's then prevailing preference for value stocks over growth stocks. The portfolio achieved its best performance in three key countries: China, Taiwan and Malaysia. In each of these areas, our security selection strategy and the portfolio's limited exposure to technology stocks helped produce better returns than the MSCI EMF Index. China, the portfolio's largest country weighting, represented the most positive contributor to the portfolio' s overall performance. In fact, several of the portfolio' s top 10 performing stocks came from China, most notably the electric utility companies, Shangdong International Power Development and Beijing Datang. Among the primary businesses in Taiwan are manufacturing companies that produce goods for larger U.S.-based technology companies. With the turmoil experienced by the technology group and the slowing U.S. economy, our holdings in this area suffered. In Malaysia, threats of a potential currency devaluation and a slowdown in the country's economic growth hampered stock market returns. While the absolute returns in both Taiwan and Malaysia were negative, our deci- sion to maintain about half of the exposure compared to those countries' weightings in the MSCI EMF Index helped bolster portfolio performance relative to its benchmark. Most of the portfolio's stocks in Latin America were disappointing during the reporting period, with the exception of Mexico, which benefited from a strong currency and rising oil prices. Russian oil exporters and South Africa's fourth largest bank, ABSA, contributed positively to the portfolio's returns, while the rest of the Europe Middle East Africa ("EMEA") region posted mostly flat performance. What is the portfolio's current strategy? We are currently very excited about the prospects of the emerging markets going forward. After years of lackluster returns, we believe that valuations currently are very attractive in the emerging markets, especially when compared to stocks in the developed markets. We are also encouraged by the Federal Reserve Board's aggressive policy of reducing short-term interest rates, and we believe that these moves have the potential to help stimulate economic growth in the U.S. and around the world. July 16, 2001 (1) TOTAL RETURN INCLUDES REINVESTMENT OF NET DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF GROSS DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE (MSCI EMF) INDEX IS A MARKET CAPITALIZATION-WEIGHTED INDEX COMPOSED OF COMPANIES REPRESENTATIVE OF THE MARKET STRUCTURE OF 26 EMERGING MARKET COUNTRIES IN EUROPE, LATIN AMERICA AND THE PACIFIC BASIN. The Portfolio STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) COMMON STOCKS--90.4% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ARGENTINA--1.1% Banco Hipotecario 2,300 (a) 16,107 Telecom Argentina STET--France Telecom, ADR 1,300 20,085 36,192 BRAZIL--7.8% Companhia de Saneamento Basico do Estado de Sao Paulo 510 36,665 Companhia Vale do Rio Doce, ADR 1,400 32,481 Petroleo Brasileiro, ADR 1,690 43,941 Telecomunicacoes Brasileiras, ADR 1,050 49,088 Tele Celular Sul Participacoes, ADR 800 16,160 Tele Norte Leste Participacoes, ADR 1,600 24,416 Ultrapar Participacoes, ADR 2,400 18,000 Unibanco, GDR 600 15,271 Votorantim Celulose e Papel, ADR 750 11,325 247,347 CHILE--1.8% Compania de Telecomunicaciones de Chile, ADR 1,800 (a) 25,344 Quinenco, ADR 4,200 (a) 31,710 57,054 CHINA--3.4% Guangshen Railway, Cl. H 89,000 16,203 PetroChina, ADR 1,100 22,440 Shangdong International Power Development, Cl. H 107,000 25,791 Sinopec Yizheng Chemical Fibre, Cl. H 77,000 16,584 Zhejiang Expressway, Cl. H 104,000 25,334 106,352 CROATIA--1.1% Pliva d.d., GDR 3,200 (b) 35,520 CZECH REPUBLIC--.6% Philip Morris CR 120 17,628 EGYPT--3.2% Commercial International Bank, GDR 3,300 (b) 28,710 Misr International Bank, GDR 4,400 (b) 21,450 Orascom Construction Industries 2,000 (a) 16,163 Paints & Chemicals Industries, GDR 6,300 (b) 9,293 Suez Cement, GDR 2,800 (b) 25,480 101,096 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ GREECE--1.7% Hellenic Telecommunications Organization 1,600 21,055 Hellenic Telecommunications Organization, ADR 5,300 33,973 55,028 HONG KONG--2.4% Brilliance China Automotive 49,000 11,937 CNOOC, ADR 800 15,160 China Pharmaceutical Enterprise and Investment 102,000 12,815 Hengan International 76,000 16,565 Mandarin Oriental International 22,000 11,660 Shanghai Industrial 4,000 7,078 75,215 HUNGARY--3.0% EGIS 680 23,459 MOL Magyar Olaj-es Gazipari 1,400 19,977 Magyar Tavkozlesi 5,300 15,514 OTP Bank 550 28,557 Pick Szeged 600 (a) 7,589 95,096 INDIA--11.1% BSES, GDR 1,950 (a,b) 26,325 Bajaj Auto, GDR 4,500 (a,b) 29,363 Gas Authority of India, GDR 4,700 (a,b) 40,772 Grasim Industries, GDR 2,100 (b) 16,800 ICICI, ADR 1,800 16,560 Indian Hotels, GDR 3,650 (a,b) 21,444 Mahanagar Telephone Nigam, GDR 11,450 (b) 64,120 Mahindra & Mahindra, GDR 10,550 (b) 20,309 State Bank of India, GDR 2,600 (b) 28,860 Tata Engineering & Locomotive, GDR 17,400 (b) 26,100 Videsh Sanchar Nigam, ADR 4,350 58,290 348,943 INDONESIA--2.4% PT Indah Kiat Pulp & Paper 376,500 (a) 12,231 PT Indofood Sukses Makmur 223,000 (a) 16,642 PT Indosat, ADR 2,500 22,375 PT Telekomunikasi Indonesia, ADR 4,300 23,908 75,156 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ISRAEL--3.5% AudioCodes 2,400 (a) 16,968 Bank Hapoalim 25,350 62,128 Blue Square-Israel, ADR 800 11,776 ECI Telecom 4,200 21,000 111,872 MALAYSIA--3.8% Berjaya Sports Toto 28,700 29,003 Genting 14,100 32,468 Malayan Banking 2,800 7,589 Perusahaan Otomobil Nasional 5,000 6,711 Petronas Gas 10,000 14,606 Sime Darby 29,000 30,222 120,599 MEXICO--9.6% Alfa, Ser. A 23,400 32,383 Apasco 6,000 31,884 Cemex 2,400 12,807 Consorcio ARA 10,300 17,104 Controladora Comercial Mexicana 8,500 7,933 Controladora Comercial Mexicana, GDR 600 11,040 Desc, Ser. B 81,800 35,771 Grupo Continental 13,300 19,362 Kimberly Clark de Mexico, Cl. A 20,800 61,737 Pepsi-Gemex, GDR 5,150 (a) 31,106 Telefonos de Mexico, ADR 1,200 42,108 303,235 PANAMA--1.1% Banco Latinoamericano de Exportaciones, Cl. E 900 33,093 PHILIPPINES--3.3% Bank of the Philippine Islands 3,800 5,291 La Tondera Distillers 12,500 6,437 Manila Electric, Cl. B 47,500 (a) 50,286 Philippine Long Distance Telephone, ADR 2,200 30,910 San Miguel 7,500 6,795 Universal Robina 44,000 4,364 104,083 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ POLAND--1.8% KGHM Polska Miedz 6,900 28,907 Polski Koncern Naftowy Orlen 4,000 17,855 Powszechny Bank Kredytowy 400 9,835 56,597 RUSSIA--.9% LUKOIL, ADR 550 29,081 SINGAPORE--.2% Golden Agri-Resources 96,000 (a) 7,372 SOUTH AFRICA--7.0% ABSA 5,700 26,791 Edgars Consolidated Stores 2,400 8,583 Foschini 15,900 13,822 Illovo Sugar 5,900 5,202 Metro Cash and Carry 108,924 21,777 Murray & Roberts 20,100 (a) 15,725 Nampak 29,000 41,595 Nedcor 1,000 19,496 Sage 10,500 10,431 Steinhoff International 8,700 7,022 Tiger Brands 3,900 30,318 Woolworths 44,100 19,715 220,477 SOUTH KOREA--10.0% H&CB, ADR 3,801 42,115 Kookmin Bank, GDR 3,100 (b) 41,075 Korea Electric Power, ADR 8,000 76,000 Korea Telecom, ADR 1,500 32,970 Pohang Iron & Steel, ADR 3,400 67,048 SK Telecom, ADR 1,400 23,660 Samsung Electronics, GDR 400 (b) 31,280 314,148 TAIWAN--6.1% Advanced Semiconductor Engineering 7,000 (a) 4,310 Advanced Semiconductor Engineering, ADR 5,400 (a) 16,470 China Steel 8,000 3,996 China Steel, GDR 2,040 20,400 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ TAIWAN (CONTINUED) Compal Electronics 4,109 22,357 D-Link, GDR 2,400 15,540 Elan Microelectronics 10,000 19,314 Nan Ya Plastic 30,000 30,323 Nien Hsing Textile 15,000 (a) 13,723 Standard Foods Taiwan, GDR 5,600 (b) 6,721 Taiwan Semiconductor Manufacturing 2,800 (a) 5,204 Taiwan Semiconductor Manufacturing, ADR 2,240 (a) 34,026 192,384 THAILAND--1.2% Saha-Union 32,000 9,804 Thai Farmers Bank 61,000 (a) 26,941 36,745 TURKEY--1.4% Akcansa Cimento 1,619,800 9,475 Hurriyet Gazetecilik ve Matbaacilik 3,723,216 (a) 7,652 Turkcell Iletisim Hizmetleri, ADR 3,677 (a) 10,296 Turk Ekonomi Bankasi, GDR 3,800 (a) 7,695 Yapi ve Kredit Bankasi 3,029,100 (a) 9,338 44,456 UNITED KINGDOM--.9% South African Breweries 3,700 28,415 TOTAL COMMON STOCKS (cost $3,029,469) 2,853,184 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--1.5% ------------------------------------------------------------------------------------------------------------------------------------ BRAZIL; Companhia Energetica de Minas Gerais (cost $46,681) 4,000 47,466 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $3,076,150) 91.9% 2,900,650 CASH AND RECEIVABLES (NET) 8.1% 255,842 NET ASSETS 100.0% 3,156,492 (A) NON-INCOME PRODUCING. (B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT JUNE 30, 2001, THESE SECURITIES AMOUNTED TO $473,622 OR 15.0% OF NET ASSETS. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 3,076,150 2,900,650 Cash 189,246 Cash denominated in foreign currencies 74,172 69,462 Receivable for investment securities sold 44,954 Dividends receivable 16,658 Prepaid expenses 4,622 Due from The Dreyfus Corporation and affiliates 1,949 3,227,541 -------------------------------------------------------------------------------- LIABILITIES ($): Payable for investment securities purchased 50,520 Payable for shares of Beneficial Interest redeemed 2 Accrued expenses 20,527 71,049 -------------------------------------------------------------------------------- NET ASSETS ($) 3,156,492 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 3,727,380 Accumulated undistributed investment income--net 22,665 Accumulated net realized gain (loss) on investments and foreign currency transactions (413,316) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4 (180,237) -------------------------------------------------------------------------------- NET ASSETS ($) 3,156,492 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 3,108,349 48,143 Shares Outstanding 327,902 5,080 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 9.48 9.48 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $3,270 foreign taxes withheld at source) 44,622 Interest 3,938 TOTAL INCOME 48,560 EXPENSES: Investment advisory fee--Note 3(a) 16,185 Custodian fees 20,175 Auditing fees 16,988 Prospectus and shareholders' reports 12,785 Trustees' fees and expenses--Note 3(c) 1,699 Legal fees 581 Registration fees 231 Distribution fees--Note 3(b) 37 Miscellaneous 3,522 TOTAL EXPENSES 72,203 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertaking--Note 3(a) (46,308) NET EXPENSES 25,895 INVESTMENT INCOME--NET 22,665 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (233,139) Net realized gain (loss) on forward currency exchange contracts (5,180) NET REALIZED GAIN (LOSS) (238,319) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 286,817 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 48,498 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 71,163 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 22,665 7,789 Net realized gain (loss) on investments (238,319) (174,972) Net unrealized appreciation (depreciation) on investments 286,817 (642,641) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 71,163 (809,824) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (13,002) Net realized gain on investments: Initial shares -- (1,920) TOTAL DIVIDENDS -- (14,922) ------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 2,876,583 2,060,851 Service shares 48,627 500 Dividends reinvested: Initial shares -- 14,922 Cost of shares redeemed: Initial shares (2,011,995) (1,260,453) Service shares (219) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 912,996 815,820 TOTAL INCREASE (DECREASE) IN NET ASSETS 984,159 (8,926) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 2,172,333 2,181,259 END OF PERIOD 3,156,492 2,172,333 Undistributed investment income--net 22,665 -- The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 302,457 194,080 Shares issued for dividends reinvested -- 1,429 Shares redeemed (209,963) (120,101) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 92,494 75,408 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 5,050 54 Shares redeemed (24) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 5,026 54 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ---------------------- INITIAL SHARES (Unaudited) 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.23 13.63 12.50 Investment Operations: Investment income--net .08(b) .04(b) .02 Net realized and unrealized gain (loss) on investments .17 (4.37) 1.11 Total from Investment Operations .25 (4.33) 1.13 Distributions: Dividends from investment income--net -- (.06) -- Dividends from net realized gain on investments -- (.01) -- Total Distributions -- (.07) -- Net asset value, end of period 9.48 9.23 13.63 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 2.71(c) (31.81) 9.04(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .99(c) 2.00 .09(c) Ratio of net investment income to average net assets .87(c) .36 .18(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.77(c) 1.86 1.51(c) Portfolio Turnover Rate 104.83(c) 123.49 .43(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 3,108 2,172 2,181 (A) FROM DECEMBER 15, 1999 (COOMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 9.23 9.23 Investment Operations: Investment income--net .08(b) -- Net realized and unrealized gain (loss) on investments .17 -- Total from Investment Operations .25 -- Net asset value, end of period 9.48 9.23 -------------------------------------------------------------------------------- TOTAL RETURN (%) 2.71(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .99(c) -- Ratio of net investment income to average net assets .83(c) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.87(c) -- Portfolio Turnover Rate 104.83(c) 123.49 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 48 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 Emerging Markets Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a non-diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in 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, 2001, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 161,123 Initial shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (A) PORTFOLIO VALUATION: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (B) FOREIGN CURRENCY TRANSACTIONS: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and pre- mium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $1,161 for the period ended June 30, 2001, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The fund has an unused capital loss carryover of appoximately $61,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $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, 2001, the portfolio did not borrow under the line of credit. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (A) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of 1.25% of the value of the portfolio's average daily net assets and is payable monthly. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fee and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of 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, 2001, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $46,308, 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, 2001, Service shares were charged $37 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, 2001, the portfolio was charged $50 pursuant to the transfer agency agreement. (C) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group").Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund' s Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2001, amounted to $3,332,547 and $2,431,474, respectively. At June 30, 2001, accumulated net unrealized depreciation on investments was $175,500, consisting of $146,443 gross unrealized appreciation and $321,943 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio For More Information Dreyfus Investment Portfolios, Emerging Markets Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 191SA0601 ================================================================================ Dreyfus Investment Portfolios, European Equity Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 9 Statement of Assets and Liabilities 10 Statement of Operations 11 Statement of Changes in Net Assets 13 Financial Highlights 15 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, European Equity Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, European Equity Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio managers, Joanna Bowen and Kieran Gallagher. While the first half of 2001 was difficult for the U.S. economy, weakness in many international economies was not as severe. What's more, we have recently seen signs that improvement in the U.S. may be in sight, which could lead to better conditions in Europe as well. The Federal Reserve Board's aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the U.S. economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth in the U.S., as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth in the U.S. later this year, and in Europe soon thereafter. Japan's economy remains mired in recession, however, despite the recent election of a reform-minded prime minister. In our view, the implications of this economic scenario may be positive for certain sectors of the international stock markets, especially for global companies that rely on exports to the United States. A stronger global economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies that were severely punished during the recent downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE Joanna Bowen and Kieran Gallagher, Portfolio Managers How did Dreyfus Investment Portfolios, European Equity Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, the portfolio produced total returns of -20.40% for its Initial shares and -20.00% for its Service shares.(1) For the same period, the Financial Times Eurotop 300 Index (the "Index"), the portfolio's benchmark, produced a total return of -16.45% in U.S. dollar terms.(2) We attribute the Index's and the portfolio's disappointing performance to an uncertain economic environment and disappointing corporate earnings reports. What is the portfolio's investment approach? The portfolio seeks to outperform the European stock market in U.S. dollar terms by investing primarily in the 300 largest European companies. We identify investment themes, such as the impact of new technologies, aging populations and the communications revolution, and invest in companies that we believe are best positioned to benefit from these trends. Within markets and sectors, we seek attractively priced companies that possess a sustainable competitive advantage. In addition, we attempt to identify and forecast key economic variables, such as gross domestic product, inflation and interest rates. What other factors influenced the portfolio's performance? An uncertain economic environment and challenging market conditions detracted from performance during the reporting period. However, our successful security selection strategy helped offset some of the effects of the market's weakness. Weakness in the U.S. economy appeared to have spread to European markets during the reporting period, especially those that rely heavily on exports to the United States. That slowdown was reflected in disappoint The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) ing corporate earnings reports for many European companies. Earnings-related concerns were intensified by slowing industrial production and higher energy prices. As a result, investor enthusiasm for stocks waned during the reporting period, particularly for technology-oriented companies that had previously reached unusually high valuations. In this environment, we adhered to our long-standing, theme-based security selection strategy. The portfolio received positive contributions from companies that we expect to benefit from our "erosion of pricing power" theme. The portfolio enjoyed favorable results from our focus on telecommunications companies that we believe have realistic business models and reasonable valuations. These included local communications providers in Portugal, Spain and Italy. We generally avoided regional telecommunication companies that, in our view, paid inflated prices for new frequency licenses at the top of the market. The portfolio also benefited from our emphasis on companies selling basic materials to industries, such as cement, industrial gases and oil. These stocks gained value against a backdrop of increasing industry consolidation and higher sales to "old economy" companies. On the other hand, the portfolio was adversely affected by price declines in its financial services holdings, which generally fell because of economic weakness and heightened market volatility. Fortunately, the portfolio held relatively few financial stocks during the reporting period and was able to avoid the brunt of those declines, especially among companies with substantial exposure to a weakening U.S. market. Our country allocation strategy remained relatively unchanged during the period, except for modestly greater exposure to Eastern European stocks that we believe represented attractive values. What is the portfolio's current strategy? We are currently optimistic about the prospects for Europe's economy and stock markets. In our view, prevailing inflation concerns should abate as energy prices moderate, enabling the European Central Bank to cut interest rates further and stimulate economic growth. The economy may be further supported by tax cuts in Germany and Italy, continued consumer spending and the positive effects of a relatively weak euro on exports. Accordingly, we have recently increased the portfolio's exposure to the service sector, where we have found companies that we believe are attractively valued. In our view, these companies' stock prices should recover if the economy -- and corporate profits -- recover. We have identified similar opportunities in a select group of retailers. On the other hand, we recently sold stocks that have reached their valuation targets, mostly in traditionally defensive industry groups such as pharmaceuticals. Regardless of portfolio adjustments during the reporting period, we remain committed to our theme-based investment strategy, as well as our focus on reasonably valued stocks with attractive long-term growth prospects. We believe that consistent adherence to our long-standing investment approach is the best way to achieve the portfolio's investment objectives over the long term. July 16, 2001 (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 FINANCIAL TIMES EUROTOP 300 INDEX IS A MARKET-CAPITALIZATION INDEX OF EUROPE'S 300 LARGEST COMPANIES. The Portfolio STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) COMMON STOCKS--97.7% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AUSTRIA--1.4% Erste Bank der oesterreichischen Sparkassen 8,100 404,637 BELGIUM--.5% Interbrew 5,300 142,191 Interbrew-VVPR Strips 7,000 (a) 59 142,250 CZECH REPUBLIC--1.4% Ceske Energeticke Zavody 113,200 253,690 Ceske Radiokomunikace 11,400 142,888 396,578 DENMARK--.7% ISS 3,500 (a) 205,156 FINLAND--1.8% Nokia 23,000 514,927 FRANCE--14.8% BNP Paribas 3,690 322,053 Business Objects 9,000 (a) 215,476 Elior 26,800 299,205 Generale de Sante 7,700 125,843 Lafarge 4,700 403,020 Pechiney, CL. A 11,400 580,716 Publicis Groupe 10,600 257,383 Rexel 5,700 331,492 TotalFinaElf 4,880 685,272 Vivendi Environnement 11,100 468,462 Vivendi Universal 7,900 461,784 4,228,135 GERMANY--10.3% AMB Aachener & Muenchener Beteiligungs 4,400 463,215 Altana 8,244 314,262 Deutsche Boerse 5,800 204,354 Deutsche Post 30,800 488,990 Fielmann 14,170 523,319 Muenchener Rueckversicherungs-Gesellschaft 2,260 636,062 Roesch Medizintechnik 5,900 (a) 51,093 Techem 10,300 (a) 260,592 2,941,887 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ IRELAND--1.2% Irish Life & Permanent 29,000 339,770 ITALY--7.1% Amplifon 7,400 151,410 Assicurazioni Generali 25,200 760,585 ENI 24,950 305,940 Telecom Italia 90,300 807,893 2,025,828 NETHERLANDS--8.8% Be Semiconductor Industries 53,900 (a) 356,937 Koninklijke Ahold 15,700 493,184 Koninklijke (Royal) Philips Electronics 24,400 648,605 PinkRoccade 2,200 80,315 Seagull Holding 17,200 (a) 69,947 Unit 4 Agresso 6,800 (a) 86,598 VNU 14,100 478,837 Vedior 33,100 300,690 2,515,113 NORWAY--.9% Statoil 33,300 246,544 PORTUGAL--1.9% Portugal Telecom 29,990 (a) 209,803 Portugal Telecom Rights 29,990 (a) 4,074 Telecel-Comunicacoes Pessoais 42,100 (a) 344,919 558,796 SPAIN--10.4% Aldeasa 21,342 443,381 Altadis 34,700 496,111 Aurea Concesiones de Infraestructuras del Estado 16,500 294,179 Banco Santander Central Hispano 76,100 691,315 Grupo Dragados 28,400 358,057 Industria de Diseno Textil 17,000 272,062 Telefonica 35,068 (a) 433,492 2,988,597 SWEDEN--.9% Nordea 47,600 271,732 SWITZERLAND--3.5% Roche Holding 5,700 411,065 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SWITZERLAND (CONTINUED) UBS 4,150 595,102 1,006,167 UNITED KINGDOM--32.1% BAE SYSTEMS 58,300 280,755 BP Amoco 111,800 924,204 Bank of Scotland 40,000 454,273 British Telecommunications 64,610 408,459 CGNU 21,000 291,954 Egg 167,000 (a) 374,358 GlaxoSmithKline 28,400 803,322 Hilton Group 102,000 344,778 Innovation Group 16,437 (a) 123,208 Liberty International 20,277 152,996 Marconi 84,800 303,430 Michael Page International 92,000 (a) 182,162 Northern Rock 43,000 351,510 Pearson 16,700 276,812 Prudential 66,100 804,908 Reuters Group 39,500 515,633 Shell Transport & Trading 97,500 814,955 Standard Chartered 58,100 748,576 Taylor Nelson Sofres 104,200 301,372 Vodafone Group 329,000 732,855 9,190,520 TOTAL COMMON STOCKS (cost $30,887,445) 27,976,637 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--1.3% ------------------------------------------------------------------------------------------------------------------------------------ GERMANY; Fresenius (cost $342,240) 4,000 378,654 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $31,229,685) 99.0% 28,355,291 CASH AND RECEIVABLES (NET) 1.0% 290,461 NET ASSETS 100.0% 28,645,752 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 31,229,685 28,355,291 Cash 242,167 Cash denominated in foreign currencies 333,273 333,273 Receivable for investment securities sold 516,158 Dividends receivable 52,930 Receivable for shares of Beneficial Interest subscribed 13,399 Net unrealized appreciation on forward currency exchange contracts--Note 4(a) 551 Prepaid expenses 2,512 29,516,281 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 20,565 Payable for investment securities purchased 466,553 Payable for shares of Beneficial Interest redeemed 362,299 Accrued expenses 21,112 870,529 -------------------------------------------------------------------------------- NET ASSETS ($) 28,645,752 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 35,286,321 Accumulated undistributed investment income--net 306,622 Accumulated net realized gain (loss) on investments and foreign currency transactions (4,066,514) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4(b) (2,880,677) -------------------------------------------------------------------------------- NET ASSETS ($) 28,645,752 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 28,460,380 185,372 Shares Outstanding 2,390,077 15,487 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 11.91 11.97 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $60,293 foreign taxes withheld at source) 458,695 Interest 21,348 TOTAL INCOME 480,043 EXPENSES: Investment advisory fee--Note 3(a) 159,350 Custodian fees 28,279 Auditing fees 12,188 Prospectus and shareholders' reports 11,926 Legal fees 8,335 Registration fees 1,102 Trustees' fees and expenses--Note 3(c) 386 Distribution fees--Note 3(b) 111 Loan commitment fees--Note 2 82 Shareholder servicing costs --Note 3(b) 65 Miscellaneous 4,496 TOTAL EXPENSES 226,320 Less--waiver of fees due to undertaking--Note 3(a) (27,134) NET EXPENSES 199,186 INVESTMENT INCOME--NET 280,857 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (1,923,113) Net realized gain (loss) on forward currency exchange contracts (160,237) Net realized gain (loss) on financial futures (257,445) NET REALIZED GAIN (LOSS) (2,340,795) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (4,359,261) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (6,700,056) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (6,419,199) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 280,857 124,688 Net realized gain (loss) on investments (2,340,795) (1,360,361) Net unrealized appreciation (depreciation) on investments (4,359,261) 833,543 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (6,419,199) (402,130) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (33,270) (66,235) Service shares (39) -- Net realized gain on investments: Initial shares -- (813,709) TOTAL DIVIDENDS (33,309) (879,944) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 101,817,560 109,246,347 Service shares 1,779,015 500 Dividends reinvested: Initial shares 33,270 879,944 Service shares 39 -- Cost of shares redeemed: Initial shares (97,626,266) (84,747,748) Service shares (1,594,421) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 4,409,197 25,379,043 TOTAL INCREASE (DECREASE) IN NET ASSETS (2,043,311) 24,096,969 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 30,689,063 6,592,094 END OF PERIOD 28,645,752 30,689,063 Undistributed investment income--net 306,622 59,074 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 7,618,938 6,963,909 Shares issued for dividends reinvested 2,655 56,000 Shares redeemed (7,280,489) (5,383,878) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 341,104 1,636,031 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 141,307 33 Shares issued for dividends reinvested 3 -- Shares redeemed (125,856) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 15,454 33 A EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ---------------------- INITIAL SHARES (Unaudited) 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.98 15.96 12.50 Investment Operations: Investment income--net .12(b) .10(b) .04(b) Net realized and unrealized gain (loss) on investments (3.18) (.37) 3.61 Total from Investment Operations (3.06) (.27) 3.65 Distributions: Dividends from investment income--net (.01) (.03) (.03) Dividends from net realized gain on investments -- (.68) (.16) Total Distributions (.01) (.71) (.19) Net asset value, end of period 11.91 14.98 15.96 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (20.40)(c) (2.00) 29.20(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .62(c) 1.27 1.01(c) Ratio of net investment income to average net assets .87(c) .62 .32(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .08(c) .33 2.38(c) Portfolio Turnover Rate 61.08(c) 144.74 99.89(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 28,460 30,689 6,592 (A) FROM APRIL 30, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 14.98 14.98 Investment Operations: Investment income--net .33(b) -- Net realized and unrealized gain (loss) on investments (3.33) -- Total from Investment Operations (3.00) -- Distributions: Dividends from investment income--net (.01) -- Net asset value, end of period 11.97 14.98 -------------------------------------------------------------------------------- TOTAL RETURN (%) (20.00)(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .58(c) -- Ratio of net investment income to average net assets 2.01(c) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .27(c) -- Portfolio Turnover Rate 61.08(c) 144.74 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 185 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 European Equity Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. which is a wholly-owned subsidiary of Mellon Financial Corporation. Newton Capital Management Limited ("Newton"), an affiliate of Dreyfus, serves as the portfolio's sub-investment adviser. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio receives net earnings credits based on available cash balances left on deposit. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2001, 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, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of taxes, brokerage fees, interest on borrowings, The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) commitment fees and extraordinary expenses, exceed an annual rate of 1.25% of the value of the average daily net assets of their class. During the period ended June 30, 2001, Dreyfus waived receipt of fees of $27,134, pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Newton, the sub-investment fee is payable monthly by Dreyfus, and is based upon the value of the portfolio's average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million. . . . . . . . . . . . . . . . . .35 of 1% In excess of $100 million to $1 billion. . . . . . .30 of 1% In excess of $1 billion to $1.5 billion. . . . . . .26 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2001, Service shares were charged $111 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, 2001, the portfolio was charged $65 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: (a) The aggregate amount of purchases and sales of investment securities, excluding short-term securities, forward currency exchange contracts and financial futures, during the period ended June 30, 2001, amounted to $22,983,163 and $18,690,383, respectively. The portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the portfolio is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counter party nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. The following summarizes open forward currency exchange contracts at June 30, 2001: The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) Foreign Unrealized Forward Currency Currency Appreciation/ Exchange Contracts Amounts Cost ($) Value ($) (Depreciation)($) ------------------------------------------------------------------------------------------------------------------------------------ PURCHASES: British Pounds, expiring 7/3/2001 120,530 169,466 170,466 1,000 Euro, expiring 7/2/2001 99,221 83,822 84,239 417 SALES: Proceeds ($) British Pounds, expiring 7/2/2001 59,880 83,822 84,688 (866) TOTAL 551
The portfolio may invest in financial futures contracts in order to gain exposure to or protect against changes in the market. The portfolio is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments in financial futures require the portfolio to "mark to market" on a daily basis, which reflects the change in the market value of the contract at the close of each day' s trading. Typically, variation margin payments are received or made to reflect daily unrealized gains or losses. When the contracts are closed, the portfolio recognizes a realized gain or loss. These investments require initial margin deposits with a custodian or broker, which consist of cash or cash equivalents, up to approximately 10% of the contract amount. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. At June 30, 2001, there were no financial futures contracts outstanding. (b) At June 30, 2001, accumulated net unrealized depreciation on investments and forward currency exchange contracts was $2,873,843, consisting of $1,607,653 gross unrealized appreciation and $4,481,496 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). For More Information Dreyfus Investment Portfolios, European Equity Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Newton Capital Management Limited 71 Queen Victoria Street London, EC4V 4DR England Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 181SA0601 ================================================================================ Dreyfus Investment Portfolios, Founders Discovery Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 15 Financial Highlights 17 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Discovery Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Founders Discovery Portfolio covering the six-month period from January 1, 2001 through June 30, 2001. 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. While the first half of 2001 was difficult for the U.S. economy, we have recently seen signs that economic improvement may be in sight. The Federal Reserve Board' s aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth, as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth later this year. In our view, the implications of this economic scenario may be positive for the stock market. Better economic times generally tend to lead to increased sales and profits for many companies, especially those that are sensitive to changes in the economic cycle. A stronger economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies whose valuations dropped during the recent economic downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE Robert Ammann, CFA, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders Discovery Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, Dreyfus Investment Portfolios, Founders Discovery Portfolio produced total returns of -9.47% for its Initial shares and -9.55% for its Service shares.(1) In comparison, the Russell 2000 Index, the portfolio' s benchmark, and the Russell 2000 Growth Index produced total returns of 6.94% and 0.04%, respectively, for the same period.(2) Because the portfolio currently focuses primarily on small-cap growth stocks, we believe that the Russell 2000 Growth Index is also an accurate measure of the portfolio's performance for comparison purposes. We attribute the portfolio's lagging absolute performance to a stock market environment that favored the value style of investing over the growth style during most of the reporting period. In this environment, many of the portfolio's growth-oriented holdings suffered declines. As the portfolio's benchmark does not favor any one investment style, the portfolio underperformed its benchmark. In addition, our stock selection strategy within the technology group primarily caused the portfolio to produce lower returns than the Russell 2000 Growth Index. What is the portfolio's investment approach? The portfolio invests primarily in equity securities of small and relatively unknown U.S.-based companies that we believe possess high growth potential. Typically, these companies are not listed on national securities exchanges but instead trade on the over-the-counter market. The portfolio may also invest in larger companies if, in our opinion, they represent better prospects for capital appreciation. Although the portfolio will normally invest in common stocks of U.S.-based companies, it may invest up to 30% of its total assets in foreign securities. Rather than utilizing a "top-down" approach to stock selection, which relies on forecasting stock market trends, we focus on a "bottom-up" The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) 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? Declines in technology stocks contributed significantly to the portfolio's negative return during the reporting period. As a group, technology stocks fell sharply amid investors' concerns over high inventory levels, high corporate debt levels and a slowdown in corporate spending. In response, we reduced some of the portfolio's technology holdings and, in other cases, eliminated entire positions within this sector. While we retained quite a few of the portfolio's technology holdings, we kept only stocks of companies with sound fundamentals and valuations that, in our opinion, had already reached their lows. In most cases, those stocks bounced back and contributed positively to the portfolio's performance during the second half of the reporting period. Disappointing results from several of the portfolio's health care holdings, most notably Albany Molecular Research, also contributed to its disappointing performance during the reporting period. The company provides contract chemistry services, hiring chemists to conduct research for large biotechnology and pharmaceutical companies. These chemists are trying to develop new drugs through the human genome project that could contribute to cures for a number of long-standing diseases. In addition, Albany Molecular Research collects a royalty on Allegra, the antihistamine drug, and on its sales both in the U.S. and abroad. The stock recently suffered over concerns that Allegra may soon be sold over the counter, which could drive prices down and hurt Albany Molecular Research's royalties on Allegra and the company's profits. Several areas among the portfolio's holdings provided positive returns during the reporting period. In the consumer area, spending remained strong despite rising unemployment. As a result, most of the portfolio' s holdings in restaurants generally posted very strong results, perhaps because individuals consider dining out as an alternative to more expensive forms of entertainment, such as travel and the arts. Digital consumer electronics companies and the rent-to-own furniture and appliance businesses also benefited from strong consumer spending and as a result many of the portfolio's holdings in these areas also produced strong results. What is the portfolio's current strategy? As bottom-up stock pickers, we continue to select investments one stock at a time, based on their individual merits and generally without regard to their industry groups. We currently seek small-cap companies that we believe have an entrepreneurial vision and the discipline of a large company. We are currently finding fewer such companies in the beaten down technology industry group and we are therefore maintaining the portfolio's exposure to technology at a slightly lower level than that of the Russell 2000 Growth Index. We believe that the earnings outlook for small-cap technology companies over the near term is simply too uncertain. Exceptions, in our view, are companies that specialize in security technology, including firewall, virtual private networking (VPN) and content filtering services. We believe that companies in these areas have earnings potential because corporations generally will first cut spending in other, less critical information technology areas. July 16, 2001 (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, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE RUSSELL 2000 INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCK MARKET PERFORMANCE AND IS COMPOSED OF THE 2,000 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE RUSSELL 3000 INDEX IS COMPOSED OF THE 3,000 LARGEST U.S. COMPANIES BASED ON TOTAL MARKET CAPITALIZATION. THE RUSSELL 2000 GROWTH INDEX IS AN UNMANAGED INDEX WHICH MEASURES THE PERFORMANCE OF THOSE RUSSELL 2000 COMPANIES WITH LOWER PRICE-TO-BOOK RATIOS AND LOWER FORECASTED GROWTH VALUES. The Portfolio STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) COMMON STOCKS--87.2% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ BANKS--.5% Southwest Bancorporation of Texas 3,240 (a) 97,880 BIOTECHNOLOGY--2.1% Celgene 2,789 (a) 80,463 Cephalon 2,380 (a) 167,790 Medarex 1,480 (a) 34,780 Myriad Genetics 670 (a) 42,424 OSI Pharmaceuticals 890 (a) 46,805 372,262 BROADCASTING--1.8% Mediacom Communications 8,120 (a) 143,399 Radio One, Cl. D 8,090 (a) 178,385 321,784 COMMUNICATION EQUIPMENT--7.0% DMC Stratex Networks 28,672 (a) 286,720 Harris 10,006 272,263 REMEC 18,028 (a) 223,547 Sawtek 3,430 (a) 80,708 SonicWALL 15,180 (a) 382,688 1,245,926 COMPUTERS--7.4% BARRA 3,010 (a) 122,146 Documentum 10,410 (a) 134,497 Eclipsys 5,150 (a) 123,600 Informatica 2,690 (a) 46,698 Internet Security Systems 1,450 (a) 70,412 IntraNet Solutions 3,850 (a) 146,492 Macrovision 3,926 (a) 268,931 Netegrity 2,030 (a) 60,900 Novatel Wireless 8,040 16,321 Secure Computing 10,171 (a) 159,786 SeeBeyond Technology 6,230 (a) 99,057 WebEx Communications 2,520 67,183 1,316,023 DISTRIBUTORS--1.2% Patterson Dental 1,692 (a) 55,836 Performance Food Group 5,060 (a) 152,964 208,800 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT--1.1% DDi 8,200 (a) 164,000 Proton Energy Systems 3,370 40,440 204,440 ELECTRONICS--4.7% AXT 8,971 (a) 239,526 Centillium Communications 3,340 (a) 82,632 Cree 2,924 (a) 76,448 FEI 2,360 (a) 96,760 Ixia 5,980 113,620 MKS Instruments 2,060 (a) 59,328 Microtune 7,800 171,600 839,914 ENGINEERING & CONSTRUCTION--3.1% Dycom Industries 6,140 (a) 140,790 Jacobs Engineering Group 1,930 (a) 125,894 MasTec 5,910 (a) 78,012 Quanta Services 9,113 (a) 200,851 545,547 FOOTWEAR--.4% Timberland, Cl. A 1,930 (a) 76,254 HEALTH CARE--16.2% Accredo Health 9,297 (a) 345,755 Albany Molecular Research 3,998 (a) 151,964 Align Technology 5,570 43,669 Alpharma, Cl. A 1,460 39,785 CIMA Labs 1,280 (a) 100,480 Community Health Systems 5,520 (a) 162,840 Cytyc 19,760 (a) 455,468 First Health Group 4,600 (a) 110,952 LifePoint Hospitals 5,220 (a) 231,142 Medicis Pharmaceutical, Cl. A 5,000 (a) 265,000 Professional Detailing 3,510 (a) 322,920 Province Healthcare 2,430 (a) 85,755 SICOR 5,280 (a) 121,968 Taro Pharmaceutical Industries 5,200 (a) 455,312 2,893,010 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HOMEBUILDING--.1% Odyssey Re Holdings 1,000 18,070 LEISURE TIME--.8% Garmin 6,060 138,471 LODGING--1.7% Hotel Reservations Network, Cl. A 6,590 (a) 306,633 MACHINERY--.0% Global Power Equipment Group 240 7,032 MANUFACTURING--2.3% AstroPower 3,474 (a) 181,134 Insituform Technologies, Cl. A 2,255 (a) 82,307 Optimal Robotics 1,102 (a) 41,876 Stewart & Stevenson Services 3,180 104,940 410,257 METAL FABRICATORS--3.4% Lone Star Technologies 7,360 (a) 266,432 Shaw Group 8,550 (a) 342,855 609,287 OIL & GAS--4.4% Cal Dive International 4,890 (a) 120,294 Core Laboratories 9,398 (a) 176,213 Hanover Compressor 3,840 (a) 127,066 National-Oilwell 4,384 (a) 117,491 Patterson-UTI Energy 1,660 (a) 29,664 Superior Energy Services 4,860 (a) 38,394 Veritas DGC 6,476 (a) 179,709 788,831 RESTAURANTS--2.8% CEC Entertainment 6,140 (a) 303,009 Ruby Tuesday 11,610 198,531 501,540 RETAIL--8.7% American Eagle Outfitters 4,720 (a) 166,333 CDW Computer Centers 4,132 (a) 164,082 Cost Plus 4,580 (a) 137,400 Duane Reade 4,610 (a) 149,825 Fastenal 2,760 171,065 Insight Enterprises 15,448 (a) 378,476 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ RETAIL (CONTINUED) Tech Data 2,030 (a) 67,721 Tweeter Home Entertainment Group 4,138 (a) 146,071 Ultimate Electronics 2,938 (a) 95,250 Whole Foods Market 3,080 (a) 83,468 1,559,691 SEMICONDUCTORS & EQUIPMENT--2.4% Brooks Automation 859 (a) 39,600 EMCORE 5,404 (a) 166,173 Mattson Technology 4,980 (a) 87,050 PRI Automation 3,580 (a) 66,319 Therma-Wave 3,438 (a) 65,563 424,705 SERVICES--10.4% Braun Consulting 7,821 (a) 62,959 Corinthian Colleges 5,170 (a) 243,352 Corporate Executive Board 4,816 (a) 202,272 Education Management 5,280 (a) 211,464 ITT Educational Services 4,810 (a) 216,450 Keane 3,920 (a) 86,240 MAXIMUS 3,010 (a) 120,671 Management Network Group 6,429 (a) 39,217 Rent-A-Center 8,860 (a) 466,036 Strayer Education 2,770 135,038 Titan 3,480 (a) 79,692 1,863,391 TELECOMMUNICATIONS--.9% Illuminet Holdings 5,100 (a) 160,395 TRUCKERS--2.1% C.H. Robinson Worldwide 8,728 243,424 CNF 1,920 54,240 USFreightways 2,510 74,045 371,709 WASTE MANAGEMENT--1.7% Stericycle 4,460 (a) 209,397 Waste Connections 2,670 (a) 96,120 305,517 TOTAL COMMON STOCKS (cost $14,679,121) 15,587,369 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal SHORT-TERM INVESTMENTS--12.9% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCY NOTES; Federal National Mortgage Association, 3.94%, 7/2/2001 (cost $2,299,748) 2,300,000 2,299,748 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $16,978,869) 100.1% 17,887,117 LIABILITIES, LESS CASH AND RECEIVABLES (.1%) (18,911) NET ASSETS 100.0% 17,868,206 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 16,978,869 17,887,117 Cash 85,625 Receivable for investment securities sold 126,930 Dividends receivable 671 Prepaid expenses 22 18,100,365 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 4,664 Payable for investment securities purchased 206,272 Payable for shares of Beneficial Interest redeemed 728 Accrued expenses 20,495 232,159 -------------------------------------------------------------------------------- NET ASSETS ($) 17,868,206 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 22,231,359 Accumulated investment (loss) (46,420) Accumulated net realized gain (loss) on investments (5,224,981) Accumulated net unrealized appreciation (depreciation) on investments--Note 4 908,248 -------------------------------------------------------------------------------- NET ASSETS ($) 17,868,206 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 16,486,996 1,381,210 Shares Outstanding 1,512,346 126,863 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 10.90 10.89 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 56,685 Cash dividends 4,747 TOTAL INCOME 61,432 EXPENSES: Investment advisory fee--Note 3(a) 67,006 Prospectus and shareholders' reports 25,920 Auditing fees 13,253 Custodian fees--Note 3(b) 10,860 Legal fees 2,506 Registration fees 1,286 Distribution fees--Note 3(b) 641 Trustees' fees and expenses--Note 3(c) 88 Loan commitment fees--Note 2 39 Shareholder servicing costs --Note 3(b) 17 Miscellaneous 737 TOTAL EXPENSES 122,353 Less--waiver of fees due to undertaking--Note 3(a) (14,501) NET EXPENSES 107,852 INVESTMENT (LOSS) (46,420) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (3,168,937) Net unrealized appreciation (depreciation) on investments 1,978,792 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1,190,145) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,236,565) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (46,420) (44,229) Net realized gain (loss) on investments (3,168,937) (2,053,587) Net unrealized appreciation (depreciation) on investments 1,978,792 (1,286,267) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,236,565) (3,384,083) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (1,280) Net realized gain on investments: Initial shares -- (8,320) TOTAL DIVIDENDS -- (9,600) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 4,448,702 17,975,727 Service shares 1,406,468 500 Dividends reinvested: Initial shares -- 9,600 Cost of shares redeemed: Initial shares (638,358) (2,854,260) Service shares (72,725) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 5,144,087 15,131,567 TOTAL INCREASE (DECREASE) IN NET ASSETS 3,907,522 11,737,884 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 13,960,684 2,222,800 END OF PERIOD 17,868,206 13,960,684 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 414,656 1,230,488 Shares issued for dividends reinvested -- 554 Shares redeemed (62,251) (231,101) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 352,405 999,941 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 133,936 42 Shares redeemed (7,115) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 126,821 42 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ---------------------------- INITIAL SHARES (Unaudited) 2000 1999(a) ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 12.04 13.89 12.50 Investment Operations: Investment income (loss)--net (.03)(b) (.08)(b) .01 Net realized and unrealized gain (loss) on investments (1.11) (1.71) 1.38 Total from Investment Operations (1.14) (1.79) 1.39 Distributions: Dividends from investment income--net -- (.01) -- Dividends from net realized gain on investments -- (.05) -- Total Distributions -- (.06) -- Net asset value, end of period 10.90 12.04 13.89 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (9.47)(c) (13.02) 11.12(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .72(c) 1.41 .07(c) Ratio of net investment income (loss) to average net assets (.31)(c) (.60) .06(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .09(c) .52 1.45(c) Portfolio Turnover Rate 57.65(c) 123.96 7.49(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 16,487 13,960 2,223 (A) FROM DECEMBER 15, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 12.04 12.04 Investment Operations: Investment (loss)--net (.04)(b) -- Net realized and unrealized gain (loss) on investments (1.11) -- Total from Investment Operations (1.15) -- Net asset value, end of period 10.89 12.04 -------------------------------------------------------------------------------- TOTAL RETURN (%) (9.55)(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(c) -- Ratio of net investment (loss) to average net assets (.37)(c) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .33(c) -- Portfolio Turnover Rate 57.65(c) 123.96 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 1,381 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 Discovery Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is capital appreciation. The Dreyfus Corporation ("Dreyfus") serves as the portfolio' s investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Founders Asset Management LLC ("Founders") serves as the portfolio's sub-investment adviser. Founders is a 90%-owned subsidiary of Mellon. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations, expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (B) FOREIGN CURRENCY TRANSACTIONS: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $1,832 during the period ended June 30, 2001 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (E) FEDERAL INCOME TAXES: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $1,025,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) 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, 2001, the portfolio did not borrow under the Facility. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates: (A) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .90 of 1% of the value of the portfolio' s average daily net assets and is payable monthly. Dreyfus has agreed, until December 31 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of 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, 2001, Dreyfus waived receipt of fees of $14,501, pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Founders, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio's average daily net assets, computed at the following annual rates: AVERAGE NET ASSETS 0 to $100 million. . . . . . . . . . . . . . . . . .25 of 1% In excess of $100 million to $1 billion. . . . . . .20 of 1% In excess of $1 billion to $1.5 billion. . . . . . .16 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .10 of 1% (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2001, Service shares were charged $641 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, 2001, the portfolio was charged $17 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, 2001, the portfolio was charged $10,860 pursuant to the custody agreement. (C) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2001, amounted to $11,865,550 and $7,482,399, respectively. At June 30, 2001, accumulated net unrealized appreciation on investments was $908,248, consisting of $2,350,308 gross unrealized appreciation and $1,442,060 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio For More Information Dreyfus Investment Portfolios, Founders Discovery Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 193SA0601 ================================================================================ Dreyfus Investment Portfolios, Founders Growth Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 15 Financial Highlights 17 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Growth Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We are pleased to present this semiannual report for Dreyfus Investment Portfolios, Founders Growth Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio managers, Scott Chapman, CFA and Thomas Arrington, CFA of Founders Asset Management LLC, the portfolio's sub-investment adviser. While the first half of 2001 was difficult for the U.S. economy, we have recently seen signs that improvement may be in sight. The Federal Reserve Board' s aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth, as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth later this year. In our view, the implications of this economic scenario may be positive for the stock market. Better economic times generally tend to lead to increased sales and profits for many companies, especially those that are sensitive to changes in the economic cycle. A stronger economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies whose valuations dropped during the recent economic downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE Scott Chapman, CFA and Thomas Arrington, CFA, Portfolio Managers Founders Asset Management LLC, Sub-Investment Adviser. How did Dreyfus Investment Portfolios, Founders Growth Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, Dreyfus Investment Portfolios, Founders Growth Portfolio produced a total return of -16.90% for its Initial shares and its Service shares.(1) In comparison, the Standard & Poor's 500/BARRA Growth Index (the "Index"), the portfolio's benchmark, produced a total return of -11.04% for the same period.(2) We attribute the Index' s and the portfolio' s disappointing returns to a difficult investment environment for growth-oriented stocks during the reporting period. Corporate profits remained sluggish, taking a particularly harsh toll on stocks of growth-oriented companies. We attribute the portfolio's lagging performance relative to the Index to poor results from technology and telecommunications companies, which comprised a larger portion of the portfolio than the Index. What is the portfolio's investment approach? The portfolio invests primarily in large, well-managed growth companies whose performance is not entirely dependent upon the fortunes of the economy. Utilizing a bottom-up approach, we focus on individual stock selection rather than on forecasting stock market trends. We look for high quality, proven companies with an established track record of sustained earnings growth in excess of industry averages. The companies we select must have a sustainable competitive advantage, such as a dominant brand name, a high barrier to entry from competition and/or large untapped market opportunities. Rather than having a short-term focus on next quarter' s profits, we look at a company for its long-term potential and its earning power over the next three to five years. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) What other factors influenced the portfolio's performance? Growth-oriented stocks generally remained out of favor during the reporting period. Value-oriented stocks performed well during this time, benefiting from strong performance in such areas as aerospace, commodities and basic materials. Although value stocks generally outperformed growth stocks during the period, growth stocks rallied in April and May as investors hoped that the Federal Reserve Board's interest-rate cuts would jump-start the economy. However, growth stocks were unable to sustain much momentum, primarily because corporate sales and profits remained disappointing. For growth stocks to advance, it is generally not enough for the economy merely to avoid a recession. Instead, profit growth must accelerate in order for investors to pay the high prices normally associated with growth stocks. Profits were particularly hard-hit in the technology and telecommunications industries, which suffered from sluggish sales and too much manufacturing capacity after years of overinvestment. The most disappointing among companies which detracted from the portfolio's performance during the reporting period were the leaders of the bull market from 1997 through 2000, such as Cisco Systems, Nokia, Oracle and Sun Microsystems. One pleasant surprise was Microsoft, which performed well during the reporting period as it became increasingly likely that a federal judge's order to break up the company would be reversed on appeal. In addition, the company's new Windows XP operating system is expected to boost revenues after its scheduled release later this year. Microsoft comprised nearly 5% of the portfolio's holdings during the reporting period; however, it accounted for an even greater percentage of the Index, one of the factors that caused the portfolio's performance to lag behind that of the Index. Another positive contributor to the portfolio's performance during the reporting period was the media group, which benefited from expectations that the economy may improve later this year. Media companies such as AOL Time Warner, Clear Channel Communications and Viacom generate profits primarily from the sale of advertising, which is very sen- sitive to economic growth. AOL Time Warner is one of the largest media companies in the world, with a leading presence in publishing, the Internet and the movie industry. Clear Channel currently has the world's largest market share in radio stations and outdoor advertising, while Viacom owns Paramount Studios, MTV Networks and CBS. Because of falling interest rates, certain financial services stocks among the portfolio's holdings performed well, including Citigroup and Fifth Third Bancorp. Banks often do well when interest rates fall, because they can often improve profits when their cost of funds falls more quickly than the interest rates they charge borrowers. What is the portfolio's current strategy? The portfolio currently continues to emphasize large- and mid-capitalization growth companies that provide a demonstrated track record of sustainable earnings growth along with what we believe are considerable competitive advantages. Although the performance of some of these investments has been disappointing of late, we believe we have chosen stocks that will endure over the long term. Despite the marketplace's current preference for value stocks over growth stocks, we believe that long-term profitability and not short-term changes in investor sentiment drives stock prices. Rather than reacting to quarter-to-quarter volatility, our current strategy is to continue to invest in companies that we believe have excellent growth prospects over the long term. July 16, 2001 (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, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD AND POOR'S 500/BARRA GROWTH INDEX IS A CAPITALIZATION-WEIGHTED INDEX OF ALL THE STOCKS IN THE STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX 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, 2001 (Unaudited) COMMON STOCKS--86.8% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AEROSPACE & ELECTRONICS--.9% Boeing 4,604 255,982 ALUMINUM--.6% Alcoa 4,727 186,244 BANKING--1.7% Fifth Third Bancorp 4,545 272,927 Northern Trust 2,251 140,688 State Street 2,138 105,810 519,425 BEVERAGES--.7% PepsiCo 4,983 220,249 BIOTECHNOLOGY--2.1% Amgen 3,056 (a) 185,438 Biogen 3,678 (a) 199,936 Gilead Sciences 872 (a) 50,742 Human Genome Sciences 2,373 (a) 142,973 IDEC Pharmaceuticals 654 (a) 44,269 623,358 BROADCASTING--3.4% AT&T - Liberty Media Group, Cl. A 7,483 (a) 130,878 Clear Channel Communications 11,171 (a) 700,422 Comcast, Cl. A 4,286 (a) 186,012 1,017,312 BUILDING MATERIALS--.2% Masco 2,422 60,453 COMMUNICATIONS EQUIPMENT--3.0% Comverse Technology 2,953 (a) 170,152 Nokia, ADR 21,413 471,943 QUALCOMM 4,578 (a) 267,721 909,816 COMPUTERS--16.8% Adobe Systems 8,183 384,601 BEA Systems 1,687 (a) 51,808 Brocade Communications Systems 1,862 (a) 81,909 Checkpoint Software Technologies 5,392 (a) 272,673 Cisco Systems 13,042 (a) 237,364 Dell Computer 14,382 (a) 373,213 EMC 9,292 (a) 269,933 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMPUTERS (CONTINUED) Hewlett-Packard 9,186 262,720 International Business Machines 8,210 927,730 Juniper Networks 1,645 (a) 51,159 Mercury Interactive 1,019 (a) 61,038 Microsoft 19,242 (a) 1,396,969 Oracle 9,962 (a) 189,278 PeopleSoft 1,627 (a) 80,097 Sun Microsystems 5,965 (a) 93,770 Veritas Software 4,286 (a) 285,148 5,019,410 CONSUMER FINANCE--.6% MBNA 5,144 169,495 ELECTRICAL EQUIPMENT--4.6% General Electric 24,864 1,212,120 Solectron 9,596 (a) 175,607 1,387,727 ELECTRONICS--6.5% Advanced Micro Devices 7,471 (a) 215,762 Applera -- Applied Biosystems Group 1,593 42,613 Altera 5,149 (a) 149,321 Intel 20,365 595,676 Linear Technology 3,524 155,831 Micron Technology 6,042 (a) 248,326 Texas Instruments 14,616 460,404 Waters 3,138 (a) 86,640 1,954,573 ENTERTAINMENT--6.9% AOL Time Warner 27,801 1,473,453 Viacom, Cl. B 6,859 (a) 354,953 Walt Disney 7,989 230,802 2,059,208 EQUIPMENT--.7% Applied Materials 4,241 (a) 208,233 FINANCIAL--4.5% American Express 7,328 284,326 Citigroup 10,249 541,557 Franklin Resources 5,165 236,402 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL (CONTINUED) Goldman Sachs Group 1,617 138,738 Merrill Lynch 1,212 71,811 Morgan Stanley Dean Witter & Co. 1,230 79,003 1,351,837 FOOTWEAR--.3% NIKE, Cl. B 1,850 77,681 HEALTH CARE--14.0% Abbott Laboratories 3,998 191,944 American Home Products 5,782 337,900 Baxter International 2,989 146,461 Becton, Dickinson & Co. 4,605 164,813 Bristol-Myers Squibb 6,636 347,063 Eli Lilly & Co. 2,986 220,964 Genentech 4,306 (a) 237,260 Johnson & Johnson 11,470 573,500 Medtronic 3,841 176,724 Pfizer 23,121 925,996 Pharmacia 5,670 260,537 Shire Pharmaceuticals Group, ADR 1,667 (a) 92,519 Tenet Healthcare 5,574 (a) 287,563 UnitedHealth Group 3,689 227,796 4,191,040 HOUSEHOLD PRODUCTS--.5% Colgate-Palmolive 2,674 157,739 INSURANCE--3.9% American International Group 5,489 472,054 Berkshire Hathaway, Cl. B 235 (a) 540,500 Marsh & McLennan Cos. 1,562 157,762 1,170,316 LEISURE TIME--.9% Harley-Davidson 3,025 142,417 Mattel 7,277 137,681 280,098 MANUFACTURING--3.5% Tyco International 16,753 913,039 United Technologies 1,803 132,088 1,045,127 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ NATURAL GAS--.5% El Paso 2,151 113,014 Enron 955 46,795 159,809 OIL AND GAS--.7% Anadarko Petroleum 1,987 107,358 Smith International 1,585 (a) 94,942 202,300 POWER PRODUCER--.3% Dynegy, Cl. A 1,622 75,423 PUBLISHING--.3% Gannett 1,333 87,845 RETAIL--3.5% CVS 1,770 68,322 Costco Wholesale 1,901 (a) 78,093 Home Depot 3,844 178,938 Kohl's 1,769 (a) 110,969 Safeway 3,304 (a) 158,592 Wal-Mart Stores 9,442 460,770 1,055,684 SERVICES--2.5% Automatic Data Processing 2,563 127,381 Concord EFS 2,825 (a) 146,928 DeVry 6,665 (a) 240,740 Interpublic Group 1,647 48,339 Omnicom Group 2,230 191,780 755,168 TELECOMMUNICATIONS--.4% WorldCom Inc - WorldCom Group 8,812 (a) 131,828 TELEPHONE--.6% Qwest Communications International 1,988 63,358 TyCom 7,406 (a) 127,383 190,741 TOBACCO--1.7% Philip Morris 9,779 496,284 TOTAL COMMON STOCKS (cost $25,615,384) 26,020,405 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal SHORT-TERM INVESTMENTS--13.8% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTE; Federal National Mortgage Association, 3.94%, 7/2/2001 (cost $4,119,549) 4,120,000 4,119,549 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $29,734,933) 100.6% 30,139,954 LIABILITIES, LESS CASH AND RECEIVABLES (.6%) (180,557) NET ASSETS 100.0% 29,959,397 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 29,734,933 30,139,954 Cash 25,944 Receivable for investment securities sold 279,612 Dividends receivable 10,655 Prepaid expenses 2,608 30,458,773 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 18,778 Payable for investment securities purchased 461,279 Accrued expenses 19,319 499,376 -------------------------------------------------------------------------------- NET ASSETS ($) 29,959,397 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 41,665,834 Accumulated undistributed investment income--net 15,450 Accumulated net realized gain (loss) on investments (12,126,908) Accumulated net unrealized appreciation (depreciation) on investments--Note 4 405,021 -------------------------------------------------------------------------------- NET ASSETS ($) 29,959,397 NET ASSET VALUE PER SHARE Initial Shares Service Shares ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 28,166,735 1,792,662 Shares Outstanding 2,302,442 146,616 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 12.23 12.23 SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 90,019 Cash dividends 69,475 TOTAL INCOME 159,494 EXPENSES: Investment advisory fee--Note 3(a) 108,351 Auditing fees 19,829 Prospectus and shareholders' reports 13,881 Custodian fees--Note 3(b) 11,329 Legal fees 6,644 Registration fees 1,689 Trustees' fees and expenses--Note 3(c) 1,657 Distribution fees--Note 3(b) 924 Shareholder servicing costs--Note 3(b) 133 Loan commitment fees--Note 2 116 Miscellaneous 434 TOTAL EXPENSES 164,987 Less--waiver of fees due to undertaking--Note 3(a) (21,255) NET EXPENSES 143,732 INVESTMENT INCOME--NET 15,762 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (6,801,789) Net unrealized appreciation (depreciation) on investments 1,429,851 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (5,371,938) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,356,176) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 15,762 21,916 Net realized gain (loss) on investments (6,801,789) (5,268,122) Net unrealized appreciation (depreciation) on investments 1,429,851 (2,998,632) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,356,176) (8,244,838) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (21,791) -- Service shares (437) -- Net realized gain on investments: Initial shares -- (86,561) TOTAL DIVIDENDS (22,228) (86,561) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 5,683,551 34,634,389 Service shares 1,903,708 250 Dividends reinvested: Initial shares 21,791 86,561 Service shares 437 -- Cost of shares redeemed: Initial shares (808,241) (5,291,644) Service shares (46,371) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 6,754,875 29,429,556 TOTAL INCREASE (DECREASE) IN NET ASSETS 1,376,471 21,098,157 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 28,582,926 7,484,769 END OF PERIOD 29,959,397 28,582,926 Undistributed investment income--net 15,450 21,916 The Portfolio STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 422,625 1,841,798 Shares issued for dividends reinvested 1,834 4,166 Shares redeemed (62,430) (282,279) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 362,029 1,563,685 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 150,290 17 Shares issued for dividends reinvested 37 -- Shares redeemed (3,728) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 146,599 17 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ------------------------------------------ INITIAL SHARES (Unaudited) 2000 1999 1998(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.73 19.87 15.90 12.50 Investment Operations: Investment income--net .01(b) .02(b) (.02)(b) .01 Net realized and unrealized gain (loss) on investments (2.50) (5.03) 5.79 3.39 Total from Investment Operations (2.49) (5.01) 5.77 3.40 Distributions: Dividends from investment income--net (.01) -- (.01) -- Dividends from net realized gain on investments -- (.13) (1.79) -- Total Distributions (.01) (.13) (1.80) -- Net asset value, end of period 12.23 14.73 19.87 15.90 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (16.90)(c) (25.40) 39.01 27.20(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .49(c) .97 1.00 .25(c) Ratio of net investment income to average net assets .06(c) .11 (.11) .05(c Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .07(c) .11 1.33 .31(c) Portfolio Turnover Rate 98.30(c) 171.96 115.08 75.65(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 28,167 28,583 7,485 2,544 (A) FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 14.73 14.73 Investment Operations: Investment income--net .00(b,c) -- Net realized and unrealized gain (loss) on investments (2.49) -- Total from Investment Operations (2.49) -- Distributions: Dividends from investment income--net (.01) -- Net asset value, end of period 12.23 14.73 -------------------------------------------------------------------------------- TOTAL RETURN (%) (16.90)(d) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .50(d) -- Ratio of net investment income to average net assets .00(d,e) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .25(d) -- Portfolio Turnover Rate 98.30(d) 171.96 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 1,793 --(f) (A) THE PORTFOLIO COMMENCED OFFERING SERVICE SHARES ON DECEMBER 31, 2000. (B) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (D) NOT ANNUALIZED. (E) AMOUNT REPRESENTS LESS THAN .01%. (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 direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Founders Asset Management LLC ("Founders") serves as the portfolio's sub-investment adviser. Founders is a 90%-owned subsidiary of Mellon. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, 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 $2,405 during the period ended June 30, 2001 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $1,609,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31,2000. This amount is calculated based on federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the portfolio has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2001, the portfolio did not borrow under the Facility. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .75 of 1% of the value of the portfolio's average daily net assets and is payable monthly. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of 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, 2001, Dreyfus waived receipt of fees of $21,255, pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Founders, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio's average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million . . . . . . . . . . . . . . . . . .25 of 1% In excess of $100 million to $1 billion . . . . . . .20 of 1% In excess of $1 billion to $1.5 billion . . . . . . .16 of 1% In excess of $1.5 billion . . . . . . . . . . . . . .10 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2001, Service shares were charged $924 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, 2001, the portfolio was charged $23 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, 2001, the portfolio was charged $11,329 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2001, amounted to $30,480,877 and $25,019,548, respectively. At June 30, 2001, accumulated net unrealized appreciation on investments was $405,021, consisting of $1,772,135 gross unrealized appreciation and $1,367,114 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio For More Information Dreyfus Investment Portfolios, Founders Growth Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 176SA0601 ================================================================================ Dreyfus Investment Portfolios, Founders International Equity Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 14 Financial Highlights 16 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders International Equity Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Founders International Equity Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Douglas A. Loeffler, CFA, of Founders Asset Management LLC, the portfolio's sub-investment adviser. While the first half of 2001 was difficult for the U.S. economy, weakness in many international economies was not as severe. What's more, we have recently seen signs that economic improvement in the U.S. may be in sight, which could lead to better conditions in Europe as well. The Federal Reserve Board's aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the U.S. economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth in the U.S., as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth in the U.S. later this year, and in Europe soon thereafter. Japan's economy remains mired in recession, however, despite the recent election of a reform-minded prime minister. In our view, the implications of this economic scenario may be positive for certain sectors of the international stock markets, especially for global companies that rely on exports to the United States. A stronger global economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies that were severely punished during the recent downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE Douglas A. Loeffler, CFA, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders International Equity Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, the portfolio produced a total return of -19.56% for Initial shares and -19.56% for Service shares.(1) This compares with a -14.93% total return produced by the portfolio's benchmark, the Morgan Stanley Capital International World ex U.S. Index.(2) We attribute much of the portfolio's overall weak relative performance to a continued investor preference for value-oriented stocks over the growth-oriented stocks in which the portfolio invests. Although growth stocks recovered somewhat during April and May, they remained out of favor for most of the reporting period. What is the portfolio's investment approach? The portfolio focuses on individual stock selection. We do not attempt to predict interest rates or market movements, nor do we have country allocation models or targets. Rather, we choose investments on a company-by-company basis, searching to find what we believe are well-managed, well-positioned companies, wherever they may be. Starting with roughly 1,000 of the largest companies outside the United States, we perform rigorous stock-by-stock analyses. Our goal is to identify companies that we believe have achieved and can sustain growth through a dominant brand name, growing market share, high barriers to entry or untapped market opportunities. In our view, these factors are the marks 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 will typically hold 60-90 stocks, broadly invested across countries and industries, representing what we believe to be the best growth investment ideas in the world. We generally sell a The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) stock when it reaches its target price or when we determine that circumstances have changed and it will most likely not reach the previously set target sale price. What other factors influenced the portfolio's performance? The global economic slowdown had a negative effect on portfolio performance. Market sentiment, particularly for growth stocks, remained pessimistic throughout the period. Generally, growth stocks have higher valuations than value stocks, and valuations are dependent on strong levels of investor confidence in a company' s ability to sustain sales and earnings growth. When sales and earnings momentum falters, confidence is lost, and stock prices decline. Two factors contributed to poor performance in offshore markets: weakness in the United States economy and a global slowdown in corporate earnings growth. Earnings were particularly disappointing in the telecommunications and technology industry groups, two areas where we concentrated the portfolio's investments. Concerns about these areas focused on the fact that companies held too much inventory and had invested too heavily in new plants and manufacturing equipment -- problems that investors felt would create downward pressure on earnings. Many other business-related industries also encountered difficulties, including consulting firms, airlines and replacement parts manufacturers. General weakness in international economies and markets also adversely affected portfolio performance. For example, the Japanese economy showed few signs of emerging from its decade-long recession. The European markets faced two significant problems: lower corporate earnings, which drove stock prices down, and higher energy prices that made central bankers slow to reduce interest rates. What's more, we do not hedge currency exposure in this portfolio. Consequently, the strength of the U.S. dollar relative to other major currencies further eroded the value of the portfolio' s overseas investments. What is the portfolio's current strategy? Although we believe that the long-term prospects for international growth stocks remains bright, we made some slight adjustments to the portfolio to shield it against any near-term market weakness. For example, we trimmed investments in telecommunications and technology and are currently focusing more on companies that have strong market positions and provide cost savings for other firms. Our efforts to uncover stocks of well-managed companies that have strong market shares but are also reasonably valued have intensified. Accordingly, we added to investments in companies with more stable cash flows, such as energy producers and manufacturers of consumer products. In addition, we identified and invested in companies in the automotive and health care industries, a move that added balance to the portfolio. Finally, we continue to maintain geographic balance in the portfolio. Japan represents the portfolio' s largest single country exposure, where we believe growth stocks continue to sell at reasonable valuations. In Europe, we're focusing on producers of consumer goods, as well as companies positioned to take advantage of industry consolidations. We selectively increased the portfolio's emerging markets exposure, most notably in Asia, where we believe many growth stocks are reasonably priced. July 16, 2001 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) 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, 2001 (Unaudited) COMMON STOCKS--88.0% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ BRAZIL--2.3% Companhia de Bebidas das Americas, ADR 4,100 95,005 Embraer-Empresa Brasileira de Aeronautica, ADR 5,050 197,202 292,207 CANADA--3.6% Alcan 2,625 110,302 Ballard Power Systems 1,300 (a) 60,528 Celestica 2,250 (a) 115,722 Talisman Energy 4,375 166,990 453,542 DENMARK--3.6% ISS 2,925 (a) 171,452 Novo Nordisk, Cl. B 3,625 160,497 Vestas Wind Systems 2,450 114,329 446,278 FINLAND--2.2% Nokia, ADR 12,325 271,643 FRANCE--12.8% Accor 3,375 142,839 Alstom 2,000 55,796 Altran Technologies 4,400 205,458 Aventis 2,350 188,143 Bouygues 1,700 57,617 Business Objects 4,962 (a) 118,799 Compagnie Francaise d'Etudes et de Construction 675 85,961 JC Decaux 8,150 109,325 PSA Peugeot Citroen 275 74,876 Thomson Multimedia 3,475 (a) 112,110 TotalFinaElf 1,250 175,531 Vinci 1,150 73,470 Vivendi Environnement 4,400 185,697 1,585,622 GERMANY--3.1% Allianz 550 161,892 Deutsche Boerse 4,250 149,742 SAP, ADR 2,100 73,689 385,323 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HONG KONG--3.0% CNOOC 124,500 118,117 China Unicom, ADR 14,100 249,570 367,687 INDIA--.5% Infosys Technologies, ADR 1,025 66,625 ISRAEL--1.1% Check Point Software Technologies 2,662 (a) 134,905 ITALY--3.0% Saipem 33,150 182,319 San Paolo-IMI 14,700 190,549 372,868 JAPAN--13.9% Ajinomoto 10,000 107,267 FAST RETAILING 700 121,778 HONDA MOTOR 5,000 219,666 HOYA 1,700 107,668 ITO EN 1,300 82,126 KONAMI 2,100 95,795 Mitsubishi Electric 19,000 94,136 NEC 8,000 108,069 NTT DoCoMo 8 139,175 Nikko Securities 13,000 104,117 Nippon COMSYS 6,000 81,292 PIONEER 5,500 167,114 TAKEFUJI 1,700 154,416 Takeda Chemical Industries 3,000 139,496 1,722,115 LUXEMBOURG--1.5% Societe Europeenne des Satellites 1,475 193,163 MEXICO--.7% Cemex, ADR 3,280 86,920 NETHERLANDS--5.6% ASML, ADR 2,575 (a) 57,294 Heineken 4,537 183,467 ING 2,025 132,724 STMicroelectronics 1,925 67,007 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ NETHERLANDS (CONTINUED) TNT Post 7,150 149,634 VNU 2,900 98,484 688,610 PORTUGAL--1.3% Brisa-Auto Estradas de Portugal 19,350 164,282 SINGAPORE--1.1% Flextronics International 5,350 (a) 139,689 SOUTH KOREA--3.6% Hyundai Motor 7,650 166,471 Korea Telecom, ADR 13,800 278,760 445,231 SPAIN--3.3% Banco Santander Central Hispano 17,875 162,382 Gas Natural SDG 1,375 22,297 Industria de Diseno Textil 13,875 222,050 406,729 SWEDEN--1.4% Assa Abloy, Cl. B 7,525 107,741 Skandia Forsakrings 7,200 65,962 173,703 SWITZERLAND--5.7% Adecco 2,650 124,848 Nestle 600 127,638 Serono 140 139,010 Swatch 174 (a) 174,417 Synthes-Stratec 235 (b) 144,348 710,261 TAIWAN--.6% Taiwan Semiconductors Manufacturing, ADR 4,485 (a) 68,313 UNITED KINGDOM--14.1% ARM 20,150 (a) 76,518 Aegis 65,125 96,712 British Sky Broadcasting 4,875 (a) 47,160 Compass 22,250 179,054 Dimension Data 25,475 (a) 97,279 Energis 27,100 (a) 72,343 GlaxoSmithKline 6,925 195,881 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) Prudential 13,200 160,738 Reckitt Benckiser 11,750 170,335 Shell Transport & Trading, ADR 1,200 60,408 Shire Pharmaceuticals, ADR 2,375 (a) 131,812 Spirent 37,125 116,038 Telewest Communications 84,600 (a) 106,488 Tesco 25,000 90,692 Vodafone 63,450 141,336 1,742,794 TOTAL COMMON STOCKS (cost $11,273,660) 10,918,510 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--1.2% ------------------------------------------------------------------------------------------------------------------------------------ GERMANY; Henkel KGaA (cost $158,028) 2,500 145,391 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--8.1% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AGENCY DISCOUNT NOTE; Federal National Mortgage Association, 3.94%, 7/2/2001 (cost $999,891) 1,000,000 999,891 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $12,431,579) 97.3% 12,063,792 CASH AND RECEIVABLES (NET) 2.7% 339,224 NET ASSETS 100.0% 12,403,016 (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, 2001, THIS SECURITY AMOUNTED TO $144,348 OR 1.2% OF NET ASSETS. SEE NOTES TO STATEMENT OF INVESTMENTS.
The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 12,431,579 12,063,792 Cash 854,063 Receivable for investment securities sold 85,293 Dividends receivable 6,528 Prepaid expenses 2,402 13,012,078 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 2,415 Payable for investment securities purchased 575,335 Accrued expenses 31,312 609,062 -------------------------------------------------------------------------------- NET ASSETS ($) 12,403,016 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 15,626,135 Accumulated undistributed investment income--net 21,146 Accumulated net realized gain (loss) on investments and foreign currency transcations (2,876,286) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transcations--Note 4 (367,979) -------------------------------------------------------------------------------- NET ASSETS ($) 12,403,016 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 11,126,289 1,276,727 Shares Outstanding 813,958 93,401 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 13.67 13.67 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $11,092 foreign taxes withheld at source) 78,033 Interest 33,258 TOTAL INCOME 111,291 EXPENSES: Investment advisory fee--Note 3(a) 58,677 Custodian fees 37,981 Auditing fees 18,138 Prospectus and shareholders' reports 12,481 Legal fees 1,956 Registration fees 784 Distribution fees--Note 3(b) 385 Trustees' fees and expenses--Note 3(c) 174 Shareholder servicing costs--Note 3(b) 70 Loan commitment fees--Note 2 50 Miscellaneous 4,542 TOTAL EXPENSES 135,238 Less--waiver of fees due to undertaking--Note 3(a) (47,223) NET EXPENSES 88,015 INVESTMENT INCOME--NET 23,276 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (1,967,619) Net unrealized appreciation (depreciation) on investments and foreign currency transcations (668,169) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (2,635,788) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,612,512) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 23,276 1,811 Net realized gain (loss) on investments (1,967,619) (899,661) Net unrealized appreciation (depreciation) on investments (668,169) (1,007,466) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,612,512) (1,905,316) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares (3,830) -- Service shares (111) -- Net realized gain on investments: Initial shares -- (343,289) TOTAL DIVIDENDS (3,941) (343,289) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 2,380,488 13,293,937 Service shares 1,853,873 500 Dividends reinvested: Initial shares 3,830 343,289 Service shares 111 -- Cost of shares redeemed: Initial shares (596,362) (4,108,009) Service shares (511,348) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 3,130,592 9,529,717 TOTAL INCREASE (DECREASE) IN NET ASSETS 514,139 7,281,112 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 11,888,877 4,607,765 END OF PERIOD 12,403,016 11,888,877 Undistributed investment income--net 21,146 1,811 Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 155,652 686,538 Shares issued for dividends reinvested 266 16,201 Shares redeemed (41,276) (216,289) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 114,642 486,450 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 128,756 29 Shares issued for dividends reinvested 8 -- Shares redeemed (35,392) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 93,372 29 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ------------------------------------- INITIAL SHARES (Unaudited) 2000 1999 1998(a) --------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 17.00 21.65 14.36 12.50 Investment Operations: Investment income (loss)--net .03(b) .00(b,c) (.02)(b) (.01) Net realized and unrealized gain (loss) on investments (3.35) (3.55) 8.73 1.87 Total from Investment Operations (3.32) (3.55) 8.71 1.86 Distributions: Dividends from investment income--net (.01) -- -- -- Dividends from net realized gain on investments -- (1.10) (1.42) -- Total Distributions (.01) (1.10) (1.42) -- Net asset value, end of period 13.67 17.00 21.65 14.36 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%) (19.56)(d) (17.41) 60.69 14.88(d) ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(d) 1.50 1.50 .38(d) Ratio of net investment income (loss) to average net assets .20(d) .02 (.11) (.08)(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .38(d) .57 2.27 .81(d) Portfolio Turnover Rate 94.66(d) 171.34 190.80 29.25(d) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 11,126 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 $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 17.00 17.00 Investment Operations: Investment income--net .02(b) -- Net realized and unrealized gain (loss) on investments (3.34) -- Total from Investment Operations (3.32) -- Distributions: Dividends from investment income--net (.01) -- Net asset value, end of period 13.67 17.00 ------------------------------------------------------------------------------- TOTAL RETURN (%) (19.56)(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(c) -- Ratio of net investment income to average net assets .19(c) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .44(c) -- Portfolio Turnover Rate 94.66(c) 171.34 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 1,277 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 portfolios, including the Founders International Equity Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Founders Asset Management LLC ("Founders") serves as the portfolio's sub-investment adviser. Founders is a 90% -owned subsidiary of Mellon. Dreyfus Service Corporation (the "Distributor "), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (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 $1,209 during the period ended June 30, 2001, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $390,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of 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, 2001, 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, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of 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, 2001, Dreyfus waived receipt of fees of $47,223, pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Founders, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio's average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million. . . . . . . . . . . . . . . . . .35 of 1% In excess of $100 million to $1 billion. . . . . . .30 of 1% In excess of $1 billion to $1.5 billion. . . . . . .26 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2001, Service shares were charged $385 pursuant to the Plan. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the portfolio. During the period ended June 30, 2001, the portfolio was charged $26 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2001, amounted to $12,915,032 and $10,106,342, respectively. At June 30, 2001, accumulated net unrealized depreciation on investments was $367,787, consisting of $514,608 gross unrealized appreciation and $882,395 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). For More Information Dreyfus Investment Portfolios, Founders International Equity Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian The Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 177SA0601 ================================================================================ Dreyfus Investment Portfolios, Founders Passport Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 14 Statement of Assets and Liabilities 15 Statement of Operations 16 Statement of Changes in Net Assets 18 Financial Highlights 20 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Founders Passport Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Founders Passport Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Tracey Stouffer of Founders Asset Management LLC, the portfolio's sub-investment adviser. While the first half of 2001 was difficult for the U.S. economy, weakness in many international economies was not as severe. What's more, we have recently seen signs that improvement in the U.S. may be in sight, which could lead to better conditions in Europe as well. The Federal Reserve Board's aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the U.S. economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth in the U.S., as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth in the U.S. later this year, and in Europe soon thereafter. Japan's economy remains mired in recession, however, despite the recent election of a reform-minded prime minister. In our view, the implications of this economic scenario may be positive for certain sectors of the international stock markets, especially for global companies that rely on exports to the United States. A stronger global economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies that were severely punished during the recent downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE Tracy Stouffer, Portfolio Manager Founders Asset Management LLC, Sub-Investment Adviser How did Dreyfus Investment Portfolios, Founders Passport Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, Dreyfus Investment Portfolios, Founders Passport Portfolio produced a total return of -21.42% for both its Initial shares and its Service shares.(1) In comparison, the portfolio's benchmark, the Morgan Stanley Capital International (MSCI) World ex U.S. Index, produced a total return of -14.93% for the same period.(2) We attribute the portfolio's lagging performance relative to its benchmark to persistent weakness in its growth-oriented stocks and particularly disappointing results from its holdings in Europe. In addition, we believe that many investors shied away from foreign small-cap stocks during this time of stock market turbulence, preferring instead to invest in large companies that some investors perceived as being more secure. What is the portfolio's investment approach? The portfolio invests primarily in foreign companies with annual revenues or market capitalizations of $1 billion or less that have demonstrated earnings growth as well as dominance in their market niches. The portfolio is a broadly diversified portfolio and currently holds more than 100 stocks across many industries. Because of this broad mandate, we believe it is very important for us to meet with corporate management teams to assess their business strategies. We also believe it is important to travel to the countries in which they are located to assess the local business environment. When it comes to global small-cap stocks, it is especially important to learn as much as we can because there is a limited amount of Wall Street research available on many of these companies. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) What other factors influenced the portfolio's performance? During the reporting period, the growth style of investing -- that is, buying shares of companies with above-average growth prospects -- lagged after years of market dominance in most countries. Instead, the value style of investing, which emphasizes paying modest prices for companies that have slower growth possibilities, produced better performance. As a result, companies in such industries as commodities, construction, energy and utilities generally produced good returns both for the market and the portfolio during the reporting period. The portfolio's performance was hindered primarily because our investment approach favors the growth style of investing. In addition, Europe entered an economic slowdown, negatively impacting the performance of many of the portfolio's holdings in European companies. Because of its commitment to fighting inflationary pressures, the European Central Bank has been unwilling to lower interest rates to stimulate the economy. This is in stark contrast to the actions of the U.S. Federal Reserve Board, which reduced short-term interest rates six times during the first half of 2001, for a total reduction of 2.75 percentage points during the reporting period. Because corporate profit growth typically was insufficient to support high stock prices in Europe, technology and telecommunications stocks generally performed very poorly. However, the portfolio benefited from its holdings in energy, mining and utilities -- industries operating at full capacity that could command significant price increases. Construction companies also performed well, as European governments began spending heavily to repair roads, bridges and tunnels. In Asia, we believe that the Japanese stock market remained unattractive during the reporting period, as that nation remains mired in recession. In contrast, the Chinese stock market was among the top-performing markets in the world during the first half of 2001. Investors generally ignored the international tensions that resulted when a U.S. military aircraft and its crew were detained in China this past March. Instead, they focused on China's likely admission into the World Trade Organization, as well as its bid to host the 2008 Olympics. Both developments are expected to help open China' s markets to trade with other nations, and local companies in the shipping, transportation, real estate and tourism industries are among the likely beneficiaries. Accordingly, portfolio performance benefited from investments in Denway Motors, a Chinese automaker, and Texwinca, the country's largest retail clothing chain. Other regions that showed strong performance during the reporting period included Korea, where stocks responded favorably to lower interest rates; Australia, where merger and acquisition activity has reduced the supply of shares, thus boosting prices; and Canada, where most of the portfolio's holdings are energy related. What is the portfolio's current strategy? Our current strategy is to continue to focus on finding small, fast-growing companies throughout the world, regardless of industry or location. Because of the current market preference for value stocks over growth stocks, we have reconsidered the prices that we are willing to pay for companies with strong growth rates. However, we believe that it is important to remain consistent in our investment style, since it is impossible to predict whether growth or value stocks will be favored in the future. July 16, 2001 (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, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) 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, 2001 (Unaudited) COMMON STOCKS--94.9% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AUSTRALIA--6.5% Aristocrat Leisure 55,150 198,486 Boral 117,000 171,839 ERG 190,250 139,857 Foodland Associated 20,500 115,358 James Hardie Industries 27,800 75,245 Lang 14,150 79,445 Mayne Nickless 18,325 60,339 Metcash Trading 123,400 84,414 National Foods 53,250 61,219 Orbital Engine 151,625 (a) 56,505 PaperlinX 28,725 59,536 Renewable Energy 148,141 (a) 170,915 Smorgon Steel 43,900 20,170 Sonic Healthcare 17,150 69,253 Toll 5,500 54,776 1,417,357 AUSTRIA--.5% Gericom 3,425 99,593 BELGIUM--.7% Omega Pharma 4,225 163,210 CANADA--8.9% ATI Technologies 18,850 (a) 175,995 Alimentation Couche-Tard, Cl. B 375 (a) 7,841 CAE 12,300 239,822 CHC Helicopter, Cl. B 11,625 152,132 Cott 14,475 (a) 159,579 Descartes Systems 5,300 (a) 97,067 FirstService 1,150 (a) 25,463 GT Group Telecom 5,550 (a) 33,931 Goldcorp 14,825 158,734 IPSCO 10,775 163,797 Industrial Alliance Life Insurance 2,625 66,536 Nexen 4,400 110,800 Open Text 1,350 (a) 31,685 Pivotal 2,700 (a) 46,062 SNC-Lavalin 16,100 214,418 Saputo 2,175 53,980 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ CANADA (CONTINUED) Stantec 2,300 (a) 34,203 Toromont Industries 4,600 69,927 WestJet Airlines 5,400 (a) 86,907 1,928,879 CHINA--4.9% AsiaInfo 4,600 (a) 90,850 Beijing Capital International Airport, Cl. H 718,000 225,529 Beijing Datang Power Generation, Cl. H 464,000 159,130 Beijing North Star, Cl. H 538,000 158,643 People's Food 645,000 263,590 Tsingtao Brewery, Cl. H 112,000 38,052 United Food 435,000 139,591 1,075,385 DENMARK--.9% NEG Micon 3,650 (a) 165,758 Sophus Berendsen, Cl. B 1,250 34,145 199,903 FINLAND--1.1% Aldata Solution 17,300 (a) 59,192 Instrumentarium 2,200 62,571 KCI Konecranes International 2,900 81,249 Tamro 15,500 42,110 245,122 FRANCE--6.4% Euro Disney 148,650 (a) 137,562 Genesys 3,625 (a) 78,787 GrandVision 7,825 148,481 ILOG 3,125 (a) 47,967 Infogrames Entertainment 6,875 (a) 109,733 Penauille Polyservices 3,950 224,688 SR Teleperformance 2,575 57,934 Scor 4,325 192,776 Silicon-On-Insulator Technologies 7,875 (a) 129,305 Studio Canal 3,175 (a) 31,403 Vallourec 4,325 240,511 1,399,147 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ GERMANY--1.7% Evotec Biosystems 1 (a) 13 IM Internationalmedia 2,350 (a) 55,864 Kontron Embedded Computers 1,025 (a) 42,815 Nordex 15,975 132,915 Stada Arzneimittel 1,050 25,680 UMS International 2,375 45,812 Vossloh 2,800 58,598 WEB.DE 1,000 (a) 5,773 367,470 HONG KONG--5.0% Beijing Enterprises 76,000 97,924 Chaoda Modern Agriculture 498,000 123,225 China Insurance International 464,000 157,643 China Pharmaceutical Enterprise and Investment 240,000 30,154 China Rare Earth 184,000 64,873 China Travel International (Warrants) 91,600 (a) 14,327 Denway Motors 158,000 (a) 56,719 First Pacific 74,000 16,034 Guangzhou Investment 1,522,000 (a) 165,861 Industrial and Commercial Bank of China 63,000 56,943 Roadshow 374,000 122,271 Shenzhen International 1,670,000 (a) 96,347 Texwinca 214,000 81,623 1,083,944 INDIA--.6% Hindalco, GDR 6,825 134,794 IRELAND--4.0% Datalex, ADR 14,300 46,475 Fyffes 86,075 90,393 Grafton 70,750 203,626 ICON, ADR 2,125 (a) 64,111 Irish Continental 15,400 73,218 Riverdeep, ADR 3,700 (a) 103,600 SmartForce, ADR 8,000 (a) 281,840 863,263 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ISRAEL--1.4% Precise Software Solutions 2,600 79,820 Taro Pharmaceutical 2,600 (a) 227,656 307,476 ITALY--3.8% Cementir 29,692 81,121 Gruppo Coin 13,225 (a) 160,785 Impregilo 587,500 (a) 323,264 Marzotto 10,500 124,429 Recordati 2,575 34,734 Saeco International 27,000 103,314 827,647 JAPAN--4.9% ADVAN 900 10,462 COLIN 500 58,925 HOKUTO 4,260 165,981 HUDSON SOFT 1,000 8,257 Hitachi Construction Machinery 9,000 33,768 INTELLIGENT WAVE 5 70,950 KURODA ELECTRIC 60 1,152 MITSUBISHI GAS CHEMICAL 15,000 60,248 MIYACHI TECHNOS 40 1,106 NISSIN KOGYO 2,000 76,392 SANYO SHOKAI 27,000 111,476 SHOHKOH FUND & Co. 580 94,764 Seino Transportation 35,000 227,562 Snow Brand Milk Products 12,000 (a) 39,444 TOYO SUISAN KAISHA 11,000 114,026 1,074,513 MEXICO--2.1% Apasco 17,475 92,865 Empresas ICA Sociedad Controladora 122,025 (a) 56,335 Grupo Aeroportuario del Sureste, ADR 10,825 202,427 Grupo Financiero Banorte 26,275 (a) 55,270 Tubos de Acero de Mexico, ADR 4,450 56,293 463,190 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ NORWAY--.2% Bergesen 2,200 40,130 SINGAPORE--.5% Hyflux 202,000 86,429 NatSteel Broadway 9,000 12,836 99,265 SOUTH KOREA--7.9% Cheil Industries 20,150 115,895 Daeduck 8,360 58,176 Daelim Industrial 17,330 137,254 Doosan 1,920 (a) 36,245 Duzon Digital Ware 1,860 58,353 Hana Bank 33,550 245,079 Handan BroadinfoCom 930 60,069 Hankook Tire 27,650 58,043 Hotel Shilia 31,400 185,672 Hyundai Mobis 5,240 56,409 Korea Electric Terminal 3,950 39,181 LG Ad 1,400 56,947 LG Engineering & Construction 13,470 111,862 Lotte Chilsung Beverage 180 26,436 Neowiz 1,533 68,487 Nong Shim 1,410 55,511 Pacific 1,010 49,937 Pyung Hwa Industrial 30,020 59,093 S Net Systems 1,058 8,745 Samyoung Heat Exchanger 5,170 127,213 Sewon Telecom 33,755 97,333 1,711,940 SPAIN--2.6% ACS 7,650 212,641 Cementos Portland 775 18,752 Fomento de Construcciones y Contratas 7,725 147,567 Grupo Ferrovial 10,875 180,226 559,186 SWEDEN--2.8% Capio 6,600 (a) 48,312 D. Carnegie & Co. 6,300 75,410 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SWEDEN (CONTINUED) Elekta, Cl. B 30,000 (a) 205,788 Eniro 7,600 74,875 Getinge Industrier 4,400 76,570 Munters 8,825 138,136 619,091 SWITZERLAND--2.5% Leica Geosystems 775 222,267 Logitech International 950 (a) 304,728 Unilabs 25 20,758 547,753 THAILAND--1.3% Bangkok Bank 38,700 (a) 39,311 Banpu 36,675 25,106 Land and Houses 61,900 (a) 37,590 National Finance 476,975 (a) 104,274 Ocean Glass 22,850 18,796 S&P Syndicate 7,000 5,178 Siam Cement 4,100 (a) 44,363 Thai Union Frozen Products 7,525 11,549 286,167 UNITED KINGDOM--22.3% AMEC 30,325 215,944 Aberdeen Asset Management 11,750 85,583 Amey 7,175 34,502 BTG 5,975 (a) 98,870 Balfour Beatty 50,075 141,111 Biocompatibles International 16,675 (a) 64,854 Bodycote International 17,000 63,714 City Centre Restaurants 195,100 149,002 Dairy Crest 15,575 78,859 De La Rue 7,900 58,770 De Vere 18,400 88,479 easyJet 27,450 168,296 Eidos (Rights) 9,941 (a) 12,513 Electronics Boutique 79,700 120,328 FKI 71,050 282,366 Fibernet 12,350 (a) 71,613 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM (CONTINUED) First Choice Holidays 7,850 16,542 Galen 8,650 99,950 HIT Entertainment 61,325 316,572 Innovation 11,450 (a) 85,827 Intermediate Capital 9,725 96,966 J. D. Wetherspoon 23,750 123,442 Jarvis 25,725 162,631 Laura Ashley 229,525 (a) 123,108 Luminar 9,400 116,659 MFI Furniture 191,650 316,452 Man 17,225 233,260 Matalan 24,550 172,216 Meggitt 28,600 99,707 Mothercare 38,175 176,415 PHS 138,850 163,974 Rank 70,075 214,071 SSL International 10,425 73,720 Selfridges 31,875 165,897 Shaftesbury 3,525 14,582 Signet 156,575 195,978 Somerfield 46,000 (a) 85,551 Stagecoach 18,625 20,744 TTP Communications 12,725 32,125 Unite 3,100 16,704 4,857,897 UNITED STATES--1.4% ResMed 4,100 (a) 207,255 Ultra Petroleum 18,025 (a) 85,181 292,436 TOTAL COMMON STOCKS (cost $21,025,389) 20,664,758 Principal SHORT-TERM INVESTMENTS--2.8% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL PAPER; Union Electric, 4.20%, 7/2/2001 (cost $599,930) 600,000 599,930 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $21,625,319) 97.7% 21,264,688 CASH AND RECEIVABLES (NET) 2.3% 503,193 NET ASSETS 100.0% 21,767,881 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 21,625,319 21,264,688 Cash 528,125 Receivable for investment securities sold 2,086,340 Dividends receivable 43,059 Prepaid expenses 2,383 Due from The Dreyfus Corporation and affiliates 716 23,925,311 ------------------------------------------------------------------------------- LIABILITIES ($): Payable for investment securities purchased 2,025,879 Payable for shares of Beneficial Interest redeemed 10,940 Accrued expenses 120,611 2,157,430 ------------------------------------------------------------------------------- NET ASSETS ($) 21,767,881 ------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 36,046,885 Accumulated undistributed investment income--net 86,909 Accumulated net realized gain (loss) on investments and foreign currency transactions (14,004,318) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4 (361,595) -------------------------------------------------------------------------------- NET ASSETS ($) 21,767,881 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 21,299,504 468,377 Shares Outstanding 1,594,345 35,066 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 13.36 13.36 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): Income: Cash dividends (net of $22,497 foreign taxes withheld at source) 230,793 Interest 32,253 TOTAL INCOME 263,046 EXPENSES: Investment advisory fee--Note 3(a) 117,424 Custodian fees 208,920 Auditing fees 12,688 Prospectus and shareholders' reports 11,312 Legal fees 3,677 Trustees' fees and expenses--Note 3(c) 1,262 Registration fees 295 Distribution fees--Note 3(b) 283 Loan commitment fees--Note 2 138 Miscellaneous 12,845 TOTAL EXPENSES 368,844 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertaking--Note 3(a) (192,707) NET EXPENSES 176,137 INVESTMENT INCOME--NET 86,909 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (4,103,053) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (1,677,373) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (5,780,426) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,693,517) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 86,909 (130,763) Net realized gain (loss) on investments (4,103,053) (9,871,866) Net unrealized appreciation (depreciation) on investments (1,677,373) (2,628,496) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,693,517) (12,631,125) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Net realized gain on investments: INITIAL SHARES -- (1,358,339) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 8,819,028 46,822,858 Service shares 792,115 500 Dividends reinvested: Initial shares -- 1,358,339 Cost of shares redeemed: Initial shares (8,152,037) (22,746,435) Service shares (279,313) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 1,179,793 25,435,262 TOTAL INCREASE (DECREASE) IN NET ASSETS (4,513,724) 11,445,798 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 26,281,605 14,835,807 END OF PERIOD 21,767,881 26,281,605 Undistributed investment income--net 86,909 -- Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 594,429 1,865,969 Shares issued for dividends reinvested -- 49,939 Shares redeemed (547,388) (991,434) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 47,041 924,474 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 54,770 29 Shares redeemed (19,733) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 35,037 29 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ------------------------------------------ INITIAL SHARES (Unaudited) 2000 1999 1998(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 16.99 23.82 14.46 12.50 Investment Operations: Investment income (loss)--net .05(b) (.11)(b) (.10)(b) .00(c) Net realized and unrealized gain (loss) on investments (3.68) (5.61) 11.04 1.97 Total from Investment Operations (3.63) (5.72) 10.94 1.97 Distributions: Dividends from investment income--net -- -- -- (.00)(c) Dividends from net realized gain on investments -- (1.11) (1.58) (.01) Total Distributions -- (1.11) (1.58) (.01) Net asset value, end of period 13.36 16.99 23.82 14.46 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (21.42)(d) (25.76) 76.05 15.79(d) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(d) 1.50 1.50 .38(d) Ratio of net investment income (loss) to average net assets .37(d) (.47) (.60) .02(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .82(d) 2.09 2.14 .30(d) Portfolio Turnover Rate 336.65(d) 493.10 319.31 3.98(d) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 21,300 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 $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 16.99 16.99 Investment Operations: Investment income--net .05(b) -- Net realized and unrealized gain (loss) on investments (3.68) -- Total from Investment Operations (3.63) -- Net asset value, end of period 13.36 16.99 -------------------------------------------------------------------------------- TOTAL RETURN (%) (21.42)(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(c) -- Ratio of net investment income to average net assets .36(c) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .93(c) -- Portfolio Turnover Rate 336.65(c) 493.10 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 468 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 Passport Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is capital appreciation. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Founders Asset Management LLC ("Founders") serves as the portfolio's sub-investment adviser. Founders is a 90%-owned subsidiary of Mellon. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (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. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $1,529 during the period ended June 30, 2001 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $6,528,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires in fiscal 2008. 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, 2001, 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, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of 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, 2001, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $192,707 pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Founders, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio's average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million . . . . . . . . . . . . . . . . . .35 of 1% In excess of $100 million to $1 billion . . . . . . .30 of 1% In excess of $1 billion to $1.5 billion . . . . . . .26 of 1% In excess of $1.5 billion . . . . . . . . . . . . . .20 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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, 2001, Service shares were charged $283 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, 2001, the portfolio was charged $20 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2001, amounted to $77,462,148 and $76,197,705, respectively. At June 30, 2001, accumulated net unrealized depreciation on investments was $360,631, consisting of $608,419 gross unrealized appreciation and $969,050 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio For More Information Dreyfus Investment Portfolios, Founders Passport Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 178SA0601 ================================================================================ Dreyfus Investment Portfolios, Japan Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the 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 FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Japan Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We are pleased to present this semiannual report for Dreyfus Investment Portfolios, Japan Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. 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, Miki Sugimoto. While the first half of 2001 was difficult for the U.S. economy, weakness in many international economies was not as severe. What's more, we have recently seen signs that economic improvement in the U.S. may be in sight, which could lead to better conditions in Europe as well. The Federal Reserve Board's aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the U.S. economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth in the U.S., as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth in the U.S. later this year, and in Europe soon thereafter. Japan's economy remains mired in recession, however, despite the recent election of a reform-minded prime minister. In our view, the implications of this economic scenario may be positive for certain sectors of the international stock markets, especially for global companies that rely on exports to the United States. A stronger global economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies that were severely punished during the recent downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 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, 2001, Dreyfus Investment Portfolios, Japan Portfolio produced total returns of -6.33% for both its Initial shares and its Service shares.(1) This compares with the -8.31% total return provided by the Morgan Stanley Capital International (MSCI) Japan Index, the portfolio's benchmark, for the same period.(2) We attribute the portfolio's absolute negative performance to a difficult and volatile stock market environment in Japan during the reporting period. However, we are pleased that the portfolio outperformed its benchmark, mainly because we emphasized stocks with lower valuations and more reasonable earnings growth. What is the portfolio's investment approach? The portfolio seeks long-term capital growth. To pursue this goal, the portfolio invests primarily in stocks of Japanese companies. Generally, the portfolio invests at least 60% of its assets in Japanese companies with market capitalizations of at least $1.5 billion at the time of investment. The portfolio's investments may include common, preferred and convertible stocks, including those purchased through IPOs. The portfolio manager utilizes a "top-down," theme-driven investment approach to stock selection. The portfolio manager first attempts to identify overall economic trends, and then begins to narrow the search to industry groups that are believed to have the potential to benefit from these trends. The portfolio manager also considers economic variables, such as the relative valuations of equities and bonds, and trends in the currency exchange markets. The investment themes and economic variables provide a framework for the portfolio's stock selection process. We consider three primary criteria when selecting stocks for the portfolio. First, we look either for industries with positive long-term out The Portfolio 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? Japan's economy continued to deteriorate during the reporting period, as it has for the past several years, led by the technology sector, which depends heavily on exports to the United States. We navigated the portfolio through this difficult environment by steering clear of higher priced stocks and instead emphasized stocks with lower valuations and reasonable earnings growth. We found stocks that fit our criteria within the consumer finance, pharmaceutical and electric utility areas. In the consumer finance area, ACOM and Promise were very profitable during the reporting period, chiefly because local banks have refused to participate in the non-collateralized lending area. When individuals are not able to obtain personal loans through their banks, they often go to smaller finance companies, where they are generally charged higher interest rates. Within the pharmaceutical sector, the portfolio continued to benefit from its holdings in DAIICHI PHARMACEUTICAL, a company whose main product, Levaquin, is used to treat lung, sinus, skin and urinary tract infections. Levaquin, which has been on the market in Japan for years, was introduced to the U.S. about two years ago. The portfolio also enjoyed profits from investments in KISSEI PHARMACEUTICAL. We were also successful in our electric utility investments, where stocks benefited from high dividend yields and stable earnings outlooks. As a result, unlike California and other parts of North America, Japan, due to its strict regulation in the past, has an abundance of electricity. However, we are concerned that deregulation threats to loosen capacity requirements could drive down electricity costs and ultimately cause these companies' earnings to suffer. What is the portfolio's current strategy? We have recently found it increasingly difficult to find large-cap stocks with very favorable price movements. Instead, we are finding higher returns and better valuations in midcap stocks. Accordingly, we increased our exposure to stocks in the $1.2 to $1.9 billion range, but with Japan's depressed economy, we are careful to focus on companies that we believe have the ability to grow their earnings reasonably independent of the economic cycle, as in the pharmaceutical and medical equipment areas. Finally, we continue to watch the U.S. economy closely for any changes that might affect Japan's export business over the near term. July 16, 2001 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF PORTFOLIO EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE PORTFOLIO'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF NET DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) JAPAN INDEX IS A MARKET CAPITALIZATION INDEX OF JAPANESE COMPANIES BASED ON MSCI-SELECTED CRITERIA. The Portfolio STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) COMMON STOCKS--94.7% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ AUTO RELATED--2.8% NISSAN MOTOR 9,000 62,124 BEVERAGES--2.1% CALPIS 10,000 47,140 CHEMICALS--3.7% KANEKA 6,000 54,307 MITSUBISHI GAS CHEMICAL COMPANY 7,000 28,116 82,423 COMMERCIAL SERVICES--2.2% Goodwill Group 14 50,283 CONSUMER DURABLES--9.0% Lion 11,000 41,889 Makita 8,000 50,411 Mitsubishi 6,000 48,342 SONY 600 39,444 TOKYO STYLE 2,000 22,287 202,373 CONSUMER STAPLES--3.8% ADERANS 1,200 40,983 KATOKICHI 1,900 44,935 85,918 FINANCIAL--18.0% ACOM 900 79,440 Aioi Insurance 17,000 56,560 Credit Saison 2,000 48,583 Daiwa Securities Group 4,000 41,849 Hachijuni Bank 6,000 29,823 Mitsubishi Tokyo Financial Group 3 25,013 Nichiei 4,300 37,575 Promise 800 65,932 UFJ Holdings 4 (a) 21,518 406,293 HEALTH CARE--3.9% OLYMPUS OPTICAL 3,000 48,054 TERUMO 2,200 40,390 88,444 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ LEISURE EQUIPMENT & PRODUCT--1.5% DAIICHIKOSHO 1,700 34,072 MACHINERY--8.9% Hitachi 6,000 58,925 MINEBEA 4,000 26,327 Mitsubishi Heavy Industries 16,000 72,987 SUMITOMO 6,000 41,993 200,232 MEDIA--.1% Aoi Advertising Promotion 300 2,403 PHARMACEUTICAL--4.2% DAIICHI PHARMACEUTICAL 2,000 46,258 KISSEI PHARMACEUTICAL 2,000 47,380 93,638 REAL ESTATE--4.1% Mitsubishi Estate 6,000 55,173 Tokyo Tatemono 18,000 36,798 91,971 RETAIL--3.9% ITO-YOKADO 1,000 46,098 UNY 4,000 40,790 86,888 TECHNOLOGY--8.1% CANON 2,000 80,811 NEC 4,000 54,035 SHINKO ELECTRIC INDUSTRIES 1,800 48,054 182,900 TELECOMMUNICATIONS--6.5% JAPAN TELECOM 2 41,528 NIPPON TELEGRAPH AND TELEPHONE 10 52,110 NTT DoCoMo 3 52,191 145,829 UTILITIES--11.9% AIFUL 500 45,096 BELLSYSTEM24 130 43,043 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (CONTINUED) Chubu Electric Power Company 2,800 59,486 Hitachi Plant Engineering & Construction 9,000 47,188 Kyushu Electric Power Company 2,400 40,309 SHINKAWA 1,700 31,551 266,673 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $2,169,619) 94.7% 2,129,604 CASH AND RECEIVABLES (NET) 5.3% 118,983 NET ASSETS 100.0% 2,248,587 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 2,169,619 2,129,604 Cash 97,707 Receivable for investment securities sold 90,400 Net unrealized appreciation on forward currency exchange contracts--Note 4(a) 21,124 Dividends receivable 554 Prepaid expenses 1,440 Due from The Dreyfus Corporation and affiliates 3,441 2,344,270 -------------------------------------------------------------------------------- LIABILITIES ($): Payable for investment securities purchased 76,243 Accrued expenses 19,440 95,683 -------------------------------------------------------------------------------- NET ASSETS ($) 2,248,587 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 2,669,590 Accumulated investment (loss) (6,905) Accumulated net realized gain (loss) on investments and foreign currency transactions (395,151) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4(b) (18,947) ------------------------------------------------------------------------------- NET ASSETS ($) 2,248,587 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 2,241,171 7,416 Shares Outstanding 213,353 705.864 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 10.50 10.51 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $1,555 foreign taxes withheld at source) 8,814 Interest 193 TOTAL INCOME 9,007 EXPENSES: Investment advisory fee--Note 3(a) 10,608 Prospectus and shareholders' reports 14,493 Auditing fees 13,338 Custodian fees 4,759 Legal fees 368 Shareholder servicing costs--Note 3(b) 115 Trustees' fees and expenses--Note 3(c) 77 Registration fees 36 Distribution fees--Note 3(b) 3 Miscellaneous 2,810 TOTAL EXPENSES 46,607 Less--waiver of fees and assumption of expenses by The Dreyfus Corporation due to undertaking--Note 3(a) (30,695) NET EXPENSES 15,912 INVESTMENT (LOSS) (6,905) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (266,868) Net realized gain (loss) on forward currency exchange contracts 1,218 NET REALIZED GAIN (LOSS) (265,650) Net unrealized appreciation (depreciation) on investments and foreign currency transactions 124,365 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (141,285) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (148,190) SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (6,905) (18,796) Net realized gain (loss) on investments (265,650) (24,210) Net unrealized appreciation (depreciation) on investments 124,365 (199,565) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (148,190) (242,571) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Initial shares -- (7,520) Net realized gain on investments: Initial shares -- (83,281) TOTAL DIVIDENDS -- (90,801) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 953,776 1,650,427 Service shares 6,899 500 Dividends reinvested: Initial shares -- 90,801 Cost of shares redeemed: Initial shares (818,163) (1,208,578) Service shares (12) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 142,500 533,150 TOTAL INCREASE (DECREASE) IN NET ASSETS (5,690) 199,778 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 2,254,277 2,054,499 END OF PERIOD 2,248,587 2,254,277 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 89,681 125,595 Shares issued for dividends reinvested -- 7,922 Shares redeemed (77,186) (92,659) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 12,495 40,858 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 662 45 Shares redeemed (1) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 661 45 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ------------------------ INITIAL SHARES (Unaudited) 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.22 12.84 12.50 Investment Operations: Investment income (loss)--net (.03)(b) (.08)(b) .00(b,c) Net realized and unrealized gain (loss) on investments (.69) (1.06) .34 Total from Investment Operations (.72) (1.14) .34 Distributions: Dividends from investment income--net -- (.05) -- Dividends from net realized gain on investments -- (.43) -- Total Distributions -- (.48) -- Net asset value, end of period 10.50 11.22 12.84 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (6.33)(d) (8.92) 2.64(d) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(d) 1.50 .07(d) Ratio of net investment income (loss) to average net assets (.32)(d) (.80) .03(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.43(d) 1.90 1.35(d) Portfolio Turnover Rate 113.89(d) 378.54 -- ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 2,241 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 $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 11.22 11.22 Investment Operations: Investment (loss) (.02)(b) -- Net realized and unrealized gain (loss) on investments (.69) -- Total from Investment Operations (.71) -- Net asset value, end of period 10.51 11.22 -------------------------------------------------------------------------------- TOTAL RETURN (%) (6.33)(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .74(c) -- Ratio of net investment (loss) to average net assets (.24)(c) -- Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation 1.83(c) -- Portfolio Turnover Rate 113.89(c) 378.54 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 7 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 Japan Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Newton Capital Management Limited ("Newton"), serves as the portfolio's sub-investment adviser. Newton is an affiliate of Dreyfus. 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, 2001, MBC Investments Corp., an indirect subsidiary of Mellon Financial Corporation, held 166,639 Initial shares and 45 Service shares of the portfolio. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) 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 $191 during the period ended June 30, 2001, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. 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, 2001, 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 until December 31, 2001, to waive receipt of its fees and/or assume expenses of the portfolio so that the expenses of neither class, exclusive of 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, 2001, Dreyfus waived receipt of fees and assumed expenses of the portfolio of $30,695, pursuant to the undertaking. Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Newton, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the portfolio' s average daily net assets, computed at the following annual rates: Average Net Assets 0 to $100 million. . . . . . . . . . . . . . . . . .35 of 1% In excess of $100 million to $1 billion. . . . . . .30 of 1% In excess of $1 billion to $1.5 billion. . . . . . .26 of 1% In excess of $1.5 billion. . . . . . . . . . . . . .20 of 1% (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing their shares, for servicing and/or maintaining Service shares shareholder accounts and for advertising and marketing for Service shares. The Plan provides for payments to be made at an annual rate of .25 of 1% of the value of the Service shares' average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2001, Service shares were charged $3 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) portfolio. During the period ended June 30, 2001, the portfolio was charged $29 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: (a) 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, 2001, amounted to $2,431,403 and $2,349,614, respectively. The portfolio enters into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the portfolio is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the portfolio would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The portfolio realizes a gain if the value of the contract increases between those dates. The portfolio is also exposed to credit risk associated with counter party nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. The following summarizes open forward currency exchange contracts at June 30, 2001: Foreign Forward Currency Currency Unrealized Exchange Contracts Amounts Proceeds ($) Value ($) Appreciation ($) ------------------------------------------------------------------------------------------------------------------------------------ SALES: Japanese Yen, expiring 12/14/2001 100,513,058 841,254 820,130 21,124
(b) At June 30, 2001, accumulated net unrealized depreciation on investments and forward currency exchange contracts was $18,891, consisting of $132,266 gross unrealized appreciation and $151,157 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Japan Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Sub-Investment Adviser Newton Capital Management Limited 71 Queen Victoria Street London, EC4V 4DR, England Custodian Bank of New York 100 Church Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 189SA0601 ================================================================================ Dreyfus Investment Portfolios, MidCap Stock Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 16 Financial Highlights 18 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, MidCap Stock Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We are pleased to present this semiannual report for Dreyfus Investment Portfolios, MidCap Stock Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. 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. While the first half of 2001 was difficult for the U.S. economy, we have recently seen signs that improvement may be in sight. The Federal Reserve Board' s aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth, as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth later this year. In our view, the implications of this economic scenario may be positive for the stock market. Better economic times generally tend to lead to increased sales and profits for many companies, especially those that are sensitive to changes in the economic cycle. A stronger economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies whose valuations dropped during the recent economic downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE John O'Toole, Portfolio Manager How did Dreyfus Investment Portfolios, MidCap Stock Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, Dreyfus Investment Portfolios, MidCap Stock Portfolio produced total returns of -1.59% for its Initial shares and -1.66% for its Service shares.(1) In contrast, the Standard & Poor's MidCap 400 Index (the "Index"), the portfolio's benchmark, produced a total return of 0.46% for the same period.(2) We attribute the portfolio's absolute performance to investors' preferences for the smaller capitalization stocks within the midcap universe during the reporting period. In turn, the portfolio slightly underperformed the Index because its average market capitalization was slightly larger than that of the Index. What is the portfolio's investment approach? The portfolio invests primarily in a blend of growth and value stocks of mid-capitalization companies chosen through a disciplined process that combines computer modeling techniques, fundamental analysis and risk management. The quantitatively driven valuation process identifies and ranks approximately 2,500 midcap stocks as attractive, neutral or unattractive investments, based upon more than a dozen different valuation inputs. Those inputs, which we believe can have an important influence on stock returns, include, among other things, earnings estimates, profit margins and growth in cash flow. We establish weightings for each factor based upon our analysis of which factors are being rewarded by investors and make adjustments along the way for the uniqueness of various industries and economic sectors. For example, if the equity markets were rewarding companies with strong growth in cash flow, then we would add more weight to our growth-in-cash-flow factor. The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) Next, our investment management team conducts fundamental research on each stock, which ultimately results in the buy-and-sell recommendations. We seek to have the portfolio own the best-performing stocks within each economic sector of the midcap market. By maintaining an economic sector-neutral stance, we allow individual stock selection to drive the portfolio's performance. What other factors influenced the portfolio's performance? The portfolio was positively influenced by the relatively strong returns produced by midcap stocks, which generally outperformed large-cap stocks during the reporting period. Our individual stock selection strategy also served the portfolio well during the reporting period. Our stock selection methodology is a bottom-up process in which we examine each company in which the portfolio may invest on its own merits, which sometimes produces results that are contrary to consensus thinking. For example, Westwood One, which produces radio programming, nearly doubled in price during the reporting period despite the slumping advertising environment. We were attracted to the company because of its broad array of programming and its steady earnings. Another good performer for the portfolio was AmeriCredit, a lender focusing on car buyers with less than perfect credit records. The company produced strong returns despite a weakening U.S. economy, partly because AmeriCredit screens its clients thoroughly and because the declining interest-rate environment allowed it to boost profit margins. Despite volatile performance in the energy sector because of falling oil and natural gas prices, Ultramar Diamond Shamrock produced strong returns for the portfolio, because it was the target of a takeover bid. In addition, SunGard Data Systems and Black Box produced good returns for the portfolio, despite being part of the out-of-favor technology sector. Unlike many technology companies, these companies were solidly profitable during the reporting period. Certain portfolio holdings reported earnings disappointments during the reporting period, and as a result those stocks generally performed poorly. One example includes Atlas Air Worldwide Holdings, an air cargo company, which cited a weakening economic environment that reduced demands for its services. Another holding which detracted from the portfolio' s performance, NRG Energy, was dragged down by the energy crisis in California, as investors became concerned that there might be a government backlash against independent power producers. What is the portfolio's current strategy? We continue to fine-tune our quantitatively driven valuation model and our sector- and industry-neutral portfolio construction process. For example, to reflect the market' s current preference for value investing, we recently adjusted the model to place greater emphasis on price-earnings (P/E) ratios. A P/E ratio is a stock's price divided by its earnings per share. We believe that in the current market environment, stocks of companies with low P/E ratios can have valuations that are attractive compared to those of their large-cap counterparts. July 16, 2001 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF FUND EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT IN EFFECT THROUGH DECEMBER 31, 2001, AT WHICH TIME IT MAY BE EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE FUND'S RETURNS WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S MIDCAP 400 INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN INDEX MEASURING THE PERFORMANCE OF THE MIDSIZE COMPANY SEGMENT OF THE U.S. STOCK MARKET. The Portfolio STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) COMMON STOCKS--97.9% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ALCOHOL & TOBACCO--.5% R.J. Reynolds Tobacco Holdings 11,800 644,280 CONSUMER CYCLICAL--10.2% Albany International, Cl. A 26,900 (a) 508,410 Alberto-Culver, Cl. B 10,900 458,236 American Eagle Outfitters 23,900 (a) 842,236 Atlas Air Worldwide Holdings 20,900 (a) 295,944 BJ's Wholesale Club 31,900 (a) 1,698,994 Brinker International 36,000 (a) 930,600 Callaway Golf 17,600 278,080 Darden Restaurants 24,300 677,970 International Game Technology 17,800 (a) 1,116,950 Johnson Controls 8,300 601,501 Jones Apparel Group 26,900 (a) 1,162,080 Lear 8,300 (a) 289,670 MGM Mirage 22,600 (a) 677,096 Miller (Herman) 21,800 527,560 Mohawk Industries 12,600 (a) 443,520 Neiman Marcus Group, Cl. A 13,400 (a) 415,400 Payless ShoeSource 11,800 (a) 763,460 Williams-Sonoma 20,900 (a) 811,338 Zale 24,300 (a) 818,910 13,317,955 CONSUMER STAPLES--3.1% Dean Foods 11,800 474,360 Energizer Holdings 26,900 (a) 617,355 McCormick & Co. 17,600 739,552 Pepsi Bottling Group 10,100 405,010 Smithfield Foods 15,100 (a) 608,530 Suiza Foods 12,600 (a) 669,060 Tyson Foods, Cl. A 51,100 470,631 3,984,498 ENERGY RELATED--8.1% BJ Services 47,000 (a) 1,333,860 ENSCO International 42,700 999,180 Energen 15,900 438,840 Equitable Resources 20,100 669,531 Louis Dreyfus Natural Gas 16,800 (a) 585,480 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ENERGY RELATED (CONTINUED) Marine Drilling Cos. 31,900 (a) 609,609 Murphy Oil 15,100 1,111,360 Nabors Industries 11,800 (a) 438,960 Noble Affiliates 8,300 293,405 Questar 30,200 747,752 Rowan Cos. 27,700 (a) 612,170 Ultramar Diamond Shamrock 33,500 1,582,875 UtiliCorp United 37,700 1,151,735 10,574,757 HEALTH CARE--14.4% AmeriSource Health, Cl. A 15,100 (a) 835,030 Apogent Technologies 36,000 (a) 885,600 Barr Laboratories 9,300 (a) 654,813 Beckman Coulter 14,300 583,440 Bergen Brunswig, Cl. A 35,200 676,544 Edwards Lifesciences 22,600 (a) 595,736 Express Scripts 13,100 (a) 720,893 Genzyme-General Division 49,500 (a) 3,019,500 Health Net 39,400 (a) 685,560 IDEC Pharmaceuticals 35,200 (a) 2,382,688 IVAX 42,900 (a) 1,673,100 King Pharmaceuticals 9,300 (a) 499,875 Millennium Pharmaceuticals 16,000 (a) 569,280 Mylan Laboratories 21,800 613,234 Oxford Health Plans 36,000 (a) 1,029,600 Protein Design Labs 11,800 (a) 1,023,768 Quest Diagnostics 10,400 (a) 778,440 Trigon Healthcare 14,300 (a) 927,355 Waters 22,600 (a) 623,986 18,778,442 INTEREST SENSITIVE--18.8% AmeriCredit 17,600 (a) 914,320 Associated Banc-Corp 28,500 1,025,715 Banknorth Group 25,100 568,515 City National 15,100 668,779 Compass Bancshares 47,000 1,245,500 Dime Bancorp 41,000 1,527,250 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ INTEREST SENSITIVE (CONTINUED) Dime Bancorp (Warrants) 19,900 5,572 Everest Re Group 14,300 1,069,640 Federated Investors, Cl. B 21,800 701,960 First Tennessee National 32,700 1,135,017 Gallagher (Arthur J.) & Co. 36,900 959,400 Golden State Bancorp 25,800 794,640 GreenPoint Financial 20,100 771,840 Heller Financial, Cl. A 17,600 704,000 Investment Technology Group 15,100 (a) 759,379 LaBranche & Co. 18,400 (a) 533,600 M&T Bank 16,800 1,268,400 Mercantile Bankshares 21,800 853,034 Metris Cos. 23,400 788,814 Nationwide Financial Services, Cl. A 18,500 807,525 North Fork Bancorporation 51,100 1,584,100 Old Republic International 27,700 803,300 PMI Group 15,100 1,097,166 Radian Group 25,200 1,019,340 SEI Investments 21,800 1,033,320 Silicon Valley Bancshares 18,400 (a) 404,800 TCF Financial 16,800 778,008 Union Planters 16,800 732,480 24,555,414 INTERNET RELATED--.5% Macromedia 34,400 (a) 619,200 PRODUCER GOODS--9.4% Alexander & Baldwin 18,400 473,800 American Standard Cos. 18,400 (a) 1,105,840 Ashland 10,900 437,090 Bemis 11,800 474,006 Bowater 14,300 639,782 C&D Technologies 14,300 443,300 Cytec Industries 26,200 (a) 995,600 D. R. Horton 37,200 844,440 Engelhard 15,100 389,429 Fuller (H.B.) 10,900 543,910 Harsco 16,800 455,784 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER GOODS (CONTINUED) Kennametal 9,300 343,170 Lennar 19,300 804,810 Lyondell Chemical 33,700 518,306 Parker-Hannifin 13,400 568,696 Precision Castparts 18,400 688,528 Sonoco Products 23,500 584,680 Teekay Shipping 10,900 436,218 Tidewater 26,000 980,200 York International 14,300 500,786 12,228,375 SERVICES--10.9% Administaff 17,600 (a) 457,600 Apollo Group, Cl. A 26,500 (a) 1,124,925 Belo, Cl. A 30,200 568,968 Cox Radio, Cl. A 23,400 (a) 651,690 DST Systems 24,300 (a) 1,280,610 Entercom Communications 7,500 (a) 402,075 Hanover Compressor 20,900 (a) 691,581 Henry (Jack) & Associates 21,800 675,800 Republic Services 15,100 (a) 299,735 Scholastic 16,800 (a) 707,280 SunGard Data Systems 72,100 (a) 2,163,721 Telephone and Data Systems 6,400 696,000 US Cellular 6,700 (a) 386,255 United Rentals 20,100 (a) 521,595 Valassis Communications 16,800 (a) 601,440 Viad 37,700 995,280 Washington Post, Cl. B 1,700 975,800 Westwood One 29,400 (a) 1,083,390 14,283,745 TECHNOLOGY--16.4% Advent Software 9,000 (a) 571,500 Arrow Electronics 38,500 935,165 Atmel 30,300 (a) 408,747 Avnet 24,300 544,806 Black Box 9,300 (a) 626,448 Cabot Microelectronics 13,400 (a) 830,800 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ TECHNOLOGY (CONTINUED) Cadence Design Systems 46,100 (a) 858,843 CommScope 18,400 (a) 432,400 Diebold 15,100 485,465 DuPont Photomasks 11,500 (a) 554,875 Electro Scientific Industries 11,800 (a) 449,580 Electronic Arts 9,300 (a) 538,470 Federal Signal 20,100 471,747 InFocus 13,400 (a) 273,226 International Rectifier 15,100 (a) 514,910 L-3 Communications Holdings 9,300 (a) 709,590 Lattice Semiconductor 16,000 (a) 390,400 Macrovision 9,300 (a) 637,050 Mentor Graphics 19,400 (a) 339,500 Mercury Interactive 4,200 (a) 251,580 Microchip Technology 19,300 (a) 661,025 NVIDIA 13,700 (a) 1,270,675 National Instruments 18,400 (a) 597,080 Novellus Systems 12,600 (a) 715,554 PerkinElmer 8,300 228,499 Polycom 25,000 (a) 577,250 Rational Software 28,700 (a) 805,035 Reynolds & Reynolds, Cl. A 24,300 533,385 SPX 8,700 (a) 1,089,066 Semtech 21,400 (a) 642,000 Sybase 33,500 (a) 551,075 Symantec 21,800 (a) 952,442 THQ 5,800 (a) 345,854 Tech Data 21,800 (a) 727,248 Vishay Intertechnology 37,700 (a) 867,100 21,388,390 UTILITIES--5.6% Alliant Energy 24,300 708,345 Black Hills 15,900 639,657 Conectiv 26,000 561,600 Dycom Industries 17,600 (a) 403,568 IDACORP 20,900 728,992 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (CONTINUED) Kansas City Power & Light 19,000 466,450 NRG Energy 23,400 (a) 516,672 Pinnacle West Capital 15,900 753,660 Public Service Company of New Mexico 19,300 619,530 Puget Energy 26,000 681,200 SCANA 20,600 585,040 TECO Energy 20,100 613,050 7,277,764 TOTAL COMMON STOCKS (cost $122,187,270) 127,652,820 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--5.7% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ REPURCHASE AGREEMENT; Greenwich Capital Markets, Tri-Party Repurchase Agreement, 3.98%, dated 6/29/2001, due 7/2/2001, in the amount of $7,402,454 (fully collateralized by $7,030,000 Federal Home Loan Mortgage Corp., Notes, 6.875%, 9/15/2010, value $7,551,305) (cost $7,400,000) 7,400,000 7,400,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $129,587,270) 103.6% 135,052,820 LIABILITIES, LESS CASH AND RECEIVABLES (3.6%) (4,693,324) NET ASSETS 100.0% 130,359,496 (A) NON-INCOME PRODUCING. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value ------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments--Note 1(b) 129,587,270 135,052,820 Cash 443,187 Dividends and interest receivable 51,046 Prepaid expenses 19,622 135,566,675 ------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 86,769 Payable for investment securities purchased 5,073,702 Payable for shares of Beneficial Interest redeemed 6,952 Accrued expenses 39,756 5,207,179 -------------------------------------------------------------------------------- NET ASSETS ($) 130,359,496 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 129,617,192 Accumulated undistributed investment income--net 101,020 Accumulated net realized gain (loss) on investments (4,824,266) Accumulated net unrealized appreciation (depreciation) on investments--Note 4 5,465,550 -------------------------------------------------------------------------------- NET ASSETS ($) 130,359,496 NET ASSET VALUE PER SHARE Initial Shares Service Shares -------------------------------------------------------------------------------- Net Assets ($) 126,820,885 3,538,611 Shares Outstanding 9,022,194 251,881 -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 14.06 14.05 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends 432,910 Interest 127,974 TOTAL INCOME 560,884 EXPENSES: Investment advisory fee--Note 3(a) 367,535 Professional fees 33,340 Prospectus and shareholders' reports 19,290 Custodian fees--Note 3(b) 16,436 Registration fees 13,586 Distribution fees--Note 3(b) 1,658 Trustees' fees and expenses--Note 3(c) 454 Shareholder servicing costs--Note 3(b) 258 Miscellaneous 3,407 TOTAL EXPENSES 455,964 Less--waiver of fees due to undertaking--Note 3(a) (2,006) NET EXPENSES 453,958 INVESTMENT INCOME--NET 106,926 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (4,341,633) Net unrealized appreciation (depreciation) on investments 3,480,013 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (861,620) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (754,694) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 106,926 133,868 Net realized gain (loss) on investments (4,341,633) 940,784 Net unrealized appreciation (depreciation) on investments 3,480,013 90,204 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (754,694) 1,164,856 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS ($): From investment income--net: Initial shares (13,745) (126,162) Service shares (167) -- From net realized gain on investments: Initial shares -- (659,279) In excess of net realized gain on investments: Initial shares -- (482,633) TOTAL DIVIDENDS (13,912) (1,268,074) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 56,599,577 70,330,857 Service shares 3,955,826 500 Dividends reinvested: Initial shares 13,745 1,268,074 Service shares 167 -- Cost of shares redeemed: Initial shares (5,736,445) (10,274,545) Service shares (489,311) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 54,343,559 61,324,886 TOTAL INCREASE (DECREASE) IN NET ASSETS 53,574,953 61,221,668 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 76,784,543 15,562,875 END OF PERIOD 130,359,496 76,784,543 Undistributed investment income--net 101,020 8,006 Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: INITIAL SHARES Shares sold 4,070,841 4,850,323 Shares issued for dividends reinvested 1,071 95,332 Shares redeemed (423,272) (729,677) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 3,648,640 4,215,978 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 286,495 35 Shares issued for dividends reinvested 13 -- Shares redeemed (34,662) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 251,846 35 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ------------------------------------- INITIAL SHARES (Unaudited) 2000 1999 1998(a) ---------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 14.29 13.44 12.16 12.50 Investment Operations: Investment income--net .01(b) .05(b) .03(b) .02 Net realized and unrealized gain (loss) on investments (.24) 1.05 1.28 (.34) Total from Investment Operations (.23) 1.10 1.31 (.32) Distributions: Dividends from investment income--net .00(c) (.03) (.03) (.02) Dividends from net realized gain on investments -- (.13) -- -- Dividends in excess of net realized gain on investments -- (.09) -- -- Total Distributions .00(c) (.25) (.03) (.02) Net asset value, end of period 14.06 14.29 13.44 12.16 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%) (1.59)(d) 8.28 10.82 (2.53)(d) ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .46(d) .98 .97 .67(d) Ratio of net investment income to average net assets .11(d) .34 .26 .18(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- .06 .49 .60(d) Portfolio Turnover Rate 36.85(d) 102.89 77.73 75.74(d) ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 126,821 76,784 15,563 10,506 (A) FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 14.29 14.29 Investment Operations: Investment income--net .01(b) -- Net realized and unrealized gain (loss) on investments (.25) -- Total from Investment Operations (.24) -- Net asset value, end of period 14.05 14.29 -------------------------------------------------------------------------------- TOTAL RETURN (%) (1.66)(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .50(c) -- Ratio of net investment income to average net assets .06(c) -- Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .15(c) -- Portfolio Turnover Rate 36.85(c) 102.89 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 3,539 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 MidCap Stock Portfolio (the "portfolio"). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide investment results that are greater than the total return performance of publicly-traded common stocks of medium-size domestic companies in the aggregate, as represented by the Standard & Poor's MidCap 400 Index. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. (b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $13 during the period ended June 30, 2001 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The portfolio may enter into repurchase agreements with financial institutions, deemed to be creditworthy by Dreyfus, subject to the seller's agreement to repurchase and the portfolio's agreement to resell such securities at a mutually agreed upon price. Securities purchased subject to repurchase agreements are deposited with the portfolio' s custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the 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 The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) collateral is not met, or the seller defaults on its repurchase obligation, the portfolio maintains the right to sell the underlying securities at market value and may claim any resulting loss against the seller. (c) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the portfolio not to distribute such gain. (d) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2--Bank Line of Credit: The portfolio participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the portfolio based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2001, the portfolio did not borrow under the line of credit. NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .75 of 1% of the value of the portfolio's average daily net assets and is payable monthly. Dreyfus has agreed, until December 31, 2001, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses of neither class, exclusive of 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, 2001, Dreyfus waived receipt of fees of $2,006, 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, 2001, Service shares were charged $1,658 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, 2001, the portfolio was charged $89 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, 2001, the portfolio was charged $16,436 pursuant to the custody 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"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2001, amounted to $90,878,301 and $35,414,110, respectively. At June 30, 2001, accumulated net unrealized appreciation on investments was $5,465,550, consisting of $13,487,625 gross unrealized appreciation and $8,022,075 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). NOTES For More Information Dreyfus Investment Portfolios, MidCap Stock Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 174SA0601 ================================================================================ Dreyfus Investment Portfolios, Technology Growth Portfolio SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE PORTFOLIO ------------------------------------------------------------ 2 Letter from the Chairman 3 Discussion of Performance 6 Statement of Investments 9 Statement of Securities Sold Short 10 Statement of Assets and Liabilities 11 Statement of Operations 12 Statement of Changes in Net Assets 13 Financial Highlights 15 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Portfolio Dreyfus Investment Portfolios, Technology Growth Portfolio LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Investment Portfolios, Technology Growth Portfolio, covering the six-month period from January 1, 2001 through June 30, 2001. Inside, you'll find valuable information about how the portfolio was managed during the reporting period, including a discussion with the portfolio manager, Mark Herskovitz. While the first half of 2001 was difficult for the U.S. economy, we have recently seen signs that improvement may be in sight. The Federal Reserve Board's aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth, as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth later this year. In our view, the implications of this economic scenario may be positive for the stock market. Better economic times generally tend to lead to increased sales and profits for many companies, especially those that are sensitive to changes in the economic cycle. A stronger economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies whose valuations dropped during the recent economic downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF PERFORMANCE Mark Herskovitz, Primary Portfolio Manager How did Dreyfus Investment Portfolios, Technology Growth Portfolio perform relative to its benchmark? For the six-month period ended June 30, 2001, the portfolio's Initial shares produced a total return of -25.86% and its Service shares produced a total return of -26.00% .(1) In comparison, the portfolio's benchmarks, the Morgan Stanley High Technology 35 Index and the Standard & Poor's 500 Composite Stock Price Index (" S& P 500 Index"), produced total returns of -13.19% and -6.69%, respectively, over the same period.(2,3) The Nasdaq Composite Index produced a total return of -12.53% for the same period.(4) We attribute continued weakness in the technology sector and the portfolio's performance to declining corporate spending and negative investor sentiment caused by the economic downturn. The portfolio underperformed its benchmarks due to poor performance in a few of its telecommunications holdings and its underweighted position in software relative to its benchmarks. What is the portfolio's investment approach? The portfolio seeks capital appreciation by investing primarily in growth companies of any size that we believe are leading producers or beneficiaries of technological innovation. These investments may include companies in the computer, semiconductor, electronics, communications, health care, biotechnology, computer software and hardware, electronic components and systems, networking and cable broadcasting, telecommunications, defense and aerospace and environmental sectors. When evaluating investment opportunities, we first assess economic and market conditions in an attempt to identify trends that we believe are likely to drive demand within the various technology-related sectors. Second, we strive to identify the companies that are most likely to benefit from these overall trends. Typically, these companies are leaders in their market segments and are characterized by rapid earnings or revenue growth and dominant market shares. We conduct extensive fundamental research to understand these companies' competitive The Portfolio DISCUSSION OF PERFORMANCE (CONTINUED) advantages and to evaluate their ability to maintain their leadership positions over time. This process enables us to seek the stocks of leading technology companies for the portfolio. Many of those stocks are considered core holdings that we believe could lead their industry segments over the long term. We complement these positions with non-core holdings that we believe can provide above-average gains over a shorter time frame. Although the portfolio looks for companies with the potential for strong earnings or revenue growth rates, some of the portfolio's investments may currently be experiencing losses. Moreover, the portfolio may invest in small-, mid- and large-cap securities in all available trading markets, including initial public offerings ("IPOs"). The portfolio's strategy with respect to IPOs is to participate in IPOs of companies that meet the portfolio's investment criteria described above, and that we believe have the potential to become full positions within the portfolio. What other factors influenced the portfolio's performance? Because of the slowing economy, business fundamentals deteriorated sharply within the technology sector during the reporting period. Most notably, demand for technology products and services declined, adversely affecting technology companies' sales and earnings. Lack of demand was particularly severe among business customers, many of whom canceled or postponed capital investments during the downturn. Communications services companies were particularly hard-hit because of business customers' reluctance to spend in a slower economy. As a result, many former highflyers, such as Cisco Systems and Nortel Networks, were forced to write down large inventories of slow-selling products, leading to sharply lower earnings. Weakness in communications services soon spread to the semiconductor manufacturing industry, which represented the portfolio's largest concentration of holdings during the reporting period. Despite this very challenging environment, there have been several bright spots. The portfolio has participated in relatively strong areas, such as technology services, with investments in industry leaders Electronic Data Systems and Automatic Data Processing. These companies have withstood the full brunt of the downturn, because they have multiyear customer contracts to support their revenue streams. We have also received attractive returns from certain software companies, such as Microsoft, Veritas Software and Siebel Systems. What is the portfolio's current strategy? Despite the cyclical downturn, we continue to believe that the technology group will grow faster than other economic sectors over the course of a full business cycle. In our view, fundamentally sound technology companies have been unfairly punished along with more speculative businesses. For example, because consumer spending has remained relatively robust, we are optimistic about companies that do business with individuals as well as corporations. We also like the growth potential of digital data storage companies as more documents, videos, photographs, music and other materials are accessed by computer. In addition, we believe that the "shakeout" among telecommunications companies may help boost the prospects of the regional Bell operating companies. However, in light of the extreme volatility and overall risks of the technology sector, we again caution investors that the portfolio should be considered only as a supplement to an overall investment program. In the meantime, investors should not be surprised if volatility continues, especially if the U.S. economy remains weak. In addition to our long-term perspective, we try to manage these risks by maintaining a broadly diversified technology portfolio and focusing on fundamentally sound companies over the long term. July 16, 2001 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS, WHICH WILL REDUCE RETURNS. (2) SOURCE: BLOOMBERG L.P. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY HIGH TECHNOLOGY 35 INDEX IS AN UNMANAGED, EQUAL DOLLAR-WEIGHTED INDEX OF 35 STOCKS FROM THE ELECTRONICS-BASED SUBSECTORS. (3) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. (4) SOURCE: LIPPER INC. -- THE NASDAQ COMPOSITE INDEX MEASURES THE MARKET VALUE OF ALL THE DOMESTIC AND FOREIGN COMMON STOCKS LISTED ON THE NASDAQ STOCK MARKET. PRICE CHANGES IN EACH SECURITY EFFECT EITHER A RISE OR FALL IN THE INDEX, IN PROPORTION TO THE SECURITY'S MARKET VALUE. THE MARKET VALUE -- THE LAST SALE PRICE MULTIPLIED BY TOTAL SHARES OUTSTANDING -- IS CALCULATED CONTINUALLY THROUGHOUT THE DAY. THE INDEX INCLUDES THE SECURITIES OF MORE THAN 5,300 COMPANIES REPRESENTING A WIDE ARRAY OF INDUSTRIES. The Portfolio STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) COMMON STOCKS--90.1% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMPUTER SERVICES--5.9% Automatic Data Processing 73,500 3,652,950 Electronic Data Systems 45,000 2,812,500 6,465,450 DATA STORAGE--5.0% Brocade Communications Systems 75,000 (a) 3,299,250 EMC 76,000 (a) 2,207,800 5,507,050 HARDWARE--6.6% Apple Computer 96,500 (a) 2,243,625 Dell Computer 83,500 (a) 2,183,525 Jabil Circuit 40,500 (a) 1,249,830 Sun Microsystems 100,000 (a) 1,572,000 7,248,980 INTERNET--1.4% VeriSign 25,000 (a) 1,500,250 NETWORKING--2.6% Cisco Systems 94,000 (a) 1,710,800 Juniper Networks 37,500 (a) 1,166,250 2,877,050 SEMICONDUCTORS--22.3% Advanced Micro Devices 83,000 (a) 2,397,040 Intel 78,500 2,296,125 Linear Technology 57,500 2,542,650 Micrel 105,000 (a) 3,465,000 NVIDIA 23,000 (a) 2,133,250 PMC-Sierra 48,000 (a) 1,491,360 Taiwan Semiconductor Manufacturing, ADR 247,800 (a) 3,764,082 Texas Instruments 85,000 2,677,500 Vitesse Semiconductor 57,000 (a) 1,199,280 Xilinx 60,000 (a) 2,474,400 24,440,687 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ SEMICONDUCTOR EQUIPMENT--7.9% Applied Materials 60,500 (a) 2,970,550 KLA-Tencor 58,000 (a) 3,391,260 Teradyne 70,500 (a) 2,333,550 8,695,360 SOFTWARE--15.9% BEA Systems 63,500 (a) 1,950,085 Microsoft 50,000 (a) 3,650,000 Oracle 130,000 (a) 2,470,000 Rational Software 136,000 (a) 3,814,800 Siebel Systems 53,500 (a) 2,509,150 Veritas Software 45,500 (a) 3,027,115 17,421,150 TELECOMMUNICATION EQUIPMENT--9.3% Comverse Technology 23,000 (a) 1,325,260 JDS Uniphase 78,500 (a) 1,000,875 Nokia, ADR 128,000 2,821,120 Nortel Networks 122,000 1,108,980 Qualcomm 37,500 (a) 2,193,000 Scientific-Atlanta 45,500 1,847,300 10,296,535 TELECOMMUNICATION SERVICES--13.2% BellSouth 88,500 3,563,895 Qwest Communications International 100,000 3,187,000 SBC Communications 83,000 3,324,980 Verizon Communications 83,000 4,440,500 14,516,375 TOTAL COMMON STOCKS (cost $120,820,511) 98,968,887 The Portfolio STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Principal SHORT-TERM INVESTMENTS--10.1% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. TREASURY BILLS: 3.69%, 7/26/2001 2,053,000 (b) 2,048,484 3.73%, 8/2/2001 92,000 91,737 3.64%, 8/9/2001 505,000 503,197 3.50%, 8/16/2001 569,000 566,536 3.57%, 8/23/2001 410,000 407,962 3.53%, 8/30/2001 238,000 236,634 3.45%, 9/6/2001 176,000 174,847 3.37%, 9/13/2001 619,000 614,568 3.37%, 9/20/2001 4,742,000 4,706,435 3.53%, 9/27/2001 1,734,000 1,719,192 TOTAL SHORT-TERM INVESTMENTS (cost $11,068,035) 11,069,592 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $131,888,546) 100.2% 110,038,479 LIABILITIES, LESS CASH AND RECEIVABLES (.2%) (246,110) NET ASSETS 100.0% 109,792,369 (A) NON-INCOME PRODUCING. (B) PARTIALLY HELD BY BROKER AS COLLATERAL FOR OPEN SHORT POSITIONS. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF SECURITIES SOLD SHORT June 30 ,2001 (Unaudited) COMMON STOCKS Shares Value ($) -------------------------------------------------------------------------------- Nasdaq 100 Shares (proceeds $645,185) 15,000 689,850 SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 131,888,546 110,038,479 Cash 241,129 Receivable from brokers for proceeds on securities sold short 645,185 Dividends receivable 8,578 Prepaid expenses 8,294 110,941,665 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 71,031 Payable for investment securities purchased 357,097 Securities sold short, at value (proceeds $645,185) --See Statement of Securities Sold Short 689,850 Accrued expenses 31,318 1,149,296 -------------------------------------------------------------------------------- NET ASSETS ($) 109,792,369 -------------------------------------------------------------------------------- COMPOSITION NET ASSETS ($): Paid-in capital 198,329,185 Accumulated investment (loss) (58,584) Accumulated net realized gain (loss) on investments (66,583,500) Accumulated net unrealized appreciation (depreciation) on investments--Note 4(b) (21,894,732) -------------------------------------------------------------------------------- NET ASSETS ($) 109,792,369 NET ASSET VALUE PER SHARE Initial Shares Service Shares ------------------------------------------------------------------------------ Net Assets ($) 105,816,739 3,975,630 Shares Outstanding 10,052,017 378,565 ------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 10.53 10.50 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 267,880 Cash dividends (net of $5,055 foreign taxes withheld at source) 199,905 TOTAL INCOME 467,785 EXPENSES: Investment advisory fee--Note 3(a) 453,540 Legal fees 27,000 Prospectus and shareholders' reports 16,962 Auditing fees 13,479 Custodian fees--Note 3(b) 8,812 Registration fees 1,968 Distribution fees--Note 3(b) 1,919 Trustees' fees and expenses--Note 3(c) 1,572 Shareholder servicing costs--Note 3(b) 359 Miscellaneous 758 TOTAL EXPENSES 526,369 INVESTMENT (LOSS) (58,584) -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments: Long transactions (37,024,466) Short sale transactions (130,091) NET REALIZED GAIN (LOSS) (37,154,557) Net unrealized appreciation (depreciation) on investments and securities sold short (414,716) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (37,569,273) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (37,627,857) SEE NOTES TO FINANCIAL STATEMENTS. The Portfolio STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- OPERATIONS ($): Investment (loss) (58,584) (456,415) Net realized gain (loss) on investments (37,154,557) (29,427,490) Net unrealized appreciation (depreciation) on investments (414,716) (36,217,189) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (37,627,857) (66,101,094) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Net realized gain (loss) on investments: INITIAL SHARES -- (128,126) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Initial shares 11,559,835 154,480,771 Service shares 4,482,759 500 Dividends reinvested: Initial shares -- 128,126 Cost of shares redeemed: Initial shares (7,968,212) (14,540,419) Service shares (201,180) -- INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 7,873,202 140,068,978 TOTAL INCREASE (DECREASE) IN NET ASSETS (29,754,655) 73,839,758 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 139,547,024 65,707,266 END OF PERIOD 109,792,369 139,547,024 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): INITIAL SHARES Shares sold 918,069 7,217,120 Shares issued for dividends reinvested -- 5,513 Shares redeemed (699,901) (767,276) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 218,168 6,455,357 -------------------------------------------------------------------------------- SERVICE SHARES Shares sold 396,823 35 Shares redeemed (18,293) -- NET INCREASE (DECREASE) IN SHARES OUTSTANDING 378,530 35 (A) EFFECTIVE DECEMBER 31, 2000, SHARES OF THE PORTFOLIO WERE REDESIGNATED AS INITIAL SHARES AND THE PORTFOLIO COMMENCED SELLING SERVICE SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single portfolio share. Total return shows how much your investment in the portfolio would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the portfolio's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ---------------------- INITIAL SHARES (Unaudited) 2000 1999(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.19 19.45 12.50 Investment Operations: Investment (loss)--net (.01)(b) (.06)(b) (.02)(b) Net realized and unrealized gain (loss) on investments (3.65) (5.18) 6.97 Total from Investment Operations (3.66) (5.24) 6.95 Distributions: Dividends from net realized gain on investments -- (.02) -- Net asset value, end of period 10.53 14.19 19.45 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (25.86)(c) (26.98) 55.60(c) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .43(c) .84 .36(c) Ratio of net investment (loss) to average net assets (.04)(c) (.30) (.14)(c) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- .09(c) Portfolio Turnover Rate 44.03(c) 121.88 20.01(c) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 105,817 139,547 65,707 (A) FROM AUGUST 31, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1999. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio FINANCIAL HIGHLIGHTS (CONTINUED) Six Months Ended June 30, 2001 Period Ended SERVICE SHARES (Unaudited) December 31, 2000(a) -------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 14.19 14.19 Investment Operations: Investment (loss)--net (.04)(b) -- Net realized and unrealized gain (loss) on investments (3.65) -- Total from Investment Operations (3.69) -- Net asset value, end of period 10.50 14.19 -------------------------------------------------------------------------------- TOTAL RETURN (%) (26.00)(c) -- -------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .64(c) -- Ratio of net investment (loss) to average net assets (.34)(c) -- Portfolio Turnover Rate 44.03(c) 121.88 -------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 3,976 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 Technology Growth Portfolio (the "portfolio" ). The portfolio is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The portfolio is a diversified series. The portfolio's investment objective is to provide long-term capital growth. The Dreyfus Corporation ("Dreyfus") serves as the portfolio's investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of Dreyfus, is the distributor of the portfolio's shares, which are sold without a sales charge. The portfolio is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the distribution plan and the expenses borne by each class and certain voting rights. The fund accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The portfolio's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Trustees. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The portfolio does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the portfolio's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the portfolio received net earnings credits of $1,596 during the period ended June 30, 2001, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the portfolio may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the portfolio not to distribute such gain. (e) Federal income taxes: It is the policy of the portfolio to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. The portfolio has an unused capital loss carryover of approximately $10,860,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2000. This amount is calculated based on Federal income tax regulations which may differ from financial reporting in accordance with accounting principles generally accepted in the United States. If not applied, the carryover expires fiscal 2008. 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, 2001, the portfolio did not borrow under the line of credit. The Portfolio NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) NOTE 3--Investment Advisory Fee and Other Transactions With Affiliates: (a) Pursuant to an Investment Advisory Agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .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, 2001, Service shares were charged $1,919 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, 2001, the portfolio was charged $63 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, 2001, the portfolio was charged $8,812 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $25,000 and an attendance fee of $4,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. (d) During the period ended June 30, 2001, the portfolio incurred total brokerage commissions of $75,614, of which $21,264 was paid to Dreyfus Brokerage Services, a wholly-owned subsidiary of Mellon Financial Corporation. NOTE 4--Securities Transactions: (a) The following summarizes the aggregate amount of purchases and sales of investment securities and securities sold short, excluding short-term securities, during the period ended June 30, 2001: Purchases Sales -------------------------------------------------------------------------------- Long transactions 52,806,238 49,143,007 Short sale transactions 24,656,770 25,171,864 TOTAL 77,463,008 74,314,871 The portfolio is engaged in short-selling which obligates the portfolio to replace the security borrowed by purchasing the security at current market value. The portfolio would incur a loss if the price of the security increases between the date of the short sale and the date on which the portfolio replaces the borrowed security. The portfolio would realize a gain if the price of the security declines between those dates. Until the portfolio replaces the borrowed security, the portfolio will maintain daily a segregated account with a broker or custodian of permissable liquid assets sufficient to cover its short position. Securities sold short at June 30, 2001, and their related market values and proceeds are set forth in the Statement of Securities Sold Short. (b) At June 30, 2001, accumulated net unrealized depreciation on investments and securities sold short was $21,894,732, consisting of $5,738,681 gross unrealized appreciation and $27,633,413 gross unrealized depreciation. At June 30, 2001, the cost of investments for Federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments). The Portfolio NOTES For More Information Dreyfus Investment Portfolios, Technology Growth Portfolio 200 Park Avenue New York, NY 10166 Investment Adviser The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-554-4611 or 516-338-3300 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 Attn: Institutional Servicing (c) 2001 Dreyfus Service Corporation 175SA0601