-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NHq9/qIITNpqf7rJOwBnYDrXoL0Omvq4sFHI5aApOf93joh+h3bH5MyhC7A79y4B fYPa9XBkoiBuauTgLP9EOw== 0001056707-99-000001.txt : 19990225 0001056707-99-000001.hdr.sgml : 19990225 ACCESSION NUMBER: 0001056707-99-000001 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYFUS INVESTMENT PORTFOLIOS CENTRAL INDEX KEY: 0001056707 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08673 FILM NUMBER: 99548904 BUSINESS ADDRESS: STREET 1: C/O THE DREYFUS CORPORATION STREET 2: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 MAIL ADDRESS: STREET 1: C/O THE DREYFUS CORPORATION STREET 2: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 N-30D 1 ANNUAL REPORT YEAR 2000 ISSUES (UNAUDITED) The fund could be adversely affected if the computer systems used by The Dreyfus Corporation and the fund' s other service providers do not properly process and calculate date-related information from and after January 1, 2000. The Dreyfus Corporation is working to avoid Year 2000-related problems in its systems and to obtain assurances from other service providers that they are taking similar steps. In addition, issuers of securities in which the fund invests may be adversely affected by Year 2000-related problems. This could have an impact on the value of the fund's investments and its share price. DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Shareholder: We are pleased to provide you with this first annual report for Dreyfus Investment Portfolios -- Core Value Portfolio for the period from its inception on May 1, 1998 through December 31, 1998. Over this period, your Portfolio's total return was -5.59%.* This compares with a total return of 11.72% for the Standard & Poor' s 500 Composite Stock Price Index (S&P 500) for the same period.** ECONOMIC REVIEW During 1998, the main regions of the world had very different economic fundamentals. The U.S. entered the year with a strong economy near full employment, with unemployment only slightly above 4%. The tight labor market led the Federal Reserve Board to contemplate a rise in interest rates early in the year, but world economic weakness generated powerful enough disinflationary forces that the Fed acted instead to ease credit beginning in September. After many years of subpar economic growth, continental Europe moved into a sustained economic expansion. The overall European economy benefited as interest rates in peripheral countries such as Spain and Italy fell, approaching the lower levels established by Germany, on the eve of currency unification. Unlike the U.S., Europe has substantial excess capacity of productive plant and labor. In Asia, weak economies were pervasive as a result of a financial crisis. The Latin American economies weakened in turn as the financial stresses spread throughout that region. On balance, there was a substantial weakening of the world economy over the course of 1998 moderated mainly by the American consumer's role as "spender of last resort." A main influence on the U.S. economy during the year was the foreign financial crisis and consequent cooling of the world economy. The positive effects hit first. Actual inflation and expected inflation dropped, causing a decline in long-term Treasury bond yields and mortgage rates. This caused a boom in housing. The fall in inflation left more of the growth in consumer income with which to buy goods and services. Thus, consumers benefited from a combination of good growth in income after inflation, a strong labor market, and increases in the prices of assets they owned, including bonds, stocks and real estate. In a sense, 1998 was a year of disinflationary boom in the U.S., as above-trend economic growth coincided with negligible inflation. The negative effect of Asian weakness was felt in the industrial sector more than in the consumer sector. Corporate profits weakened, especially in sectors affected by the Asian crisis such as world-traded commodities (oil, metals and paper) and exports. Evidence of a weaker world economy accumulated during 1998 as the financial stresses continued. A worsened financial crisis occurred between the Russian default in mid-August and the fallout from the Long Term Capital Management hedge fund crisis through early October. However, energetic steps were taken to stabilize the Japanese banks, design a support package for Brazil, ease monetary policy, and help overinvested financial institutions rebuild their cash reserves. Indications of a calming of financial fears were evident in the final months of the year. In any case, there appears to have been a shift in the priorities of key policymakers from fighting potential inflation to restimulating future world economic growth. The global economy survived a triple financial crisis in 1998 from Japan, emerging market countries and overextended financial institutions. Excess capacity persists in many worldwide industries after years of high capital spending followed by the onset of a worldwide weakening in demand. Fortunately, the U.S. has led the world in making the transition away from the old manufacturing industries to the new growth industries, such as biotechnology, software, computer hardware and the Internet. This contributed to the favorable combination of low unemployment and low inflation in the U.S., and may yet lead toward more efficient allocation of capital elsewhere in the world. As 1998 ended, interest rates set by central banks remained in a downtrend in most parts of the world including Europe and the U.S. A similar trend had even begun in many emerging countries, as the stresses of financial crisis relaxed. MARKET OVERVIEW Volatility was the overriding characteristic of equity markets in the year ended December 31. There was stock market strength during the early part of the year. Small-cap indices started to erode in the spring and were joined by large-cap indices by midsummer. Indices declined sharply until the end of August followed by a rebound and then a renewed decline amidst financial fears until early October. A strong rally followed in the last three months of the year in response to the easing of monetary policy. Over the 12-month period, the total return on the Standard and Poor's 500 Composite Stock Price Index was 28.60%. Returns on mid-cap and small-cap stock indices continued to be weaker, with a negative total return on small-cap indices. Three key trends influenced stock market behavior during the year. First, the Federal Reserve kept the Federal Funds rate flat at 5.5% for nearly nine months of the year, but then began a succession of easing moves. Second, weakness in the economies of emerging countries contributed to declining commodity prices and a drop in long-term Treasury bond yields to multidecade lows. Third, expectations for corporate profits dropped, first in the sectors sensitive to Asian developments such as oil, basic materials and exports and then for a broader list of stocks. The trigger for the sharp decline in stocks in August appeared to be the Russian default that month. This resulted in deepening concerns about weaker economic growth and corporate profits. There was also a global margin call on risky assets held by hedge funds and financial institutions. This raised the cost of debt financing for many corporations and many emerging countries. Expectations for economic activity in emerging countries in Asia and Latin America sank; those for U.S. corporate profits were put on hold. Despite the fall in Treasury bond yields, financial stocks led the summer selloff due to concerns that financial difficulties might spread among emerging countries, who might fail to repay loans. However, in the last three months of the year, these fears began to ebb in response to Federal Reserve easing moves. The erosion of expectations for corporate profit growth over the last year contributed to an outperformance by a small group of "supercap" growth stocks for much of the year. Investors had more confidence in the prospect for strong persistent earnings growth for this small group of stocks than for the broad market. Value stocks, which often have greater cyclical sensitivity to earnings fluctuations, lagged behind these "supercap" growth stocks. In addition, many of the financial stocks that fall into the value category fell sharply following the Russian default and global margin call concerns, before rebounding strongly after the Federal Reserve acted. The year ended December 31, 1998 was characterized by very different performances of the various market sectors. For example, the total return for the year on the Russell 1000 Index, with a heavy large-cap representation, was 27.02%, while the Russell 1000 Growth Index returned 38.71% and the Russell 1000 Value Index returned 15.63%. The return on the Russell Midcap Index was 10.09% while the small-cap Russell 2000 Index return was negative 2.55%. Another pattern in 1998 was that high quality assets outperformed medium and low quality assets. Treasury bonds outperformed junk bonds; U.S. and European stocks outperformed emerging market stocks; blue chip stocks, especially major growth stocks, generally rose more than the average stock. In an environment of concern about financial risks, the high-grade assets were the market leaders. PORTFOLIO FOCUS The Portfolio' s performance trailed that of the S& P 500 in 1998. The Portfolio' s orientation made it challenging to surpass the index's performance, which was primarily driven by large-capitalization growth stocks. The vast disparity between growth and value styles during 1998 made it difficult for the Portfolio, which has a value orientation, to surpass the index's performance. Growth stocks in the S&P 500 appreciated 42.2%, whereas value stocks returned 14.7% in 1998. In fact, the top ten contributors to the S&P 500 Index's returns in 1998, including Microsoft, General Electric, Wal-Mart Stores, Lucent Technologies and Cisco Systems, generated over 40% of the index's total return. The high valuation levels of these stocks precluded the Portfolio from owning them and thus from participating in this portion of the stock market rally. The Portfolio did not keep pace with the S&P Barra Value Index in 1998 primarily because of its underweight position in telephone utilities and consumer durables. Performance of this index was even more concentrated than that of the S&P 500, with the top ten stocks accounting for 65% of the index's 1998 return. The Portfolio' s best performing sectors during 1998 included consumer services and capital goods. The Portfolio was overweight in both of these sections throughout the year. The Portfolio's top five performing stocks were Sun Microsystems, International Business Machines, Alcatel, McDonald's, and Tricon Global Restaurants. Among the weakest performing sectors in the Portfolio were health care and technology. Due to the high valuation levels of these sectors, the Portfolio was underweighted in both of these areas throughout the year. Venator Group, Republic Industries, RJR Nabisco Holdings, Bankers Trust New York and Lam Research were the weakest securities in the Portfolio. The Portfolio' s investment policies remain unchanged. It continues to emphasize large cap value stocks with strong operating fundamentals and positive business momentum. The Portfolio is highly diversified with over 80 holdings in 12 different economic sectors. Currently, the Portfolio is overweighted in financial services, consumer services, and energy and underweighted in technology and health care. Recent strategy changes included increasing the consumer durables, technology and utilities weightings and decreasing the basic industries and energy weightings. We believe that the holdings in the Portfolio represent compelling value and expect that underlying value to be recognized as the valuation disparity between growth and value stocks narrows. We appreciate the opportunity to serve your investment needs. Sincerely, [Valerie J. Sill signature] Valerie J. Sill Portfolio Manager January 11, 1999 New York, N.Y. *Total return includes reinvestment of dividends and any capital gains paid. 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. **SOURCE: LIPPER ANALYTICAL SERVICES, INC.--Reflects the reinvestment of income dividends and, where applicable, capital gain distributions. The Standard & Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index of U.S. stock market performance. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 89% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index consists of the bottom 800 securities in the Russell 1000 Index as ranked by total market capitalization and is a widely accepted measure of medium-cap stock market performance. The Russell 2000 Index is composed of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index is composed of 3,000 of the largest U.S. companies by market capitalization. All indices are unmanaged and include reinvested dividends. DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO DECEMBER 31, 1998 - ----------------------------------------------------------------------------- COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO WITH THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX AND THE STANDARD & POOR'S BARRA VALUE INDEX Dollars $11,172 Standard & Poor's 500 Composite Stock Price Index* $10,160 Standard & Poor's Barra Value Index* $9,441 Dreyfus Investment Portfolios, Core Value Portfolio *Source: Lipper Analytical Services, Inc. Actual Aggregate Total Return - ----------------------------------------------------------------------------- From Inception (5/1/98) to December 31, 1998 ____________________ -5.59% - --------------- Past performance is not predictive of future performance. THE PORFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. The above graph compares a $10,000 investment made in Dreyfus Investment Portfolios, Core Value Portfolio on 5/1/98 (Inception Date) to a $10,000 investment made on that date in the Standard & Poor's 500 Composite Stock Price Index (S& P 500) as well as to the Standard & Poor's Barra Value Index (Value Index) which are described below. All dividends and capital gain distributions are reinvested. The Portfolio' s performance shown in the line graph takes into account all applicable fees and expenses of the Portfolio. The S&P 500 is a widely accepted, unmanaged index of overall stock market performance. The Value Index is a capitalization-weighted index of all the stocks in the S&P 500 that have low price-to-book ratios. It is designed so that approximately 50% of the S&P 500's market capitalization is in the Value Index. The Indices do not take into account charges, fees and other expenses. Further information relating to Portfolio performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the Prospectus and elsewhere in this report.
DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS DECEMBER 31, 1998 Common Stocks--94.9% Shares Value - ------------------------------------------------------- ___________ __________ Basic Industries--2.4% Dow Chemical . . . . . . . . . . . . . . . . . . . . . 300 $ 27,281 Fort James . . . . . . . . . . . . . . . . . . . . . . 800 32,000 Reynolds Metals . . . . . . . . . . . . . . . . . . . 800 42,150 Union Carbide . . . . . . . . . . . . . . . . . . . . 1,000 42,500 ___________ 143,931 ___________ Capital Goods--8.5% Federal-Mogul. . . . . . . . . . . . . . . . . . . . . 500 29,750 Ingersoll-Rand . . . . . . . . . . . . . . . . . . . . 350 16,428 Lockheed Martin . . . . . . . . . . . . . . . . . . . 800 67,800 LucasVarity, A.D.R. . . . . . . . . . . . . . . . . . 1,500 50,250 Northrop Grumman . . . . . . . . . . . . . . . . . . . 400 29,250 U.S. Filter . . . . . . . . . . . . . . . . . . . (a) 2,700 61,763 United Technologies . . . . . . . . . . . . . . . . . 1,200 130,500 Waste Management . . . . . . . . . . . . . . . . . . . 2,647 123,416 ___________ 509,157 ___________ Consumer Cyclical--.3% NIKE, Cl. B. . . . . . . . . . . . . . . . . . . . . . 400 16,225 ___________ Consumer Durables--5.5% Ford Motor . . . . . . . . . . . . . . . . . . . . . . 1,500 88,031 Lear . . . . . . . . . . . . . . . . . . . . . . . (a) 400 15,400 Philips Electronics, N.V . . . . . . . . . . . . . . . 1,750 118,453 Republic Industries . . . . . . . . . . . . . . . (a) 3,900 57,525 Whirlpool . . . . . . . . . . . . . . . . . . . . . . 900 49,838 ___________ 329,247 ___________ Consumer Non-Durables--10.4% General Mills. . . . . . . . . . . . . . . . . . . . . 700 54,425 Harcourt General . . . . . . . . . . . . . . . . . . . 1,800 95,738 Hasbro . . . . . . . . . . . . . . . . . . . . . . . . 1,300 46,963 Kimberly-Clark . . . . . . . . . . . . . . . . . . . . 2,500 136,250 Loews . . . . . . . . . . . . . . . . . . . . . . . . 1,500 147,375 Mattel . . . . . . . . . . . . . . . . . . . . . . . . 1,200 27,375 Philip Morris Cos. . . . . . . . . . . . . . . . . . . 2,100 112,350 ___________ 620,475 ___________ Consumer Services--14.2% ACNielsen. . . . . . . . . . . . . . . . . . . . . (a) 1,900 53,675 American Stores . . . . . . . . . . . . . . . . . . . 700 25,856 Circuit City Stores-Circuit City Group . . . . . . . . 2,300 114,856 Deluxe . . . . . . . . . . . . . . . . . . . . . . . . 1,000 36,563 Dun & Bradstreet . . . . . . . . . . . . . . . . . . . 1,300 41,031 Federated Department Stores . . . . . . . . . . . (a) 2,100 91,481 First Data . . . . . . . . . . . . . . . . . . . . . . 3,400 107,738 Limited . . . . . . . . . . . . . . . . . . . . . . . 3,200 93,200 McDonald's . . . . . . . . . . . . . . . . . . . . . . 1,400 107,275 Tele-Communications, Cl. A . . . . . . . . . . . . (a) 1,400 77,438 Tricon Global Restaurants . . . . . . . . . . . . (a) 1,200 60,150 Venator Group . . . . . . . . . . . . . . . . . . (a) 5,300 34,119 ___________ 843,382 ___________ DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------- ___________ __________ Energy--10.5% Canadian Pacific . . . . . . . . . . . . . . . . . . . 2,800 $ 52,850 Conoco, Cl.A . . . . . . . . . . . . . . . . . . . (a) 2,200 45,925 Elf Aquitaine, A.D.S . . . . . . . . . . . . . . . . . 900 50,963 Exxon . . . . . . . . . . . . . . . . . . . . . . . . 800 58,500 Mobil . . . . . . . . . . . . . . . . . . . . . . . . 2,000 174,246 Phillips Petroleum . . . . . . . . . . . . . . . . . . 1,400 59,675 Schlumberger . . . . . . . . . . . . . . . . . . . . . 1,300 59,963 Tosco . . . . . . . . . . . . . . . . . . . . . . . . 2,400 62,100 Unocal . . . . . . . . . . . . . . . . . . . . . . . . 2,300 67,131 ___________ 631,353 ___________ Finance--20.3% Allmerica Financial. . . . . . . . . . . . . . . . . . 900 52,088 Allstate . . . . . . . . . . . . . . . . . . . . . . . 3,100 119,738 American General . . . . . . . . . . . . . . . . . . . 700 54,600 American International Group . . . . . . . . . . . . . 1,125 108,703 BankAmerica . . . . . . . . . . . . . . . . . . . . . 2,678 161,015 Chase Manhattan . . . . . . . . . . . . . . . . . . . 2,400 163,350 CIGNA . . . . . . . . . . . . . . . . . . . . . . . . 1,700 131,431 Equitable Cos. . . . . . . . . . . . . . . . . . . . . 1,100 63,663 Everest Reinsurance Holdings . . . . . . . . . . . . . 1,500 58,406 First Union . . . . . . . . . . . . . . . . . . . . . 2,000 121,625 Hartford Financial Services Group . . . . . . . . . . 1,000 54,875 Republic New York . . . . . . . . . . . . . . . . . . 1,200 54,675 Washington Mutual . . . . . . . . . . . . . . . . . . 1,644 62,780 ___________ 1,206,949 ___________ Health Care--5.2% Aetna. . . . . . . . . . . . . . . . . . . . . . . . . 700 55,038 Columbia/HCA Healthcare . . . . . . . . . . . . . . . 2,400 59,400 Johnson & Johnson . . . . . . . . . . . . . . . . . . 700 58,713 Pharmacia & Upjohn . . . . . . . . . . . . . . . . . . 1,400 79,275 Tenet Healthcare . . . . . . . . . . . . . . . . . (a) 2,200 57,750 ___________ 310,176 ___________ Technology--7.3% Compaq Computer. . . . . . . . . . . . . . . . . . . . 1,900 79,681 Hewlett-Packard . . . . . . . . . . . . . . . . . . . 1,375 93,930 International Business Machines . . . . . . . . . . . 550 101,613 Learning Company . . . . . . . . . . . . . . . . . (a) 1,100 28,531 Sun Microsystems . . . . . . . . . . . . . . . . . (a) 1,500 128,438 ___________ 432,193 ___________ Transportation--1.3% Union Pacific. . . . . . . . . . . . . . . . . . . . . 1,700 76,606 ___________ Utilities--9.0% AT&T . . . . . . . . . . . . . . . . . . . . . . . . . 900 67,725 CMS Energy . . . . . . . . . . . . . . . . . . . . . . 1,500 72,656 Duke Energy . . . . . . . . . . . . . . . . . . . . . 450 28,828 Edison International . . . . . . . . . . . . . . . . . 1,800 50,175 Entergy . . . . . . . . . . . . . . . . . . . . . . . 2,000 62,250 DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------- ___________ __________ Utilities (continued) GTE. . . . . . . . . . . . . . . . . . . . . . . . . . 900 $ 60,694 Pinnacle West Capital . . . . . . . . . . . . . . . . 1,200 50,850 SBC Communications . . . . . . . . . . . . . . . . . . 1,500 80,438 Southern . . . . . . . . . . . . . . . . . . . . . . . 2,100 61,031 ___________ 534,647 ___________ TOTAL COMMON STOCKS (cost $5,614,052) . . . . . . . . . . . . . . . . $5,654,341 ___________ Preferred Stocks--1.8% - ------------------------------------------------------- Consumer Services; News Corp, A.D.R. (cost $99,267) . . . . . . . . . . . . . . . . . . 4,200 $ 103,688 ___________ Principal Short-Term Investments--2.9% Amount - ------------------------------------------------------------------------------------------- ___________ Agency Discount Notes; Federal Home Loan Banks, 4.30%, 1/4/1999 (cost $174,937) . . . . . . . . . . . . . . . . . $...175,000 $ 174,937 ___________ TOTAL INVESTMENTS (cost $5,888,256). . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.6% $5,932,966 _______ ___________ CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4% $ 25,787 _______ ___________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $5,958,753 _______ ___________ Notes to Statement of Investments: - ----------------------------------------------------------------------------- (a) Non-income producing. SEE NOTES TO FINANCIAL STATEMENTS. DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 Cost Value ___________ __________ ASSETS: Investments in securities--See Statement of Investments . . $5,888,256 $5,932,966 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 78,763 Receivable for investment securities sold . . . . . . . . 26,457 Dividends receivable . . . . . . . . . . . . . . . . . . 7,124 Prepaid expenses--Note 1(f) . . . . . . . . . . . . . . . 26,252 Due from The Dreyfus Corporation and affliliates . . . . 1,987 ___________ 6,073,549 ___________ LIABILITIES: Payable for investment securities purchased . . . . . . . 80,654 Accrued expenses and other liabilities . . . . . . . . . 34,142 ___________ 114,796 ___________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,958,753 ___________ REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $6,218,806 Accumulated net realized gain (loss) on investments . . . (304,763) Accumulated net unrealized appreciation (depreciation) on investments--Note 3 . . . . . . . . . . . . . . . . 44,710 ___________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,958,753 ___________ SHARES OUTSTANDING (UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED). . . . . . 508,348 NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $11.72 _______ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF OPERATIONS FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 INVESTMENT INCOME INCOME: Cash dividends (net of $1,254 foreign taxes withheld at source) . . . . . . . . . . . . . . . . . $ 54,427 Interest . . . . . . . . . . . . . . . . . . . . . . . . 12,249 _________ Total Income . . . . . . . . . . . . . . . . . . . $ 66,676 EXPENSES: Investment advisory fee--Note 2(a) . . . . . . . . . . . 26,068 Auditing fees . . . . . . . . . . . . . . . . . . . . . . 20,000 Custodian fees--Note 2(a) . . . . . . . . . . . . . . . . 8,468 Legal fees . . . . . . . . . . . . . . . . . . . . . . . 4,495 Organization expenses--Note 1(f) . . . . . . . . . . . . 4,033 Prospectus and shareholders' reports . . . . . . . . . . 3,917 Trustees' fees and expenses--Note 2(b) . . . . . . . . . 3,092 Registration fees . . . . . . . . . . . . . . . . . . . . 1,741 Shareholder servicing costs . . . . . . . . . . . . . . . 596 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 798 _________ Total Expenses . . . . . . . . . . . . . . . . . . 73,208 Less--expense reimbursement from Dreyfus due to undertaking--Note 2(a) . . . . . . . . . . . . . . . . (38,451) _________ Net Expenses . . . . . . . . . . . . . . . . . . . 34,757 __________ INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,919 __________ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3: Net realized gain (loss) on investments . . . . . . . . . $ (304,763) Net unrealized appreciation (depreciation) on investments . . 44,710 _________ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . (260,053) __________ NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $ (228,134) __________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 OPERATIONS: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,919 Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (304,763) Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . . . . . . . . . 44,710 ___________ Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . . . . . . . . . (228,134) ___________ DIVIDENDS TO SHAREHOLDERS FROM; Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,433) ___________ BENEFICIAL INTEREST TRANSACTIONS: Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,187,697 Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,433 Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,810) ___________ Increase (Decrease) in Net Assets from Beneficial Interest Transactions . . . . . . . . . . . . . . 6,173,320 ___________ Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,908,753 NET ASSETS: Beginning of Period--Note 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 ___________ End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,958,753 ___________ Shares ___________ CAPITAL SHARE TRANSACTIONS: Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505,520 Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,358 Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,530) ___________ Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 504,348 ___________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for a share of Beneficial Interest outstanding, total investment return, ratios to average net assets and other supplemental data for the period from May 1, 1998 (commencement of operations) to December 31, 1998. This information has been derived from the Series' financial statements. PER SHARE DATA: Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.50 _______ Investment Operations: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .07 Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . (.77) _______ Total from Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.70) _______ Distributions; Dividends from investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.08) _______ Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.72 _______ TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5.59%)* RATIOS/SUPPLEMENTAL DATA: Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67%* Ratio of net investment income to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . .62%* Decrease reflected in above expense ratio due to undertaking by Dreyfus . . . . . . . . . . . . . . . . 74%* Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.37%* Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,959 - ------------------------ * Not annualized. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "Fund") had no operations until May 1, 1998 (commencement of operations) other than matters relating to its organization and registration as a diversified open-end management investment company under the Investment Company Act of 1940, as amended (the "Act"), and the Securities Act of 1933 and the sale and issuance of 4,000 shares of Beneficial Interest ("Initial Shares") to The Dreyfus Corporation ("Dreyfus"). The Fund operates as a series company currently offering five series, including the Core Value Portfolio (the "Series"). The Fund is only offered to variable annuity and variable life insurance separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The Series' investment objective is to provide long-term capital growth. Dreyfus serves as the Series' investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. (" Mellon" ), which is a wholly-owned subsidiary of Mellon Bank Corporation. Premier Mutual Fund Services, Inc. is the distributor of the Series' shares, which are sold without a sales charge. As of December 31, 1998, MBC Investment Corp., an indirect subsidiary of Mellon Bank Corporation, held 402,775 shares of the Series. 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 Series' financial statements are prepared in accordance with generally accepted accounting principles 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 Series 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 Series' books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the Series received net earnings credits of $357 during the period ended December 31, 1998 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) (D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually, but the Series 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 Series not to distribute such gain. (E) FEDERAL INCOME TAXES: It is the policy of the Series 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 Series has an unused capital loss carryover of approximately $269,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 1998. The carryover does not include net realized securities losses from November 1, 1998 through December 31, 1998 which are treated, for Federal income tax purposes, as arising in fiscal 1999. If not applied, the carryover expires in fiscal 2006. During the period ended December 31, 1998, the Series reclassified $4,514 between paid-in capital and accumulated undistributed investment income-net. Net assets were not affected by this reclassification. (F) OTHER: Organization expenses paid by the Fund are included in prepaid expenses and are being amortized to operations from May 1, 1998, the date operations commenced, over the period during which it is expected that a benefit will be realized, not to exceed five years. At December 31, 1998, the unamortized balance of such expenses amounted to $26,217. In the event that any of the Initial Shares are redeemed during the amortization period, the redemption proceeds will be reduced by any unamortized organization expenses in the same proportion as the number of such shares being redeemed bears to the number of such shares outstanding at the time of such redemption. NOTE 2--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 Series' average daily net assets and is payable monthly. However, Dreyfus had undertaken from May 1, 1998 through December 31, 1998, to reduce the management fee and reimburse such excess expenses paid by the Series, to the extent that the Series' aggregate annual expenses (exclusive of taxes, brokerage, interest on borrowings and extraordinary expenses) exceeded an annual rate of 1% of the value of the Series' average daily net assets. The expense reimbursement, pursuant to the undertaking, amounted to $38,451 during the period ended December 31, 1998. The Series 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 Series. During the period ended December 31, 1998, the Series was charged $64 pursuant to the transfer agency agreement. The Series compensates Mellon under a custody agreement for providing custodial services for the Series. During the period ended December 31, 1998, the Series was charged $8,468 pursuant to the custody agreement. (B) Each trustee who is not an "affiliated person" as defined in the Act receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board receives an additional 25% of such compensation. NOTE 3--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 1998 amounted to $8,378,988 and $2,360,906, respectively. At December 31, 1998, accumulated net unrealized appreciation on investments was $44,710, consisting of $460,902 gross unrealized appreciation and $416,192 gross unrealized depreciation. At December 31, 1998, 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). DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO - ----------------------------------------------------------------------------- REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS SHAREHOLDERS AND BOARD OF TRUSTEES DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Core Value Portfolio (one of the Series constituting Dreyfus Investment Portfolios) as of December 31, 1998, and the related statements of operations and changes in net assets and financial highlights for the period from May 1, 1998 (commencement of operations) to December 31, 1998. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 1998 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Core Value Portfolio at December 31, 1998, and the results of its operations, the changes in its net assets and the financial highlights for the period from May 1, 1998 to December 31, 1998, in conformity with generally accepted accounting principles. New York, New York February 4, 1999 IMPORTANT TAX INFORMATION (UNAUDITED) For Federal tax purposes the Series hereby designates 100% of the ordinary dividends paid during the fiscal year ended December 31, 1998 as qualifying for the corporate dividends received deduction. [reg.tm logo] (reg.tm) DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO 200 Park Avenue New York, NY 10166 INVESTMENT ADVISER The Dreyfus Corporation 200 Park Avenue New York, NY 10166 CUSTODIAN Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 TRANSFER AGENT & DIVIDEND DISBURSING AGENT Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Printed in U.S.A. 172AR9812 Investment Portfolios, CORE VALUE PORTFOLIO Annual Report December 31, 1998 YEAR 2000 ISSUES (UNAUDITED) The fund could be adversely affected if the computer systems used by The Dreyfus Corporation and the fund' s other service providers do not properly process and calculate date-related information from and after January 1, 2000. The Dreyfus Corporation is working to avoid Year 2000-related problems in its systems and to obtain assurances from other service providers that they are taking similar steps. In addition, issuers of securities in which the fund invests may be adversely affected by Year 2000-related problems. This could have an impact on the value of the fund's investments and its share price. DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Shareholder: We are pleased to provide you with this annual report for Dreyfus Investment Portfolios -- MidCap Stock Portfolio. From its inception on May 1, 1998, through December 31, 1998, the total return of the Portfolio during this period was - -2.53% .* This compares with a total return of 5.37% for the Portfolio's benchmark, the Standard & Poor's MidCap 400 Index, during the same period.** In the Portfolio Focus section of this letter, we review reasons for the underperformance. ECONOMIC REVIEW During 1998, the main regions of the world had very different economic fundamentals. The U.S. entered the year with a strong economy near full employment, with unemployment only slightly above 4%. The tight labor market led the Federal Reserve Board (the "Fed") to contemplate a rise in interest rates early in the year, but world economic weakness generated powerful enough disinflationary forces that the Fed acted instead to ease credit beginning in September. After many years of subpar economic growth, continental Europe moved into a sustained economic expansion. The overall European economy benefited as interest rates in peripheral countries such as Spain and Italy fell, approaching the lower levels established by Germany, on the eve of currency unification. Unlike the U.S., Europe has substantial excess capacity of productive plant and labor. In Asia, weak economies were pervasive as a result of a financial crisis. The Latin American economies weakened in turn as the financial stresses spread throughout that region. On balance, there was a substantial weakening of the world economy over the course of 1998 moderated mainly by the American consumer's role as "spender of last resort." A main influence on the U.S. economy during the year was the foreign financial crisis and consequent cooling of the world economy. The positive effects hit first. Actual inflation and expected inflation dropped, causing a decline in long-term Treasury bond yields and mortgage rates. This caused a boom in housing. The fall in inflation left more of the growth in consumer income with which to buy goods and services. Thus, consumers benefited from a combination of good growth in income after inflation, a strong labor market, and increases in the prices of assets they owned, including bonds, stocks and real estate. In a sense, 1998 was a year of disinflationary boom in the U.S., as above-trend economic growth coincided with negligible inflation. The negative effect of Asian weakness was felt in the industrial sector more than in the consumer sector. Corporate profits weakened, especially in sectors affected by the Asian crisis such as world-traded commodities (oil, metals and paper) and exports. Evidence of a weaker world economy accumulated during 1998 as the financial stresses continued. A worsened financial crisis occurred between the Russian default in mid-August and the fallout from the Long-Term Capital Management hedge fund crisis through early October. However, energetic steps were taken to stabilize the Japanese banks, design a support package for Brazil, ease monetary policy, and help overinvested financial institutions rebuild their cash reserves. Indications of a calming of financial fears were evident in the final months of the year. In any case, there appears to have been a shift in the priorities of key policymakers from fighting potential inflation to restimulating future world economic growth. The global economy survived a triple financial crisis in 1998 from Japan, emerging market countries and overextended financial institutions. Excess capacity persists in many worldwide industries after years of high capital spending followed by the onset of a worldwide weakening in demand. Fortunately, the U.S. has led the world in making the transition away from the old manufacturing industries to the new growth industries, such as biotechnology, software, computer hardware and the Internet. This contributed to the favorable combination of low unemployment and low inflation in the U.S., and may yet lead toward more efficient allocation of capital elsewhere in the world. As 1998 ended, interest rates set by central banks remained in a downtrend in most parts of the world including Europe and the U.S. A similar trend had even begun in many emerging countries, as the stresses of financial crisis relaxed. MARKET OVERVIEW Volatility was the overriding characteristic of equity markets in the year ended December 31. There was stock market strength during the early part of the year. Small-cap indices started to erode in the spring and were joined by large-cap indices by midsummer. Indices declined sharply until the end of August followed by a rebound and then a renewed decline amidst financial fears until early October. A strong rally followed in the last three months of the year in response to the easing of monetary policy. Over the 12-month period, the total return on the Standard and Poor's 500 Composite Stock Price Index was 28.60%. Returns on mid-cap and small-cap stock indices continued to be weaker, with a negative total return on small-cap indices. Three key trends influenced stock market behavior during the year. First, the Federal Reserve kept the Federal Funds rate flat at 5.5% for nearly nine months of the year, but then began a succession of easing moves. Second, weakness in the economies of emerging countries contributed to declining commodity prices and a drop in long-term Treasury bond yields to multidecade lows. Third, expectations for corporate profits dropped, first in the sectors sensitive to Asian developments such as oil, basic materials and exports and then for a broader list of stocks. The trigger for the sharp decline in stocks in August appeared to be the Russian default that month. This resulted in deepening concerns about weaker economic growth and corporate profits. There was also a global margin call on risky assets held by hedge funds and financial institutions. This raised the cost of debt financing for many corporations and many emerging countries. Expectations for economic activity in emerging countries in Asia and Latin America sank; those for U.S. corporate profits were put on hold. Despite the fall in Treasury bond yields, financial stocks led the summer selloff due to concerns that financial difficulties might spread among emerging countries, who might fail to repay loans. However, in the last three months of the year, these fears began to ebb in response to Federal Reserve easing moves. The erosion of expectations for corporate profit growth over the last year contributed to an outperformance by a small group of "supercap" growth stocks for much of the year. Investors had more confidence in the prospect for strong persistent earnings growth for this small group of stocks than for the broad market. Value stocks, which often have greater cyclical sensitivity to earnings fluctuations, lagged behind these supercap growth stocks. In addition, many of the financial stocks that fall into the value category fell sharply following the Russian default and global margin call concerns, before rebounding strongly after the Federal Reserve acted. The year ended December 31, 1998 was characterized by very different performances of the various market sectors. For example, the total return for the year on the Russell 1000 Index, with a heavy large-cap representation, was 27.02%, while the Russell 1000 Growth Index returned 38.71% and the Russell 1000 Value Index returned 15.63%. The return on the Russell MidCap Index was 10.09% while the small-cap Russell 2000 Index return was -2.55%.*** Another pattern in 1998 was that high quality assets outperformed medium and low quality assets. Treasury bonds outperformed junk bonds; U.S. and European stocks outperformed emerging market stocks; blue chip stocks, especially major growth stocks, generally rose more than the average stock. In an environment of concern about financial risks, the high-grade assets were the market leaders. PORTFOLIO FOCUS The Portfolio's performance from May 1, 1998 (inception) through December 31, 1998 was below the performance of the Standard & Poor's MidCap 400 Index during the same period and was obviously disappointing. The primary factor that adversely affected Portfolio performance was stock selection, with some other portfolio risk factors also contributing to the underperformance. The Standard & Poor' s MidCap 400 Index was dominated in 1998 by the performance of America Online (AOL) . At the beginning of the year, AOL was approximately 1% of the benchmark, while by year end it was over 7% of the benchmark. This one stock had a return of 585.64% for 1998, and thus greatly affected the return of the Index. We did not initiate a position in AOL until midyear, and though we held the position until the end of the year, we were for the most part either equal-weighted or underweighted in the company compared to the benchmark. Thus, this one stock had a meaningful impact on relative performance. In addition to some of the unique issues pertaining to the benchmark, the quantitative valuation process used in the management of the Portfolio did not perform up to the Portfolio' s historical expectations. Stock selection influenced performance throughout the reporting period, and this problem was especially acute in September and October. Portfolio risk factors that also adversely influenced returns were the Portfolio' s modestly-smaller-than-benchmark average market capitalization. Even this modest position hurt performance because, as mentioned above, 1998 was categorized as a year where large and mid-size companies outperformed small capitalization firms. Finally, the Portfolio's performance also suffered from the Portfolio' s below-benchmark price-to-earnings (P/E) ratio during a period when higher P/E stocks generally outperformed lower P/E issues. Nonetheless, despite the events described above, we remain committed to our quantitative equity valuation process along with our fully-invested and sector-neutral portfolio construction methods. Sincerely, [John O'Toole signature] John O'Toole Portfolio Manager January 15, 1999 New York, N.Y. *Total return includes reinvestment of dividends and any capital gains paid. 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. **SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of income dividends and, where applicable, capital gain distributions. The Standard & Poor's MidCap 400 Index is a widely accepted, unmanaged index of midcap stock market performance. ***The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index which represents approximately 89% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell MidCap Index consists of the bottom 800 securities in the Russell 1000 Index as ranked by total market capitalization and is a widely accepted measure of medium-cap stock market performance. The Russell 2000 Index is composed of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Index is composed of 3,000 of the largest U.S. companies by market capitalization. All indices are unmanaged and include reinvested dividends. DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO DECEMBER 31, 1998 - ----------------------------------------------------------------------------- COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO AND THE STANDARD & POOR'S MIDCAP 400 INDEX Dollars $10,537 Standard & Poor's MidCap 400 Index* $9,747 Dreyfus Investment Portfolios, MidCap Stock Portfolio *Source: Lipper Analytical Services, Inc. Actual Aggregate Total Return - ----------------------------------------------------------------------------- From Inception (5/1/98) to December 31, 1998 ____________________ -2.53% - --------------- Past performance is not predictive of future performance. THE PORTFOLIO'S PERFORMANCE DOES NOT REFLECT THE DEDUCTION OF ADDITIONAL CHARGES AND EXPENSES IMPOSED IN CONNECTION WITH INVESTING IN VARIABLE INSURANCE CONTRACTS WHICH WILL REDUCE RETURNS. The above graph compares a $10,000 investment made in Dreyfus Investment Portfolios, MidCap Stock Portfolio on 5/1/98 (Inception Date) to a $10,000 investment made in the Standard & Poor's MidCap 400 Index on that date. All dividends and capital gain distributions are reinvested. The Portfolio' s performance shown in the line graph takes into account all applicable fees and expenses of the Portfolio. The Standard & Poor's MidCap 400 Index is a broad-based index of 400 companies with market capitalizations generally ranging from $50 million to $10 billion and is a widely accepted, unmanaged index of overall midcap stock market performance, which does not take into account charges, fees and other expenses. Further information relating to Portfolio performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the Prospectus and elsewhere in this report.
DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS DECEMBER 31, 1998 Common Stocks--97.7% Shares Value - ------------------------------------------------------- ____________ ___________ Basic Industries--6.0% Ball . . . . . . . . . . . . . . . . . . . . . . . . . 2,150 $ 98,363 Caraustar Industries . . . . . . . . . . . . . . . . . 3,250 92,828 Centex Construction Products . . . . . . . . . . . . . 1,550 62,969 Crompton & Knowles . . . . . . . . . . . . . . . . . . 3,700 76,544 Cytec Industries . . . . . . . . . . . . . . . . . . . 2,550 (a) 54,188 Georgia-Pacific Group . . . . . . . . . . . . . . . . 1,350 32,147 Rohm & Haas . . . . . . . . . . . . . . . . . . . . . 2,850 85,856 Solutia . . . . . . . . . . . . . . . . . . . . . . . 2,950 66,006 Vulcan Materials . . . . . . . . . . . . . . . . . . . 500 65,781 ____________ 634,682 ____________ Capital Spending--22.3% Allied Waste Industries. . . . . . . . . . . . . . . . 2,300 (a) 54,338 American Power Conversion . . . . . . . . . . . . . . 1,850 (a) 89,609 Apple Computer . . . . . . . . . . . . . . . . . . . . 1,150 (a) 47,078 BMC Software . . . . . . . . . . . . . . . . . . . . . 1,850 (a) 82,441 Computer Task Group . . . . . . . . . . . . . . . . . 1,450 39,331 Compuware . . . . . . . . . . . . . . . . . . . . . . 3,000 (a) 234,375 Crane . . . . . . . . . . . . . . . . . . . . . . . . 1,800 54,338 DST Systems . . . . . . . . . . . . . . . . . . . . . 700 (a) 39,944 Graco . . . . . . . . . . . . . . . . . . . . . . . . 1,550 45,725 Gulfstream Aerospace . . . . . . . . . . . . . . . . . 1,750 (a) 93,188 Harte-Hanks Communications . . . . . . . . . . . . . . 1,700 48,450 Hertz, Cl. A . . . . . . . . . . . . . . . . . . . . . 2,550 116,344 Ingram Micro, Cl. A . . . . . . . . . . . . . . . . . 1,550 (a) 54,056 J D Edwards . . . . . . . . . . . . . . . . . . . . . 900 (a) 25,538 Kaydon . . . . . . . . . . . . . . . . . . . . . . . . 1,500 60,094 Leggett & Platt . . . . . . . . . . . . . . . . . . . 2,750 60,500 Lexmark International Group, Cl. A . . . . . . . . . . 1,250 (a) 125,625 NCR . . . . . . . . . . . . . . . . . . . . . . . . . 1,250 (a) 52,188 Network Associates . . . . . . . . . . . . . . . . . . 2,150 (a) 142,438 Premark International . . . . . . . . . . . . . . . . 2,150 74,444 Quintiles Transnational . . . . . . . . . . . . . . . 2,800 (a) 149,450 Robert Half International . . . . . . . . . . . . . . 1,500 (a) 67,032 SABRE Group Holdings, Cl. A . . . . . . . . . . . . . 3,000 (a) 133,500 Snyder Communications . . . . . . . . . . . . . . . . 2,650 (a) 89,438 Sterling Software . . . . . . . . . . . . . . . . . . 2,600 (a) 70,363 Sundstrand . . . . . . . . . . . . . . . . . . . . . . 1,000 51,875 Sylvan Learning Systems . . . . . . . . . . . . . . . 1,400 (a) 42,700 Trinity Industries . . . . . . . . . . . . . . . . . . 2,250 86,625 United Stationers . . . . . . . . . . . . . . . . . . 1,600 (a) 41,600 VERITAS Software . . . . . . . . . . . . . . . . . . . 500 (a) 29,969 Young & Rubicam . . . . . . . . . . . . . . . . . . . 1,400 (a) 45,325 ____________ 2,347,921 ____________ Consumer Cyclical--13.7% Abercromobie & Fitch, Cl. A. . . . . . . . . . . . . . 1,000 (a) 70,750 Best Buy . . . . . . . . . . . . . . . . . . . . . . . 1,700 (a) 104,338 Dollar Tree Stores . . . . . . . . . . . . . . . . . . 2,100 (a) 91,744 Federal-Mogul . . . . . . . . . . . . . . . . . . . . 1,150 68,425 Furniture Brands International . . . . . . . . . . . . 3,150 (a) 85,838 DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------- ____________ ___________ Consumer Cyclical (continued) Harley-Davidson. . . . . . . . . . . . . . . . . . . . 1,650 $ 78,169 IHOP . . . . . . . . . . . . . . . . . . . . . . . . . 1,350 (a) 53,916 International Game Technology . . . . . . . . . . . . 2,800 68,075 King World Productions . . . . . . . . . . . . . . . . 1,150 (a) 33,853 Knight-Ridder . . . . . . . . . . . . . . . . . . . . 900 46,013 Magna International, Cl.A . . . . . . . . . . . . . . 400 24,800 McClatchy Newspapers, Cl. A . . . . . . . . . . . . . 1,250 44,219 Meritor Automotive . . . . . . . . . . . . . . . . . . 2,050 43,434 Nautica Enterprises . . . . . . . . . . . . . . . . . 1,750 (a) 26,250 Pulitzer Publishing . . . . . . . . . . . . . . . . . 900 77,963 Ross Stores . . . . . . . . . . . . . . . . . . . . . 2,650 104,344 SUPERVALU . . . . . . . . . . . . . . . . . . . . . . 2,350 65,800 TJX Cos. . . . . . . . . . . . . . . . . . . . . . . . 4,500 130,500 U.S. Foodservice . . . . . . . . . . . . . . . . . . . 1,100 (a) 53,900 V.F. . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 70,313 Zale . . . . . . . . . . . . . . . . . . . . . . . . . 2,950 (a) 95,138 ____________ 1,437,782 ____________ Consumer Staples--4.3% CBRL Group . . . . . . . . . . . . . . . . . . . . . . 2,500 58,281 Dial . . . . . . . . . . . . . . . . . . . . . . . . . 2,150 62,081 Earthgrains . . . . . . . . . . . . . . . . . . . . . 1,250 38,671 International Home Foods . . . . . . . . . . . . . . . 2,650 (a) 44,718 Lancaster Colony . . . . . . . . . . . . . . . . . . . 1,650 53,006 Lauder (Estee), Cl. A . . . . . . . . . . . . . . . . 800 68,400 Universal Foods . . . . . . . . . . . . . . . . . . . 4,800 131,700 ____________ 456,857 ____________ Electronics--8.7% Advanced Micro Devices . . . . . . . . . . . . . . . . 2,300 (a) 66,556 Altera . . . . . . . . . . . . . . . . . . . . . . . . 3,250 (a) 197,844 Arrow Electronics . . . . . . . . . . . . . . . . . . 2,900 (a) 77,394 Linear Technology . . . . . . . . . . . . . . . . . . 1,750 156,734 Maxim Integrated Products . . . . . . . . . . . . . . 3,300 (a) 144,169 QUALCOMM . . . . . . . . . . . . . . . . . . . . . . . 300 (a) 15,544 Sanmina . . . . . . . . . . . . . . . . . . . . . . . 1,000 (a) 62,500 Tellabs . . . . . . . . . . . . . . . . . . . . . . . 1,550 (a) 106,272 Waters . . . . . . . . . . . . . . . . . . . . . . . . 1,000 (a) 87,250 ____________ 914,263 ____________ Energy--5.6% ENSCO International. . . . . . . . . . . . . . . . . . 2,650 28,322 El Paso Energy . . . . . . . . . . . . . . . . . . . . 2,150 74,847 Helmerich & Payne . . . . . . . . . . . . . . . . . . 2,650 51,343 KeySpan Energy . . . . . . . . . . . . . . . . . . . . 2,850 88,350 National Fuel Gas . . . . . . . . . . . . . . . . . . 1,750 79,078 Questar . . . . . . . . . . . . . . . . . . . . . . . 2,750 53,281 R&B Falcon . . . . . . . . . . . . . . . . . . . . . . 2,665 (a) 20,320 Sunoco . . . . . . . . . . . . . . . . . . . . . . . . 2,250 81,141 Tidewater . . . . . . . . . . . . . . . . . . . . . . 1,250 28,984 Vastar Resources . . . . . . . . . . . . . . . . . . . 1,850 79,897 ____________ 585,563 ____________ DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------- ____________ ___________ Health Care--10.4% Arterial Vascular Engineering. . . . . . . . . . . . . 900 (a) $ 47,250 Biogen . . . . . . . . . . . . . . . . . . . . . . . . 2,600 (a) 215,800 Biomet . . . . . . . . . . . . . . . . . . . . . . . . 2,650 106,662 Centocor . . . . . . . . . . . . . . . . . . . . . . . 600 (a) 27,075 Elan, A.D.S. . . . . . . . . . . . . . . . . . . . . . 700 (a) 48,693 Genzyme (General Division) . . . . . . . . . . . . . . 1,100 (a) 54,725 Lincare Holdings . . . . . . . . . . . . . . . . . . . 1,750 (a) 70,984 McKesson . . . . . . . . . . . . . . . . . . . . . . . 1,350 106,734 PacifiCare Health Systems, Cl. B . . . . . . . . . . . 600 (a) 47,700 Patterson Dental . . . . . . . . . . . . . . . . . . . 500 (a) 21,750 STERIS . . . . . . . . . . . . . . . . . . . . . . . . 4,600 (a) 130,812 Total Renal Care Holdings . . . . . . . . . . . . . . 1,800 (a) 53,212 Watson Pharmaceuticals . . . . . . . . . . . . . . . . 2,550 (a) 160,331 ____________ 1,091,728 ____________ Interest Sensitive--13.8% AFLAC. . . . . . . . . . . . . . . . . . . . . . . . . 3,700 162,800 CMAC Investment . . . . . . . . . . . . . . . . . . . 1,000 45,937 Centura Banks . . . . . . . . . . . . . . . . . . . . 700 52,062 City National . . . . . . . . . . . . . . . . . . . . 2,850 118,631 Cullen/Frost Bankers . . . . . . . . . . . . . . . . . 1,250 68,594 Dime Bancorp . . . . . . . . . . . . . . . . . . . . . 2,350 62,128 Edwards (A.G.) . . . . . . . . . . . . . . . . . . . . 2,400 89,400 First Tennessee National . . . . . . . . . . . . . . . 2,750 104,672 Golden West Financial . . . . . . . . . . . . . . . . 700 64,181 Mercantile Bankshares . . . . . . . . . . . . . . . . 2,250 86,625 Nationwide Financial Services, Cl. A . . . . . . . . . 1,550 80,115 Old Kent Financial . . . . . . . . . . . . . . . . . . 2,250 104,625 PMI Group . . . . . . . . . . . . . . . . . . . . . . 1,350 66,656 Regions Financial . . . . . . . . . . . . . . . . . . 2,550 102,797 RenaissanceRe Holdings . . . . . . . . . . . . . . . . 600 21,975 T. Rowe Price Associates . . . . . . . . . . . . . . . 2,550 87,337 Wilmington Trust . . . . . . . . . . . . . . . . . . . 500 30,812 Zions Bancorporation . . . . . . . . . . . . . . . . . 1,550 96,681 ____________ 1,446,028 ____________ Mining and Metals--.5% Cleveland-Cliffs . . . . . . . . . . . . . . . . . . . 400 16,125 General Cable . . . . . . . . . . . . . . . . . . . . 1,750 35,875 ____________ 52,000 ____________ Transportation--1.7% Alaska Air Group . . . . . . . . . . . . . . . . . . . 1,000 (a) 44,250 Kansas City Southern Industries . . . . . . . . . . . 1,700 83,619 Royal Caribbean Cruises . . . . . . . . . . . . . . . 1,300 48,100 ____________ 175,969 ____________ Utilities--10.7% BEC Energy . . . . . . . . . . . . . . . . . . . . . . 3,600 148,275 Century Telephone Enterprises . . . . . . . . . . . . 3,300 222,750 Commonwealth Energy Systems . . . . . . . . . . . . . 2,000 81,000 Energy East . . . . . . . . . . . . . . . . . . . . . 1,800 101,700 DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------- ____________ ___________ Utilities (continued) IPALCO Enterprises . . . . . . . . . . . . . . . . . . 2,250 $ 124,453 Montana Power . . . . . . . . . . . . . . . . . . . . 1,700 96,156 Pinnacle West Capital . . . . . . . . . . . . . . . . 2,750 116,531 SCANA . . . . . . . . . . . . . . . . . . . . . . . . 3,600 116,100 Sierra Pacific Resources . . . . . . . . . . . . . . . 1,650 62,700 TECO Energy . . . . . . . . . . . . . . . . . . . . . 1,750 49,328 ____________ 1,118,993 ____________ TOTAL COMMON STOCKS (cost $9,405,872) . . . . . . . . . . . . . . . . . $10,261,786 ____________ Principal Amount Short-Term Investments--1.7% ____________ - ------------------------------------------------------- U.S. Treasury Bills: 4.37%, 2/4/99. . . . . . . . . . . . . . . . . . . . . $ 69,000 $ 68,717 4.33%, 3/18/99 . . . . . . . . . . . . . . . . . . . . 15,000 14,867 4.31%, 3/25/99 . . . . . . . . . . . . . . . . . . . . 96,000 95,040 ____________ TOTAL SHORT-TERM INVESTMENTS (cost $178,596) . . . . . . . . . . . . . . . . . . $ 178,624 ____________ TOTAL INVESTMENTS (cost $9,584,468). . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.4% $10,440,410 _______ ____________ CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6% $ 65,720 _______ ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $10,506,130 _______ ____________ Notes to Statement of Investments: - ----------------------------------------------------------------------------- (a) Non-income producing. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 Cost Value ____________ ___________ ASSETS: Investments in securities--See Statement of Investments . . $ 9,584,468 $10,440,410 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 163,051 Receivable for investment securities sold . . . . . . . . 629,227 Dividends receivable . . . . . . . . . . . . . . . . . . 6,871 Prepaid expenses--Note 1(e) . . . . . . . . . . . . . . . 26,911 ____________ 11,266,470 ____________ LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 2,205 Payable for investment securities purchased . . . . . . . 717,934 Accrued expenses and other liabilities . . . . . . . . . 40,201 ____________ 760,340 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,506,130 ____________ REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $10,386,414 Accumulated undistributed investment income--net . . . . 331 Accumulated net realized gain (loss) on investments . . . (736,557) Accumulated net unrealized appreciation (depreciation) on investments--Note 3 . . . . . . . . . . . . . . . . 855,942 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,506,130 ____________ SHARES OUTSTANDING (UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 863,690 NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $12.16 _______ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF OPERATIONS FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 INVESTMENT INCOME INCOME: Cash dividends (net of $12 foreign taxes withheld at source) . . . . . . . . . . . . . . . . . $ 49,738 Interest . . . . . . . . . . . . . . . . . . . . . . . . 18,962 __________ Total Income . . . . . . . . . . . . . . . . . . . $ 68,700 EXPENSES: Investment advisory fee--Note 2(a) . . . . . . . . . . . 40,453 Auditing fees . . . . . . . . . . . . . . . . . . . . . . 21,250 Custodian fees--Note 2(a) . . . . . . . . . . . . . . . . 14,320 Legal fees . . . . . . . . . . . . . . . . . . . . . . . 7,437 Trustees' fees and expenses--Note 2(b) . . . . . . . . . 5,300 Prospectus and shareholders' reports . . . . . . . . . . 5,143 Organization expenses--Note 1(e) . . . . . . . . . . . . 4,111 Registration fees . . . . . . . . . . . . . . . . . . . . 2,889 Shareholder servicing costs . . . . . . . . . . . . . . . 258 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 799 __________ Total Expenses . . . . . . . . . . . . . . . . . . 101,960 Less--expense reimbursement from Dreyfus due to undertaking--Note 2(a) . . . . . . . . . . . . . . . . (48,023) __________ Net Expenses . . . . . . . . . . . . . . . . . . . 53,937 __________ INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,763 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3: Net realized gain (loss) on investments . . . . . . . . . $ (736,557) Net unrealized appreciation (depreciation) on investments . . 855,942 __________ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 119,385 __________ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $134,148 __________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS FROM MAY 1, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 OPERATIONS: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,763 Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (736,557) Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . . . . . . . 855,942 ____________ Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . . . . . . 134,148 ____________ DIVIDENDS TO SHAREHOLDERS FROM: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,543) ____________ BENEFICIAL INTEREST TRANSACTIONS: Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,816,688 Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,543 Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,494,706) ____________ Increase (Decrease) in Net Assets from Beneficial Interest Transactions . . . . . . . . . . . 10,340,525 ____________ Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . 10,456,130 NET ASSETS: Beginning of Period--Note 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 ____________ End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,506,130 ____________ UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 331 ____________ Shares ____________ CAPITAL SHARE TRANSACTIONS: Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996,748 Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,611 Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (138,669) ____________ Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . 859,690 ____________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for a share of Beneficial Interest outstanding, total investment return, ratios to average net assets and other supplemental data for the period from May 1, 1998 (commencement of operations) to December 31, 1998. This information has been derived from the Series' financial statements. PER SHARE DATA: Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.50 ______ Investment Operations: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .02 Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . (.34) ______ Total from Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.32) ______ Distributions: Dividends from investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.02) ______ Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.16 ______ TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.53%)* RATIOS/SUPPLEMENTAL DATA: Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67%* Ratio of net investment income to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . .18%* Decrease reflected in above expense ratio due to undertaking by Dreyfus . . . . . . . . . . . . . . . . .60%* Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.74%* Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,506 - ------------------------ * Not annualized. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "Fund") had no operations until May 1, 1998 (commencement of operations) other than matters relating to its organization and registration as an open-end management investment company under the Investment Company Act of 1940, as amended (the "Act"), and the Securities Act of 1933 and the sale and issuance of 4,000 shares of Beneficial Interest (" Initial Shares") to The Dreyfus Corporation ("Dreyfus"). The Fund operates as a series company currently offering five series, including the MidCap Stock Portfolio (the "Series" ). The Series is only offered to variable annuity and variable life insurance separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The Series is a diversified portfolio. The Series' 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. Dreyfus serves as the Series' investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Bank Corporation. Premier Mutual Fund Services, Inc. is the distributor of the Series' shares, which are sold without a sales charge. As of December 31, 1998, MBC Investment Corp., an indirect subsidiary of Mellon Bank Corporation, held 308,677 shares of the Series. 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 Series' financial statements are prepared in accordance with generally accepted accounting principles 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. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the Series received net earnings credits of $2,227 during the period ended December 31, 1998 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain , if any, are normally declared and paid annually, but the Series may make DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 Series not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the Series 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 Series has an unused capital loss carryover of approximately $689,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 1998. If not applied, the carryover expires in fiscal 2006. During the period ended December 31, 1998, the Series reclassified $4,111 between paid-in capital and accumulated undistributed investment income-net. Net assets were not affected by this reclassification. (E) OTHER: Organization expenses paid by the Series are included in prepaid expenses and are being amortized to operations from May 1, 1998, the date operations commenced, over the period during which it is expected that a benefit will be realized, not to exceed five years. At December 31, 1998, the unamortized balance of such expenses amounted to $26,891. In the event that any of the Initial Shares are redeemed during the amortization period, the redemption proceeds will be reduced by any unamortized organization expenses in the same proportion as the number of such shares being redeemed bears to the number of such shares outstanding at the time of such redemption. NOTE 2--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 Series' average daily net assets and is payable monthly. However, Dreyfus had undertaken from May 1, 1998 through December 31, 1998, to reduce the management fee and reimburse such excess expenses paid by the Series, to the extent that the Series' aggregate annual expenses (exclusive of taxes, brokerage, interest on borrowings and extraordinary expenses) exceeded an annual rate of 1% of the value of the Series' average daily net assets. The expense reimbursement, pursuant to the undertaking, amounted to $48,023 during the period ended December 31, 1998. The Series 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 Series. The Series compensates Mellon under a custody agreement for providing custodial services for the Series. During the period ended December 31, 1998, the Series was charged $14,320 pursuant to the custody agreement. DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) (B) Each trustee who is not an "affiliated person" as defined in the Act receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board receives an additional 25% of such compensation. NOTE 3--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 1998, amounted to $16,262,763 and $6,120,567, respectively. At December 31, 1998, accumulated net unrealized appreciation on investments was $855,942, consisting of $1,218,916 gross unrealized appreciation and $362,974 gross unrealized depreciation. At December 31, 1998, 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). DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS SHAREHOLDERS AND BOARD OF TRUSTEES DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, MidCap Stock Portfolio (one of the Series constituting Dreyfus Investment Portfolios) as of December 31, 1998, and the related statements of operations and changes in net assets and financial highlights for the period from May 1, 1998 (commencement of operations) to December 31, 1998. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 1998 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, MidCap Stock Portfolio at December 31, 1998, and the results of its operations, the changes in its net assets and the financial highlights for the period from May 1, 1998 to December 31, 1998, in conformity with generally accepted accounting principles. New York, New York February 4, 1999 DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO - ----------------------------------------------------------------------------- IMPORTANT TAX INFORMATION (UNAUDITED) For Federal tax purposes the Series hereby designates 100% of the ordinary dividends paid during the fiscal year ended December 31, 1998 as qualifying for the corporate dividends received deduction. [reg.tm logo] (reg.tm) DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO 200 Park Avenue New York, NY 10166 INVESTMENT ADVISER The Dreyfus Corporation 200 Park Avenue New York, NY 10166 CUSTODIAN Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 TRANSFER AGENT & DIVIDEND DISBURSING AGENT Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Printed in U.S.A. 174AR9812 Investment Portfolios, MIDCAP STOCK PORTFOLIO Annual Report December 31, 1998 YEAR 2000 ISSUES (UNAUDITED) The fund could be adversely affected if the computer systems used by The Dreyfus Corporation and the fund' s other service providers do not properly process and calculate date-related information from and after January 1, 2000. The Dreyfus Corporation is working to avoid Year 2000-related problems in its systems and to obtain assurances from other service providers that they are taking similar steps. In addition, issuers of securities in which the fund invests may be adversely affected by Year 2000-related problems. This could have an impact on the value of the fund's investments and its share price. DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Shareholder: It is my pleasure to introduce the new co-managers of Dreyfus Investment Portfolios -- Founders Growth Portfolio, Scott A. Chapman and Thomas M. Arrington. They each joined the staff of Founders Asset Management LLC, an affiliate of The Dreyfus Corporation and sub-investment advisor to the Portfolio, in December 1998, as Vice President of Investments. Scott A. Chapman, Director of Research for Founders, is a Chartered Financial Analyst who joined Founders from HighMark Capital Management, Inc., a subsidiary of Union BanCal Corporation. At that firm, he served as Vice President and Director of Growth Strategy (1993-98) and a securities research analyst (1991-93) . A graduate of Santa Clara University, Scott received an MBA from Golden Gate University. Thomas M. Arrington is a Chartered Financial Analyst, who also joined Founders from HighMark Capital Management. Before joining Founders, Tom had held the following posts at HighMark: Vice President and Director of Income Equity Strategy (1994-98) , securities research analyst (1991-94) and business administration manager (1990-91) . He graduated from the University of California, Los Angeles, and earned an MBA at San Francisco State University. We have great confidence in the ability of Scott Chapman and Tom Arrington, as co-lead portfolio managers, to manage the Portfolio on your behalf. Sincerely, [Stephen E. Canter, President signature] Stephen E. Canter, President The Dreyfus Corporation January 19, 1999 New York, N.Y. DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Shareholder: We are pleased to report the performance of the Dreyfus Investment Portfolios - -- Founders Growth Portfolio. The Portfolio produced a total return of 27.20% in the three months since its inception on September 30, 1998, through December 31, 1998,* and outperformed its benchmark, the Standard & Poor's 500 Composite Stock Price Index, which had a total return of 21.28% over the same period.** ECONOMIC REVIEW During 1998, the main regions of the world had very different economic fundamentals. The U.S. entered the year with a strong economy near full employment, with unemployment only slightly above 4%. The tight labor market led the Federal Reserve Board (the "Fed") to contemplate a rise in interest rates early in the year, but world economic weakness generated powerful enough disinflationary forces that the Fed acted instead to ease credit beginning in September. After many years of subpar economic growth, continental Europe moved into a sustained economic expansion. The overall European economy benefited as interest rates in peripheral countries such as Spain and Italy fell, approaching the lower levels established by Germany, on the eve of currency unification. Unlike the U.S., Europe has substantial excess capacity of productive plant and labor. In Asia, weak economies were pervasive as a result of a financial crisis. The Latin American economies weakened in turn as the financial stresses spread throughout that region. On balance, there was a substantial weakening of the world economy over the course of 1998, moderated mainly by the American consumer's role as "spender of last resort." A main influence on the U.S. economy during the year was the foreign financial crisis and consequent cooling of the world economy. The positive effects hit first. Actual inflation and expected inflation dropped, causing a decline in long-term Treasury bond yields and mortgage rates. This caused a boom in housing. The fall in inflation left more of the growth in consumer income with which to buy goods and services. Thus, consumers benefited from a combination of good growth in income after inflation, a strong labor market, and increases in the prices of assets they owned, including bonds, stocks and real estate. In a sense, 1998 was a year of disinflationary boom in the U.S., as above-trend economic growth coincided with negligible inflation. The negative effect of Asian weakness was felt in the industrial sector more than in the consumer sector. Corporate profits weakened, especially in sectors affected by the Asian crisis such as world-traded commodities (oil, metals and paper) and exports. Evidence of a weaker world economy accumulated during 1998 as the financial stresses continued. A worsened financial crisis occurred between the Russian default in mid-August and the fallout from the Long-Term Capital Management hedge fund crisis through early October. However, energetic steps were taken to stabilize the Japanese banks, design a support package for Brazil, ease monetary policy, and help overinvested financial institutions rebuild their cash reserves. Indications of a calming of financial fears were evident in the final months of the year. In any case, there appears to have been a shift in the priorities of key policymakers from fighting potential inflation to restimulating future world economic growth. The global economy survived a triple financial crisis in 1998 from Japan, emerging market countries and overextended financial institutions. Excess capacity persists in many worldwide industries after years of high capital spending followed by the onset of a worldwide weakening in demand. Fortunately, the U.S. has led the world in making the transition away from the old manufacturing industries to the new growth industries, such as biotechnology, software, computer hardware and the Internet. This contributed to the favorable combination of low unemployment and low inflation in the U.S., and may yet lead toward more efficient allocation of capital elsewhere in the world. As 1998 ended, interest rates set by central banks remained in a downtrend in most parts of the world including Europe and the U.S. A similar trend had even begun in many emerging countries, as the stresses of financial crises relaxed. MARKET OVERVIEW Volatility was the overriding characteristic of equity markets in the year ended December 31. There was stock market strength during the early part of the year. Small-cap indices started to erode in the spring and were joined by large-cap indices by midsummer. Indices declined sharply until the end of August, followed by a rebound and then a renewed decline amidst financial fears until early October. A strong rally followed in the last three months of the year in response to the easing of monetary policy. Three key trends influenced stock market behavior during the year. First, the Federal Reserve kept the Federal Funds rate flat at 5.5% for nearly nine months of the year, but then began a succession of easing moves. Second, weakness in the economies of emerging countries contributed to declining commodity prices and a drop in long-term Treasury bond yields to multidecade lows. Third, expectations for corporate profits dropped, first in the sectors sensitive to Asian development, such as oil, basic materials and exports, and then for a broader list of stocks. The trigger for the sharp stock decline in August appeared to be the Russian default that month. This resulted in deepening concerns about weaker economic growth and corporate profits. There was also a global margin call on risky assets held by hedge funds and financial institutions. This raised the cost of debt financing for many corporations and many emerging countries. Expectations for economic activity in emerging countries in Asia and Latin America sank; those for U.S. corporate profits were put on hold. Despite the fall in Treasury bond yields, financial stocks led the summer selloff due to concerns that financial difficulties might spread among emerging countries, which might fail to repay loans. However, in the last three months of the year, these fears began to ebb in response to Federal Reserve easing moves. PORTFOLIO COMPOSITION During the reporting period, the Portfolio benefited from its holdings in strong performers such as America Online (+172%), MCI WorldCom (+38%), Best Buy (+41% ), Gap Stores (+48% ), and Intuit (+55% ). The Portfolio had a modest relative weight in the booming technology sector and was underweighted in drugs, a sector that investors valued because of its earnings predictability and stability. Some companies which were added to the Portfolio during the latter part of the period include Airtouch Communications, American Express, Cisco Systems, Coca-Cola, Gillette, Home Depot, McDonalds, State Street, Sun Microsystems, Walgreen, Wal-Mart Stores, and Disney (Walt). The Portfolio' s financial securities were somewhat hurt as investors fretted over Russia' s effective loan default and the near collapse of hedge fund Long-Term Capital Management LP. The Portfolio also made some disappointing investments in gaming stocks. Also, the Portfolio held some mid-cap companies that did not keep up with the giant-cap names that led the market higher in 1998. INVESTMENT STRATEGY To find investments for the Portfolio, we use a bottom-up process that begins with quantitative screens, resulting in approximately 200 well-established, high-quality companies from a 10,000 stock universe. We do hands-on fundamental research to further narrow stock selection, resulting in a portfolio of approximately 100 companies. We appreciate your investment in Dreyfus Investment Portfolios -- Founders Growth Portfolio. Sincerely, [Scott Chapman, CFA signature] [Thomas Arrington, CFA signature] Scott Chapman, CFA Thomas Arrington, CFA Portfolio Manager Portfolio Manager January 21, 1999 Denver, CO *Total return includes reinvestment of dividends and any capital gains paid. The Portfolio's performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable contracts, which will reduce returns. **SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of income dividends and, where applicable, capital gain distributions. The Standard & Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index of U.S. stock market performance.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS DECEMBER 31, 1998 Common Stocks--95.1% Shares Value - ------------------------------------------------------------------------------- ------------------ ------------------ Banking--2.5% Citigroup . . . . . . . . . . . . . . . . . 500 $ 24,750 Firstar . . . . . . . . . . . . . . . . . . 150 13,988 State Street . . . . . . . . . . . . . . . . 175 12,173 U.S. Bancorp . . . . . . . . . . . . . . . . 350 12,425 ___________ 63,336 ___________ Biotechnology--1.5% Amgen . . . . . . . . . . . . . . . . . .(a) 375 39,211 ___________ Business Services--3.0% Cintas . . . . . . . . . . . . . . . . . . . 200 14,088 Computer Sciences . . . . . . . . . . . . . 300 19,331 Fiserv . . . . . . . . . . . . . . . . . .(a) 500 25,719 Interpublic Group Cos. . . . . . . . . . . . 75 5,981 Robert Half International . . . . . . . .(a) 250 11,172 ___________ 76,291 ___________ Chemicals--.2% Monsanto . . . . . . . . . . . . . . . . . . 125 5,938 ___________ Computer Equipment--5.1% Compaq Computer . . . . . . . . . . . . . . 300 12,581 Dell Computer . . . . . . . . . . . . . .(a) 425 31,105 EMC . . . . . . . . . . . . . . . . . . .(a) 275 23,375 International Business Machines . . . . . . 275 50,806 Sun Microsystems . . . . . . . . . . . . .(a) 150 12,844 ___________ 130,711 ___________ Computer Networking--1.8% Cisco Systems . . . . . . . . . . . . . .(a) 500 46,406 ___________ Computer Software--5.5% Automatic Data Processing . . . . . . . . . 100 8,019 Intuit . . . . . . . . . . . . . . . . . .(a) 175 12,688 Microsoft . . . . . . . . . . . . . . . .(a) 775 107,483 Oracle . . . . . . . . . . . . . . . . . .(a) 275 11,859 ___________ 140,049 ___________ Consumer Services--.6% DeVry . . . . . . . . . . . . . . . . . .(a) 475 14,547 ___________ Consumer Products--5.4% Clorox . . . . . . . . . . . . . . . . . . . 50 5,841 Colgate-Palmolive . . . . . . . . . . . . . 200 18,575 Dial . . . . . . . . . . . . . . . . . . . . 425 12,272 Gillette . . . . . . . . . . . . . . . . . . 775 37,442 Philip Morris . . . . . . . . . . . . . . . 675 36,113 Procter & Gamble . . . . . . . . . . . . . . 300 27,393 ___________ 137,636 ___________ Diversified--2.3% Bershire Hathaway, Cl. B . . . . . . . . .(a) 25 58,750 ___________ DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------------------------------- ------------------ ------------------ Electronics--5.7% General Electric . . . . . . . . . . . . . . 1,100 $ 112,263 Perkin-Elmer . . . . . . . . . . . . . . . . 25 2,439 Solectron . . . . . . . . . . . . . . . .(a) 325 30,205 ___________ 144,907 ___________ Financial--4.2% American Express . . . . . . . . . . . . . . 250 25,563 Associates First Capital, Cl. A . . . . . . 300 12,713 Federal National Mortgage Association . . . 600 44,400 Franklin Resources . . . . . . . . . . . . . 150 4,800 Northern Trust . . . . . . . . . . . . . . . 150 13,097 Schwab (Charles) . . . . . . . . . . . . . . 125 7,023 ___________ 107,596 ___________ Foods And Beverages--2.8% Coca-Cola . . . . . . . . . . . . . . . . . 700 46,813 Hershey Foods . . . . . . . . . . . . . . . 100 6,219 PepsiCo . . . . . . . . . . . . . . . . . . 300 12,281 Wrigley, (Wm) Jr . . . . . . . . . . . . . . 75 6,717 ___________ 72,030 ___________ Health Services--2.4% IMS Health . . . . . . . . . . . . . . . . . 800 60,350 ___________ Insurance--2.4% American International Group . . . . . . . . 375 36,234 Marsh & McLennan . . . . . . . . . . . . . . 425 24,836 ___________ 61,070 ___________ Leisure & Entertainment--3.7% America Online . . . . . . . . . . . . . . . 300 48,000 Carnival, Cl. A . . . . . . . . . . . . . . 150 7,200 Disney (Walt) . . . . . . . . . . . . . . . 900 27,000 Harley-Davidson . . . . . . . . . . . . . . 150 7,106 Mattel . . . . . . . . . . . . . . . . . . . 175 3,992 ___________ 93,298 ___________ Manufacturing--1.5% Danaher . . . . . . . . . . . . . . . . . . 225 12,220 Illinois Tool Works . . . . . . . . . . . . 200 11,600 Tyco International . . . . . . . . . . . . . 175 13,202 ___________ 37,022 ___________ Medical Supplies & Equipment--1.8% Johnson & Johnson . . . . . . . . . . . . . 150 12,581 Medtronic . . . . . . . . . . . . . . . . . 450 33,413 ___________ 45,994 ___________ DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------------------------------- ------------------ ------------------ Pharmaceuticals--13.2% ALZA . . . . . . . . . . . . . . . . . . .(a) 250 $ 13,063 Bristol-Myers Squibb . . . . . . . . . . . . 300 40,144 Glaxo PLC, A.D.R. . . . . . . . . . . . . . 100 6,950 Lilly (Eli) . . . . . . . . . . . . . . . . 700 62,213 Merck & Co. . . . . . . . . . . . . . . . . 175 25,845 Pfizer . . . . . . . . . . . . . . . . . . . 700 87,806 Schering-Plough . . . . . . . . . . . . . . 875 48,344 Warner-Lambert . . . . . . . . . . . . . . . 700 52,631 ___________ 336,996 ___________ Publishing and Broadcasting--5.3% Comcast, Cl. A . . . . . . . . . . . . . . . 675 39,614 Gannett . . . . . . . . . . . . . . . . . . 175 11,583 McGraw-Hill Cos. . . . . . . . . . . . . . . 50 5,094 MediaOne Group . . . . . . . . . . . . . .(a) 500 23,500 Tele-Communications, Cl. A, TCI Group . .(a) 675 37,336 Time Warner . . . . . . . . . . . . . . . . 275 17,067 ___________ 134,194 ___________ Restaurants--1.6% McDonald's . . . . . . . . . . . . . . . . . 425 32,566 Outback Steakhouse . . . . . . . . . . . .(a) 225 8,972 ___________ 41,538 ___________ Retail--7.7% Bed Bath & Beyond . . . . . . . . . . . .(a) 200 6,825 Best Buy . . . . . . . . . . . . . . . . .(a) 100 6,138 Costco Cos. . . . . . . . . . . . . . . .(a) 350 25,266 Gap . . . . . . . . . . . . . . . . . . . . 375 21,094 Home Depot . . . . . . . . . . . . . . . . . 650 39,772 Kohl's . . . . . . . . . . . . . . . . . .(a) 225 13,823 Staples . . . . . . . . . . . . . . . . .(a) 150 6,553 Wal-Mart Stores . . . . . . . . . . . . . . 700 57,006 Walgreen . . . . . . . . . . . . . . . . . . 325 19,033 ___________ 195,510 ___________ Semiconductors--3.5% Intel . . . . . . . . . . . . . . . . . . . 675 80,030 Texas Instruments . . . . . . . . . . . . . 100 8,556 ___________ 88,586 ___________ Supermarkets--.8% Safeway . . . . . . . . . . . . . . . . .(a) 325 19,805 ___________ Telecommunication Equipment--4.4% Lucent Technologies . . . . . . . . . . . . 575 63,250 Motorola . . . . . . . . . . . . . . . . . . 175 10,686 Nokia, Cl. A, A.D.R. . . . . . . . . . . . . 200 24,088 Qwest Communications . . . . . . . . . . .(a) 250 12,500 ___________ 110,524 ___________ DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------------------------------- ------------------ ------------------ Telecommunication Services--6.2% Airtouch Communications . . . . . . . . .(a) 475 $ 34,259 BellSouth . . . . . . . . . . . . . . . . . 475 23,691 MCI WorldCom . . . . . . . . . . . . . . .(a) 1,050 75,338 SBC Communications . . . . . . . . . . . . . 450 24,131 ___________ 157,419 ___________ TOTAL INVESTMENTS (cost $2,138,374). . . . . . . . . . . . . . . . . . . . . . . 95.1% $2,419,714 _______ ___________ CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9% $ 123,909 _______ ___________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $2,543,623 _______ ___________ Notes to Statement of Investments: - ----------------------------------------------------------------------------- (a) Non-income producing. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 Cost Value ___________ ___________ ASSETS: Investments in securities--See Statement of Investments . . $2,138,374 $2,419,714 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 110,212 Receivable for investment securities sold . . . . . . . . 351,850 Dividends receivable . . . . . . . . . . . . . . . . . . 1,492 Due from The Dreyfus Corporation and affiliates . . . . . 2,400 ____________ 2,885,668 ____________ LIABILITIES: Payable for investment securities purchased . . . . . . . 335,263 Accrued expenses . . . . . . . . . . . . . . . . . . . . 6,782 ____________ 342,045 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,543,623 ____________ REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $2,000,000 Accumulated undistributed investment income--net . . . . 1,078 Accumulated net realized gain (loss) on investments . . . 261,205 Accumulated net unrealized appreciation (depreciation) on investments--Note 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281,340 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,543,623 ____________ SHARES OUTSTANDING (unlimited number of $.001 par value shares of Beneficial Interest authorized) . . . . . . 160,000 NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $15.90 _______ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF OPERATIONS FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 INVESTMENT INCOME INCOME: Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . $ 2,802 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,991 _________ Total Income . . . . . . . . . . . . . . . . . . . . . . $ 6,793 EXPENSES: Investment advisory fee--Note 2(a) . . . . . . . . . . . . . . 4,286 Auditing fees . . . . . . . . . . . . . . . . . . . . . . . . . 6,150 Prospectus and shareholders' reports . . . . . . . . . . . . 828 Trustees' fees and expenses--Note 2(b) . . . . . . . . . . . 683 Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . 276 Custodian fees--Note 2(a) . . . . . . . . . . . . . . . . . . . 174 Shareholder servicing costs . . . . . . . . . . . . . . . . . . 31 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 208 _________ Total Expenses . . . . . . . . . . . . . . . . . . . . . 12,636 Less--expense reimbursement from Dreyfus due to undertaking--Note 2(a) . . . . . . . . . . . . . . . . . . (6,921) _________ Net Expenses . . . . . . . . . . . . . . . . . . . . . . 5,715 __________ INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,078 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3: Net realized gain (loss) on investments . . . . . . . . . . . . $261,205 Net unrealized appreciation (depreciation) on investments . . . 281,340 _________ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 542,545 __________ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $543,623 __________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 OPERATIONS: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,078 Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261,205 Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 281,340 ____________ Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . . . . . . . . . . . . 543,623 ____________ BENEFICIAL INTEREST TRANSACTIONS: Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 ____________ Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,543,623 NET ASSETS: Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- ____________ End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,543,623 ____________ UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,078 ____________ Shares ____________ CAPITAL SHARE TRANSACTIONS: Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000 ____________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for a share of Beneficial Interest outstanding, total investment return, ratios to average net assets and other supplemental data for the period from September 30, 1998 (commencement of operations) to December 31, 1998. This information has been derived from the Series' financial statements. PER SHARE DATA: Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.50 ________ Investment Operations: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .01 Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 3.39 ________ Total from Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.40 ________ Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15.90 ________ TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.20%* RATIOS/SUPPLEMENTAL DATA: Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25%* Ratio of net investment income to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .05%* Decrease reflected in above expense ratio due to undertaking by Dreyfus . . . . . . . . . . . . . . . . . . .31%* Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.65%* Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,544 - ----------------------------- * Not annualized. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "Fund") had no operations until May 1, 1998 (commencement of operations) other than matters relating to its organization and registration as an open-end management investment company under the Investment Company Act of 1940, as amended (the "Act") and the Securities Act of 1933. The Fund operates as a series company currently offering five series, including the Founders Growth Portfolio (the "Series") which commenced operations on September 30, 1998. The Series is only offered to variable annuity and variable life insurance separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The Series is a diversified portfolio. The Series' investment objective is to provide long-term capital growth. The Dreyfus Corporation (" Dreyfus") serves as the Series' investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Bank Corporation. Founders Asset Management LLC (" Founders" ) serves as the Series sub-investment adviser. Founders is a 90% - -owned subsidiary of Mellon. Premier Mutual Fund Services, Inc. is the distributor of the Series' shares, which are sold without a sales charge. As of December 31, 1998, MBC Investment Corp., an indirect subsidiary of Mellon Bank Corporation, held 160,000 shares of the Series. 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 Series' financial statements are prepared in accordance with generally accepted accounting principles 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 Series 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 Series' 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 DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the Series 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, are normally declared and paid annually, but the Series 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 Series not to distribute such gain. (E) FEDERAL INCOME TAXES: It is the policy of the Series 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--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 Series' average daily net assets and is payable monthly. Dreyfus had undertaken from September 30, 1998 through December 31, 1998, to reduce the management fee and reimburse such excess expenses paid by the Series, to the extent that the Series' aggregate annual expenses (exclusive of taxes, brokerage, interest on borrowings and extraordinary expenses) exceeded an annual rate of 1% of the value of the Series' average daily net assets. The expense reimbursement, pursuant to the undertaking, amounted to $6,921 during the period ended December 31, 1998. Pursuant to a Sub-Investment Advisory Agreement with Founders, the sub-investment fees are payable monthly by Dreyfus, and are based upon the value of the Series' 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% The Series 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 Series. DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Series compensates Mellon under a custody agreement for providing custodial services for the Series. During the period ended December 31, 1998, the Series was charged $174 pursuant to the custody agreement. (B) Each trustee who is not an "affiliated person" as defined in the Act receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board receives an additional 25% of such compensation. NOTE 3--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 1998, amounted to $3,490,264 and $1,612,381, respectively. At December 31, 1998, accumulated net unrealized appreciation on investments was $281,340, consisting of $289,303 gross unrealized appreciation and $7,963 gross unrealized depreciation. At December 31, 1998, 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). DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO - ----------------------------------------------------------------------------- REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS SHAREHOLDERS AND BOARD OF TRUSTEES DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the statement of investments of Dreyfus Investment Portfolios, Founders Growth Portfolio (one of the series constituting Dreyfus Investment Portfolios) as of December 31, 1998, and the related statements of operations, changes in net assets and financial highlights for the period from September 30, 1998 (commencement of operations) to December 31, 1998. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included verification by examination of securities held by the custodian as of December 31, 1998 and confirmation of securities not held by the custodian by correspondence with others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders Growth Portfolio at December 31, 1998, and the results of its operations, the changes in its net assets and the financial highlights for the period from September 30, 1998 to December 31, 1998, in conformity with generally accepted accounting principles. New York, New York February 04, 1999 [This Page Intentionally Left Blank] [reg.tm logo] (reg.tm) DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS GROWTH PORTFOLIO 200 Park Avenue New York, NY 10166 INVESTMENT ADVISER The Dreyfus Corporation 200 Park Avenue New York, NY 10166 SUB-INVESTMENT ADVISER Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 CUSTODIAN Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 TRANSFER AGENT & DIVIDEND DISBURSING AGENT Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Printed in U.S.A. 176AR9812 Investment Portfolios, FOUNDERS GROWTH PORTFOLIO Annual Report December 31, 1998 YEAR 2000 ISSUES (UNAUDITED) The fund could be adversely affected if the computer systems used by The Dreyfus Corporation and the fund' s other service providers do not properly process and calculate date-related information from and after January 1, 2000. The Dreyfus Corporation is working to avoid Year 2000-related problems in its systems and to obtain assurances from other service providers that they are taking similar steps. In addition, issuers of securities in which the fund invests may be adversely affected by Year 2000-related problems. This could have an impact on the value of the fund's investments and its share price. DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Shareholder: It is my privilege to introduce you to Douglas A. Loeffler, the portfolio manager of Dreyfus Investment Portfolios -- Founders International Equity Portfolio, which is subadvised by Founders Asset Management, LLC, a corporate affiliate of The Dreyfus Corporation. Doug Loeffler, who is Vice President of Investments at Founders and a Chartered Financial Analyst, joined Founders in 1995 as a senior international equities analyst. Before that he served for seven years with Scudder, Stevens & Clark as an international equities analyst and a quantitative analyst. He has a role in all of Founders' international products. Doug received a BA from Washington State University and an MBA in finance from the University of Chicago. He is also a member of the Association for Investment Management and Research. Doug Loeffler has amply demonstrated at Founders his ability to manage international investments, and we are confident of his ability to manage this new portfolio on your behalf. Sincerely, [Stephen E. Canter, President signature] Stephen E. Canter, President The Dreyfus Corporation January 29, 1999 New York, N.Y. DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Shareholder: The Dreyfus Investment Portfolios -- Founders International Equity Portfolio, which commenced operations on September 30, 1998, produced a total return of 14.88% through December 31, 1998,* but lagged the 20.46% return of its benchmark, the Morgan Stanley Capital International (MSCI) World ex U.S.A. Index, for that period.** The reporting period was a tumultuous one for global stock markets. It began with a bang, as stock markets fell sharply the first week of October, and ended with a bang as many markets rebounded 30% or more from their early October lows. With the Founders International Equity Portfolio, we concentrate our research process on company fundamentals, not top-down forecasts or country allocations. The strong upward movement in share prices in the fourth quarter occurred at the same time as companies' earnings were being revised down sharply. We observed the rapid deterioration in companies' earning prospects during the reporting period and were cautious in our stock selection. The sharp snap-back in stock prices was led primarily by those stocks which had earlier fallen the most. As we did not own many of these companies, the Portfolio's performance suffered. In hindsight, our weighting in the technology sector was too low, which was costly to our performance when compared to many other international growth funds. At the time, we did not participate in the sharp rebound in many Southeast Asian markets, which caused us to underperform many international value funds. The approaching launch of the Euro in January 1999 began to occupy many investors' minds in the fourth quarter. We believed that the Euro currency launch would lead to a flow of funds into larger cap stocks in this region. We accordingly focused much of our research attention on larger cap Euro stocks and were able to find many attractive growth companies there. At the end of 1998, approximately 61% of the Portfolio was invested in the 11 Euro countries versus 46% for the MSCI World ex U.S.A. benchmark. This overweighted position benefited us during the quarter and, we believe, leaves us well-positioned for 1999. MARKET OVERVIEW While we do not expect to see a global recession, it is our belief that the global economy is slowing, and that this trend will continue through 1999. Many areas of the world are still dealing with the devastation caused by the financial crises of 1998, especially in Asia. Some, particularly Brazil, are just beginning to face the problems brought by these crises. We do currently believe, however, that many of the Asian economies have seen the worst of these effects and are slowly recovering. This recovery is being helped in some countries, like Thailand and South Korea, by their governments' efforts to solve the problems in the economy and in the financial system. Japan is still struggling through a very difficult economic environment, and as we continue through 1999, it seems unlikely to us that we will see substantive reform of the Japanese economic system. We currently believe that China will once again be the relative bright spot in Asia, although if 1999 is to be the year in which China begins to address the problems within its banks and state-owned enterprises, it could slightly damper the economy. LOOKING AHEAD We remain cautiously optimistic about foreign markets in 1999. Despite a weakened growth environment for Europe, we find it encouraging that in contrast to the U.S., many European markets such as Germany and France are not even close to their highs of last July. The Portfolio is still underweight in Japan and the rest of Asia, but we continue to look for attractive growth companies in this and all other regions. We are still waiting to see whether company earnings will live up to forecasts in 1999. The answer to this question can have a large effect on global valuation levels and whether or not strong stock market performance continues. We continually monitor our Portfolio in seeking to ensure that our holdings live up to expectations. We will continue to use a bottom-up approach to invest in strong international names with competitive market positions, innovative products, and seasoned management. Sincerely, [Douglas A. Loeffer, CFA signature] Douglas A. Loeffer, CFA Portfolio Manager January 29, 1999 Denver, CO *Total return includes reinvestment of dividends and any capital gains paid. 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. **SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- The Morgan Stanley Capital International (MSCI) World ex U.S.A. Index is an arithmetical average of the performance of 1,138 securities listed on the stock exchanges of Europe, Canada, Australia, New Zealand, and the Far East. Total return figures for this index assume change in share price and reinvestment of dividends after deduction of local taxes. An investor may not invest in this Index. The Index is the property of Morgan Stanley & Co. Incorporated and includes net dividends reinvested
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS DECEMBER 31, 1998 Common Stocks--94.7% Shares Value - ------------------------------------------------------------------------------- ------------------ ------------------ Argentina--1.5% YPF Sociedad Anonima, ADS . . . . . . . . . 1,225 $ 34,223 ___________ Austria--2.3% Austria Tabak . . . . . . . . . . . . . . . 375 28,769 KTM Motorraholding . . . . . . . . . . . . . 375 25,249 ___________ 54,018 ___________ Brazil--.3% Aracruz Celulose, ADS . . . . . . . . . . . 1,000 8,000 ___________ Canada--1.6% MetroNet Communications, Cl. B . . . . . . . 600 (a) 20,100 Newbridge Networks . . . . . . . . . . . . . 525 (a) 15,947 ___________ 36,047 ___________ Finland--8.7% Kone . . . . . . . . . . . . . . . . . . . . 300 34,957 Merita . . . . . . . . . . . . . . . . . . . 7,600 48,331 Nokia, ADS . . . . . . . . . . . . . . . . . 375 45,164 Sonera Group . . . . . . . . . . . . . . . . 2,700 (a) 48,525 Sponda . . . . . . . . . . . . . . . . . . . 3,800 (a) 22,289 ___________ 199,266 ___________ France--7.5% Altran Technologies . . . . . . . . . . . . 250 60,327 Cap Gemini . . . . . . . . . . . . . . . . . 200 32,115 Danone . . . . . . . . . . . . . . . . . . . 175 50,123 Dassault Systemes . . . . . . . . . . . . . 625 29,392 ___________ 171,957 ___________ Germany--10.1% Continental . . . . . . . . . . . . . . . . 900 24,856 DaimlerChrysler . . . . . . . . . . . . . . 630 (a) 60,519 Deutsche Lufthansa . . . . . . . . . . . . . 950 20,989 Douglas Holding . . . . . . . . . . . . . . 700 42,447 Dresdner Bank . . . . . . . . . . . . . . . 400 16,811 Mannesmann . . . . . . . . . . . . . . . . . 450 51,603 Schwarz Pharma . . . . . . . . . . . . . . . 250 14,411 ___________ 231,636 ___________ Greece--.6% Panafon Hellenic Telecom, ADS . . . . . . . 550 (a) 14,575 ___________ Ireland--2.3% Elan, ADS . . . . . . . . . . . . . . . . . 750 (a) 52,172 ___________ Italy--6.2% Alleanza Assicurazioni . . . . . . . . . . . 2,600 36,868 Banca di Roma . . . . . . . . . . . . . . . 10,000 (a) 16,975 Mondadori (Arnoldo) Editore . . . . . . . . 2,700 (a) 35,874 Telecom Italia . . . . . . . . . . . . . . . 1,500 12,798 Telecom Italia RNC . . . . . . . . . . . . . 2,500 15,712 Unicredito Italiano . . . . . . . . . . . . 4,000 23,678 ___________ 141,905 ___________ DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------------------------------- ------------------ ------------------ Japan--10.8% Kao . . . . . . . . . . . . . . . . . . . . 1,800 $ 40,537 Konami . . . . . . . . . . . . . . . . . . . 1,200 34,655 NTT Mobile Communications Network . . . . . 2 82,134 Ryohin Keikaku . . . . . . . . . . . . . . . 300 39,875 Takefuji . . . . . . . . . . . . . . . . . . 700 51,002 ___________ 248,203 ___________ Netherlands--8.3% Benckiser . . . . . . . . . . . . . . . . . 600 39,324 ING Groep . . . . . . . . . . . . . . . . . 700 42,708 Oce . . . . . . . . . . . . . . . . . . . . 625 22,480 TNT Post Group . . . . . . . . . . . . . . . 1,275 41,103 VNU . . . . . . . . . . . . . . . . . . . . 1,225 46,214 ___________ 191,829 ___________ Portugal--5.0% Brisa-Auto Estradas de Portugal . . . . . . 1,250 73,580 Portugal Telecom . . . . . . . . . . . . . . 900 41,265 ___________ 114,845 ___________ Spain--4.8% Superdiplo . . . . . . . . . . . . . . . . . 1,450 (a) 40,882 Telefonica, ADS . . . . . . . . . . . . . . 255 34,520 Union Electrica Fenosa . . . . . . . . . . . 2,000 34,934 ___________ 110,336 ___________ Sweden--3.0% Netcom, Cl. B . . . . . . . . . . . . . . . 1,050 (a) 42,647 Skandinaviska Enskilda Banken . . . . . . . 2,400 25,256 ___________ 67,903 ___________ Switzerland--4.8% Novartis . . . . . . . . . . . . . . . . . . 35 68,777 Swisscom . . . . . . . . . . . . . . . . . . 100 (a) 41,849 ___________ 110,626 ___________ Taiwan--.6% Taiwan Semiconductor Manufacturing, ADS . . 900 (a) 12,769 ___________ United Kingdom--15.4% Allied Irish Banks . . . . . . . . . . . . . 1,600 28,383 British Telecommunications . . . . . . . . . 1,075 16,138 Cable & Wireless Communications . . . . . . 7,800 (a) 70,995 Compass Group . . . . . . . . . . . . . . . 3,525 40,237 Dixons Group . . . . . . . . . . . . . . . . 2,200 30,839 Esprit Telecom Group, ADR . . . . . . . . . 275 (a) 12,856 Glaxo Wellcome, ADR . . . . . . . . . . . . 375 26,062 Ladbroke Group . . . . . . . . . . . . . . . 11,000 44,042 Pearson . . . . . . . . . . . . . . . . . . 2,900 57,358 Royal & Sun Alliance Insurance Group . . . . 3,400 27,663 ___________ 354,573 ___________ DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - ------------------------------------------------------------------------------- ------------------ ------------------ United States--.9% Global Telesystems Group . . . . . . . . . . 375 (a) $ 20,906 ___________ TOTAL COMMON STOCKS (cost $1,832,514) . . . . . . . . . . . . $2,175,789 ___________ Preferred Stocks--2.2% - ------------------------------------------------------------------------------- Germany: Hornbach Holding . . . . . . . . . . . . . . 350 $ 20,803 ProSieben Media . . . . . . . . . . . . . . 625 28,894 ___________ TOTAL PREFERRED STOCKS (cost $65,758) . . . . . . . . . . . . . . $ 49,697 ___________ Principal Short-Term Investments--3.4% Amount - ------------------------------------------------------------------------------- ----------- U.S. Treasury Bills: 3.87%, 1/14/99 . . . . . . . . . . . . . . . $ 21,000 $ 20,973 4.42%, 1/21/99 . . . . . . . . . . . . . . . 58,000 57,858 ___________ TOTAL SHORT-TERM INVESTMENTS (cost $78,828) . . . . . . . . . . . . . . $ 78,831 ___________ TOTAL INVESTMENTS (cost $1,977,100). . . . . . . . . . . . . . . . . . . . . . . 100.3% $2,304,317 _______ ___________ LIABILITIES, LESS CASH AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . (.3%) $ (7,169) _______ ___________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $2,297,148 _______ ___________ Notes to Statement of Investments: - ----------------------------------------------------------------------------- (a) Non-income producing. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 Cost Value ___________ ___________ ASSETS: Investments in securities--See Statement of Investments . . . . $1,977,100 $2,304,317 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,729 Receivable for investment securities sold . . . . . . . . . . . 22,188 Dividends receivable . . . . . . . . . . . . . . . . . . . . . 444 Due from The Dreyfus Corporation and affiliates . . . . . . . . 1,912 ____________ 2,361,590 ____________ LIABILITIES: Payable for investment securities purchased . . . . . . . . . . 46,795 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 17,647 ____________ 64,442 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,297,148 ____________ REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . $1,998,209 Accumulated net realized gain (loss) on investments and foreign currency transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,274) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions . . . . . . . . . . . . . . . . . . . . . 327,213 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,297,148 ____________ SHARES OUTSTANDING (UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 160,000 NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $14.36 _______ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF OPERATIONS FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 INVESTMENT INCOME INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,397 Cash dividends (net of $242 foreign taxes withheld at source) . . . . . . . . . . . . . . . . . . . . 1,894 _________ Total Income . . . . . . . . . . . . . . . . . . . . . . $ 6,291 EXPENSES: Investment advisory fee--Note 2(a) . . . . . . . . . . . . . . 5,388 Auditing fees . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 5,879 Prospectus and shareholders' reports . . . . . . . . . . . . 2,203 Registration fees . . . . . . . . . . . . . . . . . . . . . . . 556 Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Trustees' fees and expenses--Note 2(b) . . . . . . . . . . . 153 Shareholder servicing costs . . . . . . . . . . . . . . . . . . 8 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 475 _________ Total Expenses . . . . . . . . . . . . . . . . . . . . . 25,162 Less--expense reimbursement from Dreyfus due to undertaking--Note 2(a) . . . . . . . . . . . . . . (17,080) _________ Net Expenses . . . . . . . . . . . . . . . . . . . . . . 8,082 __________ INVESTMENT (LOSS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,791) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3: Net realized gain (loss) on investments and foreign currency transactions . . . . . . . . . . . . . $ (28,274) Net unrealized appreciation (depreciation) on investments and foreign currency transactions . . . . . . . . . . . . . 327,213 _________ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 298,939 __________ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $297,148 __________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 OPERATIONS: Investment (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,791) Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,274) Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 327,213 ____________ Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . . . . . . . . . . . . 297,148 ____________ BENEFICIAL INTEREST TRANSACTIONS: Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 ____________ Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,297,148 NET ASSETS: Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- ____________ End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,297,148 ____________ Shares ____________ CAPITAL SHARE TRANSACTIONS: Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000 ____________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for a share of Beneficial Interest outstanding, total investment return, ratios to average net assets and other supplemental data for the period from September 30, 1998 (commencement of operations) to December 31, 1998. This information has been derived from the Series' financial statements. PER SHARE DATA: Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.50 ________ Investment Operations: Investment (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.01) Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 1.87 ________ Total from Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.86 ________ Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14.36 ________ TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.88%* RATIOS/SUPPLEMENTAL DATA: Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38%* Ratio of investment (loss) to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.08%)* Decrease reflected in above expense ratio due to undertaking by Dreyfus . . . . . . . . . . . . . . . . . . .81%* Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.25%* Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,297 - ----------------------------- * Not annualized. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "Fund") had no operations until May 1, 1998 (commencement of operations) other than matters relating to its organization and registration as an open-end management investment company under the Investment Company Act of 1940, as amended (the "Act") and the Securities Act of 1933. The Fund operates as a series company currently offering five series, including the Founders International Equity Portfolio (the "Series" ) which commenced operations on September 30, 1998. The Series is only offered to variable annuity and variable life insurance separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The Series is a diversified portfolio. The Series' investment objective is to provide long-term capital growth. The Dreyfus Corporation (" Dreyfus" ) serves as the Series' investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Bank Corporation. Founders Asset Management LLC ("Founders") serves as the Series' sub-investment adviser. Founders is a 90% - -owned subsidiary of Mellon. Premier Mutual Fund Services, Inc. is the distributor of the Series' shares, which are sold without a sales charge. As of December 31, 1998, MBC Investment Corp., an indirect subsidiary of Mellon Bank Corporation, held 160,000 shares of the Series. 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 Series' financial statements are prepared in accordance with generally accepted accounting principles 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 Series 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 Series' books and the U.S. dollar equivalent of the DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the Series received net earnings credits of $673 during the period ended December 31, 1998 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 Series 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 Series not to distribute such gain. (E) FEDERAL INCOME TAXES: It is the policy of the Series 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 Series has an unused capital loss carryover of approximately $16,000 available for Federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 1998. The carryover does not include net realized securities losses from November 1, 1998 through December 31, 1998 which are treated, for Federal income tax purposes, as arising in fiscal 1999. If not applied, the carryover expires in fiscal 2006. During the period ended December 31, 1998, the Series reclassified $1,791 between paid-in capital and accumulated undistributed investment income-net. Net assets were not affected by this reclassification. NOTE 2--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 Series' average daily net assets and is payable monthly. Dreyfus had undertaken from September 30, 1998 through December 31, 1998, to reduce the management fee and reimburse such excess expenses paid by the Series, to the extent that the Series' aggregate annual expenses (exclusive of taxes, brokerage, interest on borrowings and extraordinary expenses) exceeded an annual rate of 1.50% of the value of the Series' average daily net assets. The expense reimbursement, pursuant to the undertaking, amounted to $17,080 during the period ended December 31, 1998. DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) Pursuant to a Sub-Investment Advisory Agreement with Founders, the sub-investment advisory fees are payable monthly by Dreyfus, and are based upon the value of the Series' average daily net assets, computed at the following annual rates: Average Net Assets ______________ 0 to $100 million .35 of 1% In excess of $100 million to $1 billion .30 of 1% In excess of $1 billion to $1.5 billion .26 of 1% In excess of $1.5 billion .20 of 1% The Series 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 Series. (B) Each trustee who is not an "affiliated person" as defined in the Act receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board receives an additional 25% of such compensation. NOTE 3--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 1998, amounted to $2,529,168 and $601,715, respectively. At December 31, 1998, accumulated net unrealized appreciation on investments was $327,217, consisting of $356,714 gross unrealized appreciation and $29,497 gross unrealized depreciation. At December 31, 1998, 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). DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO - ----------------------------------------------------------------------------- REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS SHAREHOLDERS AND BOARD OF TRUSTEES DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders International Equity Portfolio (one of the series constituting Dreyfus Investment Portfolios) as of December 31, 1998, and the related statements of operations and changes in net assets and financial highlights for the period from September 30, 1998 (commencement of operations) to December 31, 1998. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 1998 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders International Equity Portfolio at December 31, 1998, and the results of its operations, the changes in its net assets and the financial highlights for the period from September 30, 1998 to December 31, 1998, in conformity with generally accepted accounting principles. New York, New York February 4, 1999 [reg.tm logo] (reg.tm) 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 90 Washington Street New York, NY 10286 TRANSFER AGENT & DIVIDEND DISBURSING AGENT Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Printed in U.S.A. 177AR9812 Investment Portfolios, FOUNDERS INTERNATIONAL EQUITY PORTFOLIO Annual Report December 31, 1998 YEAR 2000 ISSUES (UNAUDITED) The fund could be adversely affected if the computer systems used by The Dreyfus Corporation and the fund' s other service providers do not properly process and calculate date-related information from and after January 1, 2000. The Dreyfus Corporation is working to avoid Year 2000-related problems in its systems and to obtain assurances from other service providers that they are taking similar steps. In addition, issuers of securities in which the fund invests may be adversely affected by Year 2000-related problems. This could have an impact on the value of the fund's investments and its share price. DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Shareholder: It is my privilege to introduce you to Michael W. Gerding who manages Dreyfus Investment Portfolios -- Founders Passport Portfolio. He is a Senior Vice President of Investments for Founders Asset Management LLC, our corporate affiliate and subinvestment adviser of the Portfolio, and also is a Chartered Financial Analyst. Mike Gerding has been a member of the Founders Investment Department since 1990, when he joined the firm. Before joining Founders, he was a portfolio manager and research analyst with NCNB Texas from 1985 to 1990. He earned a BA in finance and an MBA from Texas Christian University. Mike Gerding has amply demonstrated his ability to manage international investments. We have full confidence that his experience at Founders will benefit investors in the Dreyfus Investment Portfolios -- Founders Passport Portfolio. Sincerely, [Stephen E. Canter, President signature] Stephen E. Canter, President The Dreyfus Corporation January 29, 1999 New York, N.Y. DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Shareholder: The Dreyfus Investment Portfolios -- Founders Passport Portfolio, which commenced operations on September 30, 1998, outperformed its benchmark index through December 31, 1998. The Portfolio gained 15.79%,* compared to the Morgan Stanley Capital International World ex U.S.A. Small Cap Index return of 13.51% for the same period.** Our strongest performance came from the Portfolio's telecommunications and technology stocks in Europe, as these industries rebounded dramatically from the lows set in the second week of October. And although our Japanese weighting was lower than the benchmark, it did contribute positively to the performance of the Portfolio in the fourth quarter. MARKET OVERVIEW 1998 was characterized by strong economic growth in Europe and the U.S., and crisis in nearly all the rest of the world. Markets reacted to this, and even in just the fourth quarter, we saw both the depths of despair as markets fell in response to several crises, and a major rebound as stock markets came to reflect what may be a more realistic assessment of the world's economies. It is our belief that the global economy began slowing in the second half of 1998, and that this trend will continue into 1999. Many areas of the world spent 1998 dealing with the devastation caused by the financial crises of 1998, especially Asia and Russia. Some, particularly Brazil, are just beginning to face the problems brought on by these crises. We do currently believe, however, that many of the Asian economies have seen the worst of these effects, and are slowly recovering. However, companies may not reflect this for some time, and as growth stock investors, we found very few investments in Asia during the reporting period. PORTFOLIO FOCUS During the reporting period, our bottom-up, stock-by-stock focus on rapidly growing small companies for the Founders Passport Portfolio led us to a substantial overweighting in Europe. Approximately 70% of the Portfolio was invested in Europe at the end of the period, with the largest weights in the United Kingdom, Germany and France. Because it was so difficult to find growing companies in Japan, our weight there at the close of the period was very low, at 7%. Also, because of the crisis in Asia, earnings growth there has been nearly non-existent, and consequently, we owned only two names in all of the rest of Asia, with a total portfolio weight of only 2.4%. LOOKING AHEAD We remain cautiously optimistic about foreign markets in 1999. Despite a weakened growth environment for Europe, we find it encouraging that in contrast to the U.S., many European markets such as Germany and France are not even close to their highs of last July. In this environment, our disciplined investment process becomes even more important. We will continue to choose investments for the Dreyfus Investment Portfolios -- Founders Passport Portfolio one by one, going anywhere in the world to find well managed, small companies that meet our growth criteria. Sincerely, [Michael W. Gerding, CFA signature] Michael W. Gerding, CFA Portfolio Manager January 29, 1999 Denver, CO * Total return includes reinvestment of dividends and any capital gains paid. 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. **SOURCE: Morgan Stanley & Co. Incorporated--The Morgan Stanley Capital International World ex U.S.A. Small Cap Index is a weighted average of the performance of securities in 21 countries that includes companies with market capitalizations between US $200 million and $800 million. Total return figures assume change in share price and deduction of local taxes and excludes dividends reinvested. The Index is an unmanaged group of securities that does not reflect the costs of managing a mutual fund. An investor may not invest directly in this Index. The Index is the property of Morgan Stanley & Co. Incorporated.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS DECEMBER 31, 1998 Common Stocks--78.1% Shares Value - -------------------------------------------------------------------------------- ---------- ------------ Austria--.7% KTM Motorraholding . . . . . . . . . . . . . 550 $ 37,032 ___________ Brazil--.3% Aracruz Celulose, ADS . . . . . . . . . . . 2,250 18,000 ___________ Canada--4.0% Cinar, ADR . . . . . . . . . . . . . . . . . 7,000 (a) 177,625 Dorel Industries, Cl. B . . . . . . . . . . 3,350 (a) 54,685 ___________ 232,310 ___________ Denmark--2.7% Kobenhavns Lufthavne . . . . . . . . . . . . 775 95,806 Vestas Wind Systems . . . . . . . . . . . . 1,125 (a) 60,031 ___________ 155,837 ___________ Finland--2.8% KCI Konecranes International . . . . . . . . 1,450 65,865 Raisio Group . . . . . . . . . . . . . . . . 9,100 98,847 ___________ 164,712 ___________ France--6.2% Altran Technologies . . . . . . . . . . . . 900 217,178 Dassault Systemes . . . . . . . . . . . . . 2,650 124,620 Royal Canin . . . . . . . . . . . . . . . . 250 15,664 ___________ 357,462 ___________ Germany--6.5% Douglas Holding . . . . . . . . . . . . . . 1,550 93,990 IXOS Software . . . . . . . . . . . . . . . 275 (a) 61,915 Schwarz Pharma . . . . . . . . . . . . . . . 1,650 95,111 Sixt . . . . . . . . . . . . . . . . . . . . 1,575 123,874 ___________ 374,890 ___________ Greece--.5% Chipita International . . . . . . . . . . . 900 29,219 ___________ Hong Kong--1.8% VTech Holdings . . . . . . . . . . . . . . . 24,000 104,710 ___________ Ireland--2.0% Ryanair Holdings, ADS . . . . . . . . . . . 3,125 (a) 117,969 ___________ Italy--3.9% Bulgari . . . . . . . . . . . . . . . . . . 18,025 107,170 Gruppo Editoriale L'Espresso . . . . . . . . 4,625 40,628 Industrie Natuzzi, ADS . . . . . . . . . . . 3,125 77,734 ___________ 225,532 ___________ Japan--7.0% Doutor Coffee . . . . . . . . . . . . . . . 2,400 79,484 Fuji Soft ABC . . . . . . . . . . . . . . . 2,000 101,563 Nippon System Development . . . . . . . . . 3,000 92,732 Ryohin Keikaku . . . . . . . . . . . . . . . 1,000 132,915 ___________ 406,694 ___________ DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Common Stocks (continued) Shares Value - -------------------------------------------------------------------------------- ---------- ------------ Netherlands--5.7% Beter Bed Holding . . . . . . . . . . . . . 1,100 $ 38,392 Brunel International . . . . . . . . . . . . 1,725 34,928 Hunter Douglas . . . . . . . . . . . . . . . 2,175 72,087 IHC Caland . . . . . . . . . . . . . . . . . 1,775 73,773 Nutreco Holding . . . . . . . . . . . . . . 2,750 108,435 ___________ 327,615 ___________ Norway--1.4% Tomra Systems . . . . . . . . . . . . . . . 2,475 81,067 ___________ Singapore--.6% Natsteel Electronics . . . . . . . . . . . . 14,000 35,615 ___________ Spain--5.4% Baron de Ley . . . . . . . . . . . . . . . . 1,150 (a) 37,739 TelePizza . . . . . . . . . . . . . . . . . 28,800 (a) 273,375 ___________ 311,114 ___________ Sweden--3.9% Haldex . . . . . . . . . . . . . . . . . . . 2,425 24,474 NetCom . . . . . . . . . . . . . . . . . . . 3,725 (a) 151,296 Ortivus . . . . . . . . . . . . . . . . . . 2,225 (a) 16,157 Semcon . . . . . . . . . . . . . . . . . . . 4,000 32,985 ___________ 224,912 ___________ Switzerland--1.6% Kudelski . . . . . . . . . . . . . . . . . . 20 (a) 55,313 Logitech International . . . . . . . . . . . 300 36,245 ___________ 91,558 ___________ United Kingdom--19.1% BTG . . . . . . . . . . . . . . . . . . . . 4,700 27,273 British-Borneo Oil & Gas . . . . . . . . . . 17,975 31,290 Capital Radio . . . . . . . . . . . . . . . 5,500 53,343 Eidos, ADR . . . . . . . . . . . . . . . . . 2,450 (a) 39,353 Energis . . . . . . . . . . . . . . . . . . 8,600 (a) 191,056 Filtronic . . . . . . . . . . . . . . . . . 2,700 27,082 Flextech . . . . . . . . . . . . . . . . . . 9,150 (a) 92,536 ICON, ADR . . . . . . . . . . . . . . . . . 2,300 77,050 JBA Holdings . . . . . . . . . . . . . . . . 11,450 36,068 Misys . . . . . . . . . . . . . . . . . . . 7,750 56,245 PizzaExpress . . . . . . . . . . . . . . . . 14,050 186,814 Psion . . . . . . . . . . . . . . . . . . . 15,200 146,664 Select Appointment Holdings . . . . . . . . 8,500 87,371 Wetherspoon (J.D) . . . . . . . . . . . . . 18,000 53,418 ___________ 1,105,563 ___________ United States--2.0% Global TeleSystems Group . . . . . . . . . . 2,100 (a) 117,075 ___________ TOTAL COMMON STOCKS (cost $3,812,964) . . . . . . . . . . . . $4,518,886 ___________ DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998 Preferred Stocks--7.6% Shares Value - -------------------------------------------------------------------------------- ---------- ----------- Germany: Marschollek, Lautenschlaeger und Partner . . 375 $ 213,887 Porsche . . . . . . . . . . . . . . . . . . 100 228,146 ___________ TOTAL PREFERRED STOCKS (cost $366,337) . . . . . . . . . . . . . $ 442,033 ___________ Principal Short-Term Investments--14.0% Amount ------------------------------------------------------------------------------------------- ---------- U.S. Treasury Bills: 4.22%, 1/21/99 . . . . . . . . . . . . . . . $ 802,000 $ 800,039 4.31%, 2/4/99 . . . . . . . . . . . . . . . 11,000 10,955 ___________ TOTAL SHORT-TERM INVESTMENTS (cost $811,075) . . . . . . . . . . . . . $ 810,994 ___________ TOTAL INVESTMENTS (cost $4,990,376). . . . . . . . . . . . . . . . . . . . . . . 99.7% $5,771,913 _______ ___________ CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . .3% $ 16,383 _______ ___________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $5,788,296 _______ ___________ Notes to Statement of Investments: - ----------------------------------------------------------------------------- (a) Non-income producing. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998 Cost Value ___________ ___________ ASSETS: Investments in securities--See Statement of Investments . . . . $4,990,376 $5,771,913 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,116 Dividends receivable . . . . . . . . . . . . . . . . . . . . . 1,279 Due from The Dreyfus Corporation and affiliates . . . . . . . . 1,179 ____________ 5,812,487 ____________ LIABILITIES: Payable for investment securities purchased . . . . . . . . . . 4,381 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 19,810 ____________ 24,191 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,788,296 ____________ REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . $5,005,600 Accumulated undistributed investment income--net . . . . . . . 91 Accumulated net realized gain (loss) on investments and foreign currency transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,077 Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions . . . . . . . . . . . . . . . . . . . . . 781,528 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,788,296 ____________ SHARES OUTSTANDING (UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 400,390 NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $14.46 _______ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF OPERATIONS FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 INVESTMENT INCOME INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,703 Cash dividends (net of $435 foreign taxes withheld at source) . . . . . . . . . . . . . . . . . . . . 3,955 _________ Total Income . . . . . . . . . . . . . . . . . . . . . . $ 21,658 EXPENSES: Investment advisory fee--Note 2(a) . . . . . . . . . . . . . . 13,578 Auditing fees . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . 7,526 Prospectus and shareholders' reports . . . . . . . . . . . . 2,203 Registration fees . . . . . . . . . . . . . . . . . . . . . . . 1,392 Trustees' fees and expenses--Note 2(b) . . . . . . . . . . . 537 Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Shareholder servicing costs . . . . . . . . . . . . . . . . . . 8 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 458 _________ Total Expenses . . . . . . . . . . . . . . . . . . . . . 36,202 Less--expense reimbursement from Dreyfus due to undertaking--Note 2(a) . . . . . . . . . . . . . . (15,835) _________ Net Expenses . . . . . . . . . . . . . . . . . . . . . . 20,367 _________ INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,291 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3: Net realized gain (loss) on investments and foreign currency transactions . . . . . . . . . . . . . $ 5,477 Net unrealized appreciation (depreciation) on investments and foreign currency transactions . . . . . . . . . . . . . 781,528 _________ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 787,005 _________ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $788,296 _________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS FROM SEPTEMBER 30, 1998 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1998 OPERATIONS: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,291 Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,477 Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 781,528 ___________ Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . . . . . . . . . . . . 788,296 ___________ DIVIDENDS TO SHAREHOLDERS FROM: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,200) Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,400) ___________ Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,600) ___________ BENEFICIAL INTEREST TRANSACTIONS: Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600 ___________ Increase (Decrease) in Net Assets from Beneficial Interest Transactions . . . . . . . . . . . . . . . . . 5,005,600 ___________ Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,788,296 NET ASSETS: Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- ___________ End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,788,296 ___________ UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 91 ___________ Shares __________ CAPITAL SHARE TRANSACTIONS: Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390 ___________ Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,390 ___________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for a share of Beneficial Interest outstanding, total investment return, ratios to average net assets and other supplemental data for the period from September 30, 1998 (commencement of operations) to December 31, 1998. This information has been derived from the Series' financial statements. PER SHARE DATA: Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.50 ________ Investment Operations: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .00(1) Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 1.97 ________ Total from Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.97 ________ Distributions: Dividends from investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.00)(1) Dividends from net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.01) ________ Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.01) ________ Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14.46 ________ TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.79%(2) RATIOS/SUPPLEMENTAL DATA: Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38%(2) Ratio of net investment income to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .02%(2) Decrease reflected in above expense ratio due to undertaking by Dreyfus . . . . . . . . . . . . . . . . . . .30%(2) Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.98%(2) Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,788 - ----------------------------- (1) Amount represents less than $.01 per share. (2) Not annualized. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Investment Portfolios (the "Fund") had no operations until May 1, 1998 (commencement of operations) other than matters relating to its organization and registration as an open-end management investment company under the Investment Company Act of 1940, as amended (the "Act") and the Securities Act of 1933. The Fund operates as a series company currently offering five series, including the Founders Passport Portfolio (the "Series" ) which commenced operations on September 30, 1998. The Series is only offered to variable annuity and variable life insurance separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The Series is a diversified portfolio. The Series' investment objective is to provide capital appreciation. The Dreyfus Corporation (" Dreyfus" ) serves as the Series' investment adviser. Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Bank Corporation. Founders Asset Management LLC ("Founders") serves as the Series' sub-investment adviser. Founders is a 90%-owned subsidiary of Mellon. Premier Mutual Fund Services, Inc. is the distributor of the Series' shares, which are sold without a sales charge. As of December 31, 1998, MBC Investment Corp., an indirect subsidiary of Mellon Bank Corporation, held 400,390 shares of the Series. 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 Series' financial statements are prepared in accordance with generally accepted accounting principles 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 Series 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 Series' books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities other than investments in securities resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the Series received net DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) earnings credits of $1,254 during the period ended December 31, 1998 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the Series 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 Series not to distribute such gain. (E) FEDERAL INCOME TAXES: It is the policy of the Series 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--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 Series' average daily net assets and is payable monthly. Dreyfus had undertaken from September 30, 1998 through December 31, 1998, to reduce the management fee and reimburse such excess expenses paid by the Series, to the extent that the Series' aggregate annual expenses (exclusive of taxes, brokerage, interest on borrowings and extraordinary expenses) exceeded an annual rate of 1.50% of the value of the Series' average daily net assets. The expense reimbursement, pursuant to the undertaking, amounted to $15,835 during the period ended December 31, 1998. Pursuant to a Sub-Investment Advisory Agreement with Founders, the sub-investment advisory fees are payable monthly by Dreyfus, and are based upon the value of the Series' average daily net assets, computed at the following annual rates: Average Net Assets _________________ 0 to $100 million .35 of 1% In excess of $100 million to $1 billion .30 of 1% In excess of $1 billion to $1.5 billion .26 of 1% In excess of $1.5 billion .20 of 1% The Series 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 Series. (B) Each trustee who is not an "affiliated person" as defined in the Act receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board receives an additional 25% of such compensation. NOTE 3--SECURITIES TRANSACTIONS: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 1998, amounted to $4,352,387 and $176,634, respectively. At December 31, 1998, accumulated net unrealized appreciation on investments was $781,537, consisting of $893,115 gross unrealized appreciation and $111,578 gross unrealized depreciation. At December 31, 1998, 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). DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO - ----------------------------------------------------------------------------- REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS SHAREHOLDERS AND BOARD OF TRUSTEES DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Investment Portfolios, Founders Passport Portfolio (one of the series constituting Dreyfus Investment Portfolios) as of December 31, 1998, and the related statements of operations and changes in net assets and financial highlights for the period from September 30, 1998 (commencement of operations) to December 31, 1998. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 1998 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Investment Portfolios, Founders Passport Portfolio at December 31, 1998, and the results of its operations, the changes in its net assets and the financial highlights for the period from September 30, 1998 to December 31, 1998, in conformity with generally accepted accounting principles. New York, New York February 4, 1999 [reg.tm logo] (reg.tm) DREYFUS INVESTMENT PORTFOLIOS, FOUNDERS PASSPORT PORTFOLIO 200 Park Avenue New York, NY 10166 INVESTMENT ADVISER The Dreyfus Corporation 200 Park Avenue New York, NY 10166 SUB-INVESTMENT ADVISER Founders Asset Management LLC Founders Financial Center 2930 East Third Avenue Denver, CO 80206 CUSTODIAN The Bank of New York 90 Washington Street New York, NY 10286 TRANSFER AGENT & DIVIDEND DISBURSING AGENT Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Printed in U.S.A. 178AR9812 Investment Portfolios, FOUNDERS PASSPORT PORTFOLIO Annual Report December 31, 1998 EX-99.A 2 GRAPHS IN PRESIDENT'S LTR OF ANNUAL REPORT COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS INVESTMENT PORTFOLIOS, CORE VALUE PORTFOLIO WITH THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX AND THE STANDARD & POOR'S BARRA VALUE INDEX EXHIBIT A: STANDARD DREYFUS & POOR'S 500 STANDARD INVESTMENT COMPOSITE & POOR'S PORTFOLIOS, STOCK BARRA CORE PERIOD PRICE VALUE VALUE INDEX * INDEX* PORTFOLIO 5/1/98 10,000 10,000 10,000 5/31/98 9,828 9,859 9,648 6/30/98 10,227 9,934 9,632 7/31/98 10,119 9,718 9,288 8/31/98 8,656 8,156 7,888 9/30/98 9,211 8,652 8,224 10/31/98 9,959 9,329 8,802 11/30/98 10,563 9,815 9,244 12/31/98 11,172 10,160 9,441 * Source: Lipper Analytical Services, Inc. COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS INVESTMENT PORTFOLIOS, MIDCAP STOCK PORTFOLIO AND THE STANDARD & POOR'S MIDCAP 400 INDEX EXHIBIT A: DREYFUS STANDARD & POOR'S INVESTMENT PERIOD MIDCAP 400 PORTFOLIOS, MIDCAP INDEX * STOCK PORTFOLIO 5/1/98 10,000 10,000 5/31/98 9,550 9,600 6/30/98 9,610 9,560 7/31/98 9,237 9,200 8/31/98 7,518 7,472 9/30/98 8,220 7,952 10/31/98 8,955 8,328 11/30/98 9,401 8,832 12/31/98 10,537 9,747 * Source: Lipper Analytical Services, Inc. -----END PRIVACY-ENHANCED MESSAGE-----