DREYFUS MIDCAP VALUE FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to send you this first annual report for Dreyfus Midcap
Value Fund, a portfolio of Dreyfus Growth and Value Funds, Inc. It covers the
fiscal year from the Fund's inception, September 29, 1995, through August 31,
1996. You will be glad to know that the total return for this 11-month period
was 26.88%,* more than double the 10.58% total return of the Russell MidCap
Index, which we use as our benchmark.** During the same time span, the
Standard & Poor's 500 Composite Stock Price Index, comprising mainly
large-capitalization companies, had a total return of 13.91%.***
ECONOMIC REVIEW
The robust pace of the U.S. economy in the first half of 1996 was broken
temporarily by July's sluggishness. Somewhat faster growth is again evident.
However, above-trend economic expansion this year has raised fears of higher
future inflation, even while reported inflation remains tame. These inflation
fears pushed bond yields higher and built expectations for a Federal Reserve
Board (the "Fed") tightening.
This year's economic strength is due to robust domestic demand that has
kept inventories lean. Real Gross Domestic Product grew 3.4% in the first
half, driven largely by consumer spending and housing investment although
homebuilding saw slower activity. Industrial output likewise surged, although
producers bent on meeting demand have been unable to also rebuild inventory.
Support for sustained consumer spending growth is coming from new jobs, wage
increases, low summer utility bills and a fall hike in the minimum wage. In
addition, new orders for exports and capital goods--both sluggish sectors this
summer--have recently reaccelerated. Corporate profits, however, are not
sharing this year's prosperity as profit growth is now decelerating.
Core consumer price inflation remains moderate although rising food and
energy prices have begun to pull the overall inflation rate higher and wage
increases have accelerated in this year's tight labor market. As a result,
reports of a faster economic pace have boosted fears of accelerated inflation
and bond yields have risen substantially; short-term market rates have also
surged on expectations of a Federal Reserve tightening in coming months. So
far, long-term rates have risen more than short-term rates, forcing the yield
curve to steepen. A steep yield curve is usually supportive of sustained
growth in the real economy.
MARKET OVERVIEW
The securities markets remained strong through a good part of the last 12
months but stumbled in late June and July of this year. The summer sell-off
was due to a number of factors, among them the higher price levels and
price-to-earnings ratios that many stocks had already achieved, and
indications that corporate profits might not be as strong in the second half
of the year as in the first half. The overriding influence, however, was the
market's anticipation of what the Fed might do about interest rates.
In late 1995 and early 1996, the Fed was preoccupied with offsetting
economic weakness, and that occasioned the series of cuts in short-term rates
initiated by the Fed, the last one occurring at the end of January, 1996.
After that, through August 31, the Fed adopted a hands-off posture in regard
to interest rates. However, the stock and bond markets expected the Fed to
shift gears and slam on the monetary brakes as the economy continued to
expand.
These fears of an anti-inflation move by the Fed were particularly acute
in June and July, leading to a sharp shake-out in security prices--among bonds
as well as stocks. Technology stocks were affected the most, but large
capitalization blue chips also experienced setbacks. Bond prices slumped as
interest rates rose.
As July gave way to August, the markets appeared to make an adjustment to
the interest rate outlook, and regained some of the ground lost earlier.
However, high anxiety still prevailed as the country moved into the Fall
season, bringing with it the unknowns of the pending Presidential and
Congressional elections.
PORTFOLIO FOCUS
Our investment philosophy focuses on identifying inexpensive stocks with
positive short-term business trends and solid long-term fundamentals. We
examine many measures to identify these stocks. Price-to-earnings,
price-to-book and price-to-sales ratios, enterprise value/EBITDA (Earnings
Before Interest, Taxes and Depreciation Allowance) and breakup value are the
most prevalent. We also pay close attention to normalized values for cyclical
industries. Our focus is on stocks that are cheap compared to their peers, to
their own historical valuation ranges and to the market as a whole. But we do
not just invest in cheap stocks, since some stocks deserve to be cheap.
Instead, we try to identify positive catalysts that can drive stocks higher.
These can come in the form of rising earnings estimates, improving income
statements and balance sheets, and management action to unlock hidden values.
We look for strong long-term fundamentals, namely, high return on assets and
return on equity, free cash flow, defendable business franchises and quality
of management.
ENERGY
Over the past year our investments in energy services firms, particularly
drillers, contributed substantially to investment results. After a lull of
many years, business picked up markedly about 18 months ago. The turn in
business was aided by technological developments that made finding oil more
economical. Drilling rig utilization rates and day rates have surged, leading
to dramatic profit growth. The outlook remains favorable since day rates
remain well below levels needed for replacement rigs to be built. Many
drillers have doubled in value over the past year, including several that
were held in the portfolio. Diamond Offshore Drilling and Arethusa Off-Shore
are two such examples.
RETAILING
The largest concentration in the portfolio is in consumer services,
particularly retailers. Early in the calendar year many retailers had become
quite cheap after posting disappointing holiday sales. Furthermore, in
February and March there were signs of a pickup in retail sales. We
established a significant overweighting in the sector once it became clear
that momentum had turned positive. Our largest position in the sector is
Woolworth, which has dramatically improved its balance sheet, cut costs and
disposed of underperforming assets under the leadership of new management. In
our view, consensus estimates dramatically understate Woolworth's earnings
power. It has so far performed well for us.
FINANCE
We continue to have a large weighting in finance, approximately evenly
split between banking and insurance. Within insurance, we have focused on
names that are cheap on price-to-book ratio and where earnings estimates are
rising due to a restructuring or a positive turn in operations. Everest
Reinsurance Holdings (RE), which was spun out of Prudential Insurance, is such a
restructuring story. The firm is focused on cutting costs and exiting
money-losing lines of business. RE has consistently exceeded earnings
estimates. Yet it trades at a modest premium to book value. In general, our
strategy in finance also has paid off.
HEALTHCARE
Until recently, we were underweight in health care. But we took advantage
of the recent sell-off in HMOs and long-term health care companies to buy
franchises that became too cheap to ignore. While questions remain about
HMOs' recent deterioration in medical loss ratios, the fact remains that HMOs
will continue to grow dramatically as they continue to take market share from
traditional indemnity programs. And there is a trend towards consolidation,
which should help midsized companies in the sector. Two names that were added
recently are Foundation Health and Wellpoint Health Network, both of which
were trading near their 52-week lows when we acquired them.
TECHNOLOGY
Technology has been a very volatile sector over the last six to nine
months. Early in the year, we had very modest exposure to the group due to
concerns about a decline in earnings estimates for the sector. But we
opportunistically took advantage of a dramatic sell-off early in the year to
purchase high quality franchises that we believed were oversold. For example,
Dell Computer and Gateway 2000 were purchased because we believed that their
earnings prospects and business fundamentals were stronger than the market
gave them credit for. Subsequently, both companies reported positive earnings
surprises. A strong rebound in their share prices has caused us to reduce
both holdings.
We continue to believe that there are excellent investment opportunities
in the midcap area, but current valuation levels make it necessary to be
quite selective. Our emphasis on cheap stocks with solid fundamentals and
positive momentum, as well as our broad diversification of holdings across
sectors and individual stocks, should help limit downside risk while
providing opportunities to excel in performance.
Sincerely,
[ Peter I. Higgins signature logo]
Peter I. Higgins
Portfolio Manager
September 12, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
** The Russell Midcap Index consists of the bottom 800 securities in the
Russell 1000 Index as ranked by total market capitalization and is a widely
accepted measure of medium-cap stock market performance.
*** SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
DREYFUS MIDCAP VALUE FUND AUGUST 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS MIDCAP VALUE
FUND AND
THE RUSSELL MIDCAP INDEX
Dollars
$12,688
Dreyfus
Midcap Value Fund
$11,058
Russell Midcap Index*
*Source: Lipper Analytical Services, Inc.
ACTUAL AGGREGATE TOTAL RETURN
FROM INCEPTION (9/29/95)
TO AUGUST 31, 1996
____________________
26.88%
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus Midcap Value
Fund on 9/29/95 (Inception Date) to a $10,000 investment made in the Russell
Midcap Index on that date. 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 Russell Midcap Index consists of the bottom
800 securities in the Russell 1000 Index as ranked by total market
capitalization and is a widely accepted measure of medium-cap stock market
performance. The 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.
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DREYFUS MIDCAP VALUE FUND
STATEMENT OF INVESTMENTS AUGUST 31, 1996
COMMON STOCKS--93.3% SHARES VALUE
________ ________
<S> <C> <C>
BASIC INDUSTRIES-8.8% ASARCO................................. 600 $ 15,525
Betz Laboratories...................... 600 29,475
First Mississippi...................... 3,000 80,625
General Chemical Group................. 1,600 29,200
LTV.................................... 2,500 29,375
Mallinckrodt Group..................... 1,200 48,600
Nalco Chemical......................... 600 19,275
Reynolds Metals........................ 700 37,450
Titanium Metals........................ 1,100 26,263
___________
315,788
___________
CAPITAL GOODS-7.3% Belden................................. 1,300 35,262
EG & G................................. 2,500 46,875
Global Industrial Technologies......... (a) 1,300 25,025
ITT Industries......................... 1,300 29,738
Nokia, Cl. A, A.D.R. .................. 3,000 126,750
___________
263,650
___________
CONSUMER DURABLES-4.6% Alvin Industries....................... 1,700 39,100
Black & Decker......................... 700 27,650
Cooper Tire & Rubber................... 1,400 27,300
Kaufman & Broad Home................... 4,000 49,000
Singer................................. 1,000 20,625
___________
163,675
___________
CONSUMER
NON-DURABLES-12.3% Alberto-Culver, Cl. A.................. 1,600 56,000
Fruit of the Loom, Cl. A............... (a) 1,800 49,950
Harland (John H.)...................... 1,900 47,738
Hasbro ................................ 1,300 47,775
Polaroid............................... 1,500 63,562
Reebok International................... 600 21,600
Rubbermaid............................. 1,100 29,150
Russell................................ 1,300 41,600
Tupperware............................. 1,000 43,750
Westpoint Stevens...................... (a) 1,500 39,188
___________
440,313
___________
CONSUMER SERVICES-19.2% American Portable Telecom.............. 3,000 28,500
American Stores........................ 700 28,788
Darden Restaurants..................... 3,000 24,000
Deluxe................................. 500 19,125
Great Atlantic & Pacific Tea........... 1,600 42,800
Harcourt General....................... 400 19,150
Kroger................................. (a) 1,500 63,562
McGraw-Hill............................ 1,000 41,000
Melville............................... 800 33,800
DREYFUS MIDCAP VALUE FUND
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
COMMON STOCKS (CONTINUED) SHARES VALUE
________ ________
CONSUMER SERVICES
(CONTINUED) New York Times, Cl. A.................. 1,300 $ 40,625
Pittston Brink's Group................. 600 16,950
Red Lion Hotels........................ (a) 700 19,512
Talbots................................ 1,700 58,225
True North Communications.............. 5,200 100,100
Waban.................................. (a) 1,800 38,250
Woolworth.............................. (a) 5,500 116,875
___________
691,262
___________
ENERGY-4.6% Amerada Hess........................... 600 30,525
Diamond Offshore Drilling.............. 734 37,434
Global Marine.......................... (a) 1,200 17,250
McDermott (J. Ray)..................... (a) 2,600 60,450
Noble Drilling......................... (a) 1,300 18,525
___________
164,184
___________
FINANCE-14.3% Allmerica Financial.................... 1,800 55,575
Bancorp Hawaii......................... 1,500 56,813
Bank of Boston......................... 660 34,815
Berkley (W.R.)......................... 500 22,750
Equitable.............................. 1,600 39,400
Everest Reinsurance Holdings........... 3,000 73,125
First Colony........................... 1,200 42,150
Glendale Federal Bank ................. (a) 3,300 58,575
Republic New York...................... 600 39,675
SAFECO................................. 1,100 36,437
Washington Mutual...................... 1,500 54,375
___________
513,690
___________
HEALTH CARE-5.9% Beckman Instruments.................... 1,000 36,875
Biomet................................. (a) 2,000 31,250
Foundation Health...................... (a) 1,700 51,000
Living Centers of America.............. (a) 1,000 26,750
Wellpoint Health Networks.............. 2,100 65,100
___________
210,975
___________
TECHNOLOGY-11.3% Digital Equipment...................... (a) 1,500 57,938
Gateway 2000........................... (a) 600 26,737
General Instrument..................... (a) 2,300 62,962
HMT Technology......................... 1,700 30,600
National Semiconductor................. (a) 4,400 80,850
Quantum................................ (a) 4,900 75,338
Symantec............................... (a) 4,500 43,875
Tektronix.............................. 700 27,125
___________
405,425
___________
DREYFUS MIDCAP VALUE FUND
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
COMMON STOCKS (CONTINUED) SHARES VALUE
________ _______
TRANSPORTATION-2.2% Southern Pacific Rail.................. (a) 1,300 $ 37,050
USFreightways.......................... 2,100 43,575
___________
80,625
___________
UTILITIES-2.8% CMS Energy............................. 600 17,925
Illinova............................... 700 18,287
Pinnacle West Capital.................. 700 20,125
360 Communications..................... 1,800 42,975
___________
99,312
___________
TOTAL COMMON STOCKS
(cost $3,305,266).................... $3,348,899
============
PRINCIPAL
SHORT-TERM INVESTMENTS-4.3% AMOUNT
__________
U.S. TREASURY BILLS: 5.09%, 9/19/96......................... (b) $ 55,000 $ 54,851
5.12%, 10/3/96......................... (b) 31,000 30,857
5.05%, 11/7/96......................... (b) 55,000 54,470
5.10%, 11/29/96........................ 15,000 14,807
___________
TOTAL SHORT-TERM INVESTMENTS
(cost $155,012)...................... $ 154,985
============
TOTAL INVESTMENTS (cost $3,460,278)......................................... 97.6% $3,503,884
====== ============
CASH AND RECEIVABLES (NET).................................................. 2.4% $ 87,504
====== ============
NET ASSETS.................................................................. 100.0% $3,591,388
====== ============
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Partially held by brokers as collateral for open short positions.
STATEMENT OF SECURITIES SOLD SHORT AUGUST 31, 1996
COMMON STOCKS SHARES VALUE
_________ _________
Cirrus Logic................................................................ 700 $ 10,850
Gulf South Medical Supply................................................... 600 13,050
Matsushita-Kotobuki Electron................................................ 1,000 23,990
McAfee Associates........................................................... 1,000 59,625
Micron Technology........................................................... 400 9,100
Quanex...................................................................... 700 15,575
___________
TOTAL SECURITIES SOLD SHORT
(proceeds $137,226)..................................................... $ 132,190
============
See notes to financial statements.
DREYFUS MIDCAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
ASSETS:
Investments in securities, at value
(cost $3,460,278)-see statement....................................... $3,503,884
Cash.................................................................... 90,649
Receivable from brokers for proceeds on securities sold short........... 137,226
Receivable for investment securities sold............................... 4,375
Dividends and interest receivable....................................... 3,708
Prepaid expenses........................................................ 8,883
Due from The Dreyfus Corporation and affiliates......................... 8,886
____________
3,757,611
LIABILITIES:
Due to Distributor...................................................... $ 779
Securities sold short, at value
(proceeds $137,226)-see statement..................................... 132,190
Payable for investment securities purchased............................. 25,875
Accrued expenses........................................................ 7,379 166,223
________ _________
NET ASSETS.................................................................. $3,591,388
============
REPRESENTED BY:
Paid-in capital......................................................... $2,997,462
Accumulated undistributed investment income-net......................... 9,508
Accumulated undistributed net realized gain on investments, securities sold short
and foreign currency transactions..................................... 535,776
Accumulated net unrealized appreciation on investments and
securities sold short-Note 4(b)....................................... 48,642
____________
NET ASSETS at value applicable to 227,287 shares outstanding
(100 million shares of $.001 par value Common Stock authorized)......... $3,591,388
============
NET ASSET VALUE, offering and redemption price per share
($3,591,388 / 227,287 shares)........................................... $15.80
=======
See notes to financial statements.
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<CAPTION>
DREYFUS MIDCAP VALUE FUND
STATEMENT OF OPERATIONS
from September 29, 1995 (commencement of operations) to August 31, 1996
INVESTMENT INCOME:
<S> <C> <C>
INCOME:
Cash dividends (net of $384 foreign taxes withheld at source)......... $ 38,710
Interest.............................................................. 10,411
________
TOTAL INCOME.................................................... $ 49,121
EXPENSES:
Management fee-Note 3(a).............................................. 19,408
Auditing fees......................................................... 12,800
Shareholder servicing costs-Note 3(b)................................. 11,802
Custodian fees-Note 3(b).............................................. 11,676
Legal fees............................................................ 8,198
Prospectus and shareholders' reports.................................. 4,586
Registration fees..................................................... 3,068
Directors' fees and expenses-Note 3(c)................................ 1,240
Dividends on securities sold short.................................... 235
Miscellaneous......................................................... 850
________
TOTAL EXPENSES.................................................. 73,863
Less-expense reimbursement from Manager
due to undertaking-Note 3(a)...................................... 40,520
________
NET EXPENSES.................................................... 33,343
_________
INVESTMENT INCOME-NET........................................... 15,778
_________
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments:
Long transactions (including foreign currency transactions)........... $558,886
Short sale transactions............................................... (20,423)
________
NET REALIZED GAIN..................................................... 538,463
Net unrealized appreciation on investments and securities sold short.... 48,642
_________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 587,105
_________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $602,883
==========
See notes to financial statements.
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<CAPTION>
DREYFUS MIDCAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
from September 29, 1995 (commencement of operations) to August 31, 1996 <C> <C>
<S>
OPERATIONS:
Investment income-net................................................................... $ 15,778
Net realized gain on investments........................................................ 538,463
Net unrealized appreciation on investments for the period............................... 48,642
_________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................. 602,883
_________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................................... (6,270)
Net realized gain on investments........................................................ (2,687)
_________
TOTAL DIVIDENDS....................................................................... (8,957)
_________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................................... 4,374,036
Dividends reinvested.................................................................... 8,938
Cost of shares redeemed................................................................. (1,385,512)
_________
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS................................ 2,997,462
_________
TOTAL INCREASE IN NET ASSETS...................................................... 3,591,388
NET ASSETS:
Beginning of period..................................................................... -
_________
End of period (including undistributed investment income-net;
$9,508 on August 31, 1996)............................................................ $3,591,388
===========
SHARES
_________
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................................. 319,436
Shares issued for dividends reinvested.................................................. 682
Shares redeemed......................................................................... (92,831)
_________
NET INCREASE IN SHARES OUTSTANDING.................................................... 227,287
===========
See notes to financial statements.
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<CAPTION>
DREYFUS MIDCAP VALUE 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 the period September 29, 1995
(commencement of operations) to August 31, 1996. This information has been
derived from the Fund's financial statements.
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period..................................................... $12.50
______
INVESTMENT OPERATIONS:
Investment income-net.................................................................... .08
Net realized and unrealized gain on investments.......................................... 3.28
______
TOTAL FROM INVESTMENT OPERATIONS................................................... 3.36
______
DISTRIBUTIONS:
Dividends from investment income-net..................................................... (.04)
Dividends from net realized gain on investments.......................................... (.02)
______
TOTAL DISTRIBUTIONS................................................................ (.06)
______
Net asset value, end of period........................................................... $15.80
========
TOTAL INVESTMENT RETURN...................................................................... 26.88%(1)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets........................................ 1.18%(1)
Ratio of dividends on securities sold short to average net assets........................ .01%(1)
Ratio of net investment income to average net assets..................................... .56%(1)
Decrease reflected in above expense ratio due to undertaking
by the Manager (limited to the expense limitation
provision of the management agreement)................................................. 1.13%(1)
Portfolio Turnover Rate.................................................................. 266.80%(1)
Average commission rate paid (2)....................................................... $.0478
Net Assets, end of period (000's omitted).......................................... $3,591
(1) Not annualized.
(2) The Fund is required to disclose its average commission rate paid
per share for purchases and sales of investment securities.
See notes to financial statements.
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DREYFUS MIDCAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Growth and Value Funds, Inc. (the "Company") is registered under
the Investment Company Act of 1940 ("Act") as a diversified open-end
management investment company and operates as a series company currently
offering eight series, including the Dreyfus Midcap Value Fund (the "Fund")
which commenced operations on September 29, 1995. The Fund's investment
objective is to provide investment results that exceed the total return
performance of publicly traded common stocks in the aggregate, as represented
by a recognized index of mid cap stocks. The Dreyfus Corporation ("Dreyfus")
serves as the Fund's investment adviser. Dreyfus is a direct subsidiary of
Mellon Bank, N.A. ("Mellon"). On September 29, 1995, the Fund's shareholders
approved a sub-investment advisory agreement between Dreyfus and The Boston
Company Asset Management, Inc. ("TBC Asset Management"), an affiliate of
Dreyfus. Premier Mutual Fund Services, Inc. (the "Distributor") acts as 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 funds' operations; expenses which are applicable to all
series are allocated among them on a pro rata basis.
As of August 31, 1996, Allomon Corporation, a subsidiary of Mellon Bank
Investments Corporation, the parent company of which is Mellon Bank, held
160,610 shares of Dreyfus Midcap Value Fund.
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: The Fund's investments in securities (including
options and financial futures) are valued at the last sales price on the
securities exchange on which such securities are primarily traded or at the
last sales price on the national securities market. Securities not listed on
an exchange or the national securities market, or securities for which there
were no transactions, are valued at the average of the most recent bid and
asked prices, except for open short positions, where the asked price is used
for valuation purposes. Bid price is used when no asked price is available.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(B) 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.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and dividends from net realized
capital gain are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the
policy of the Fund not to distribute such gain.
DREYFUS MIDCAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) 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 $300 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
Fund at rates which are related to the Federal Funds rate in effect at the
time of borrowings. For the period ended August 31, 1996 the Fund did not
borrow under the line of credit.
NOTE 3-MANAGEMENT FEE, SUB-INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH
AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with Dreyfus, 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. The Agreement
provides that if in any full fiscal year the aggregate expenses of the Fund,
exclusive of taxes, brokerage, interest on borrowings (which, in the view of
Stroock & Stroock & Lavan, counsel to the Fund, also contemplates dividends
and interest accrued on securities sold short) and extraordinary expenses,
exceed the expense limitation of any state having jurisdiction over the Fund,
the Fund may deduct from payments to be made to Dreyfus or Dreyfus will bear
the amount of such excess to the extent required by state law. The most
stringent state expense limitation applicable to the Fund presently requires
reimbursement of expenses in any full fiscal year that such expenses
(exclusive of certain expenses as described above) exceed 21\2% of the first
$30 million, 2% of the next $70 million and 11\2% of the excess over $100
million of the average value of the Fund's net assets in accordance with
California "blue sky" regulations. Dreyfus has undertaken from September 29,
1995 through August 31, 1997 to reduce the management fee paid by or
reimburse such excess expenses of the Fund, to the extent that the Fund's
aggregate annual expenses (exclusive of certain expenses as described above)
exceed an annual rate of 1.25% of the average daily value of the Fund's net
assets. The expense reimbursement, pursuant to the undertaking, amounted to
$40,520 during the period ended August 31, 1996.
The undertaking may be extended, modified or terminated by Dreyfus,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the agreement.
Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and TBC
Asset Management, the sub-investment advisory fee is computed at the annual
rate of .375 of 1% of the value of the Fund's average daily net assets and is
paid monthly by Dreyfus. Effective May 23, 1996, the Sub-Investment Advisory
Agreement has been terminated.
(B) Pursuant to the Fund's 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 other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. During the period ended August 31,
1996, the Fund was charged an aggregate of $6,469 pursuant to the Shareholder
Services Plan.
Effective December 1, 1995, 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. Such compensation amounted to $378 during the period from
December 1, 1995 through August 31, 1996.
Effective May 10, 1996, the Fund entered into a custody agreement with
Mellon to provide custodial services for the Fund. During the period from May
10, 1996 through August 31, 1996, $3,265 was paid to Mellon pursuant to the
custody agreement.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Company an annual fee of $5,000 and an attendance fee of
$500 per meeting. The Chairman of the Board receives an additional 25% of
such compensation.
NOTE 4-SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities
and securities sold short, excluding short-term securities, during the period
ended August 31, 1996 is summarized as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
____________ ____________
<S> <C> <C>
Long transactions................................................ $9,304,351 $6,558,020
Short sale transactions.......................................... 192,628 309,431
____________ ____________
TOTAL.......................................................... $9,496,979 $6,867,451
=========== ============
</TABLE>
DREYFUS MIDCAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund is engaged in short-selling which obligates the Fund to replace
the security borrowed by purchasing the security at
current market value. The Fund would incur a loss if the price of the
security increases between the date of the short sale and the date on which
the Fund replaces the borrowed security. The Fund would realize a gain if the
price of the security declines between those dates. Until the Fund replaces
the borrowed security, the Fund will maintain daily, a segregated account
with a broker and custodian, of cash and/or U.S. Government securities
sufficient to cover its short position. Securities sold short at August 31,
1996, and their related market values and proceeds are set forth in the
Statement of Securities Sold Short.
(B) At August 31, 1996, accumulated net unrealized appreciation on
investments and securities sold short was $48,642, consisting of $208,663
gross unrealized appreciation and $160,021 gross unrealized depreciation.
At August 31, 1996, 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 MIDCAP VALUE FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS MIDCAP VALUE FUND
We have audited the accompanying statement of assets and liabilities,
including the statements of investments and securities sold short, of Dreyfus
Midcap Value Fund (one of the Series constituting Dreyfus Growth and Value
Funds, Inc.) as of August 31, 1996, and the related statements of operations
and changes in net assets and financial highlights for the period from
September 29, 1995 (commencement of operations) to August 31, 1996. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included verification by
examination of securities held by the custodian as of August 31, 1996 and conf
irmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Midcap Value Fund at August 31, 1996, and the results of
its operations, the changes in its net assets and the financial highlights
for the period from September 29, 1995 to August 31, 1996, in conformity with
generally accepted accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
September 27, 1996
[Dreyfus lion "d" logo]
DREYFUS MIDCAP VALUE FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 258AR968
[Dreyfus logo]
Midcap Value Fund
Annual Report
August 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN DREYFUS MIDCAP VALUE FUND
AND THE RUSSELL MIDCAP INDEX
EXHIBIT A:
_____________________________________________
| | | |
| | | DREYFUS |
| PERIOD | RUSSELL MIDCAP | MIDCAP VALUE |
| | INDEX * | FUND |
|---------|------------------|----------------|
| 9/29/95 | 10,000 | 10,000 |
|11/30/95 | 10,263 | 10,256 |
| 2/29/96 | 10,788 | 11,411 |
| 5/31/96 | 11,425 | 13,146 |
| 8/31/96 | 11,058 | 12,688 |
|---------------------------------------------|
*Source: Lipper Analytical Services, Inc.
