Dreyfus
International
Growth Fund
ANNUAL REPORT
May 31, 1999
<PAGE>
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.
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
<PAGE>
Contents
THE FUND
- ----------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
11 Statement of Assets and Liabilities
12 Statement of Operations
13 Statement of Changes in Net Assets
14 Financial Highlights
15 Notes to Financial Statements
20 Report of Independent Auditors
21 Important Tax Information
FOR MORE INFORMATION
- -----------------------
Back Cover
<PAGE>
Dreyfus The Fund
International Growth Fund
LETTER FROM THE PRESIDENT
- -------------------------
Dear Shareholder:
We are pleased to present this annual report for Dreyfus International Growth
Fund, covering the 12-month period from June 1, 1998 through May 31, 1999.
Inside, you'll find valuable information about how the fund was managed during
the reporting period, including a discussion with the fund's portfolio manager,
Douglas Loeffler.
After experiencing the severe effects of the global currency and credit crisis
during the second half of 1998, many regional economies have shown marked
improvement so far in 1999. Less restrictive monetary policies especially helped
prevent further economic deterioration in Japan, Asia, Latin America and Eastern
Europe, where the worst of the global currency and credit crisis appears to be
behind us. In contrast, some Western European economies slowed moderately after
the formation of the European Monetary Union (EMU) and the debut of a new
currency, the euro.
These economic conditions produced mixed results for international stocks over
the past year. Stock markets in Japan, Asia and Latin America began to recover,
showing their first signs of real strength in more than a year. European
markets, on the other hand, provided disparate performance during the reporting
period. For example, while Spain and the United Kingdom experienced higher stock
prices on average, others, such as Germany, have declined recently.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus International Growth Fund.
Sincerely,
/s/Stephen E. Cantaer
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
June 14, 1999
2
<PAGE>
DISCUSSION OF FUND PERFORMANCE
- -------------------------------
Douglas Loeffler, Portfolio Manager
How did Dreyfus International Growth Fund perform relative to its benchmark?
The fund produced a total return of -16.02% for the 12-month period ended May
31, 1999.1 This compares with a 4.36% return for the fund's benchmark, the
Morgan Stanley Capital International Europe, Australasia, Far East (MSCI
EAFE(R)) Index for the same period.2 Douglas Loeffler became the fund's primary
portfolio manager in February of this year. Changes in investment approach and
strategy undertaken by Mr. Loeffler to improve your fund's performance are
described below.
What is the fund's investment approach?
Dreyfus International Growth Fund focuses on individual stock selection. We
choose our investments on a company-by-company basis, attempting to find the
companies we believe to be the best managed and best positioned in their
industries. We do not attempt to make broad calls on interest rates or market
movements. We do not have country allocation models or targets. We focus on
individual stock selection rather than analysis of macroeconomic factors.
Starting with roughly 1,000 of the largest companies outside the United States,
we perform rigorous stock-by-stock analyses. Generally, we look for companies
that we believe have achieved and can sustain growth through a dominant brand
name, growing market share, high barriers to entry or untapped market
opportunities. In our view, these factors are the marks of companies whose
growth, in both revenues and earnings, should exceed that of global industry
peers as well as that of its local market. We typically construct a portfolio of
roughly 55-75 stocks, broadly invested across countries and industries,
representing what we believe to be the best growth ideas in the world. We
generally sell a stock when it reaches the price we have predicted
The Fund 3
<PAGE>
to be its maximum value or when we determine that circumstances have changed and
that it will no longer reach the price target we previously set.
What other factors influenced the fund's performance?
The collapse of the developing markets of Southeast Asia in mid- to late 1998
adversely affected fund performance. The fund took a conservative approach to
reentering those markets, and therefore did not benefit from their 1999 rebound.
The fund owned a proportionally large amount of European stocks. The decline of
the common European currency, the euro, versus the dollar had a negative impact
on performance over the period for U.S. investors. Finally, the fund was
underweighted in two major markets, Japan and the U.K., which outperformed world
indices.
What is the fund's current strategy?
As of the end of the reporting period, the fund focused on three business
segments: telecommunications, media and technology.
In the telecommunications area, we believe that the international market is very
similar to the U.S. market in the early 1980s. Previously closed markets have
opened to new participants. Full competition in Europe began in 1998 and,
already, the industry is growing faster there than the U.S. market did after
deregulation. We have purchased mobile operators and companies created to
challenge previous state monopolies. We hold Vodafone, a major U.K. mobile
company that recently purchased Airtouch in the U.S. to make it the world's
largest wireless communications company. In Canada, we owned MetroNet
Communications, Cl. B, a major telecommunications provider which recently became
AT&T Canada. Mannesmann, traditionally known as a German industrial firm, has
diversified strongly into telecommunications. We also hold an interesting
Pan-European firm, Global Telesystems Group. This firm began as a provider of
long distance services in Russia, but has since built a fiber- optics network
across Europe.
In the media industry, we have invested in "indirect Internet plays," which
are companies with an established core business not dependent on the Internet,
but which could benefit from continued growth in on-line commerce. Seat Pagine
4
<PAGE>
Gialle in Italy is pioneering an on-line yellow-pages service, which, for a fee
paid by advertisers, automatically transports the inquirer to the advertiser's
website. Another important trend in the media industry is the convergence of
cable television, telecommunications and the Internet. In this area, we own
United Pan-Europe Communications, the largest cable company in Europe.
In the technology industry, our focus is on companies using leading-edge
technologies that can create high profit margins. We hold ST Microelectronics of
France, a leader in the manufacture of high value-added semiconductors for use
in automobiles and appliances, and Nokia, ADS, the leading manufacturer of
mobile telephones.
June 14, 1999
1 Total return includes reinvestment of dividends and any capital gains paid.
Past performance is no guarantee of future results. Share price and
investment return fluctuate such that upon redemption fund shares may be
worth more or less than their original cost.
2 SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- The Morgan Stanley Capital
International Europe, Australasia, Far East (EAFE) Index 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 is the property of Morgan Stanley & Co., Incorporated.
The Fund 5
<PAGE>
FUND PERFORMANCE
Comparison of change in value of $10,000 investment in the fund and the Morgan
Stanley Capital International Europe, Australasia, Far East (EAFE(R)) Index
- ------------------------------------------------------------------------------
Average Annual Total Returns as of 5/31/99
Inception
1 Year 5 Years (6/29/93)
- ------------------------------------------------------------------------------
Fund (16.02)% 0.32% 3.74%
* Source: Lipper Analytical Services, Inc.
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 $10,000 investment made in the
Morgan Stanley Capital International Europe, Australasia, Far East (EAFE(R))
Index on that date. For comparative purposes, the value of the Index on 6/30/93
is used as the beginning value on 6/29/93. All dividends and capital gain
distributions are reinvested.
The fund's performance shown in the line graph takes into account all applicable
fees and expenses. The Morgan Stanley Capital International Europe, Australasia,
Far East (EAFE(R)) Index, which is the property of Morgan Stanley & Co.
Incorporated, is an unmanaged index composed of a sample of companies
representative of the market structure of European and Pacific Basin countries
and includes net dividends reinvested. The Index does not take into account
charges, fees and other expenses. Further information relating to fund
performance, including expense reimbursements, if applicable, is contained in
the Financial Highlights section of the Prospectus and elsewhere in this report.
6
<PAGE>
STATEMENT OF INVESTMENTS
May 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Common Stocks--96.2% Shares Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Austria--1.9%
Austria Tabak 10,200 649,834
VA Technologie 3,300 276,542
926,376
Brazil--1.9%
Aracruz Celulose, ADS 3,400 65,450
Petroleo Brasileiro 6,150 621,790
Tele Sudeste Celular, ADS 10,620 258,863
946,103
Canada--5.5%
Le Groupe Videotron 12,500 244,541
MetroNet Communications, Cl. B 14,600 a 839,500
Newbridge Networks 12,800 a 353,600
Telesystem International Wireless 26,000 a 502,475
Toronto-Dominion Bank 13,700 722,764
2,662,880
Finland--4.9%
Merita 117,000 691,807
Nokia, ADS 11,350 805,850
Tieto, Cl. B 16,500 575,413
UPM-Kymmene 9,500 277,895
2,350,965
France--9.2%
Accor 3,150 771,256
Altran Technologies 5,000 1,130,006
Canal Plus 2,300 664,418
Elf Aquitaine 4,950 715,229
STMicroelectronics 5,900 a 681,751
Vivendi 6,225 460,096
Vivendi (Rights) 6,225 a 6,415
4,429,171
Germany--9.1%
Continental 24,500 566,200
DaimlerChrysler, ADR 2,200 192,362
DePfa Deutsche Pfandbriefbank 6,950 600,501
Deutsche Lufthansa 11,000 235,891
Dresdner Bank 15,700 581,836
Mannesmann 7,775 1,060,285
</TABLE>
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Common Stocks (continued) Shares Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Germany (continued)
Preussag 13,670 704,408
Singulus Technologies 3,500 a 443,778
4,385,261
Hong Kong--.6%
China Telecom (Hong Kong), ADS 6,500 a 278,687
Ireland--2.2%
Elan, ADS 9,600 a 518,400
Esat Telecom Group, ADS 14,900 a 551,300
1,069,700
Italy--6.7%
Alleanza Assicurazioni 64,000 714,809
Mondadori (Arnoldo) Editore 42,000 726,222
Seat Pagine Gialle 260,000 354,023
Seat Pagine Gialle-RNC 550,000 460,159
Telecom Italia 98,000 1,008,142
3,263,355
Japan--12.7%
Japan Telecom 32 389,313
Kao 39,500 1,078,011
Kita Kyushu Coca-Cola Bottling 11,300 548,048
Konami 22,000 732,429
NTT Mobile Communications Network 18 978,052
Ryohin Keikaku 3,500 684,464
Shiseido 60,000 882,861
Takefuji 10,000 875,462
6,168,640
Mexico--1.0%
Telefonos de Mexico, ADR 6,200 495,612
Netherlands--6.5%
ASM Lithography Holding 9,800 a 432,425
Benckiser, Cl. B 10,800 582,377
ING Groep 12,000 640,215
United Pan-Europe Communications 7,500 a 458,690
VNU 24,000 1,016,849
3,130,556
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Common Stocks (continued) Shares Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Portugal--2.7%
Brisa-Auto Estradas de Portugal 28,500 1,287,316
Singapore--1.7%
Development Bank of Singapore 78,000 803,937
South Korea--.7%
Korea Telecom, ADR 10,575 a 336,417
Spain--2.8%
Banco Santander Central Hispano 33,000 687,060
Telefonica 13,740 657,668
1,344,728
Sweden--5.4%
Electrolux, Cl. B 29,000 560,684
Ericsson (LM) Tel Cl. B, ADR 16,300 439,081
NetCom, Cl. B 8,000 a 242,923
Skandia Forsakrings 35,000 599,468
Skandinaviska Enskilda Banken 64,000 772,893
2,615,049
Switzerland--1.2%
Swisscom 1,650 593,254
Taiwan--.8%
Taiwan Semiconductor Manufacturing, ADS 14,900 a 390,194
United Kingdom--17.4%
Allied Irish Banks 35,000 472,996
BP Amoco, ADS 4,700 503,487
Compass Group 73,500 744,285
Diageo 65,208 685,373
Dixons Group 38,000 681,994
Energis 18,000 a 433,999
Glaxo Wellcome, ADR 8,600 483,750
Hilton 254,000 1,112,199
Pearson 58,000 1,105,010
Securicor 81,000 726,214
South African Breweries 60,850 a 488,078
TeleWest Communications 56,000 a 240,502
</TABLE>
The Fund 9
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Common Stocks (continued) Shares Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
United Kingdom (continued)
Vodafone 38,000 723,364
8,401,251
United States--1.3%
Global TeleSystems Group 8,600 a 653,600
Total Common Stocks
(cost $43,579,293) 46,533,052
- -------------------------------------------------------------------------------
Principal
Short-Term Investments--.7% Amount ($) Value ($)
- -------------------------------------------------------------------------------
U.S. Treasury Bills;
4.46%, 8/19/99
(cost $350,535) 354,000 350,355
- -------------------------------------------------------------------------------
Total Investments (cost $43,929,828) 96.9% 46,883,407
Cash and Receivables (Net) 3.1% 1,488,602
Net Assets 100.0% 48,372,009
<FN>
a Non-income producing.
See notes to financial statements.
</FN>
</TABLE>
10
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Cost
Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets ($):
Investments in securities--See Statement of Investments 43,929,828 46,883,407
Cash 603,377
Receivable for investment securities sold 977,419
Dividends receivable 321,993
Receivable for shares of Common Stock subscribed 1,250
Prepaid expenses 13,828
48,801,274
- --------------------------------------------------------------------------------
Liabilities ($):
Due to The Dreyfus Corporation and affiliates 38,925
Due to Distributor 31,925
Payable for investment securities purchased 258,362
Payable for shares of Common Stock redeemed 19,519
Accrued expenses 80,534
429,265
- --------------------------------------------------------------------------------
Net Assets ($) 48,372,009
- --------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 47,909,398
Accumulated undistributed investment income--net 16,497
Accumulated net realized gain (loss) on investments (2,466,610)
Accumulated net unrealized appreciation (depreciation) on
investments and foreign currency transactions 2,912,724
- --------------------------------------------------------------------------------
Net Assets ($) 48,372,009
- --------------------------------------------------------------------------------
Shares Outstanding
(300 million shares of $.001 par value Common Stock authorized) 3,976,220
Net Asset Value, offering and redemption price per share--Note 3(e)($) 12.17
</TABLE>
See notes to financial statements.
The Fund 11
<PAGE>
STATEMENT OF OPERATIONS
Year Ended May 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Investment Income ($)
- ---------------------------------------------------------------------------------------
<S> <C>
Investment Income ($)
Income:
Cash dividends (net of $154,935 foreign taxes withheld at source) 1,161,844
Interest 56,782
Total Income 1,218,626
Expenses:
Management fee--Note 3(a) 448,885
Shareholder servicing costs--Note 3(b,c) 541,130
Custodian fees 85,105
Professional fees 39,162
Prospectus and shareholders' reports--Note 3(b) 31,209
Registration fees 26,502
Directors' fees and expenses--Note 3(d) 24,294
Loan commitment fees--Note 2 231
Miscellaneous 7,809
Total Expenses 1,204,327
Investment Income--Net 14,299
- ---------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 4 ($):
Net realized gain (loss) on investments and foreign currency transactions 1,941,027
Net realized gain (loss) on forward currency exchange contracts (3,731,065)
Net Realized Gain (Loss) (1,790,038)
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions (9,868,963)
Net Realized and Unrealized Gain (Loss) on Investments (11,659,001)
Net (Decrease) in Net Assets Resulting from Operations (11,644,702)
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Year Ended May 31,
------------------------
1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations ($):
Investment income (loss)--net 14,299 (591,393)
Net realized gain (loss) on investments (1,790,038) 8,771,053
Net unrealized appreciation (depreciation) on investments (9,868,963) 4,023,701
Net Increase (Decrease) in Net Assets
Resulting from Operations (11,644,702) 12,203,361
- -------------------------------------------------------------------------------------
Dividends to Shareholders from ($):
Investment income--net -- (49,648)
Net realized gain on investments (1,873,154) (9,448,032)
Total Dividends (1,873,154) (9,497,680)
- -------------------------------------------------------------------------------------
Capital Stock Transactions ($):
Net proceeds from shares sold 41,284,693 718,709,466
Dividends reinvested 1,783,764 8,967,189
Cost of shares redeemed (59,105,533) (741,149,267)
Increase (Decrease) in Net Assets from
Capital Stock Transactions (16,037,076) (13,472,612)
Total Increase (Decrease) in Net Assets (29,554,932) (10,766,931)
- -------------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 77,926,941 88,693,872
End of Period 48,372,009 77,926,941
Undistributed investment income (distributions in
excess of investment income)--net 16,497 (132,906)
- -------------------------------------------------------------------------------------
Capital Share Transactions (Shares):
Shares sold 3,197,037 46,522,459
Shares issued for dividends reinvested 144,904 686,615
Shares redeemed (4,572,974) (47,606,404)
Net Increase (Decrease) in Shares Outstanding (1,231,033) (397,330)
</TABLE>
See notes to financial statements.
The Fund 13
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended May 31,
-------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data ($):
Net asset value, beginning
of period 14.97 15.83 15.49 13.74 15.20
Investment Operations:
Investment income (loss)--net .00a (.12) (.02) .09 .01
Net realized and unrealized
gain (loss) on investments (2.39) 1.17 1.11 1.66 (1.19)
Total from Investment Operations (2.39) 1.05 1.09 1.75 (1.18)
Distributions:
Dividends from investment
income--net -- (.01) (.09) -- (.01)
Dividends in excess of investment
income--net -- -- (.03) -- (.02)
Dividends from net realized gain
on investments (.41) (1.90) (.63) -- (.25)
Total Distributions (.41) (1.91) (.75) -- (.28)
Net asset value, end of period 12.17 14.97 15.83 15.49 13.74
- --------------------------------------------------------------------------------
Total Return (%) (16.02) 8.42 7.36 12.74 (7.81)
- --------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of operating expenses to
average net assets 2.01 1.92 1.98 2.04 1.92
Ratio of interest expense and loan
commitment fees to average
net assets .00b .27 -- -- --
Ratio of net investment income (loss)
to average net assets .02 (.70) (.18) .62 .09
Portfolio Turnover Rate 232.68 167.19 158.04 96.45 40.15
- --------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 48,372 77,927 88,694 102,710 137,909
<FN>
a Amount represents less than $.01 per share.
b Amount represents less than .01%.
See notes to financial statements.
</FN>
</TABLE>
14
<PAGE>
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, as amended (the "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 (the "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
charge.
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 operations; 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. 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 Directors. 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.
The Fund 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
(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 custody 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 of 1986, as amended (the "Code"). To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the fund not to distribute such gain.
During the period ended May 31, 1999, the fund credited accumulated
undistributed net investment income $135,104 and accumulated net realized gain
16
<PAGE>
on investments $1,968 and charged paid in surplus $137,072. 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 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 $2,043,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to May 31, 1999. If not applied,
the carryover expires in fiscal 2007.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (the "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. During the period ended May
31, 1999, the fund did not borrow under the Facility.
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") 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
The Fund 17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
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, 1999, the fund was charged $314,588 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, 1999, the fund was charged $149,628 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, 1999, the fund was charged $63,401 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.
18
<PAGE>
(e) A 1% redemption fee is charged and retained by the fund on shares redeemed
within six months following the date of issuance, including redemptions made
through the use of the fund's exchange privilege.
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, 1999, amounted to $136,691,252 and $159,365,244,
respectively.
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. At May 31, 1999, there were no open forward currency exchange
contracts outstanding.
(b) At May 31, 1999, accumulated net unrealized appreciation on investments was
$2,953,579, consisting of $5,269,463 gross unrealized appreciation and
$2,315,884 gross unrealized depreciation.
At May 31, 1999, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund 19
<PAGE>
Report of 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, 1999, 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, 1999, 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, 1999, 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 L.L.P.
New York, New York
July 6, 1999
20
<PAGE>
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, 1999:
--the total amount of taxes paid to foreign countries was $154,935.
--the total amount of income sourced to foreign countries was $19,206.
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 1999 calendar year with Form 1099-DIV which will be mailed by January 31,
2000.
For Federal tax purposes the fund hereby designates $.3920 per share as a
long-term capital gain distribution of the $.4070 per share paid on December 22,
1998.
The Fund 21
<PAGE>
For More Information
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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call 1-800-645-6561
By mail Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
By E-mail Send your request to
[email protected]
On the Internet Information
can be viewed online or
downloaded from:
http://www.dreyfus.com
(C) 1999 Dreyfus Service Corporation 095AR995
- -------------------------------------------------------------------------------
Dreyfus
Emerging Markets
Fund
ANNUAL REPORT
May 31, 1999
[Dreyfus Lion]
(R) [Dreyfus Logo]
<PAGE>
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
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.
<PAGE>
Contents
THE FUND
- --------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
13 Statement of Assets and Liabilities
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Financial Highlights
17 Notes to Financial Statements
22 Report of Independent Auditors
23 Important Tax Information
FOR MORE INFORMATION
- --------------------------------------------------------
Back Cover
<PAGE>
Dreyfus The Fund
Emerging Markets Fund
LETTER FROM THE PRESIDENT
- -------------------------
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Emerging Markets Fund,
covering the 12-month period from June 1, 1998 through May 31, 1999. Inside,
you'll find valuable information about how the fund was managed during the
reporting period, including a discussion with the fund's portfolio manager, D.
Kirk Henry.
After experiencing the severe effects of the global currency and credit crisis
in 1998, many regional economies have shown marked improvement so far in 1999.
Less restrictive monetary policies especially helped prevent further economic
deterioration in Japan, Asia, Latin America and Eastern Europe, where the worst
of the global currency and credit crisis appears to be behind us. In contrast,
some Western European economies slowed moderately after the formation of the
European Monetary Union (EMU) and the debut of a new currency, the euro.
These economic conditions produced mixed results for international stocks. Stock
markets in Japan, Asia and Latin America have begun to recover, showing their
first signs of real strength in over a year. European markets, on the other
hand, provided disparate performance. For example, while Spain and the United
Kingdom experienced higher stock prices on average, others, such as Germany,
have declined recently.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Emerging Markets Fund.
Sincerely,
/s/ Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
June 14, 1999
2
<PAGE>
DISCUSSION OF FUND PERFORMANCE
- ------------------------------
D. Kirk Henry, Portfolio Manager
How did Dreyfus Emerging Markets Fund perform relative to its benchmark?
For the 12-month period ended May 31, 1999, Dreyfus Emerging Markets Fund
produced a total return of 13.56%.1 This return exceeds that provided by the
fund's benchmark, the Morgan Stanley Capital International Emerging Markets Free
(MSCI EMF) Index, which produced a total return of 3.46% for the same period.2
We attribute the fund's performance to several factors. First, our stock
selection strategy led us to many out-of-favor companies that we believed
possessed strong fundamentals but were selling at attractive prices. Second, the
fund benefited from its country allocations, which limited exposure to
disappointing stock markets. Third, since October 1998, equity investments in
emerging markets -- especially value- ori ented stocks -- have experienced a
strong rebound, which enabled many of the fund's investments to enjoy positive
returns.
What is the fund's investment approach?
The fund invests at least 65% of its assets in common and preferred stocks of
companies located in emerging market countries as represented in our benchmark,
the MSCI EMF Index. Countries currently in the benchmark include Argentina,
Brazil, Chile, China, Columbia, the Czech Republic, Greece, Hungary, India,
Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines,
Poland, Russia, Sri Lanka, South Africa, Taiwan, Thailand, Turkey and Venezuela.
We employ a value-oriented and research-driven investment approach to security
selection within each market. During the first six months of the reporting
period, this "bottom up" approach led us to focus on investments in Latin
America, particularly Mexico, Chile and Brazil. Other areas of emphasis included
South Africa, India and Israel. Our
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (continued)
participation in these markets helped us take advantage of relatively strong
performance in many individual companies during the second half of 1998.
During 1999, however, we shifted our country allocations toward Asia as we found
more attractively valued companies in that region. We took profits in some of
our Latin American holdings, primarily because their stock prices had reached
our valuation targets. While we continued to de-emphasize investments in Brazil,
our holdings in several of the country's exporters fared relatively well during
the January 1999 currency devaluation.
Despite our lower exposure to Latin America stocks, Mexico remained the largest
single country in the portfolio. Mexico continued to serve as a positive driver
of performance. For example, our holdings in Apasco, the country's second
largest cement company; and ARA, a home builder, produced strong returns during
the period.
What other factors influenced the fund's performance?
As we sold holdings in Latin America, we gradually increased our holdings in
China, India and South Korea, primarily because we believed that many of these
stocks were selling at very attractive prices. For example, in China we bought
stock in Zhejiang Expressway Cl.H, an express toll-road company. We also added
to our holdings in appliance manufacturer Guangdong Kelon Electrical, Cl.H. Both
investments produced very favorable returns for the fund.
In India, we initiated new positions in Hindalco Industries, an aluminum
exporting company, as well as Indian Hotels, owner of several of the country's
top business hotels. In addition, we added to our holdings of electric utility
company BSES and the State Bank of India, GDR. In South Korea, several new
names to the portfolio have produced strong returns, including Samsung
Electronics and Korea Telecom, ADS.
4
<PAGE>
Finally, we continued to avoid investments in Russia and limit our exposure to
Greece, Turkey and Thailand. We have not found many attractive investments in
these countries.
What is the fund's current strategy?
We have maintained the same value-oriented, "bottom-up" strategy that we have
used in the past. Our analyses of individual companies suggest that attractive
values continue to exist in many of the world's emerging markets. In fact,
historically, global growth and commodity prices have been two of the main
drivers of stock market performance in the emerging markets. As of May 31, both
drivers were trending upward.
Of course, there is no way to determine how long these positive trends will
continue. That's one of the reasons we evaluate investment opportunities on a
company-by-company basis and select investments according to their individual
merits. In our view, our value-oriented, bottom-up investment approach gives us
the flexibility we need to adapt quickly to changing market conditions.
June 14, 1999
1 Total return includes reinvestment of dividends and any capital gains paid.
Past performance is no guarantee of future results. Share price and investment
return fluctuate such that upon redemption fund shares may be worth more or less
than their original cost.
2 SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- The Morgan Stanley Capital
International Emerging Markets Free (MSCI EMF) Index is a market capitalization
weighted index composed of companies representative of the market structure of
26 emerging market countries in Europe, Latin America and the Pacific Basin.
The MSCI EMF Index excludes closed markets and those shares in otherwise free
markets which are not purchasable by foreigners. The Index is the property of
Morgan Stanley & Co., Incorporated and includes gross dividends reinvested.
The Fund 5
<PAGE>
FUND PERFORMANCE
[INSERT CHART PLOT POINTS]
$10,608
Dreyfus
Emerging Markets Fund
$7,944
Morgan Stanley Capital
International Emerging
Markets Free Index*
Comparison of change in value of $10,000 investment in the fund and the Morgan
Stanley Capital International Emerging Markets Free Index
- -----------------------------------------------------------------------
Average Annual Total Returns as of 5/31/99
Inception
1 Year (6/28/96)
- -----------------------------------------------------------------------
Fund 13.56% 2.04%
* Source: Lipper Analytical Services, Inc.
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus Emerging Markets
Fund on 6/28/96 (Inception Date) to a $10,000 investment made in the Morgan
Stanley Capital International Emerging Markets Free Index on that date. For
comparative purposes, the value of the Index on 6/30/96 is used as the beginning
value on 6/28/96. All dividends and capital gain distributions are reinvested.
The fund's performance shown in the line graph takes into account all applicable
fees and expenses. The Morgan Stanley Capital International Emerging Markets
Free Index, which is the property of Morgan Stanley & Co. Incorporated, is a
market capitalization-weighted index composed of companies representative of the
market structure of 26 Emerging Market countries in Europe, Latin America, and
the Pacific Basin. The MSCI/EMF Index excludes closed markets and those shares
in otherwise free markets which are not purchaseable by foreigners. The Index
does not take into account charges, fees and other expenses and includes gross
dividends reinvested. Further information relating to fund performance,
including expense reimbursements, if applicable, is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
6
<PAGE>
STATEMENT OF INVESTMENTS
May 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Common Stocks--92.9% Shares Value ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina--1.0%
Banco Hipotecario 14,770 155,592
Telefonica de Argentina, ADS 15,000 485,625
YPF Sociedad Anonima, ADS 7,000 294,875
936,092
Brazil--6.8%
Companhia Brasileira de Distribuicao Grupo
Pao de Acucar, ADS 23,500 b 425,937
Companhia Vale do Rio Doce, ADS 98,500 1,766,844
Petroleo Brasileiro 9,980 1,009,018
Tele Celular Sul, ADS 48,300 908,644
Tele Centro Sul, ADS 17,100 923,400
Telecomunicacoes Brasileiras, ADS 12,000 750
Telecomunicacoes Brasileiras, ADS (PFD Block) 16,400 1,369,400
6,403,993
Chile--4.1%
Administradora de Fondos de
Pensiones Provida, ADS 29,800 607,175
Compania de Telecomunicaciones de Chile, ADS 46,800 1,017,900
Cristalerias de Chile, ADS 57,400 914,812
Quinenco, ADS 64,500 677,250
Santa Isabel, ADS 59,625 648,422
3,865,559
China--4.1%
Beijing Datang Power Generation 1,867,000 450,187
Guangdong Kelon Electrical, Cl. H 374,000 b 286,943
Guangshen Railway, Cl. H 875,000 101,545
Guangshen Railway, ADS 90,000 523,125
Huaneng Power International, ADS 46,000 572,125
Jiangxi Copper 4,091,000 300,685
Shandong Huaneng Power, ADS 96,900 381,544
Shenzen Expressway 2,029,000 334,887
Yanzhou Coal Mining 1,344,000 339,674
Zhejiang Expressway, Cl. H 4,019,000 585,603
3,876,318
Czech Republic--1.6%
Ceske Energeticke Zavody 510,367 a 1,038,854
Komercni Banka 20,300 a 364,353
</TABLE>
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Common Stocks (continued) Shares Value ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Czech Republic (continued)
Komercni Banka, GDR 23,000 a,b 136,275
1,539,482
Egypt--2.0%
Misr International Bank, GDR 61,100 b 653,770
Paints & Chemical Industries, GDR 112,000 736,960
Suez Cement 36,100 536,085
1,926,815
Greece--2.7%
Hellenic Petroleum 102,990 a 933,125
Hellenic Telecommunications Organization 29,035 627,457
Hellenic Telecommunications Organization, ADS 88,555 957,501
2,518,083
Hong Kong--2.3%
Asia Satellite Telecommunications 210,000 444,089
China Hong Kong Photo Products 3,649,000 508,165
Hengan International 1,753,000 a 621,615
Hong Kong Aircraft Engineering 219,000 410,879
Mandarin Oriental International 292,000 216,080
2,200,828
Hungary--4.3%
BorsodChem 24,500 589,296
EGIS 15,035 313,020
Fotex 475,658 194,486
Gedeon Richter 11,600 429,780
MOL Magyar Olaj-es Gazipari, GDR 51,700 1,253,725
Magyar Tavkozlesi 22,800 638,400
Pick Szeged 3,048 89,655
Pick Szeged, GDR 90,800 533,450
4,041,812
India--9.8%
BSES 75,100 b 741,612
Hindalco Industries 33,400 475,950
Indian Hotels 74,500 530,813
Mahanagar Telephone Nigam 166,900 b 1,522,963
Mahindra & Mahindra 62,000 b 294,500
Reliance Industries, GDR 166,000 b 1,460,800
State Bank of India, GDR 131,100 b 1,438,822
Steel Authority of India, GDR 236,500 b 461,175
</TABLE>
8
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Common Stocks (continued) Shares Value ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
India (continued)
Tata Engineering & Locomotive, GDR 110,600 b 458,990
Videsh Sanchar Nigam, GDR 165,200 b 1,879,150
9,264,775
Indonesia--1.4%
PT Daya Guna Samudera 624,000 407,291
PT Indah Kiat Pulp & Paper 1,640,000 a 757,389
PT Indorama Synthetics 555,000 a 134,991
1,299,671
Israel--3.2%
Bank Hapoalim 286,000 724,068
Bank Leumi Le-Israel 340,600 640,117
Blue Square-Israel, ADS 79,750 1,216,188
Dor Energy 134,400 b 480,480
3,060,853
Luxembourg--1.4%
Quilmes Industrial, ADS 117,000 1,323,563
Malaysia--4.7%
Berjaya Sports Toto 587,000 c 1,077,425
Jaya Tiasa 313,000 c 484,173
Kwantas 251,000 c 153,568
Petronas Dagangan 553,000 c 497,934
Petronas Gas 190,000 c 394,800
Sime Darby 937,000 c 1,077,335
Tenaga Nasional 373,000 c 744,915
4,430,150
Malta--.7%
Maltacom 40,500 b 698,625
Mexico--10.1%
ALFA, Ser. A 252,500 898,438
ARA 239,000 a 825,753
Apasco 118,800 695,941
Carso Global Telecom 84,500 a 470,606
Cintra 1,008,900 416,733
Controladora Comercial Mexicana, GDS 31,900 615,072
Desc, Ser. B 610,000 644,225
Embotelladoras Argos 997,500 1,111,076
</TABLE>
The Fund 9
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Common Stocks (continued) Shares Value ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Mexico (continued)
Grupo Continental 340,000 550,536
Grupo Financiero Inbursa, Ser. B 428,300 1,258,926
Tablex 66,108 134,316
Telefonos de Mexico, ADS 14,600 1,167,087
Tubes de Acero de Mexico, ADR 80,200 741,850
9,530,559
Panama--.8%
Banco Latinoamericano de Exportaciones 25,900 736,531
Peru--2.2%
Telefonica del Peru, ADS 140,800 2,041,600
Philippines--2.4%
First Philippine 659,160 831,529
Philippine Long Distance Telephone, ADS 29,000 837,375
Universal Robina 3,536,600 604,150
2,273,054
Poland--2.1%
Bank Handlowy w Warszawie 62,000 728,496
Kredyt Bank PBI 30,800 a,b 714,560
Telekomunikacja Polska 83,600 a,b 504,108
1,947,164
Portugal--1.1%
Mota e Companhia 49,000 491,217
Portucel Industrial-Empresa Produtora de Celulose 95,148 534,865
1,026,082
Singapore--3.2%
Asia Pulp & Paper, ADS 39,600 a 353,925
Creative Technology 54,900 741,150
Development Bank of Singapore 110,000 1,133,758
Elec & Eltek International 100,000 296,000
Overseas Union Bank 85,600 438,657
United Overseas Bank 5,000 33,575
2,997,065
South Africa--10.1%
ABSA 214,000 979,186
AECI 411,100 868,174
</TABLE>
10
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Common Stocks (continued) Shares Value ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
South Africa (continued)
Barlow 237,885 1,103,698
Barlow, ADR 40 195
Del Monte Royal Foods 1,120,300 a 412,237
Edgars Stores 73,700 554,180
Iscor 337,000 80,873
Liberty Life Association of Africa 102,911 1,383,013
Molope 59,000 a 47,196
Molope, Cl. N 244,100 a 151,135
Murray & Roberts 849,400 407,679
Nampak 221,200 442,365
Polifin 18,500 20,126
Pretoria Portland Cement 162,843 1,042,112
Sasol 179,200 1,003,440
Tiger Oats 129,400 999,923
9,495,532
South Korea--8.9%
Kookmin Bank, ADR 42,263 b 618,096
Korea Electric Power, ADS 142,100 2,424,581
Korea Telecom, ADS 19,800 629,888
Pohang Iron & Steel 12,400 1,121,997
Pohang Iron & Steel, ADS 20,600 521,438
SK Telecom 294 362,588
SK Telecom, ADS 84,204 1,199,907
Samsung Electronics 16,500 1,150,738
Youngone 110,000 321,879
8,351,112
Taiwan--.4%
China Steel, ADR 29,085 a,b 396,283
Thailand--.4%
Ayudhya Insurance 40,000 106,057
Hana Microelectronics 65,100 a 112,151
Saha-Union 400,000 156,124
374,332
Turkey--.4%
Uzel Makina Sanayii, ADR 20,800 b 408,720
</TABLE>
The Fund 11
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Common Stocks (continued) Shares Value ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
United Kingdom--.7%
Billiton 215,900 676,621
Total Common Stocks
(cost $90,564,286) 87,641,274
Preferred Stocks--2.6%
- ------------------------------------------------------------------------------------------------
Brazil--1.2%
Companhia Energetica de Minas Gerais 31,417 666,136
Companhia Paranaense de Energia-Copel 64,800 493,248
1,159,384
Portugal--.3%
Lusomundo-SGPS 23,642 250,789
Thailand--1.1%
Siam Commercial Bank 1,005,000 1,027,994
Total Preferred Stocks
(cost $2,607,756) 2,438,167
Principal
Short-Term Investments--5.9% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------
U.S. Treasury Bills:
4.34%, 6/10/99 176,000 175,739
4.37%, 7/22/99 414,000 411,255
4.39%, 7/29/99 364,000 361,274
4.46%, 8/5/99 1,344,000 1,333,261
4.46%, 8/19/99 2,624,000 2,596,983
4.49%, 8/26/99 768,000 759,418
Total Short-Term Investments
(cost $5,639,922) 5,637,930
- ------------------------------------------------------------------------------------------------
Total Investments (cost $98,811,964) 101.4% 95,717,371
Liabilities, Less Cash and Receivables (1.4%) (1,363,242)
Net Assets 100.0% 94,354,129
<FN>
a Non-income producing.
b Securities exempt from registration under Rule 144A of the S ecurities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1999,
these securities amounted to $14,116,674 or approximately 15.0% of net
assets.
c Effective February 15, 1999, the repatriation of proceeds received from the
sale of Malaysian securities is subject to a principal and/or profit levy.
These securities are considered illiquid and are being valued at fair value
using methods determined in good faith under the direction of the Board of
Directors.
See notes to financial statements.
</FN>
</TABLE>
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Cost Value
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Assets ($):
Investments in securities--See Statement of Investments 98,811,964 95,717,371
Cash 80,390
Cash denominated in foreign currencies 2,452,646 2,452,312
Receivable for investment securities sold 398,712
Dividends receivable 335,948
Receivable for shares of Common Stock subscribed 1,943
Prepaid expenses 7,666
98,994,342
- -------------------------------------------------------------------------------------------
Liabilities ($):
Due to The Dreyfus Corporation and affiliates 103,224
Due to Distributor 20,231
Payable for investment securities purchased 4,368,919
Payable for shares of Common Stock redeemed 64,040
Net unrealized (depreciation) on forward currency
exchange contracts--Note 4(a) 110
Accrued expenses 83,689
4,640,213
- -------------------------------------------------------------------------------------------
Net Assets ($) 94,354,129
- -------------------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 101,385,936
Accumulated undistributed investment income--net 779,644
Accumulated net realized gain (loss) on investments (4,719,595)
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions--Note 4(b) (3,091,856)
- -------------------------------------------------------------------------------------------
Net Assets ($) 94,354,129
- -------------------------------------------------------------------------------------------
Shares Outstanding
(100 million shares of $.001 par value Common Stock authorized) 7,516,190
Net Asset Value, offering and redemption price per share--Note 3(d) ($) 12.55
</TABLE>
See notes to financial statements.
The Fund 13
<PAGE>
STATEMENT OF OPERATIONS
Year Ended May 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Investment Income ($)
- -------------------------------------------------------------------------------------------
<S> <C>
Income:
Cash dividends (net of $187,107 foreign taxes withheld at source) 1,968,458
Interest 214,349
Total Income 2,182,807
Expenses:
Management fee--Note 3(a) 825,478
Shareholder servicing costs--Note 3(b) 194,647
Custodian fees 111,585
Professional fees 39,125
Directors' fees and expenses--Note 3(c) 27,720
Registration fees 27,546
Prospectus and shareholders' reports 12,477
Loan commitment fees--Note 2 306
Miscellaneous 5,355
Total Expenses 1,244,239
Investment Income--Net 938,568
- -------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 4 ($):
Net realized gain (loss) on investments and foreign currency transactions (3,365,887)
Net realized gain (loss) on forward currency exchange contracts (163,368)
Net Realized Gain (Loss) (3,529,255)
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions 10,850,462
Net Realized and Unrealized Gain (Loss) on Investments 7,321,207
Net Increase in Net Assets Resulting from Operations 8,259,775
</TABLE>
See notes to financial statements.
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Year Ended May 31,
---------------------------
1999 1998
- -------------------------------------------------------------------------------------------
<S> <C>
Operations ($):
Investment income--net 938,568 367,207
Net realized gain (loss) on investments (3,529,255) 592,701
Net unrealized appreciation (depreciation)
on investments 10,850,462 (17,360,962)
Net Increase (Decrease) in Net Assets
Resulting from Operations 8,259,775 (16,401,054)
- -------------------------------------------------------------------------------------------
Dividends to Shareholders ($):
From investment income--net (549,186) (96,386)
From net realized gain on investments -- (1,261,036)
In excess of net realized gains on investments (122,041) (1,068,299)
Total Dividends (671,227) (2,425,721)
- -------------------------------------------------------------------------------------------
Capital Stock Transactions ($):
Net proceeds from shares sold 40,241,287 59,365,899
Dividends reinvested 389,280 1,898,156
Cost of shares redeemed (28,754,128) (18,067,726)
Redemption fee 61,154 76,713
Increase (Decrease) in Net Assets from
Capital Stock Transactions 11,937,593 43,273,042
Total Increase (Decrease) in Net Assets 19,526,141 24,446,267
- -------------------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 74,827,988 50,381,721
End of Period 94,354,129 74,827,988
Undistributed investment income--net 779,644 390,262
- -------------------------------------------------------------------------------------------
Capital Share Transactions (Shares):
Shares sold 3,739,409 4,449,674
Shares issued for dividends reinvested 41,501 167,386
Shares redeemed (2,955,313) (1,472,834)
Net Increase (Decrease) in Shares Outstanding 825,597 3,144,226
</TABLE>
See notes to financial statements.
The Fund 15
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Year Ended May 31,
------------------------------
1999 1998 1997a
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Data ($):
Net asset value, beginning of period 11.18 14.21 12.50
Investment Operations:
Investment income--net .14 .04 .05
Net realized and unrealized gain
(loss) on investments 1.33 (2.62) 1.70
Total from Investment Operations 1.47 (2.58) 1.75
Distributions:
Dividends from investment
income--net (.09) (.02) (.02)
Dividends from net realized gain on investments (.02) (.24) (.02)
Dividends in excess of net realized gain on investments -- (.20) --
Total Distributions (.11) (.46) (.04)
Redemption fee added to paid-in capital .01 .01 --
Net asset value, end of period 12.55 11.18 14.21
- --------------------------------------------------------------------------------------
Total Return (%) 13.56 (18.11) 14.07b
- --------------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of expenses to average net assets 1.88 1.94 1.85b
Ratio of net investment income
to average net assets 1.42 .54 .70b
Decrease reflected in above expense ratios
due to undertakings by the Manager -- .00c .36b
Portfolio Turnover Rate 87.81 87.46 52.52b
- --------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 94,354 74,828 50,382
</TABLE>
a From June 28, 1996 (commencement of operations) to May 31, 1997.
b Not annualized.
c Amount represents less than .01%.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Emerging Markets 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, as amended (the "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
long-term capital appreciation. The Dreyfus Corporation (the "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
charge.
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 operations; 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. 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 Directors. 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.
The Fund 17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
(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 custody agreement, the fund received net
earnings credits of $16,459 during the period ended May 31, 1999 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 fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the fund not to distribute such gain.
(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
18
<PAGE>
the best interests of its shareholders, by complying with the applicable
provisions of the Code, and to make distributions of taxable income sufficient
to relieve it from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $1,013,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to May 31, 1999. The carryover
does not include net realized securities losses from November 1, 1998 through
May 31, 1999 which are treated, for Federal income tax purposes, as arising in
fiscal 2000. If not applied, the carryover expires in fiscal 2007.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (the "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. During the period ended May
31, 1999, the fund did not borrow under the Facility.
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 1.25% of the value of the fund's average daily
net assets and is payable monthly.
(b) 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 (a securities dealer, financial institution or
The Fund 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
other industry professional) in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. During the period ended May
31, 1999, the fund was charged $165,096 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, 1999, the fund was charged $22,091 pursuant to the transfer agency
agreement.
(c) 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.
(d) A 1% redemption fee is charged and retained by the fund on shares redeemed
within six months following the date of issuance, including redemptions made
through the use of the fund's exchange privilege.
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, 1999, amounted to $68,145,777 and $55,356,610,
respectively.
The following summarizes open forward currency exchange contracts at May 31,
1999:
<TABLE>
<CAPTION>
Foreign Unrealized
Currency Appreciation
Forward Currency Exchange Contracts Amounts Cost ($) Value ($) (Depreciation) ($)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
South African Rand,
expiring 6/1/99 1,124,102 179,858 179,842 (16)
Sales: Proceeds ($)
Singapore Dollars, expiring 6/1/99 124,700 71,981 72,206 (225)
Singapore Dollars, expiring 6/2/99 46,530 26,880 26,943 (63)
Singapore Dollars, expiring 6/3/99 57,083 33,015 33,052 (37)
South African Rand, expiring 6/1/99 776,314 124,431 124,200 231
Total (110)
</TABLE>
20
<PAGE>
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 and to settle foreign currency transactions. 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, 1999, accumulated net unrealized depreciation on investments and
forward currency exchange contracts was $3,094,703, consisting of $7,735,210
gross unrealized appreciation and $10,829,913 gross unrealized depreciation.
At May 31, 1999, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund 21
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
Dreyfus Emerging Markets Fund
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Dreyfus Emerging Markets Fund (one of the
Series consituting Dreyfus International Funds, Inc.), as of May 31, 1999, and
the related statement of operations for the year 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, 1999, 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 Emerging Markets Fund at May 31, 1999, 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
New York, New York
July 6, 1999
22
<PAGE>
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, 1999:
--the total amount of taxes paid to foreign countries was $187,107.
--the total amount of income sourced from foreign countries was $1,210,775.
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 1999 calendar year with Form 1099-DIV which will be mailed by January 31,
2000.
The Fund 23
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus
Emerging Markets 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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call 1-800-645-6561
By mail Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
By E-mail Send your request
to [email protected]
On the Internet Information
can be viewed online or
downloaded from:
http://www.dreyfus.com
(C) 1999, Dreyfus Service Corporation 327AR995
