LETTER TO SHAREHOLDERS
Dear Shareholder:
Over the past 12 months, international markets have been roiled by a
series of events without parallel in recent financial history.
These include: The collapse and then partial recovery of the finances of
the Mexican government; the unprecedented strength of the Japanese yen and
corresponding weakness of the U.S. dollar; the ouster of the Socialist
government from power in France; the earthquake in Kobe, Japan.
Dreyfus International Equity Fund was not immune to the waves created by
these events in the world equity markets. By the close of the fiscal year,
May 31, 1995, the Fund had produced a total return for the 12-month period of
- -7.81%,* compared to a total return of 4.93% for our benchmark index, the
Morgan Stanley Capital International Europe, Australasia, Far East (EAFE(R))
Index.**
The performance of the Fund's equity holdings varied considerably between
areas and particular countries. Generally speaking, the investments in major
industrial nations such as Japan, Germany and the United Kingdom performed
well, while holdings in the smaller and emerging markets such as Mexico, Hong
Kong, Singapore and Spain underperformed.
The major factor that negatively affected performance, however, was a
currency hedge against the Japanese yen that moved contrary to the position
we held. The drop of 14.51% during the fiscal period in the yen/dollar rate
was the chief culprit. The hedge position has now been unwound, but
regrettably not in time to avoid marring performance of the overall portfolio
for the year.
The troubles in Mexico, where the Fund at one point had an exposure of
around 5% of total assets, also undercut successful performance elsewhere. By
fiscal year-end, we had liquidated the Mexican holdings.
The Japanese market, the largest of the Fund's country weightings, was
very turbulent during the year. Holdings that did well prior to the
earthquake were hit by profit-taking later. The strong yen also cast a shadow
over some of the export-oriented Japanese companies. Yet interest-rate
sensitive Japanese stocks fared well in light of the levels of interest rates
worldwide.
The Hong Kong market has reflected the power struggle going on in China.
Nonetheless, a number of the larger companies in our portfolio have done
well, while the smaller ones have lagged the benchmarks. With the prospect of
a turn in the interest rate cycle and an improving economic situation in
China, we remain optimistic for the medium term.
Along the Asian rim, particularly Malaysia and Singapore, the markets
have recently been quiet, following last year's losses. Signs of an upturn
can be discerned. We are optimistic regarding future prospects in both these
markets.
In Indonesia, where the Fund has a modest stake, we expect continued good
performance and believe the outlook for the future is excellent.
The European stock markets have been disappointing in their index
performance. The main causes have been the weakness of the U.S. dollar, the
high levels of European unemployment and consequent lack of consumer
confidence and, especially in France, the realization that the real estate
problem was far deeper and of longer duration than many had been led to
believe. However, many of the large, medium and small-sized European companies
performed well. The new conservative French government is now addressing the
country's economic problems. Hopefully these policies will benefit not only
French equities but also, indirectly, those of France's major European trading
partners as well.
The market in the United Kingdom has received a boost lately from the
strength exhibited on Wall Street. The Fund's weighting in the U.K. was
increased early this year when the market was attractive on a dividend yield
basis. The stocks selected have thus far performed well.
When the fiscal year ended, the Fund was fully invested. However, we have
reduced the number of countries where we hold equities from some 22 last
summer to 17 at the end of May. The mix of countries still embraces emerging
markets as well as the larger, mature economies. Our objective continues to
be to provide a sound, low volatility vehicle for the investor seeking a
well-spread, core international investment.
We are guided by the fact that in many major industries, most of the top
10 companies are located outside the United States: 10 out of 10 of the
leading world banks, 8 out of 10 of the electric/electronic companies, 7 out
of 10 of the chemical leaders, 8 out of 10 in chemical production, 7 out of
10 in auto manufacturing, 7 out of 10 in insurance and 5 out of 10 financial
companies. Nearly two-thirds of the world's stock market capitalization is
located overseas. The Fund's purpose is to enable the U.S. investor to share
in the growth of a selection of these overseas companies.
Sincerely,
(Sir William Vincent Signature Logo)
Sir William Vincent
Portfolio Manager
Dreyfus International Equity Fund
M & G Investment Management, Ltd.
June 15, 1995
London, U.K.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC. - The Morgan Stanley Capital
International Europe, Australasia, Far East (EAFE(R)) Index is an unmanaged
index composed of a sample of companies representative of the market
structure of European and Pacific Basin Countries. The return indicated
includes net dividends reinvested. The Index is the property of Morgan
Stanley & Co. Incorporated.
DREYFUS INTERNATIONAL EQUITY FUND, INC. MAY 31, 1995
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS INTERNATIONAL
EQUITY FUND, INC. AND THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE,
AUSTRALASIA, FAR EAST (EAFE(Registration Mark) INDEX
(EXHIBIT A)
$12,106
Morgan Stanley Capital International Europe, Australasia, Far East
(EAFERegistration
Mark) Index*
In Dollars
$11,277
Dreyfus International Equity Fund
*Source: Lipper Analytical Services, Inc.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
<S> <C>
ONE YEAR ENDED FROM INCEPTION (6/29/93)
MAY 31, 1995 TO MAY 31, 1995
--------------------- ---------------------------
(7.81%) 6.45%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment in Dreyfus International Equity
Fund on 6/29/93 (Inception Date) to a $10,000 investment made in the Morgan
Stanley Capital International Europe, Australasia, Far East (EAFERegistration
Mark) Index on that date. For comparative purposes, the value of the Index on
6/30/93 is used as the beginning value on 6/29/93. All dividends and capital
gain distributions are reinvested.
The Fund's performance shown in the line graph takes into account all
applicable fees and expenses. The Morgan Stanley Capital International
Europe, Australasia, Far East (EAFERegistration Mark) Index, which is the
property of Morgan Stanley & Co. Incorporated, is an unmanaged index composed
of a sample of companies representative of the market structure of 16
European and Pacific Basin countries and includes net dividends reinvested.
Further information relating to Fund performance, including expense
reimbursements, if applicable, is contained in the Condensed Financial
Information section of the Prospectus and elsewhere in this report.
<TABLE>
<CAPTION>
DREYFUS INTERNATIONAL EQUITY FUND, INC.
STATEMENT OF INVESTMENTS MAY 31, 1995
COMMON STOCKS-88.7% SHARES VALUE
-------------- --------------
<S> <C> <C>
AUSTRALIA-2.8%.... Boral 700,000 $ 1,747,830
Broken Hill Proprietary 100,000 1,267,105
Mayne Nickless 200,000 869,610
-------------
3,884,545
-----------
AUSTRIA-.6%.......... Burgenland Holding (a) 24,000 874,748
------------
DENMARK-1.2%......... Tele Danmark A/S, Cl. B 30,000 1,701,549
--------------
FRANCE-6.5%........... BUT S.A. 7,000 1,456,688
Banque Nationale de Paris 31,400 1,549,126
Bollore Technologies S.A. (a) 8,850 871,629
Castorama Dubois Investissements S.A. (a) 7,350 1,175,645
Compagnie Financiere de Paribas S.A., Cl. A. 13,600 872,603
Compagnie Signaux et Equipements Electronique 22,619 1,556,081
Imetal................................. 9,000 1,028,002
Naf Naf S.A. 21,142 430,165
-----------
8,939,939
--------------
GERMANY-4.5%...........BASF AG 9,250 1,980,273
Continental AG 11,500 1,760,403
Etienne Aigner AG 4,000 1,613,588
Felten & Guilleaume Energietechnik 4,200 921,444
--------------
6,275,708
--------------
HONG KONG-3.7%....... China Light & Power 160,600 878,265
Citic Pacific 145,000 376,794
Dah Sing Financial Holdings 546,650 1,261,500
Lamex Holdings 5,934,000 1,027,998
Swire Pacific, Cl. A 140,000 1,081,448
Vtech Holdings 474,000 447,343
--------------
5,073,348
--------------
INDONESIA-1.8%..... PT Indofood Sukses Makmur (a) 557,000 2,433,434
--------------
ITALY-3.2%............. Edison S.P.A. 340,000 1,487,370
Fila Holding S.P.A., A.D.R. 42,600 1,027,725
Telecom Italia S.P.A. 720,000 1,888,957
--------------
4,404,052
--------------
JAPAN-24.0%............. Amway Japan 55,000 1,772,512
Anritsu Electric 120,000 1,212,796
Asahi Concrete Works 75,000 1,244,076
DDI 180 1,198,578
East Japan Railway 300 1,549,763
Fuji Bank 80,000 1,838,862
Hitachi Credit 100,000 1,848,341
Japan Airlines (a) 200,000 1,393,365
DREYFUS INTERNATIONAL EQUITY FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1995
COMMON STOCKS (CONTINUED) SHARES VALUE
-------------- --------------
JAPAN (CONTINUED)...... Kurimoto 140,000 $ 1,411,611
Mitsubishi Bank 80,000 1,914,692
Mitsubishi Chemical 200,000 962,085
Mitsui Fudosan 125,000 1,405,509
NEC 150,000 1,599,526
Nippon Express 170,000 1,442,180
Nippon Telegraph & Telephone 200 1,658,768
Nissan Chemical Industries 210,000 1,231,635
P.S. 70,400 1,142,749
Sankyo 20,000 924,171
Seven Eleven Japan 22,000 1,629,147
Sharp 80,000 1,137,441
Sumitomo Bank 60,000 1,251,185
Sumitomo Metal Mining 160,000 1,266,351
Toshoku 220,000 1,217,299
Ushio 75,000 805,095
--------------
33,057,737
--------------
MALAYSIA-2.8%....... Hong Leong Credit Berhad 180,000 927,383
Leader Universal Holdings Berhad 166,666 581,472
Metacorp Berhad 150,000 517,241
Metacorp Berhad (Rights) (a) 62,666 74,742
Renong Berhad 950,000 1,757,404
--------------
3,858,242
--------------
NETHERLANDS-3.8%...... Ahrend Groep N.V. 11,000 1,328,653
Akzo N.V. 17,000 2,069,500
OCE-Van Der Grinten N.V. 35,000 1,876,937
--------------
5,275,090
--------------
SINGAPORE-3.7%........ Fraser & Neave 136,300 1,636,972
IPCO International 138,000 455,400
Robinson & Co. 272,000 1,271,485
Singapore Press Holdings 90,000 1,682,848
--------------
5,046,705
--------------
SPAIN-4.7% Hidroelectrica del Cantabrico S.A. 46,000 1,376,245
Iberdrola S.A. 234,000 1,638,955
Repsol S.A. 61,000 1,971,918
Uralita S.A. (a) 125,000 1,500,000
--------------
6,487,118
--------------
SWEDEN-2.1%............Autoliv AB 40,000 1,950,860
Volvo AB 57,000 1,003,124
--------------
2,953,984
--------------
DREYFUS INTERNATIONAL EQUITY FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1995
COMMON STOCKS (CONTINUED) SHARES VALUE
-------------- --------------
SWITZERLAND-4.4%.......Baloise Holdings 900 $ 1,930,502
Compagnie Financiere Michelin (a) 3,650 1,493,822
Elektrowatt AG (Warrants) (a) 7,000 426,426
Motor-Columbus (a) 1,000 1,724,582
Pelikan Holding AG (a) 7,000 504,505
--------------
6,079,837
--------------
UNITED KINGDOM-18.9%...BAT Industries PLC 230,000 1,796,285
Booker PLC 270,000 1,838,394
British Steel PLC 750,000 2,100,459
British Telecommunications PLC 250,000 1,567,151
Burton Group PLC 1,000,000 1,390,375
Cookson Group PLC 390,000 1,490,403
Glaxo Wellcome PLC 120,000 1,386,244
Hammerson PLC 350,000 1,949,306
Harrisons & Crosfield PLC 650,000 1,590,589
Lloyds Bank PLC 150,000 1,557,617
Lucas Industries PLC 1,000,000 3,019,100
RTZ PLC 190,000 2,425,847
Royal Doulton PLC 500,000 2,129,260
Welsh Water PLC 175,000 1,796,364
--------------
26,037,394
--------------
TOTAL COMMON STOCKS
(cost $118,986,514) $122,383,430
==============
PREFERRED STOCKS-2.2%
GERMANY-1.1%.......... Herlitz AG 8,444 $ 1,550,756
SWITZERLAND-1.1%...... Merck AG 2,060 1,463,475
--------------
TOTAL PREFERRED STOCKS
(cost $3,073,664) $ 3,014,231
==============
TOTAL INVESTMENTS (cost $122,060,178)....................................... 90.9% $125,397,661
======== ==============
CASH AND RECEIVABLES (NET).................................................. 9.1% $ 12,511,490
- -------- ======== ==============
NET ASSETS.................................................................. 100.0% $137,909,151
======== ==============
NOTE TO STATEMENT OF INVESTMENTS;
(a) Non-income producing.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INTERNATIONAL EQUITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $122,060,178)-see statement..................................... $125,397,661
Cash.................................................................... 9,911,234
Receivable for investment securities sold............................... 2,161,621
Dividends receivable.................................................... 685,275
Prepaid expenses........................................................ 99,071
--------------
138,254,862
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 85,325
Due to Distributor...................................................... 85,325
Payable for Common Stock redeemed....................................... 26,241
Accrued expenses........................................................ 148,820 345,711
---------- --------------
NET ASSETS ................................................................ $137,909,151
===============
REPRESENTED BY:
Paid-in capital......................................................... $144,850,746
Accumulated distributions in excess of investment income-net-Note 1(d).. (237,568)
Accumulated net realized (loss) on investments and
foreign currency transactions......................................... (10,051,903)
Accumulated net unrealized appreciation on investments
and foreign currency transactions..................................... 3,347,876
--------------
NET ASSETS at value applicable to 10,036,375 shares outstanding
(300 million shares of $.001 par value Common Stock authorized)......... $137,909,151
===============
NET ASSET VALUE, offering and redemption price per share
($137,909,151 / 10,036,375 shares)...................................... $13.74
========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INTERNATIONAL EQUITY FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED MAY 31, 1995
INVESTMENT INCOME:
<S> <C> <C>
INCOME:
Cash dividends (net of $417,080 foreign taxes withheld at source)..... $ 3,015,922
Interest.............................................................. 144,449
------------
TOTAL INCOME...................................................... $ 3,160,371
EXPENSES:
Management fee-Note 2(a).............................................. 1,181,098
Shareholder servicing costs-Note 2(b,c)............................... 1,404,431
Custodian fees........................................................ 216,524
Registration fees..................................................... 59,394
Professional fees..................................................... 46,665
Directors' fees and expenses-Note 2(d)................................ 42,518
Prospectus and shareholders' reports-Note 2(b)........................ 42,235
Miscellaneous......................................................... 23,408
------------
TOTAL EXPENSES.................................................... 3,016,273
--------------
INVESTMENT INCOME-NET............................................. 144,098
--------------
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments and foreign currency
transactions-Note 3(a)................................................ $(4,600,948)
Net realized (loss) on forward currency exchange
contracts-Note 3(a)................................................... (5,037,972)
------------
NET REALIZED (LOSS)................................................... (9,638,920)
Net unrealized (depreciation) on investments and foreign currency
transactions.......................................................... (2,647,103)
--------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (12,286,023)
--------------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $(12,141,925)
==============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INTERNATIONAL EQUITY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MAY 31,
--------------------------------
1994* 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 116,463 $ 144,098
Net realized gain (loss) on investments................................. 2,792,970 (9,638,920)
Net unrealized appreciation (depreciation) on investments for the year.. 5,994,979 (2,647,103)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... 8,904,412 (12,141,925)
-------------- --------------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net.............................................. (136,536) (144,098)
In excess of investment income-net...................................... (286,348) (207,897)
From net realized gain on investments................................... (269,107) (2,933,301)
-------------- --------------
TOTAL DIVIDENDS....................................................... (691,991) (3,285,296)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 350,172,480 514,593,936
Dividends reinvested.................................................... 648,010 3,064,914
Cost of shares redeemed................................................. (179,226,393) (544,228,996)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS..... 171,594,097 (26,570,146)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................... 179,806,518 (41,997,367)
NET ASSETS:
Beginning of year....................................................... 100,000 179,906,518
-------------- --------------
End of year [including distributions in excess of investment
income-net: ($98,669) in 1994 and ($237,568) in 1995]................. $179,906,518 $137,909,151
============== ================
SHARES SHARES
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 23,578,540 35,280,834
Shares issued for dividends reinvested.................................. 42,773 217,216
Shares redeemed......................................................... (11,796,511) (37,294,477)
-------------- --------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING......................... 11,824,802 (1,796,427)
=============== ===============
* From June 29, 1993 (commencement of operations) to May 31, 1994.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INTERNATIONAL EQUITY FUND, INC.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information
has been derived from the Fund's financial statements.
YEAR ENDED MAY 31,
----------------------
PER SHARE DATA: 1994(1) 1995
------- -------
<S> <C> <C>
Net asset value, beginning of year............................................... $12.50 $15.20
------- -------
INVESTMENT OPERATIONS:
Investment income-net............................................................ .05 .01
Net realized and unrealized gain (loss) on investments
and foreign currency transactions.............................................. 2.74 (1.19)
------- -------
TOTAL FROM INVESTMENT OPERATIONS............................................... 2.79 (1.18)
------- -------
DISTRIBUTIONS:
Dividends from investment income-net............................................. (.02) (.01)
Dividends in excess of investment income-net..................................... (.04) (.02)
Dividends from net realized gain on investments.................................. (.03) (.25)
------- -------
TOTAL DISTRIBUTIONS............................................................ (.09) (.28)
------- -------
Net asset value, end of year..................................................... $15.20 $13.74
======= =======
TOTAL INVESTMENT RETURN.............................................................. 22.32%(2) (7.81%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.......................................... 1.71%(2) 1.92%
Ratio of net investment income to average net assets............................. .11%(2) .09%
Decrease reflected in above expense ratios due to undertakings by Dreyfus........ .16%(2) -
Portfolio Turnover Rate.......................................................... 51.32%(2) 40.15%
Net Assets, end of year (000's Omitted)........................................... $179,907 $137,909
(1) From June 29, 1993 (commencement of operations) to May 31, 1994.
(2) Not annualized.
See notes to financial statements.
</TABLE>
DREYFUS INTERNATIONAL EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a non-diversified open-end management investment company. The Dreyfus
Corporation ("Dreyfus") serves as the Fund's investment adviser. M&G
Investment Management Limited ("M&G") serves as the Fund's sub-investment
adviser. Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus,
until August 24, 1994, acted as the distributor of the Fund's shares, which
are sold to the public without a sales load. Effective August 24, 1994,
Dreyfus became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of FDI
Holdings, Inc., the parent company of which is Boston Institutional Group,
Inc.
(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.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(B) FOREIGN CURRENCY TRANSACTIONS: The Fund 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, the difference between
the amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise from
changes in the value of assets and liabilities other than investments in
securities, resulting from changes in exchange rates.
(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.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and dividends from net realized
capital gain are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the
policy of the Fund not to distribute such gain.
DREYFUS INTERNATIONAL EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Dividends in excess of investment income-net result from Federal income
tax distribution requirements, primarily unrealized gains on Passive Foreign
Investment Companies and foreign currency transactions.
In accordance with a recently adopted Statement of Position (SOP 93-02)
certain differences resulting from the classification of gains/losses
recognized on foreign currency transactions and Passive Foreign Investment
Companies for book and tax purposes and the recording of related
distributions to shareholders have been reclassified. The cumulative effect
of such differences totalling $164,098 was reclassified to undistributed net
investment income from undistributed net realized gains. This reclassification
had no effect on net investment income, net realized gains and net assets.
During the year ended May 31, 1995, the Fund reclassified $30,454 charged
to undistributed investment income-net in prior years to paid-in capital. In
addition, the Fund reclassified $202,643 and $20,034 charged to undistributed
investment income-net in prior years and net realized securities losses in
prior years, respectively, to paid-in capital.
(E) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $2,639,000
available for Federal income tax purposes to be applied against future net
securities profits, if any realized subsequent to May 31, 1995. The carryover
does not include net realized securities losses from November 1, 1994 through
May 31, 1995 which are treated, for Federal income tax purposes, as arising
in fiscal 1996. If not applied, the carryover expires in fiscal 2003.
NOTE 2-INVESTMENT ADVISORY FEE, SUB-INVESTMENT ADVISORY FEE AND OTHER TRANSACT
IONS WITH AFFILIATES:
(A) Pursuant to a Management Agreement with Dreyfus, the management fee
is computed at the annual rate of .75 of 1% of the average daily value of the
Fund's net assets and is payable monthly. Dreyfus and M&G have agreed that
if in any full fiscal year the Fund's aggregate expenses, exclusive of
interest, taxes, brokerage and extraordinary expenses, exceed the expense
limitation of any state having jurisdiction over the Fund, Dreyfus and M&G
will bear the excess expense in proportion to their management fee and
sub-advisory fee to the extent required by state law. The most stringent
state expense limitation applicable to the Fund presently requires
reimbursement of expenses in any full fiscal year that such expenses
(exclusive of distribution expenses and certain expenses as described above)
exceed 2 1/2% of the first $30 million, 2% of the next $70 million and 1 1/2%
of the excess over $100 million of the average value of the Fund's net assets
in accordance with California "blue sky" regulations. No expense
reimbursement was required for the year ended May 31, 1995.
Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and M&G,
the sub-advisory fee is computed at the annual rate of .30 of 1% of the
average daily value of the Fund's net assets and is payable monthly by
Dreyfus.
DREYFUS INTERNATIONAL EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) On August 2, 1994, the shareholders approved a revised Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Pursuant to the Plan,
effective August 24, 1994, the Fund (a) reimburses the Distributor for
payments to certain Service Agents for distributing the Fund's shares and (b)
pays the Manager, Dreyfus Service Corporation and any affiliate of either of
them for advertising and marketing relating to the Fund, at an aggregate
annual rate of .50 of 1% of the value of the Fund's average daily net assets.
The Distributor may pay one or more Service Agents in respect of distribution
services. The Distributor determines the amounts, if any, to be paid to
Service Agents under the Plan and the basis on which such payments are made.
The fees payable under the Plan are payable without regard to actual expenses
incurred. The Plan also separately provides for the Fund to bear the costs of
preparing, printing and distributing certain of the Fund's prospectuses and
statements of additional information and costs associated with implementing
and operating the Plan, not to exceed the greater of $100,000 or .005 of 1% of
the Fund's average daily net assets for any full fiscal year.
Prior to August 24, 1994, the Fund's Distribution Plan ("prior
Distribution Plan") provided that the Fund pay Dreyfus Service Corporation at
an annual rate of .50 of 1% of the value of the Fund's average daily net
assets, for costs and expenses in connection with advertising, marketing and
distributing the Fund's shares and for servicing shareholder accounts.
Dreyfus Service Corporation made payments to one or more Service Agents based
on the value of the Fund's shares owned by clients of the Service Agent. The
prior Distribution Plan also separately provided for the Fund to bear the
costs of preparing, printing and distributing certain of the Fund's
prospectuses and statements of additional information and costs associated
with implementing and operating the prior Distribution Plan, not to exceed
the greater of $100,000 or .005 of 1% of the Fund's average daily net assets
for any full fiscal year.
During the year ended May 31, 1995, $613,282 was charged to the Fund
pursuant to the Plan and $203,340 was charged to the Fund pursuant to the
prior Distribution Plan.
(C) Pursuant to the Fund's Shareholder Services Plan, the Fund pays the
Distributor an annual rate of .25 of 1% of the value of the Fund's average
daily net assets for servicing shareholder accounts. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and services related to the maintenance of shareholder
accounts. From June 1, 1994 through August 23, 1994, $99,243 was charged to
the Fund by Dreyfus Service Corporation and from August 24, 1994 through May
31, 1995, $294,456 was charged to the Fund by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and directors of the Fund
were "affiliated persons," as defined in the Act, of Dreyfus and/or Dreyfus
Service Corporation. Each director who is not an "affiliated person" receives
an annual fee of $2,500 and an attendance fee of $500 per meeting. The
Chairman of the Board receives an additional 25% of such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities and forward currency exchange contracts,
during the year ended May 31, 1995 amounted to $62,272,436 and $102,895,833,
respectively.
DREYFUS INTERNATIONAL EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund enters into forward exchange currency contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings. When executing forward currency exchange
contracts, the Fund is obligated to buy or sell a foreign currency at a
specified rate on a certain date in the future. With respect to sales of
forward currency exchange contracts, the Fund would incur a loss if the value
of the contract increases between the date the forward contract is opened and
the date the forward contract is closed. The Fund realizes a gain if the value
of the contract decreases between those dates. With respect to purchases of
forward currency exchange contracts, the Fund would incur a loss if the value
of the contract decreases between the date the forward contract is opened and
the date the forward contract is closed. The Fund realizes a gain if the
contract increases between those dates. The Fund is also exposed to credit
risk associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gains on such
contracts that are recognized in the statement of assets and liabilities. At
May 31, 1995, there were no open forward currency exchange contracts.
(B) At May 31, 1995, accumulated net unrealized appreciation on
investments was $3,337,483, consisting of $11,195,422 gross unrealized
appreciation and $7,857,939 gross unrealized depreciation, excluding foreign
currency transactions.
At May 31, 1995, 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 INTERNATIONAL EQUITY FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS INTERNATIONAL EQUITY FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus International Equity Fund, Inc., including the statement of
investments, as of May 31, 1995, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with 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. Our procedures included confirmation of
securities owned as of May 31, 1995 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus International Equity Fund, Inc. at May 31, 1995, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
(Ernst & Young LLP Signature Logo)
New York, New York
June 30, 1995
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Fund hereby makes the following
designations regarding the dividend of $.28 per share paid by the Fund on
December 16, 1994:
- taxes paid to foreign countries amounts to $.01479 per share.
This amount was included as ordinary income together with net realized
gain on investments in arriving at the rate of $.29479 per share reported
on the 1994 Form 1099-DIV, and
- the portion of the $.29479 per share representing income
sourced from foreign countries is $.03 per share.
(Dreyfus Logo)
DREYFUS INTERNATIONAL
EQUITY FUND, INC.
200 Park Avenue
New York, NY 10166
INVESTMENT ADVISER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
SUB-INVESTMENT ADVISER
M & G Investment Management Limited
Three Quays, Tower Hill
London, EC3R 6BQ, England
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 095AR955
(Dreyfus Logo)
International
Equity Fund, Inc.
Annual Report
May 31, 1995
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
DREYFUS INTERNATIONAL EQUITY FUND, INC. AND THE MORGAN
STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA, FAR
EAST (EAFE(R)) INDEX
EXHIBIT A:
______________________________________________________
| | | MORGAN STANLEY |
| | DREYFUS | CAPITAL |
| PERIOD | INTERNATIONAL | INTERNATIONAL EUROPE,|
| | EQUITY | AUSTRALASIA, FAR EAST|
| | FUND | (EAFE(R)) INDEX * |
|-----------|----------------- | ---------------------|
| 6/29/93 | 10,000 | 10,000 |
| 8/31/93 | 10,984 | 10,909 |
| 11/30/93 | 11,448 | 10,031 |
| 2/28/94 | 12,675 | 11,632 |
| 5/31/94 | 12,232 | 11,536 |
| 8/31/94 | 12,715 | 12,091 |
| 11/30/94 | 11,862 | 11,519 |
| 2/28/95 | 10,875 | 11,114 |
| 5/31/95 | 11,277 | 12,106 |
|-----------------------------------------------------|
* Source: Lipper Analytical Services, Inc.
