DREYFUS EMERGING LEADERS FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this annual report for Dreyfus
Emerging Leaders Fund for the year ended August 31, 1997. Over this period,
your Fund produced a robust double-digit total return of 44.45%,* which
compares with a total return of 28.96% for our benchmark, the Russell 2000
Index.**
Economic Review
The economy has maintained a strong growth trend since last fall,
gradually eroding expectations for a natural slowdown "just around the
corner." Inflation has held steady, even in the face of a substantially
tighter labor market. Corporate profits have continued to surprise on the up
side. Market interest rates have held within a now long-established trading
range. In this setting, monetary policy has remained benign: the Federal
budget is close to being in balance and the Federal Reserve Board (the "Fed")
has kept policy rates unchanged since March.
Real GDP grew at above a 4% rate in the nine months from the third
quarter of 1996 to midyear. Indeed, the initial estimate of near 2% growth in
this year's second quarter was raised to 3.6%, erasing the record of even a
temporarily slow period. Virtually all major economic sectors have
contributed to the economy's growth. In turn, the economy has provided
personal income that, in the prevailing low-inflation environment, has
translated into strong real purchasing power. The strength in demand has begun
to raise imports, bolstering foreign economies. Inventories have also
started to accumulate at a faster pace, although inventory levels are
currently still quite lean in relation to sales.
The labor market has tightened substantially in recent months as the pace
of new hiring has consistently exceeded the increase in the labor force.
Despite this, wage growth has been moderate while overall compensation growth
has accelerated only modestly. In their determination to hold the line on
prices, companies have resorted to unconventional hiring methods that, so
far, have avoided the need for higher wage offers.
Consensus expectations for corporate profits have been ratcheted upwards
virtually every month for the last several months. So far, positive surprises
in reported profits have justified the market's higher estimates. However,
the strength of the dollar overseas and other factors could affect future
profits.
Market interest rates have been stable since early 1996, oscillating
within a fairly narrow range. Several factors have kept rates steady: the
absence of faster inflation, positive Federal budget developments and an
accommodating Federal Reserve. Although the Fed has not changed interest
rates since March, they have held a bias towards tightening since last
summer. Therefore a move to tighten interest rates should not come as a
surprise.
Market Overview
After acting like a high-speed elevator for most of the past 12 months,
the stock markets performed more like a roller coaster as the fiscal year
drew to a close on August 31.
After a brief sinking spell in March, caused by higher interest rates,
the equity markets climbed to one record after another until stopped by
another retreat in August. The Dow Jones Industrial Average, which started
the 12-month period at 5616.21, ended it at 7622.42, a gain of 2006.21
points. However, along the way, the 30 Dow Industrials broke through three
thousand-point milestones, reaching a high of 8259.31 in early August. In
spite of the drop in the last three weeks of August, the DJIA registered a
gain of 35.72% (excluding income) for the year ended August 31.
Again, with income excluded, the broader Standard & Poor's 500 Composite
Stock Price Index gained 37.96% for the 12 months even after dropping 60.85
points from its high, and the Nasdaq Composite showed a year's gain of 39.06%
even though it stood 43.12 points below the year's high at the end of August.
While the market was rising, investors appeared to favor the larger
capitalized stocks, which enjoyed the sharpest rise, and subsequently gave up
the most in prices. The smallest stocks, as measured by the Russell 2000
small cap index, finished August at their high for the year.
Interest rates, and the anticipation of where they might go in the
future, were the dominant influences on the market. The rising elevator
effect came to a halt in March when investors were shaken by the Federal
Reserve's action raising interest rates by a quarter-point, the first such
action in two years. Once that had been absorbed, however, the market resumed
its upward ride until fears of higher interest rates and their companion,
higher inflation, took hold again in August.
The August decline was prompted by several factors, including the
Teamsters strike against United Parcel Service, resulting in a settlement
considered favorable to the labor union. This revived all the dormant fears
that national wage levels might rise, thus reviving inflation, and giving the
Fed reason to step on the monetary brakes once again.
Yet the economic environment for the equity market remained favorable.
Many commentators used the phrase "Goldilocks economy" - not too hot and not
too cold - to describe the economy's performance.
Stock price volatility, much of it on the down side, took over especially
in the last three weeks of August. From the start of the calendar year
through the end of August, 30% of stock trading sessions ended with the Dow
rising or falling 1% or more. Much to the relief of investors, the volatility
on September 2, the day after Labor Day, was all on the up side, with the Dow
rising 3.38% for the day, the S&P 500 up 3.13%, the Nasdaq Composite up 1.94%
and the Russell 2000 gaining 1.09%.
Some of the August selling, no doubt, was prompted by the reduction in
the capital gains tax for securities held more than 18 months. How long that
will continue to impact the market is an open question.
Until now, the porridge on which the equity markets have been feeding has
been not too hot and not too cold. At these levels, of course, any unexpected
development can bring sharp reactions, particularly in view of the market's
spectacular gains since August 1996. Looking ahead, much depends on whether
the economy can maintain its "Goldilocks" condition, and not bring on another
dose of anti-inflation actions from the monetary authorities.
Portfolio Focus
Small is beautiful again. At the end of April, small capitalization
stocks had underperformed the large capitalization stocks of the S&P 500 by
the greatest amount since the 1990 Gulf War. Since then, small cap stocks
have closed this performance gap as the valuation multiples of the large
multinational stocks, which had driven the market for the past year, had
become stretched. In the past few months, turmoil on the Asian markets
coupled with a strengthening dollar have led to a slowdown in the growth
rates of these large multinationals. As a result, investors, in their quest
for domestic growth and relatively undervalued securities, began to embrace
the strong profit potentials of small cap stocks.
The Emerging Leaders Fund invests primarily in the equity securities of
domestic and foreign issuers, typically with market capitalizations of less
than $750 million, which we believe will be industry leaders in the future.
The Fund strives to deliver all-weather, balanced performance through all
market cycles using a blended approach of growth and value investing. The
Fund primarily looks for companies that have dominant market positions within
major product lines, sustained records of achievement, and strong financial
conditions and/or are low-cost producers. Lastly, the Fund looks for
companies with new or innovative products, services, or processes which we
believe will enhance prospects for greater earnings growth in the future.
During this 12-month period, the best-performing sector for both the
Russell 2000 Index and for your Fund was Financial Services. Our biggest
winner was property and casualty insurer Frontier Insurance Group. Other
significant contributors to performance in this segment were specialty
property casualty insurer Philadelphia Consolidated Holdings and Life USA
Holding, a financial services holding company. Underperformers were few,
namely Riggs National Corporation, a Washington, D.C. community bank;
financial guaranty insurer CapMAC Holdings, Inc.; and discount
securities broker AmeriTrade Holding Corporation.
The Consumer sector provided rewarding performance for your Fund and the
Russell 2000 Index. The best individual stock in this segment was Helen of
Troy, a haircare and appliance company. Other strong contributors were radio
program producer Westwood One and radio broadcaster Chancellor Broadcasting
Cl.A. Stocks which we mis-timed were Sola International, Inc., a manufacturer
of eyeglass lenses; Protection One, which provides security alarm monitoring
services; and animation producer Pixar.
Small cap Technology stocks have experienced a welcome and meaningful
recovery since April. The sector rebounded to become the third best
contributing sector for the Fund and the Index. Radiant Systems, a supplier
of point-of-sale solutions, was our star, followed by semiconductor supplier
PMC-Sierra and Advanced Fibre Co., a telephone equipment manufacturer.
Misfires included Trusted Information Systems, an encryption software
company; HMT Technology, a supplier of components for disk drives; and
software company HNC Software.
After a six-month slump, Energy stocks reemerged to reward our
shareholders. The two best performing stocks in your portfolio for the year
were in this sector: oilfield-service vessel boat builder Halter Marine Group
and offshore construction producer Global Industries. Winner number three,
Louisiana exploration and production outfit Ocean Energy, has been a great
stock for two years in a row. This segment was such a strong one for your
Fund that there were no losing positions during this period.
The Capital Goods segment continued to contribute to the performance of
your Fund. Thiokol, which is a commercial aerospace supplier to Boeing,
provided the same rocket booster performance this year that it did last year.
Goulds Pump, Inc. was acquired at a substantial premium by industrial
conglomerate ITT Industries during this period. Esterline Technologies is a
mini-conglomerate whose printed circuit board drilling equipment recovered
with the semiconductor capital equipment market.
Our stock selections in the remaining sectors, Materials & Processing,
Healthcare and Transportation, generally added to your Fund's performance.
However, there were no real stars and the results of these sectors in the
index paled in comparison to the ones previously mentioned.
We remain very enthusiastic regarding the prospects of our companies, and
believe that good things really do come in small packages.
We thank you for your interest, and you may be sure that we will continue
to exert our best efforts on your behalf.
Sincerely, Sincerely,
[Hilary R. Wood Signature Logo] [Paul Kandel Signature Logo]
Hilary R. Wood Paul Kandel
Portfolio Manager Portfolio Manager
September 16, 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.
DREYFUS EMERGING LEADERS FUND AUGUST 31, 1997
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS EMERGING
LEADERS FUND AND
THE RUSSELL 2000 INDEX
Dollars
$21,103
Dreyfus Emerging
Leaders Fund
$14,041
Russell 2000 Index*
*Source: Lipper Analytical Services, Inc.
<TABLE>
<CAPTION>
Average Annual Total Returns
One Year Ended From Inception (9/29/95)
August 31, 1997 to August 31, 1997
---------- ------------
<C> <C>
44.45% 47.55%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus Emerging
Leaders Fund on 9/29/95 (Inception Date) to a $10,000 investment made in the
Russell 2000 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 2000 Index is an unmanaged index
and is composed of the 2,000 smallest companies in the Russell 3000 Index.
The Russell 3000 Index is composed of 3,000 of the largest U.S. companies by
market capitalization. The Index does not take into account charges, fees and
other expenses. Further information relating to Fund performance, including
expense reimbursements, if applicable, is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
<TABLE>
<CAPTION>
DREYFUS EMERGING LEADERS FUND
STATEMENT OF INVESTMENTS AUGUST 31, 1997
Common Stocks-95.7% Shares Value
------- -------
<S> <C> <C> <C>
Commercial Services-1.3% Universal Outdoor Holdings..........................(a) 40,000 $ 1,370,000
-------
Consumer Durables-2.3% Bush Industries, Cl. A................................. 44,000 1,111,000
Helen of Troy.......................................(a) 40,000 1,310,000
-------
2,421,000
-------
Consumer Services-8.6% Applebee's International............................... 42,000 1,071,000
Chancellor Broadcasting, Cl. A......................(a) 31,000 1,348,500
CMP Media, Cl. A....................................... 18,600 497,550
Harte-Hanks Communications............................. 40,000 1,217,500
ICG Communications..................................(a) 50,000 912,500
Lin Television......................................(a) 24,000 1,138,500
Rio Hotel & Casino..................................(a) 80,000 1,565,000
Westwood One........................................(a) 43,000 1,209,375
-------
8,959,925
-------
Electronic Technology-13.1% ANADIGICS...........................................(a) 27,000 1,336,500
Aviall..............................................(a) 85,000 1,391,875
Concentric Network..................................... 100,000 1,400,000
Corsair Communications................................. 50,000 1,000,000
Esterline Technologies..............................(a) 36,000 1,336,500
Gerber Scientific...................................... 60,000 1,297,500
Information Storage Devices.........................(a) 125,000 1,328,125
PRI Automation......................................(a) 30,000 1,605,000
Rohr................................................(a) 53,000 1,434,312
Thiokol................................................ 19,500 1,552,688
-------
13,682,500
-------
Energy Minerals-4.8% Cairn Energy USA....................................(a) 80,000 915,000
Coflexip, A.D.R........................................ 32,500 1,622,969
Meridian Resource...................................(a) 65,000 710,937
Ocean Energy........................................(a) 27,500 1,768,594
-------
5,017,500
-------
Finance-21.5% American Capital Strategies............................ 40,000 785,000
Amerin..............................................(a) 60,000 1,387,500
ARM Financial Group.................................... 50,700 985,481
Berkley (W.R.)......................................... 27,000 1,493,438
Checkfree...........................................(a) 65,000 1,251,250
Enhance Financial Services Group....................... 26,000 1,202,500
Executive Risk......................................... 23,800 1,375,938
First Financial Caribbean.............................. 85,000 1,530,000
Fremont General........................................ 31,400 1,252,075
Frontier Insurance Group............................... 43,700 1,529,500
Life USA Holding....................................(a) 100,000 1,512,500
NAC Re................................................. 25,000 1,178,125
Ohio Casualty.......................................... 27,000 1,255,500
Penn-America........................................... 80,000 1,460,000
Philadelphia Consolidated Holding...................(a) 31,000 1,282,625
Terra Nova (Bermuda) Holdings, Cl. A................... 65,000 1,470,625
DREYFUS EMERGING LEADERS FUND
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1997
Common Stocks (continued) Shares Value
------- -------
Finance (continued) Titan Holdings 70,000 $ 1,500,625
-------
22,452,682
-------
Health Services-3.7% IDX Systems........................(a) 37,000 1,253,375
Sierra Health Services.............(a) 40,000 1,317,500
Sun Healthcare Group...............(a) 60,000 1,290,000
-------
3,860,875
-------
Health Technology-6.5% Bone Care International............(a) 83,500 1,503,000
Gilead Sciences....................(a) 45,000 1,456,875
ICN Pharmaceuticals................... 35,000 1,264,375
Mentor................................ 41,000 1,260,750
Sepracor...........................(a) 60,000 1,320,000
-------
6,805,000
-------
Industrial Services-1.8% Global Industries..................(a) 52,000 1,894,750
-------
Non-Energy Minerals-1.3% Lone Star Industries.................. 25,000 1,328,125
-------
Process Industries-6.9% AEP Industries.....................(a) 24,500 661,500
AptarGroup............................ 27,500 1,546,875
Crompton & Knowles.................... 50,000 1,262,500
Intertape Polymer Group............... 60,000 1,267,500
OM Group.............................. 35,000 1,281,875
Westpoint Stevens..................(a) 28,700 1,148,000
-------
7,168,250
-------
Producer Manufacturing-7.1% DeCrane Aircraft Holdings 75,000 1,256,250
Detroit Diesel.....................(a) 57,000 1,236,188
Halter Marine Group................(a) 54,000 2,136,375
Reliance Steel & Aluminum............. 45,000 1,411,875
Titan International................... 75,000 1,368,750
-------
7,409,438
-------
Retail Trade-5.6% Arbor Drugs........................... 60,000 1,432,500
Linens'n Things....................(a) 48,700 1,412,300
Pier 1 Imports........................ 82,500 1,402,500
Proffitts..........................(a) 30,000 1,610,625
-------
5,857,925
-------
Technology Services-7.8% CHS Electronics....................(a) 33,200 1,282,350
INTERSOLV..........................(a) 100,000 1,618,750
PMC-Sierra.........................(a) 45,000 1,290,937
Positron Fiber Systems................ 105,000 1,109,062
Vanstar............................(a) 100,000 1,568,750
VIASOFT............................(a) 24,500 1,326,062
-------
8,195,911
-------
Transportation-2.2% Caliber System........................ 40,000 1,670,000
Excel Industries....................... 25,000 637,500
-------
2,307,500
-------
DREYFUS EMERGING LEADERS FUND
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1997
Common Stocks (continued) Shares Value
------- -------
Utilities-1.2% Premisys Communications............(a) 60,000 $ 1,241,250
-------
TOTAL COMMON STOCKS
(cost $79,308,639)................... $ 99,972,631
=======
Principal
Short-Term Investments-6.5% Amount
-------
U.S. Treasury Bills: 5.19%, 9/18/97........................ $ 6,386,000 $ 6,367,864
5.05%, 10/16/97....................... 423,000 420,212
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $6,790,676)........................ $ 6,788,076
=======
TOTAL INVESTMENTS (cost $86,099,315)........................................... 102.2% $106,760,707
=======
LIABILITIES, LESS CASH AND RECEIVABLES......................................... (2.2%) $ (2,279,630)
=======
NET ASSETS..................................................................... 100.0% $104,481,077
=======
Notes to Statement of Investments:
(a) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS EMERGING LEADERS FUND
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997
Cost Value
-------- --------
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $ 86,099,315 $106,760,707
Cash....................................... 274,646
Receivable for investment securities sold.. 290,491
Receivable for shares of Common Stock subscribed 179,570
Dividends and interest receivable.......... 31,651
Prepaid expenses........................... 45,048
--------
107,582,113
--------
LIABILITIES: Due to The Dreyfus Corporation and affiliates 79,057
Due to Distributor......................... 21,676
Payable for investment securities purchased 2,946,417
Payable for shares of Common Stock redeemed 10,668
Accrued expenses........................... 43,218
--------
3,101,036
--------
NET ASSETS.................................................................. $104,481,077
========
REPRESENTED BY: Paid-in capital............................ $ 76,066,412
Accumulated investment (loss).............. (461,511)
Accumulated net realized gain (loss) on investments and
....................... securities sold short 8,214,784
Accumulated net unrealized appreciation (depreciation)
.................... on investments-Note 4(b) 20,661,392
--------
NET ASSETS.................................................................. $104,481,077
========
SHARES OUTSTANDING
(100 million shares of $.001 par value Common Stock authorized)............. 4,151,645
NET ASSET VALUE, offering and redemption price per share-Note 3(d).......... $25.17
========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS EMERGING LEADERS FUND
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1997
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Interest................................... $ 308,566
Cash dividends (net of $1,548 foreign taxes
withheld at source).................... 259,864
-------
Total Income......................... $ 568,430
EXPENSES: Management fee-Note 3(a)................... 665,291
Shareholder servicing costs-Note 3(b)...... 296,986
Registration fees.......................... 50,290
Professional fees.......................... 27,085
Prospectus and shareholders' reports....... 21,230
Directors' fees and expenses-Note 3(c)..... 14,639
Custodian fees-Note 3(b)................... 14,052
Interest expense-Note 2.................... 2,214
Loan commitment fees-Note 2................ 691
Miscellaneous.............................. 1,761
-------
Total Expenses....................... 1,094,239
Less-reduction in management fee due to
undertaking-Note 3(a).................. (64,125)
-------
Net Expenses......................... 1,030,114
-------
INVESTMENT (LOSS)........................................................... (461,684)
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments:
Long transactions...................... $ 9,617,097
Short sale transactions................ 6,525
-------
Net Realized Gain (Loss)............. 9,623,622
Net unrealized appreciation (depreciation) on investments
and securities sold short.............. 17,061,108
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 26,684,730
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $26,223,046
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS EMERGING LEADERS FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
August 31, 1997 August 31, 1996*
--------- ---------
<S> <C> <C>
OPERATIONS:
Investment income (loss)-net...................................... $ (461,684) $ 23,306
Net realized gain (loss) on investments........................... 9,623,622 2,256,949
Net unrealized appreciation (depreciation) on investments......... 17,061,108 3,600,284
--------------
Net Increase (Decrease) in Net Assets Resulting from Operations. 26,223,046 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..................................... 121,713,698 79,911,023
Dividends reinvested.............................................. 3,575,813 22,761
Cost of shares redeemed........................................... (80,572,147) (48,584,736)
--------------
Increase (Decrease) in Net Assets from Capital Stock Transactions 44,717,364 31,349,048
--------------
Total Increase (Decrease) in Net Assets..................... 67,274,623 37,206,454
NET ASSETS:
Beginning of Period............................................... 37,206,454 ----
-------------- -------------
End of Period..................................................... $104,481,077 $ 37,206,454
============== =============
Undistributed investment income (loss)-net............................ $ (461,511) $ 173
--------------
Shares Shares
-------------- ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................... 5,846,639 4,681,074
Shares issued for dividends reinvested............................ 181,883 1,453
Shares redeemed................................................... (3,869,328) (2,690,076)
-------------- ------------
Net Increase (Decrease) in Shares Outstanding................... 2,159,194 1,992,451
============== ============
* From September 28, 1995 (commencement of operations) to August 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
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.
Year Ended August 31,
-------------
PER SHARE DATA: 1997 1996(1)
---- ----
<S> <C> <C>
Net asset value, beginning of period.................................... $18.67 $12.50
---- ----
Investment Operations:
Investment income (loss)-net............................................ (.11) .03
Net realized and unrealized gain (loss)
on investments........................................................ 8.02 6.17
---- ----
Total from Investment Operations........................................ 7.91 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.......................................... $25.17 $18.67
---- ====
TOTAL INVESTMENT RETURN..................................................... 44.45% 46.09%(2,3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................................. 1.39% 1.16%(3)
Ratio of net investment income (loss)
to average net assets................................................. (.62%) .09%(3)
Decrease reflected in above expense ratios
due to undertaking by the Manager..................................... .09% .36%(3)
Portfolio Turnover Rate................................................. 197.99% 203.66%(3)
Average commission rate paid (4)........................................ $.0586 $.0554
Net Assets, end of period (000's Omitted)............................... $104,481 $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.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS EMERGING LEADERS FUND
NOTES TO FINANCIAL STATEMENTS
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: 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 August 31, 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 August 31, 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 August 31, 1997 was $2.1 million.
DREYFUS EMERGING LEADERS FUND
NOTES TO FINANCIAL STATEMENTS (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 had 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 $64,125 during the period ended August 31, 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 August 31, 1997, the Fund was charged an
aggregate of $184,803 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 $33,032 during the period ended August 31, 1997.
The Fund compensates Mellon under a custody agreement to provide
custodial services for the Fund. During the period ended August 31, 1997,
$14,052 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 3, 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 August 31, 1997 is summarized as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- ---------
<S> <C> <C>
Long transactions....................................... $175,635,333 $135,966,789
Short sale transactions................................. 7,449,701 5,608,236
--------- ---------
Total............................................... $183,085,034 $141,575,025
========= =========
</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
DREYFUS EMERGING LEADERS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
security declines between those dates. Until the Fund replaces the borrowed
security, the Fund will maintain daily, a segregated account with a broker
and the custodian, of cash and/or U.S. Government securities sufficient to
cover its short position. At August 31, 1997, there were no securities sold
short outstanding.
(b) At August 31, 1997, accumulated net unrealized appreciation on
investments was $20,661,392, consisting of $22,029,760 gross unrealized
appreciation and $1,368,368 gross unrealized depreciation.
At August 31, 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 EMERGING LEADERS FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
Dreyfus Emerging Leaders Fund
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Emerging Leaders Fund (one
of the Series constituting Dreyfus Growth and Value Fund, Inc.) as of August
31, 1997, 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
verification by examination of securities held as of August 31, 1997 and
confirmation 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 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 Leaders Fund at August 31, 1997, and the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[ERNST & YOUNG LLP SIGNATURE LOGO]
New York, New York
October 7, 1997
DREYFUS EMERGING LEADERS FUND
IMPORTANT TAX INFORMATION (UNAUDITED)
The Fund hereby designates 26.41% of the ordinary dividends paid during
the fiscal year ended August 31, 1997 as qualifying for the corporate
dividends received deduction. Shareholders will receive notification in
January 1998 of the percentage applicable to the preparation of their 1997
income tax returns.
Registration Mark
[DREYFUS LION 'D' LOGO]
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. 259AR978
Registration Mark
[DREYFUS LOGO]
Emerging Leaders
Fund
Annual Report
August 31, 1997
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN DREYFUS EMERGING LEADERS
FUND AND THE RUSSELL 2000 INDEX
EXHIBIT A:
DREYFUS
RUSSELL EMERGING
PERIOD 2000 LEADERS
INDEX * FUND
9/29/95 10,000 10,000
11/30/95 9,954 12,195
2/29/96 10,523 13,537
5/31/96 11,758 15,392
8/31/96 10,888 14,609
11/30/96 11,598 16,323
2/28/97 11,845 17,146
5/31/97 12,577 18,303
8/31/97 14,041 21,103
*Source: Lipper Analytical Services, Inc.
