DREYFUS EMERGING LEADERS FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report that Dreyfus Emerging Leaders Fund participated
in the robust double-digit returns produced by the stock market as a whole
during the six months ended February 28, 1997. For this half-year fiscal
period, the Fund achieved a total return rate of 17.36%.* This compares with
the return of 8.79% for our benchmark, the Russell 2000 Index of small
capitalization stocks.**
ECONOMIC REVIEW
Economic evidence in early 1997 indicates that real GDP growth has not
slowed significantly. A key economic risk now developing lies in a further
escalation of labor market tightness which could fuel faster wage inflation.
This is reigniting fears of higher future price inflation, even while current
prices are held low by the strong dollar. Market interest rates have recently
been led higher by rising expectations for a Federal Reserve tightening in
coming months, which could help temper demand and would support our view that
we are still in a long economic cycle.
In the household sector, confidence is soaring, job insecurity is
disappearing and real wages are rising. Hence, consumer spending growth
appears fairly solid in early 1997. Simultaneously, a rebound in production
of consumer goods is underway, both to meet the demand and to replenish
inventories left depleted at year-end. Elsewhere, capital goods orders have
been slowing since last fall, while export orders are less strong in early
1997, somewhat hurt by the higher dollar. However, a rise in demand for
consumer goods typically will attract imports, bolstering growth overseas;
better foreign economic growth may help offset the higher dollar to sustain
demand for U.S. exports.
Although wages have been on the rise since the fall of 1996, price
inflation has continued to decelerate. Hence, real wages are rising,
rewarding productivity in many instances. The risks for the future from wage
hikes that are driven by labor shortages are twofold: first, they may fuel
overheating in the economy, ultimately promoting price inflation; second,
they may slow profits for some companies. Profits are also vulnerable this
year for import-competing companies and at multinationals that have not
hedged their foreign currency exposure. Nonetheless, we expect overall
profits to sustain steady growth in 1997.
Market interest rates have shifted higher recently. Short-term rates are
taking their cue from the Fed, expecting a tightening within a few months.
Long-term rates, still within the trading range established over the last 12
months, have nevertheless trended higher. Announcement of a balanced Federal
budget agreement would represent a positive development that could curtail
the rise in bond yields.
The economy will shortly begin its seventh expansion year, a trend that
we believe could continue. A step by the Federal Reserve to tighten interest
rates could prolong this favorable business cycle.
MARKET OVERVIEW
The stock market activity encompassed by the six-month fiscal period
under review was remarkable, by any standard. The Dow Jones Industrials began
the period in early September in the 5700s, broke through 6000 by
mid-October, churned around a bit in December, then resumed a steady rise,
breaking the 7000-point barrier Valentine's week. But that was not the end of
the story. In February, Federal Reserve Chairman Alan Greenspan returned to a
theme he had initiated earlier - his worries about stock market excesses,
which could bring about a need for raising interest rates. By the end of
February, the market mood had changed. Investors were preoccupied with
Greenspan's warnings, even though the Fed Chairman explained that the ongoing
business expansion was moderate and did not appear to be inflationary.
Nonetheless, a sell-off occurred in the last week of February, costing
the DJIA 53.88 points for the week and sending the Standard & Poor's 500 down
10.95 points, the Nasdaq Composite 25.32 points and the Russell 2000 Index of
small cap stocks 6.32 points. Even so, as February ended, the DJIA still held
a gain of 1261.50 points for the preceding six
months, the S&P 500 was up by 138.83 and Nasdaq by 167.50. Small caps,
however, as measured by the Russell 2000, were showing an increase of only
66.41 points for the six-month period.
As these varying results indicate, the market has been a highly selective
one, closely attuned to such factors as interest rates and corporate profits.
In this climate, larger companies appeared to fare better than smaller ones,
and "value" stocks-sought after for their low price valuations-stood up
better than growth stocks.
Stock market sell-offs, when they occurred, were, however, gratifyingly
short-lived. It appeared that some fundamentals gave the market resilience.
One such factor was the continued high demand for stocks, particularly from
those putting money away for retirement. The Investment Company Institute,
the trade association of the mutual fund industry, reported that in January,
1997, mutual funds took in $29.39 billion in new money from investors. This
smashed all previous records.
Another supportive factor has been corporate profits. The Wall Street
Journal calculated that, among the stocks in the Dow Jones Industry Groups,
profits in the fourth quarter of 1996 were above security analysts' average
estimates for 56% of the companies, below estimates for 27% and matched the
estimates for 17% of companies analyzed.
To judge by the market's performance, however, investors can quickly
ignore the market's fundamental strengths, particularly when scared by a hint
of higher interest rates, or by specific cases of disappointing profits. This
latter factor has affected such market keystones as AT&T, but also shows up
in recent valuations of some technology stocks, particularly the smaller
capitalized ones.
Thus, as the fiscal half-year ended, the mood of investors appeared to be
hopeful, but very wary.
PORTFOLIO FOCUS
The year can be characterized by two different investment environments.
For the first half of the year, the Russell 2000, our benchmark, outperformed
the more popular S&P 500. New money flows had the appetite for aggressive
growth and smaller capitalization funds. After a significant setback midyear,
however, investors lost some of their nerve and showed a marked preference
for the perceived safety of the more liquid, blue chip names that populate
the S&P 500. So far, this trend has continued into the new year. For the
six-month period ended February 28, 1997, the Russell 2000 returned 8.79%,
underperforming the S&P 500 by 13.7 percentage points.
The Financial Services sector was this period's big winner on an absolute
basis, and we remain constructive on this group for 1997. The best performing
stock was Executive Risk, an underwriter of liability insurance, followed by
regional bankers, City National and Colonial Bancgroup CI. A, and specialty
property casualty insurer, Philadelphia Consolidated. The only financial
stock that lost money for your Fund during this period was insurance broker
Willis Corroon Group ADS. If we had been index-weighted instead of slightly
underweighted and if we had had an exposure to REITs, that would have
enhanced performance.
Your portfolio experienced an outstanding six months in the Consumer
Sector. The best individual stock in your portfolio was in this group, Helen
of Troy, Ltd., a haircare and appliance company. Other strong contributors
were casual shoe manufacturer Wolverine World Wide, and off-price retailer
Stein Mart. Disappointing performance was registered by Profit Recovery Group
International, a provider of accounts payable systems for retailers, and Sola
International, an
eyeglass lenses manufacturer. Our sector analysts continue to prospect in
this area. It is an eclectic group that may have potential opportunities.
Anticipating a stronger economy in 1997 led us to emphasize the Material
& Processing sector, and this paid off for your Fund during this period. The
star performer was Canadian waste management outfit Philip Environmental,
followed by specialty derivative chemical manufacturer International
Specialty Products and specialty chemical producer Crompton & Knowles Corp.
Two underperformers were Strategic Distribution, Inc., a fast-growing
industrial distributor and CFC International, an exciting newly public entity
that manufactures specialty coating and holograms.
Health Care continues not to be a good performing sector for the Russell
2000 index, but our stock selection has been very rewarding. Top performer
Sepracor Inc., a manufacturer of improved versions of existing drugs, was
followed closely by biotechnology producer Bone Care International and Algos
Pharmaceutical, a niche pharmaceutical company. Mentor Corp., a medical
products company, was the top performer in this sector last year, but the
company's recent quarters have been disappointing even though its new product
pipeline is very exciting. Nellcor, a medical products company, was
undergoing a turnaround which was delayed and this became discounted in its
stock price. We had been underrepresented in Health Care all year, but have
been increasing our exposure this year based on the belief that the
valuations have now reached reasonable levels.
In the Capital Goods segment, we were participating in several themes.
Top performer Thiokol Corp. is a commercial aerospace supplier to Boeing.
Other successful ventures included value manufacturer Watts Industries and
boat builder Avondale Industries. The only underperformer in this segment was
Rohr Industries which is also a supplier to Boeing. It was one of the best
performers for your Fund in the last report, but has been weak recently due
to concerns about its McDonnell Douglas backlog in the face of the latter's
merger with Boeing. We currently remain constructive on the Capital Goods
segment this year due to the length of the aerospace cycle and the positive
producer economy.
The trickiest sector always seems to be Technology. Some of our best and
worst stocks fall into this group. This six-month period was not kind to
small cap technology stocks, especially those trading over the counter and
boasting price/earning ratios greater than twenty-five. Winners for the Fund
included Advanced Fibre Communications, a telephone equipment manufacturer,
Novellus Systems, a semiconductor equipment manufacturer and International
Network Services, a network consulting company. Losers included Trusted
Information Systems, an encryption software company, followed by two
corporate resellers of PCs, Inacom and Vanstar Corp. We are only market
weighted in technology at this time.
After having been the best performing sector of the Russell last year and
for the Fund in the last report, Energy stocks fell victim to profit taking
during this period combined with lower commodity prices as a result of the
mild winter. Nevertheless, there were some great stocks in this category such
as oil-services outfit National-Oilwell, Inc., and exploration and production
company, Flores & Rucks, which was a top performer in the last report. The
losers were last year's big winners: Pride Petroleum Services and Marine
Drilling Companies. We continue to feel that an overweight in Energy is
appropriate in 1997. We believe the positive fundamentals we saw last year
still exist, and with the recent price correction in the group, the
valuations are more compelling.
In conclusion, we remain very constructive on small cap equities. We
continue to seek industries in which there is opportunity for growth and the
niche markets in which these companies are positioned.
We thank you for your interest. You may be sure we will exert our best
efforts on your behalf.
Sincerely, Sincerely,
[Hilary Woods signature logo] [Paul Kandel signature logo]
Hilary Woods Paul Kandel
Co-Portfolio Manager Co-Porfolio Manager
March 13, 1997
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Russell 2000 Index is a widely accepted unmanaged index of small cap stock
performance.
<TABLE>
DREYFUS EMERGING LEADERS FUND
STATEMENT OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED)
Common Stocks-91.6% Shares Value
------- -------
<S> <C> <C> <C>
Consumer-15.1% Arbor Drugs................... 50,000 $ 962,500
Bush Industries, Cl. A................. 44,000 885,500
Culligan Water Technologies.......... (a) 25,000 975,000
Dominick's Supermarkets.............. (a) 37,000 684,500
Harte-Hanks Communications............. 36,000 931,500
Helen of Troy........................ (a) 50,000 1,237,500
Lin Television....................... (a) 20,000 830,000
Mohawk Industries.................... (a) 38,000 1,002,250
Sola International................... (a) 25,000 650,000
Stein Mart........................... (a) 45,000 1,068,750
Westpoint Stevens.................... (a) 28,700 990,150
Westwood One......................... (a) 50,000 931,250
Wolverine World Wide................... 33,000 1,171,500
-------
12,320,400
-------
Energy-6.4% American Oilfield Divers......... (a) 57,500 661,250
Flores & Rucks....................... (a) 20,000 900,000
Global Industries.................... (a) 40,000 730,000
Halter Marine Group.................. (a) 40,000 655,000
Pride Petroleum Services............. (a) 32,500 544,375
Texas Meridian Resources............. (a) 65,000 918,125
TransMontaigne Oil................... (a) 57,900 854,025
-------
5,262,775
-------
Financial Services-19.4% Amerin.............. (a) 45,500 955,500
Capital Re............................. 18,000 778,500
CapMAC Holdings........................ 25,000 818,750
City National.......................... 39,000 945,750
Colonial BancGroup..................... 49,000 1,114,750
Dime Bancorp......................... (a) 55,000 962,500
Enhance Financial Services Group....... 26,000 897,000
Executive Risk......................... 25,000 1,203,125
First Financial Caribbean.............. 28,000 763,000
Frontier Insurance Group............... 25,000 1,081,250
Liberty..................................... 20,500 843,062
Life USA Holding..................... (a) 80,000 836,250
NAC Re................................. 25,000 918,750
Philadelphia Consolidated Holding.... (a) 38,000 1,125,750
Symons International Group........... (a) 60,000 1,005,000
Terra Nova (Bermuda) Holdings, Cl. A... 51,000 1,045,500
Titan Holdings.............................. 33,000 532,125
-------
15,826,562
-------
Health Care-16.9% Algos Pharmaceutical....... (a) 50,000 900,000
ALPHARMA, Cl. A........................ 70,000 936,250
Applied Analytical Industries........ (a) 25,000 625,000
Bio-Rad Labs, Cl. A.................. (a) 30,000 791,250
Bone Care International.............. (a) 75,000 750,000
Cohr........................................ (a) 35,000 896,875
CorVel...................................... (a) 30,000 836,250
DREYFUS EMERGING LEADERS FUND
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997 (UNAUDITED)
Common Stocks (continued) Shares Value
------- -------
Health Care (continued) IDX Systems.......... (a) 33,000 $ 1,039,500
Mentor...................................... 40,000 995,000
OccuSystems.......................... (a) 30,000 705,000
Physio-Control International......... (a) 47,500 914,375
Sepracor.................................... (a) 42,500 1,025,313
Specialty Care Network............... (a) 135,000 1,164,375
Target Therapeutics.................. (a) 18,000 1,271,250
Vivus....................................... (a) 17,000 939,250
-------
13,789,688
-------
Materials & Processing-11.4% AptarGroup...... 27,500 1,093,125
Cambrex................................ 26,000 871,000
CFC International...................... 59,500 721,437
Crompton & Knowles..................... 42,500 807,500
Geon........................................ 40,000 860,000
Hexcel...................................... (a) 50,000 962,500
International Specialty Products..... (a) 80,000 1,070,000
JLG Industries......................... 45,000 832,500
OM Group............................... 35,000 1,015,000
Osmonics............................. (a) 40,000 770,000
Strategic Distribution............... (a) 100,000 368,750
-------
9,371,812
-------
Producer Durables-8.6% Aztec Manufacturing... 70,000 651,875
Esterline Technologies............... (a) 36,000 909,000
Rohr........................................ (a) 47,000 851,875
Special Devices...................... (a) 43,700 786,600
Thermo Ecotek........................ (a) 50,000 750,000
Thiokol..................................... 21,500 1,198,625
Titan Wheel International.............. 60,000 847,500
Watts Industries, Cl. A................ 40,000 1,035,000
-------
7,030,475
-------
Technology-12.8% Accent Color Sciences....... (a) 79,500 755,250
Fusion Systems....................... (a) 30,000 817,500
HMT Technology....................... (a) 40,000 765,000
Infinity Financial Technology........ (a) 35,000 665,000
Radiant Systems...................... (a) 96,000 912,000
Sanmina..................................... (a) 4,300 198,875
Sierra Semiconductor................. (a) 55,000 880,000
Silicon Valley Group................. (a) 42,000 897,750
Simulation Sciences.................. (a) 62,000 837,000
Transcrypt International............. (a) 77,500 687,813
VIASOFT.............................. (a) 24,500 882,000
Ventana Medical Systems.............. (a) 72,500 1,305,000
Vitesse Semiconductor................ (a) 20,000 838,750
-------
10,441,938
-------
DREYFUS EMERGING LEADERS FUND
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997 (UNAUDITED)
Common Stocks (continued) Shares Value
------- -------
Transport & Autos-1.0% Aviall................ (a) 75,000 $ 834,375
-------
TOTAL COMMON STOCKS
(cost $67,611,613)................... $74,878,025
=======
Principal
Short-Term Investments-5.0% Amount
-------
U.S. Treasury Bills: 4.82%, 3/6/97........... $ 43,000 $ 42,969
5%, 4/3/97........................... (b) 1,292,000 1,286,096
5%, 4/10/97............................ 76,000 75,578
5%, 4/17/97............................ 590,000 586,018
5.02%, 5/1/97.......................... 582,000 577,024
4.98%, 5/8/97.......................... 994,000 984,537
4.95%, 5/15/97......................... 162,000 160,293
4.97%, 5/22/97......................... 363,000 358,818
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $4,071,692).................... $ 4,071,333
=======
TOTAL INVESTMENTS (cost $71,683,305)........................................ 96.6% $78,949,358
==== =======
CASH AND RECEIVABLES (NET).................................................. 3.4% $ 2,752,918
==== =======
NET ASSETS.................................................................. 100.0% $81,702,276
==== =======
</TABLE>
Notes to Statement of Investments:
(a) Non-income producing.
(b)Partially held by broker as collateral for open short positions.
<TABLE>
STATEMENT OF SECURITIES SOLD SHORT FEBRUARY 28, 1997 (UNAUDITED)
Common Stocks Shares Value
------- -------
<S> <C> <C>
Target Therapeutics
(proceeds $1,304,956).................................................. 20,000 $ 1,412,500
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
DREYFUS EMERGING LEADERS FUND
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997 (UNAUDITED)
Cost Value
------- ------
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $71,683,305 $78,949,358
Cash....................................... 173,979
Receivable for investment securities sold.. 3,278,853
Receivable from brokers for proceeds on
securities sold short...................... 1,304,956
Receivable for shares of Common Stock subscribed 90,276
Dividends and interest receivable.......... 29,008
Prepaid expenses........................... 18,177
-------
83,844,607
-------
LIABILITIES: Due to The Dreyfus Corporation and affiliates 54,663
Due to Distributor......................... 15,804
Securities sold short, at value
(proceeds $1,304,956 )-see statement....... 1,412,500
Payable for shares of Common Stock redeemed 371,829
Payable for investment securities purchased 246,100
Accrued expenses........................... 41,435
-------
2,142,331
-------
NET ASSETS.................................................................. $81,702,276
=======
REPRESENTED BY: Paid-in capital............................ $72,252,883
Accumulated investment (loss).............. (153,372)
Accumulated net realized gain (loss) on investments 2,444,256
Accumulated net unrealized appreciation (depreciation)
on investments and securities sold short-Note 4(b) 7,158,509
-------
NET ASSETS.................................................................. $81,702,276
=======
SHARES OUTSTANDING
(100 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED)............. 3,995,176
NET ASSET VALUE, offering and redemption price per share.................... $20.45
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
DREYFUS EMERGING LEADERS FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME: Interest................................... $ 164,500
Cash dividends (net of $1,548 foreign taxes
withheld at source).................... 93,895
------
Total Income......................... $ 258,395
EXPENSES: Management fee-Note 3(a)................... 263,202
Shareholder servicing costs-Note 3(b)...... 120,110
Registration fees.......................... 25,447
Professional fees.......................... 12,762
Directors' fees and expenses-Note 3(c)..... 10,664
Prospectus and shareholders' reports....... 9,575
Custodian fees-Note 3(b)................... 5,435
Interest-Note 2............................ 2,214
Loan commitment fees-Note 2................ 463
Miscellaneous.............................. 484
------
Total Expenses....................... 450,356
Less-reduction in management fee due to
undertaking-Note 3(a).................. (38,416)
------
Net Expenses......................... 411,940
------
INVESTMENT (LOSS)........................................................... (153,545)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.... $3,853,094
Net unrealized appreciation (depreciation) on investments
and securities sold short.............. 3,558,225
------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 7,411,319
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $7,257,774
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
DREYFUS EMERGING LEADERS FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
February 28, 1997 Year Ended
(Unaudited) August 31, 1996*
--------- ---------
<S> <C> <C>
OPERATIONS:
Investment income (loss)-net........................................... $ (153,545) $ 23,306
Net realized gain (loss) on investments................................ 3,853,094 2,256,949
Net unrealized appreciation (depreciation) on investments.............. 3,558,225 3,600,284
------- -------
Net Increase (Decrease) in Net Assets Resulting from Operations...... 7,257,774 5,880,539
------- -------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net.................................................. --- (23,133)
Net realized gain on investments....................................... (3,665,787) ---
------- -------
Total Dividends...................................................... (3,665,787) (23,133)
------- -------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.......................................... 91,686,368 79,911,023
Dividends reinvested................................................... 3,575,813 22,761
Cost of shares redeemed................................................ (54,358,346) (48,584,736)
------- -------
Increase (Decrease) in Net Assets from Capital Stock Transactions.... 40,903,835 31,349,048
------- -------
Total Increase (Decrease) in Net Assets.......................... 44,495,822 37,206,454
NET ASSETS:
Beginning of Period.................................................... 37,206,454 ---
------- -------
End of Period.......................................................... $ 81,702,276 $ 37,206,454
======= =======
UNDISTRIBUTED INVESTMENT INCOME (LOSS)-NET................................. $ (153,372) $ 173
------- -------
Shares Shares
------- -------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 4,476,309 4,681,074
Shares issued for dividends reinvested................................. 181,883 1,453
Shares redeemed........................................................ (2,655,467) (2,690,076)
------- -------
Net Increase (Decrease) in Shares Outstanding........................ 2,002,725 1,992,451
======= =======
______________________________
*From September 28, 1995 (commencement of operations) to August 31, 1996.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS EMERGING LEADERS FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
<TABLE>
Six Months Ended Year Ended
February 28, 1997 August 31,
PER SHARE DATA: (Unaudited) 1996(1)
---------- ------------
<S> <C> <C>
Net asset value, beginning of period................................ $18.67 $12.50
---- ----
Investment Operations:
Investment income (loss)-net........................................ (.04) .03
Net realized and unrealized gain (loss)
on investments.................................................... 3.23 6.17
---- ----
Total from Investment Operations.................................... 3.19 6.20
---- ----
Distributions:
Dividends from investment income-net................................ - (.03)
Dividends from net realized gain on investments..................... (1.41) -
---- ----
Total Distributions................................................. (1.41) (.03)
---- ----
Net asset value, end of period...................................... $20.45 $18.67
==== ====
TOTAL INVESTMENT RETURN(3).............................................. 17.36% 46.09% (2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets(3).......................... .70% 1.16%
Ratio of net investment income (loss)
to average net assets(3).......................................... (.26%) .09%
Decrease reflected in above expense ratios
due to undertaking by the Manager(3).............................. .07% .36%
Portfolio Turnover Rate(3).......................................... 92.15% 203.66%
Average commission rate paid(4)..................................... $.0586 $.0554
Net Assets, end of period (000's Omitted)........................... $81,702 $37,206
_______________________________
(1) From September 28, 1995 (commencement of operations) to August 31, 1996.
(2) Calculated based on net asset value on the close of business on September 29, 1995 (commencement of initial offering) to
August 31, 1996.
(3) Not annualized.
(4) The Fund is required to disclose its average commission rate paid per share for purchases and sales of investment
securities.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS EMERGING LEADERS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Emerging Leaders Fund (the "Fund") is a series of Dreyfus Growth
and Value Funds, Inc. (the "Company") which 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 Fund. The Fund's investment objective is capital
growth. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon").
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: 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.
(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 $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion
of the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings. At February 28, 1997, there
were no outstanding borrowings under the Facility.
The average daily amount of borrowings outstanding under a previous line
of credit during the period ended February 28, 1997 was approximately
$38,000, with a related weighted average annualized interest rate of 5.86%.
The maximum amount borrowed under this line of credit at any time during the
period ended February 28, 1997 was $2.1 million.
DREYFUS EMERGING LEADERS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 .90 of 1% of the value of the Fund's
average daily net assets and is payable monthly. The Manager has undertaken
from September 1, 1996 through August 31, 1997 to reduce the management fee
paid by the Fund, to the extent that the Fund's aggregate expenses, exclusive
of taxes, brokerage, interest on borrowings (which in the view of Stroock &
Stroock & Lavan, counsel to the Fund, also contemplates loan commitment fees
and dividends accrued on securities sold short) and extraordinary expenses,
exceed an annual rate of 1.40% of the value of the Fund's average daily net
assets. The reduction in management fee, pursuant to the undertaking,
amounted to $38,416 during the period ended February 28, 1997.
(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 other industry professional) in respect of these
services. The Distributor determines the amounts to be paid to Service
Agents. During the period ended February 28, 1997, the Fund was charged an
aggregate of $73,112 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. Such
compensation amounted to $27,615 during the period ended February 28, 1997.
The Fund compensates Mellon under a custody agreement to provide
custodial services for the Fund. During the period ended February 28, 1997,
$5,435 was charged by 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.
(D) Effective March 1, 1997, a 1% redemption fee is charged on certain
redemptions of Fund shares (including redemptions through use of the Fund
Exchanges service) where the shares being redeemed were issued subsequent to
a specified effective date and the redemption or exchange occurs less than
fifteen days following the date of issuance.
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 February 28, 1997 is summarized as follows:
<TABLE>
Purchases Sales
--------- ---------
<S> <C> <C>
Long transactions............................................... $83,358,214 $49,622,097
Short sale transactions......................................... 3,291,021 2,747,987
--------- ---------
TOTAL....................................................... $86,649,235 $52,370,084
========= =========
</TABLE>
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
DREYFUS EMERGING LEADERS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
segregated account with a broker and the custodian, of cash and/or U.S.
Government securities sufficient to cover its short position. Securities sold
short at February 28, 1997 and their related market values and proceeds are
set forth in the Statement of Securities Sold Short.
(B) At February 28, 1997, accumulated net unrealized appreciation on
investments and securities sold short was $7,158,509, consisting of
$9,212,565 gross unrealized appreciation and $2,054,056 gross unrealized
depreciation.
At February 28, 1997, 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 lion "d" logo]
Registration Mark
DREYFUS EMERGING LEADERS 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. 259SA972
[Dreyfus logo]
Registration Mark
Emerging Leaders
Fund
Semi-Annual
Report
February 28, 1997
