(reg.tm)
(reg.tm)
DREYFUS INTERNATIONAL GROWTH FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
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. 095AR985
International
Growth Fund
Annual Report
May 31, 1998
(2) Morgan Stanley Capital International Europe, Australasia, Far East
Index. For more information concerning the Fund's performance, please see
the other information within this report.
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
Dreyfus International Growth Fund recorded a return of 8.42% for the 12-month
period ended 5/31/98.* As shown at the right, this was lower than the 11.11%
return recorded by the Morgan Stanley Capital International, Europe,
Australasia, Far East (EAFE((reg.tm) )) Index for the period.** However, I am
pleased to report that, after a disappointing period for your Fund's performance
in the second half of calendar 1997 (corresponding roughly to the first half of
the fund' s fiscal year) , the Fund has appreciated 17.32% in the first five
months of calendar 1998, well ahead of the 15.06% recorded by the EAFE Index
(see graph below).
The clearly dominant investment issue in the year under review was the market
and currency volatility in Asian emerging countries. Your Fund's direct exposure
to Asian emerging markets was minimal during the year under review. Dreyfus
International Growth Fund's underweight position in the U.K. (a strong performer
for the period), its investments in Mexico, and several specific stock holdings
such as Japanese appliance maker Daikin Industries, printer Dai Nippon Printing
and Singapore based Overseas Union Bank (foreign shares) contributed to the
fiscal year underperformance versus the EAFE Index. Strong performers for the
period included European financial service stocks, the Fund's Italian portfolio
and specific stocks such as U.K. software maker Misys, Dutch temporary
employment service provider Unique International, and Ireland's Jurys Hotel
Group.
Investment Approach
During 14 years in international equity management, I have developed an
investment process designed to deliver to investors a portfolio that includes a
wide variety of holdings in 15 to 25 markets around the world, exposure to
rapidly growing emerging markets when we believe they are attractive for
investment, and active currency management. I evaluate growth, valuation,
interest rates, liquidity, technical (1)Morgan Stanley Capital International
Europe, Australasia, Far East Index. For more information concerning the Fund's
performance, please see the other information within this report.
factors and currency in each of the world's major markets using PC-based tools
developed over time. Markets and industry sectors will be overweighted,
underweighted or market-weighted relative to the EAFE((reg.tm)) Index in a
disciplined manner.
Under its current strategy, the Fund may invest up to 30% of its assets in
emerging markets when they are judged to be attractive. The reason for this
current policy is twofold. First, successful emerging countries have the highest
secular Gross Domestic Product (GDP) and Earnings Per Share (EPS) growth rates
in the world, and an international portfolio should offer shareholders
substantial exposure to this long-term opportunity. Second, emerging markets
often reach valuation extremes seldom seen in more developed equity markets.
Making a significant investment at the appropriate time could position the Fund
to benefit from these extraordinary opportunities.
In this investment process, we seek to manage stocks in a disciplined way. I
search for stocks expected to have higher earnings growth rates than the market
in which they trade. Attractive companies often have made a corporate change in
management, strategy or business structure that will positively alter their
future growth rate. Stocks purchased also need to have attractive valuations
compared to both their own history and that of the local market. Generally,
companies are sold when growth is forecast to fall below my own or consensus
estimates, the valuation target is reached or the weighting in that market
reduced as a result of an asset allocation decision.
Foreign currencies are at least partially hedged, where practicable, when I
believe that a given currency has 10% or more downside against the U.S. dollar
over the next 12 to 18 months.
Current Strategy
Four broad assumptions continue to drive the current strategy in the Fund.
First, growth of the world economy will be significantly lower as a result of
the currency turmoil that has recently swept emerging markets but there is a
silver lining in that interest rates are likely to be lower also. Second, my
research on both markets and individual stocks indicates that Continental Europe
is an attractive area for investment. Third, Japan may be nearing the end of its
seven-year-long bear market, a development that warrants close monitoring for
potential opportunities. Last, emerging markets are likely to need more time to
sort out their recent difficulties before they become a target for significant
investment.
Europe has become two distinct markets. The U.K. is experiencing declining
corporate earnings growth, high interest rates and poor liquidity. While this
market may become a much more fertile area for investment later in 1998, your
Fund is currently underweight in the London market. Continental Europe is a
completely different story. The Dreyfus International Growth Fund investment
team believes the Continent will see strong earnings growth in 1998 even after
adjusting for the difficulties in emerging markets. The team is even more
bullish on Continental European earnings now than at the end of 1997. We believe
that Europe is also beginning to benefit from the creation of private savings
schemes and mutual funds as citizens of that region come increasingly to realize
that government-sponsored pension plans alone will no longer assure a
comfortable retirement.
Many of your Fund' s Continental European investments continue to fall into
three main categories. In terms of countries, the Continental European portfolio
is diversified among 11 countries. But the emphasis - the largest market
overweights in the region - are in those countries that we believe can be the
greatest beneficiaries of the European Monetary Union. These are Italy, Spain
and some of the smaller markets such as Portugal and Ireland. Among recently
established investments in the Continental European markets are German retailer
Douglas Holding, French hotel group Accor, and Olivetti, an Italian company
formerly in the computer business that is in process of reinventing itself as a
telephone service provider.
Japan remains a "wait and see" market. The economy remains mired in recession
and earnings are in decline. Perhaps more importantly, the government and
Japanese companies are moving only very, very slowly to implement the
deregulatory and restructuring measures that have attracted equity capital to
other international markets such as Germany, Italy, Spain, South Africa, Brazil
and others. The graph to the right shows how powerful "investor friendly"
reforms can be. German companies began serious restructuring efforts in the
mid-1990s. While it is true that economic growth is partly responsible for the
rise in the German Dax Index over the last several years, the higher profit
margins, returns on assets and equity, and higher levels of secular profit
growth produced by restructuring among German companies have, in my opinion,
contributed greatly to the strong performance of the German market relative to
the Japanese Nikkei. As can be seen from the Fund's Statement of Investments, as
of May 31, 1998, the Fund had a total of approximately 10.6% of its portfolio
invested in the common stock and/or perferred stock of German companies and
approximately 7.1% of its portfolio invested in the common stock of Japanese
companies.
If more Japanese companies begin to embrace reform and restructuring, the
upside potential for the Japanese Nikkei could become very large. But at the
moment, liquidity remains very poor in the Tokyo market. While the economy may
well pick up during the second half of 1998, driving stock prices moderately
higher, the start of a possible new Japanese bull market awaits the
investor-friendly reforms just mentioned. Your Fund' s investments in Japan
remain at a minimal level while the Dreyfus International Growth Fund investment
team closely evaluates ongoing news from Japan for evidence of opportunities.
Following the Asian stock market and currency crisis of late 1997 and early
1998, true economic hardship - bankruptcies, unemployment, even social unrest -
is hitting the region. This difficult period can be expected to continue for at
least 12 months and possibly several years. Selected investment opportunities
have appeared in the Asian region. However, your Fund's emerging markets
investments remain at a low level.
Source: Bloomberg
For information concerning the Fund' s performance, please see the Fund
performance information contained within this report.
As manager of Dreyfus International Growth Fund I look forward to
communicating with you again at the mid-point of this fiscal year in the
semi-annual shareholder letter.
Sincerely,
Ron Chapman
Portfolio Manager
June 22, 1998
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- The Morgan Stanley Capital
International Europe, Australasia, Far East (EAFE(reg.tm)) 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 GROWTH FUND MAY 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS INTERNATIONAL
GROWTH FUND, AND THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA,
FAR EAST (EAFE((reg.tm))) INDEX
Dollars
$16,009
Morgan Stanley Capital International Europe, Australasia, Far East EAFE((reg.tm)
)Index*
$14,798
Dreyfus International Growth Fund
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended From Inception (6/29/93)
May 31, 1998 to May 31, 1998
____________________ __________________________
8.42% 8.29%
- ---------------
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus International
Growth Fund on 6/29/93 (Inception Date) to a $10,000 investment made in the
Morgan Stanley Capital International Europe, Australasia, Far East (EAFE(R))
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 (EAFE(R) ) 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 European and Pacific Basin countries
and includes net dividends reinvested. The Index does not take into account
charges, fees and other expenses. Further information relating to Fund
performance, including expense reimbursements, if applicable, is contained in
the Financial Highlights section of the Prospectus and elsewhere in this report
<TABLE>
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS MAY 31, 1998
Common Stocks--94.7% Shares Value
- ------------------------------------------------------- ______________ ____________
<S> <C> <C>
Brazil--.6% Companhia de Saneamento Basico do Estado
de Sao Paulo 3,000,000 $ 508,563
____________
Canada--.3% Canadian Conquest Exploration (a) 275,000 217,070
____________
Denmark--1.0% BG Bank 13,000 764,503
____________
Finland--.8% Merita, Cl. A 103,000 647,178
____________
France--10.2% Accor 3,000 821,527
Axa 8,000 909,136
Banque Nationale de Paris 9,500 810,096
Moet Hennessy Louis Vuitton 4,000 837,714
SGS-Thomson Microelectronics (New York Shares) (a) 19,000 1,470,125
Societe Generale, Cl. A 4,000 790,989
Suez Lyonnaise des Eaux 4,500 766,708
Vivendi 7,500 1,504,381
Vivendi (Warrants) 7,500 13,016
____________
7,923,692
____________
Germany--8.2% Adidas-Salomon 4,800 846,822
Allianz 2,000 631,756
BETA Systems Software 5,000 392,047
Commerzbank 18,000 728,871
Douglas Holding 21,500 1,168,020
Hoechst 36,000 1,794,455
Linde 1,100 813,218
____________
6,375,189
____________
Ireland--3.2% Bank of Ireland 20,000 375,752
Jurys Hotel Group 145,000 1,300,651
Ryanair Holdings, A.D.R. 23,000 807,875
____________
2,484,278
____________
Italy--16.7% Aeroporti di Roma 70,000 1,053,947
Arnoldo Mondadori Editore 35,000 428,459
Assicurazioni Generali 28,000 900,715
Banca Popolare di Brescia 110,000 2,286,123
Bulgari 140,000 825,977
ENI 150,000 1,056,106
Fiat 169,000 754,717
Istituto Bancario San Paolo di Torino 56,000 882,834
Istituto Mobiliare Italiano 54,000 922,024
Istituto Nazionale delle Assicurazioni 305,000 949,112
La Rinascente 80,000 786,160
Olivetti (a) 560,000 822,159
Poligrafici Editoriale 135,000 429,303
Telecom Italia 120,000 898,679
____________
12,996,315
____________
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS MAY 31, 1998
Common Stocks (continued) Shares Value
- --------------------------------------------------------------------------------- ______________ ____________
Japan--7.1% Aiwa 17,000 $ 511,591
Canon 15,000 356,371
Casio Computer 37,000 343,629
Dai Nippon Printing 24,000 393,952
Daikin Industries 70,000 416,775
Isetan 40,000 348,740
Kao 30,000 447,084
Minebea 42,000 429,676
Nidec 6,000 339,093
Nintendo 5,000 465,083
Olympus Optical 35,000 328,834
SHIMANO 21,000 488,337
Wacoal 45,000 453,564
Yamanouchi Pharmaceutical 9,000 199,568
____________
5,522,297
____________
Mexico--1.3% Grupo Carso, Cl. A1 80,000 407,026
Grupo Financiero Banamex Accival, Cl. B (a) 140,000 349,008
Grupo Financiero Bancomer, Cl. B 620,000 309,122
____________
1,065,156
____________
Netherlands--7.2% ABN AMRO Holding 45,000 1,088,944
ASM Lithography Holding (a) 11,200 429,100
ING Groep 14,000 960,696
Koninklijke Numico 23,000 808,000
Royal Dutch Petroleum 21,000 1,195,826
Unique International 35,000 1,170,435
____________
5,653,001
____________
Portugal--1.8% Electricidade de Portugal 39,000 1,023,510
Portugal Telecom 7,000 367,414
____________
1,390,924
____________
Singapore--3.9% Creative Technology (a) 20,000 363,853
Development Bank of Singapore 201,500 1,213,928
Keppel 165,000 328,721
Overseas Union Bank 365,000 1,110,349
____________
3,016,851
____________
South Africa--2.2% Barlow 40,000 327,646
Liberty Life Association of Africa 15,000 413,533
Primedia (Units) 45,000 388,232
Real Africa Holdings (a) 128,606 580,946
____________
1,710,357
____________
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS MAY 31, 1998
Common Stocks (continued) Shares Value
- ---------------------------------------------------------------------------------------------- ______________ ____________
Spain--8.3% Adolfo Dominguez (a) 13,000 $ 437,990
Aldeasa 40,000 1,550,735
Banco Santander 8,000 402,453
Centros Comerciales Pryca 25,000 457,408
Corporacion Bancaria de Espana 15,000 1,278,763
DOGI 30,000 464,825
Endesa 32,000 765,873
Repsol 20,000 1,110,305
____________
6,468,352
____________
Sweden--4.8% Electrolux, Cl. B 13,250 1,317,165
Skandia Forsakrings 80,000 1,167,414
Svenska Handelsbanken, Cl. A 30,000 1,261,725
____________
3,746,304
____________
Switzerland--5.6% Adecco 1,800 740,641
Nestle 250 535,076
Schweizerische Lebensversicherungs-und Rentenanstalt 875 705,902
Union Bank of Switzerland 1,405 2,359,831
____________
4,341,450
____________
Taiwan--.7% Taiwan Semiconductor Manufacturing, A.D.R. 27,800 524,725
____________
United Kingdom--10.8% British Sky Broadcasting Group 120,000 843,812
COLT Telecom Group (a) 35,000 1,144,905
Diageo 62,208 702,835
Enterprise Oil 70,000 648,113
Gallaher Group 137,000 706,309
Granada Group 20,000 374,919
Misys 16,857 1,016,481
SmithKline Beecham 47,000 508,775
Somerfield 175,000 1,130,629
Viatel (a) 108,000 837,000
Vodafone Group 45,000 494,100
____________
8,407,878
____________
TOTAL COMMON STOCKS
(cost $62,002,715) $73,764,083
============
</TABLE>
<TABLE>
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS MAY 31, 1998
Preferred Stocks-4.0% Shares Value
- ---------------------------------------------------------------------------------------------- ______________ ____________
<S> <C> <C>
Brazil--1.0% Companhia Energetica de Minas Gerais 23,252,000 $ 768,127
____________
Germany--2.4% Henkel KGaA-Vorzug 12,300 1,102,212
ProSieben Media 14,800 737,721
____________
1,839,933
____________
Italy--.6% La Rinascente 90,000 482,713
____________
TOTAL PREFERRED STOCKS
(cost $2,300,335) $ 3,090,773
=============
Principal
Short-Term Investments--.6% Amount
- ------------------------------------------------------------------------------------------ ____________
U.S. Treasury Bills;
United States; 4.88%, 8/20/1998
(cost $500,513) $.....506,000 $ 500,510
============
TOTAL INVESTMENTS (cost $64,803,563) 99.3% $77,355,366
====== ============
CASH AND RECEIVABLES (NET) .7% $ 571,575
====== ============
NET ASSETS 100.0% $77,926,941
====== ============
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1998
Cost Value
____________ ___________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $64,803,563 $77,355,366
Cash 477,242
Dividends and interest receivable 370,481
Net unrealized appreciation on forward currency
exchange contracts--Note 4(a) 250,000
Receivable for forward currency exchange contracts 182,720
Prepaid expenses 35,730
____________
78,671,539
____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 58,714
Due to Distributor 50,714
Payable for investment securities purchased and forward
currency exchange contracts 539,157
Payable for shares of Common Stock redeemed 1,500
Accrued expenses 94,513
____________
744,598
____________
NET ASSETS $77,926,941
============
REPRESENTED BY: Paid-in capital $64,083,546
Accumulated distributions in excess of
investment income--net (132,906)
Accumulated net realized gain (loss) on investments,
foreign currency transactions and forward currency
exchange contracts 1,194,614
Accumulated net unrealized appreciation (depreciation)
on investments, foreign currency transactions and
forward currency exchange contracts 12,781,687
____________
NET ASSETS $77,926,941
============
(300 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED) 5,207,253
NET ASSET VALUE, offering and redemption price per share $14.97
============
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED MAY 31, 1998
INVESTMENT INCOME
INCOME: Cash dividends (net of $188,338 foreign taxes
<S> <C> <C>
withheld at source) $ 1,155,874
Interest 100,446
____________
Total Income $ 1,256,320
EXPENSES: Management fee--Note 3(a) 634,175
Shareholder servicing costs--Note 3(b,c) 752,592
Interest expense--Note 2 222,161
Custodian fees 96,778
Professional fees 43,181
Directors' fees and expenses--Note 3(d) 29,558
Prospectus and shareholders' reports--Note 3(b) 23,546
Registration fees 21,257
Loan commitment fees--Note 2 582
Miscellaneous 23,883
____________
Total Expenses 1,847,713
____________
INVESTMENT (LOSS) (591,393)
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments and
foreign currency transactions $ 9,164,359
Net realized gain (loss) on forward currency
exchange contracts
Short transactions (393,306)
____________
Net Realized Gain (Loss) 8,771,053
Net unrealized appreciation (depreciation) on investments,
foreign currency transactions and forward currency
exchange contracts 4,023,701
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 12,794,754
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $12,203,361
============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
May 31, 1998 May 31, 1997
_____________ ____________
<S> <C> <C>
OPERATIONS:
Investment (loss) $ (591,393) $ (170,888)
Net realized gain (loss) on investments 8,771,053 6,773,463
Net unrealized appreciation (depreciation) on investments 4,023,701 1,844,082
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations 12,203,361 8,446,657
_____________ _____________
DIVIDENDS TO SHAREHOLDERS:
From investment income--net (49,648) (571,399)
In excess of investment income--net -- (177,176)
From net realized gain on investments (9,448,032) (4,084,610)
_____________ _____________
Total Dividends (9,497,680) (4,833,185)
_____________ _____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold 718,709,466 580,556,282
Dividends reinvested 8,967,189 4,195,270
Cost of shares redeemed (741,149,267) (602,381,534)
_____________ _____________
Increase (Decrease) in Net Assets from Capital Stock Transactions (13,472,612) (17,629,982)
_____________ _____________
Total Increase (Decrease) in Net Assets (10,766,931) (14,016,510)
NET ASSETS:
Beginning of Period 88,693,872 102,710,382
_____________ _____________
End of Period $ 77,926,941 $ 88,693,872
============= =============
DISTRIBUTIONS IN EXCESS OF INVESTMENT (LOSS) $ (132,906) $ (177,176)
_____________ _____________
CAPITAL SHARE TRANSACTIONS: Shares Shares
_____________ _____________
Shares sold 46,522,459 38,309,032
Shares issued for dividends reinvested 686,615 285,781
Shares redeemed (47,606,404) (39,620,262)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding (397,330) (1,025,449)
============= =============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
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 period indicated. This information has been
derived from the Fund's financial statements.
Year Ended May 31,
________________________________________________________________
PER SHARE DATA: 1998 1997 1996 1995 1994(1)
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.83 $15.49 $13.74 $15.20 $12.50
______ ______ ______ ______ ______
Investment Operations:
Investment income (loss)--net (.12) (.02) .09 .01 .05
Net realized and unrealized gain (loss)
on investments 1.17 1.11 1.66 (1.19) 2.74
______ ______ ______ ______ ______
Total from Investment Operations 1.05 1.09 1.75 (1.18) 2.79
______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net (.01) (.09) -- (.01) (.02)
Dividends in excess of investment income--net -- (.03) -- (.02) (.04)
Dividends from net realized gain on investments (1.90) (.63) -- (.25) (.03)
______ ______ ______ ______ ______
Total Distributions (1.91) (.75) -- (.28) (.09)
______ ______ ______ ______ ______
Net asset value, end of period $14.97 $15.83 $15.49 $13.74 $15.20
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN 8.42% 7.36% 12.74% (7.81%) 22.32%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets 1.92% 1.98% 2.04% 1.92% 1.71%(2)
Ratio of interest expense and loan commitment
fees to average net assets .27% -- -- -- --
Ratio of net investment income (loss)
to average net assets (.70%) (.18%) .62% .09% .11%(2)
Decrease reflected in above expense ratios
due to undertakings by the Manager -- -- -- -- .16%(2)
Portfolio Turnover Rate 167.19% 158.04% 96.45% 40.15% 51.32%(2)
Net Assets, end of period (000's Omitted) $77,927 $88,694 $102,710 $137,909 $179,907
- -----------------------------
(1) From June 29, 1993 (commencement of operations) to May 31, 1994.
(2) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS INTERNATIONAL GROWTH FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus International Growth Fund (the "Fund") is a separate non-diversified
series of Dreyfus International Funds, Inc. (the "Company") which is registered
under the Investment Company Act of 1940 ("Act") as an open-end management
investment company and operates as a series company currently offering two
series including the Fund. The Fund' s investment objective is to provide
investors with capital growth. The Dreyfus Corporation ("Manager") serves as the
Fund' s investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A. Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor
of the Fund's shares, which are sold to the public without a sales load.
The Company accounts separately for the assets, liabilities and operations of
each fund. Expenses directly attributable to each fund are charged to that
fund's operation; expenses which are applicable to all funds are allocated among
them on a pro rata basis.
The Fund' s 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. 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 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 the market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities
of short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amount of
dividends, interest and foreign withholding taxes recorded on the 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. 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 custodian agreement, the Fund 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 Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. This may result in distributions that
are in excess of investment income-net and net realized gain on a fiscal year
basis. 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 GROWTH FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During the period ended May 31, 1998, the Fund credited accumulated
undistributed net investment income $685,311 and charged accumulated net
realized gain on investments and paid-in-surplus $664,296 and $21,015,
respectively. The results of operations and net assets were not affected by the
reclassifications.
(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
NOTE 2--BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (" Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings.
The average daily amount of borrowings outstanding during the period ended May
31, 1998 was approximately $3,607,000, with a related weighted average
annualized interest rate of 6.16%.
NOTE 3--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement with the Manager, the management fee is
computed at the annual rate of
. 75 of 1% of the value of the Fund's average daily net assets and is payable
monthly.
(B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, the Fund (a) reimburses the Distributor for payments to certain
Service Agents (a securities dealer, financial institution or other industry
professional) for distributing the Fund' s shares and (b) pays the Manager,
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, 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. During the period
ended May 31, 1998, the Fund was charged $433,528 pursuant to the Plan.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor at an
annual rate of .25 of 1% of the value of the Fund's average daily net assets for
the provision of certain services. 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. The Distributor may
make payments to Service Agents in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. During the period ended May
31, 1998, the Fund was charged $211,392 pursuant to the Shareholder Services
Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the period
ended May 31, 1998, the Fund was charged $83,746 pursuant to the transfer agency
agreement.
(D) Each director who is not an "affiliated person" as defined in the Act
receives from the Company 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.
DREYFUS INTERNATIONAL GROWTH FUND
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(E) A 1% redemption fee is charged and retained by the Fund on certain
redemptions of Fund shares (including redemptions through use of the Fund
Exchanges service) where the shares being redeemed were issued subsequent to a
specified effective date and the redemption or exchange occurs less than six
months following the date of issuance.
NOTE 4--SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities and forward currency exchange contracts, during
the period ended May 31, 1998 amounted to $144,461,611 and $182,054,704,
respectively.
In addition, the following summarizes open forward currency exchange contracts
at May 31, 1998:
<TABLE>
Foreign
Currency Unrealized
Forward Currency Exchange Contracts Amount Proceeds Value Appreciation
_________________________________ ___________ ____________ ____________ ______________
<S> <C> <C> <C> <C>
Sales:
British Pounds, expiring 7/17/1998 5,000,000 $8,390,000 $8,140,000 $250,000
=========
</TABLE>
The Fund enters into forward currency exchange 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 value of 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 gain on each open
contract.
(B) At May 31, 1998, accumulated net unrealized appreciation on investments
and forward currency exchange contracts was $12,801,803, consisting of
$15,194,311 gross unrealized appreciation and $2,392,508 gross unrealized
depreciation.
At May 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 INTERNATIONAL GROWTH FUND
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS INTERNATIONAL GROWTH FUND
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus International Growth Fund
(one of the Series constituting Dreyfus International Funds, Inc.) as of May 31,
1998, 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 and financial highlights. Our procedures included confirmation of
securities owned as of May 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 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 Growth Fund at May 31, 1998, 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.
New York, New York
July 2, 1998
DREYFUS INTERNATIONAL GROWTH FUND
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IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Fund elects to provide each
shareholder with their portion of the Fund's foreign taxes paid and the income
sourced from foreign countries. Accordingly, the Fund hereby makes the following
designations regarding its fiscal year ended May 31, 1998:
--the total amount of taxes paid to foreign countries was $188,338.
--the total amount of income sourced from foreign countries was $931,045.
As required by Federal tax law rules, shareholders will receive notification
of their proportionate share of foreign taxes paid and foreign source income for
the 1998 calendar year with Form 1099-DIV which will be mailed by January 31,
1999.
For Federal tax purposes the Fund hereby designates $.7830 per share as a
long-term capital gain distribution (of which 13.41% is subject to the 20%
maximum Federal tax rate) of the $1.9130 per share paid on December 10, 1997.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
DREYFUS INTERNATIONAL GROWTH 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,
GROWTH AUSTRALASIA, FAR EAST
FUND (EAFE(R)) INDEX *
6/29/93 10,000 10,000
5/31/94 12,232 11,537
5/31/95 11,277 12,106
5/31/96 12,713 13,398
5/31/97 13,649 14,408
5/31/98 14,798 16,009
* Source: Lipper Analytical Services, Inc.
