DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
For the 12-month period ended August 31, 1998, the Dreyfus Midcap Value Fund
produced a total return of
- -27.32% .* This was significantly behind the total return of -6.69% for the
Russell Midcap Index, which serves as your Fund's benchmark.** It should be
noted that the last day of the reporting period, August 31, 1998 saw the
sharpest drop in equity prices in many years. In early September, some of the
lost ground was regained.
The Fund invests principally in companies with a market capitalization between
$400 million and $4 billion. The average company in the portfolio today has a
market cap of $1.5 billion, which is considerably smaller than the Russell
Midcap Index average of $4.8 billion. Smaller stocks have performed poorly in
recent months relative to larger stocks and this contributed significantly to
our underperformance.
ECONOMIC REVIEW
So far in 1998, the main regions of the world have had very different economic
fundamentals. The U.S. entered the year with a strong economy near full
employment, with unemployment only slightly above 4%. The tight labor market led
the Federal Reserve Board to contemplate a rise in interest rates early in the
year. The U.S. economy cooled enough over the months that the Fed decided to
stand pat. Evidence of economic cooling continued to accumulate and worries
about the world economy intensified. World economic weakness has shifted
expectations towards monetary easing. After many years of subpar economic
growth, continental Europe moved into a better economic expansion. Unlike the
U.S., Europe has substantial excess capacity of productive plant and labor. In
Asia, weak economies were pervasive as a result of the Asian financial crisis.
The Latin American economies weakened as the financial stresses spread
throughout that region.
A main influence on the U.S. economy this year was the foreign financial
crisis and cooling of the world economy. The positive effects hit first. Actual
inflation and expected inflation dropped, causing a decline in long-term
Treasury bond yields and mortgage rates. This caused a boom in housing. The fall
in inflation helped the consumer sector as more of the growth in consumer income
was left over after inflation to buy goods and services. Consumers benefited
from a combination of good growth in income after inflation, a strong labor
market and past increases in the prices of assets they owned.
The negative effect of Asian weakness was directed towards the industrial
sector more than the consumer sector. Corporate profits weakened, especially in
Asian-impacted sectors such as world-traded commodities (oil, metals and paper)
and exporters. One result of the industrial weakness was to cool off a U.S.
economy that had been growing rapidly.
The major change in the economic outlook over recent months has been a
downward shift in expectations for world economic growth. A credit crunch
developed in emerging countries and former communist countries, sharply reducing
the economic outlook for Asia and Latin America as well as for commodity
exporting countries throughout the world. The effect on Europe and the U.S. has
been to lower expectations of profit growth and drive down bond yields.
Market sentiment has shifted towards expectations of monetary ease in the U.S.
and other industrial countries as the evidence of a weaker world economy has
accumulated. The prospects for world economic weakness and monetary ease in the
major countries will be powerfully impacted by whether foreign financial
stresses calm down or intensify in the coming months. There appears to be a
shift in the priorities of key policymakers from fighting potential inflation to
restimulating future world economic growth.
MARKET OVERVIEW
The 12 months ended August 31, 1998 encompassed some very different market
phases with stock market strength during much of the period followed by a sharp
decline towards the end, especially in August 1998, the final month of the
fiscal year. Over the 12-month period, the total return on the Standard and
Poor' s 500 Composite Stock Price Index was 8.12% despite a negative return of
- -14.45% in August 1998. Returns on mid-cap and small-cap stock indices tended to
be weaker, with a negative total return on small-cap indices.
Three key trends influenced stock market behavior during the fiscal year.
First, the Federal Reserve kept the Federal Funds rate flat at 5.5% for the
entire period. Sentiment shifted from expectations of a possible Fed Funds rate
increase to expectations of a cut by the end of the period. Second, weakness in
emerging country economies contributed to declining commodity prices and a drop
in long-term Treasury bond yields to multi-decade lows. Third, expectations for
corporate profits dropped, first in the Asia-impacted sectors such as oil, basic
materials and exporters and then for a broader list of stocks.
The trigger for the sharp decline in stocks at the end of the period appeared
to be the Russian default. This resulted in deepening concerns about weaker
economic growth and corporate profits. There were also global margin calls on
risky assets held by hedge funds and financial institutions. This raised the
cost of debt financing for many corporations and many emerging countries.
Expectations for economic activity in emerging countries in Asia and Latin
America shifted down sharply while expectations for U.S. corporate profits
weakened somewhat. Despite the fall in Treasury bond yields, financial stocks
led the summer sell-off due to concerns about financial contagion among emerging
countries and potential loan losses by financial institutions.
The erosion of expectations about corporate profit growth over the last year
contributed to an outperformance by a small group of super-cap growth stocks.
Investors had more confidence in the prospect for strong persistent earnings
growth for this small group of stocks than for the broad market. Value stocks,
which often have greater cyclical sensitivity to earnings fluctuations, lagged
behind these super-growth stocks. In addition, many of the financial stocks
which fall into the value category fell sharply following the Russian default in
mid-July 1998.
The fiscal year ended August 1998 was characterized by very different
performances of the various market sectors. Super-cap growth stocks did best,
followed by large-cap stocks in general with mid-cap and small-cap stocks
lagging behind. For example, the total return for the fiscal year on the Russell
1000 Index with a heavy large-cap representation was 6.10%, with the Russell
1000 Growth Index returning 8.26% while the Russell 1000 Value Index returned
3.89% . The return on the Russell Midcap Index was -6.69% while the small-cap
Russell 2000 Index return was -19.40%.
By the end of the fiscal year, there were growing expectations of monetary
easing by the Federal Reserve but, as of this writing, no such action has yet
occurred.
INVESTMENT PHILOSOPHY
Our investment philosophy continues to focus on identifying undervalued stocks
with positive short-term business trends and solid long-term fundamentals. We
examine many measures to identify undervalued stocks; Price/Earnings,
Price/Book, Price/Sales, Enterprise Value/EBITDA and Breakup Value are the most
prevalent. We also pay close attention to normalized earnings for cyclical
industries. Our focus is on stocks that are undervalued versus their own
historical valuation ranges and against the market as a whole.
While undervalued stocks tend to have less downside than the market as a
whole, our primary focus is on those stocks where business is getting better and
there is good potential for positive earnings surprises. We spend a lot of time
talking to managements of out-of-favor companies in order to identify positive
turns in business trends before the improvements become widely known by Wall
Street. As holdings appreciate to fair value, we sell them even if business
conditions remain very favorable. Our dedication to the "value" style of
investing is of paramount importance. Additionally, our analysis is done on a
stock-by-stock basis. Our sector weightings result from detailed bottom-up
analysis of individual securities. To help manage risk, we typically limit
investments in individual securities to 5% of the Fund, limit sector weightings
to no more than 30% or three times the weight in the Russell Midcap Index, and
maintain a highly diversified portfolio.
PORTFOLIO FOCUS
In addition to our recent focus on securities in the lower end of the mid-cap
range, the Fund's performance was adversely impacted by our underweight position
in utilities and our overweight position in technology and energy, relative to
the Russell Midcap Index. Technology companies, many of which have significant
Asian exposure, have been hurt by the weakness in the Asian economies.
Nonetheless, we currently remain overweight in technology because many of these
issues are trading close to their all-time lows on many valuation measures.
There are some short-term business risks for many of these companies, but we
believe there could be considerable upside potential once all of the bad news
out of Asia has been fully discounted in the stock prices. Utilities, on the
other hand, have performed very well recently due to falling interest rates and,
more importantly, investors seeking safe havens from the risks of earnings
disappointments due to the Asian crisis. While such defensive tendencies can
continue to drive utilities higher, our exposure currently remains minimal
because, in our view, growth prospects are anemic, business momentum is neutral,
and political risk is high.
We continued to seek attractively valued stocks within the consumer services
sector. Many of these stocks previously traded at very rich price/earnings
multiples and have been severely penalized by the market because of short-term
challenges or a modest deceleration of growth. Yet many of these companies are
high quality, consistent long-term growers.
For several years, financial stocks have benefited from a very favorable
interest rate environment and a consolidation trend in the banking sector.
However, valuation levels for many of these companies are extremely high when
compared to historical valuation measures. For that reason, we have limited
exposure to this group, even though business momentum remains solid. Our
underweight position helped the Fund's overall performance.
We have reduced holdings in the basic industries sector due to slowing
international economies. This area is more cyclical and holds less promise in
the current environment. We maintain an overweight position in health care. This
sector has more consistent earnings potential and advances in technology
continue to drive earnings growth for many of the health care companies.
We now have a large exposure to energy, particularly exploration and
production companies, which hurt performance.Many of these companies trade at
or near all-time lows on such relevant measures as price-to-cash flow. If energy
prices recover, these stocks would appear to be even cheaper. Ultimately, we
believe, stock valuations and energy prices should revert to more normal levels
Your investment in this Fund is very much appreciated. Please be assured that
we will continue exerting our best efforts to bring you rewarding returns.
Very truly yours,
[Peter I. Higgins signature logo]
Peter I. Higgins
Portfolio Manager
September 25, 1998
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC.--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.
DREYFUS MIDCAP VALUE FUND AUGUST 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS MIDCAP VALUE FUND
AND THE RUSSELL MIDCAP INDEX
Dollars
$14,335
Dreyfus Midcap Value Fund
$13,835
Russell Midcap Index*
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended From Inception (9/29/95)
August 31, 1998 to August 31, 1998
____________________ ___________________________
(27.32%) 13.13%
- ---------------
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.
<TABLE>
DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS AUGUST 31, 1998
Common Stocks--99.6% Shares Value
- ------------------------------------------------------- ____________ _____________
<S> <C> <C>
Basic Industries--8.6% Geon . . . . . . . . . . . . . . . . . . . . . . . . . 27,200 $ 527,000
Louisiana Pacific . . . . . . . . . . . . . . . . . . 92,100 1,738,388
Philip Services . . . . . . . . . . . . . . . . . (a) 101,100 126,375
Safety-Kleen . . . . . . . . . . . . . . . . . . . . . 807,900 2,373,197
Stone Container . . . . . . . . . . . . . . . . . (a) 157,800 1,647,038
Tyson Foods, Cl. A . . . . . . . . . . . . . . . . . . 29,500 483,063
____________
6,895,061
____________
Capital Goods--8.0% Alliant Techsystems . . . . . . . . . . . . . . . (a) 21,700 1,424,063
Cummins Engine . . . . . . . . . . . . . . . . . . . . 24,400 992,775
Dana . . . . . . . . . . . . . . . . . . . . . . . . . 19,600 768,075
Danka Business Systems, A.D.R. . . . . . . . . . . . . 55,600 389,200
Federal Signal . . . . . . . . . . . . . . . . . . . . 9,300 189,488
Federal-Mogul . . . . . . . . . . . . . . . . . . . . 30,500 1,627,938
Fluor . . . . . . . . . . . . . . . . . . . . . . . . 8,800 348,150
U.S. Filter . . . . . . . . . . . . . . . . . . . (a) 36,400 655,200
____________
6,394,889
____________
Consumer Cyclical--2.6% Dillard's, Cl. A . . . . . . . . . . . . . . . . . . . 29,300 846,038
OfficeMax . . . . . . . . . . . . . . . . . . . . (a) 105,500 1,107,750
Sunglass Hut International . . . . . . . . . . . . (a) 18,300 105,225
____________
2,059,013
____________
Consumer Durables--2.3% BE Aerospace . . . . . . . . . . . . . . . . . . . (a) 28,200 586,913
Kaufman & Broad Home . . . . . . . . . . . . . . . . . 60,600 1,295,325
____________
1,882,238
____________
Consumer Non-Durables--4.5% Ball . . . . . . . . . . . . . . . . . . . . . . . . . 75,100 2,806,863
Department 56 . . . . . . . . . . . . . . . . . . (a) 17,300 510,350
Vitro, A.D.S. . . . . . . . . . . . . . . . . . . . . 86,900 331,306
____________
3,648,519
____________
Consumer Services--13.9% AC Nielsen . . . . . . . . . . . . . . . . . . . . (a) 101,000 2,026,313
Consolidated Stores . . . . . . . . . . . . . . . (a) 43,000 1,354,500
Dress Barn . . . . . . . . . . . . . . . . . . . . (a) 15,300 265,838
Gymboree . . . . . . . . . . . . . . . . . . . . . (a) 46,200 404,250
Pep Boys-Manny, Moe & Jack . . . . . . . . . . . . . . 60,100 882,719
Tommy Hilfiger . . . . . . . . . . . . . . . . . . (a) 50,400 2,356,200
Tricon Global Restaurants . . . . . . . . . . . . (a) 49,600 1,838,300
Unisource Worldwide . . . . . . . . . . . . . . . . . 160,900 1,065,963
Venator Group . . . . . . . . . . . . . . . . . . (a) 103,900 941,594
____________
11,135,677
____________
Energy--12.8% BJ Services . . . . . . . . . . . . . . . . . . . (a) 44,000 555,500
Devon Energy . . . . . . . . . . . . . . . . . . . . . 21,200 560,475
EEX . . . . . . . . . . . . . . . . . . . . . . . (a) 166,700 739,731
Enron Oil & Gas . . . . . . . . . . . . . . . . . . . 73,400 954,200
EVI Weatherford . . . . . . . . . . . . . . . . . (a) 48,325 736,956
Forcenergy . . . . . . . . . . . . . . . . . . . . (a) 26,400 150,150
Newfield Exploration . . . . . . . . . . . . . . . (a) 14,600 229,038
DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------- ____________ ____________
Energy (continued) Oryx Energy . . . . . . . . . . . . . . . . . . . (a) 68,300 $ 849,481
Pennzoil . . . . . . . . . . . . . . . . . . . . . . . 16,600 593,450
Santa Fe Energy Resources . . . . . . . . . . . . (a) 186,500 1,398,750
Tosco . . . . . . . . . . . . . . . . . . . . . . . . 62,500 1,375,000
Valero Energy . . . . . . . . . . . . . . . . . . . . 85,600 1,530,100
Vintage Petroleum . . . . . . . . . . . . . . . . . . 72,100 563,281
____________
10,236,112
____________
Finance--13.1% Allmerica Financial . . . . . . . . . . . . . . . . . 39,200 2,337,300
Astoria Financial . . . . . . . . . . . . . . . . . . 24,600 885,600
Dime Bancorp . . . . . . . . . . . . . . . . . . . . . 41,200 782,800
Everest Reinsurance Holdings . . . . . . . . . . . . . 41,100 1,438,500
Golden State Bancorp . . . . . . . . . . . . . . . (a) 122,800 1,949,450
Heller Financial . . . . . . . . . . . . . . . . . (a) 61,000 1,204,750
Independence Community Bank . . . . . . . . . . . (a) 23,800 261,800
Long Island Bancorp . . . . . . . . . . . . . . . . . 44,800 1,680,000
____________
10,540,200
____________
Health Care--12.1% AmeriSource Health, Cl. A . . . . . . . . . . . . (a) 8,600 404,738
Beckman Coulter . . . . . . . . . . . . . . . . . . . 35,000 1,938,125
ESC Medical Systems . . . . . . . . . . . . . . . (a) 66,400 1,240,850
Foundation Health . . . . . . . . . . . . . . . . (a) 62,300 696,981
Integrated Health Services . . . . . . . . . . . . . . 33,400 647,125
PharMerica . . . . . . . . . . . . . . . . . . . . (a) 221,500 865,234
Quest Diagnostics . . . . . . . . . . . . . . . . (a) 130,700 2,172,888
Respironics . . . . . . . . . . . . . . . . . . . (a) 5,200 59,800
Teva Pharmaceutical Industries, A.D.R. . . . . . . . . 47,000 1,683,188
____________
9,708,929
____________
Miscellaneous--.2% CalMat . . . . . . . . . . . . . . . . . . . . . . . . 10,900 183,256
____________
Oil & Gas Drilling--.3% Diamond Offshore Drilling . . . . . . . . . . . . . . 11,400 237,975
____________
Photography--1.0% Polaroid . . . . . . . . . . . . . . . . . . . . . . . 29,700 835,313
____________
Technology--17.6% Atmel . . . . . . . . . . . . . . . . . . . . . . (a) 22,900 138,116
AVX . . . . . . . . . . . . . . . . . . . . . . . . . 2,600 38,675
CHS Electronics . . . . . . . . . . . . . . . . . (a) 107,900 1,362,238
Electroglas . . . . . . . . . . . . . . . . . . . (a) 20,200 217,150
Etec Systems . . . . . . . . . . . . . . . . . . . (a) 15,400 371,525
General Semiconductor . . . . . . . . . . . . . . (a) 9,250 59,547
KLA-Tencor . . . . . . . . . . . . . . . . . . . . (a) 18,500 393,125
Lam Research . . . . . . . . . . . . . . . . . . . (a) 85,800 938,438
Learning Company . . . . . . . . . . . . . . . . . (a) 85,500 1,512,281
Maxtor . . . . . . . . . . . . . . . . . . . . . . (a) 82,300 560,669
National Semiconductor . . . . . . . . . . . . . . (a) 19,500 177,938
Oak Industries . . . . . . . . . . . . . . . . . . (a) 19,200 574,800
Quantum . . . . . . . . . . . . . . . . . . . . . (a) 105,800 1,210,088
Read-Rite . . . . . . . . . . . . . . . . . . . . (a) 99,700 548,350
Sybase . . . . . . . . . . . . . . . . . . . . . . (a) 48,800 335,500
DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------- ____________ ____________
Technology (continued) Symantec . . . . . . . . . . . . . . . . . . . . . (a) 144,200 $ 2,361,275
Teradyne . . . . . . . . . . . . . . . . . . . . . (a) 44,600 774,925
Vishay Intertechnology . . . . . . . . . . . . . . (a) 78,500 824,250
Wang Laboratories . . . . . . . . . . . . . . . . (a) 89,400 1,743,300
____________
14,142,190
____________
Transportation--1.8% Atlas Air . . . . . . . . . . . . . . . . . . . . (a) 6,000 142,500
Yellow . . . . . . . . . . . . . . . . . . . . . . (a) 111,200 1,327,450
____________
1,469,950
____________
Utilities--.8% Call-Net Enterprises, Cl. B . . . . . . . . . . . (a) 55,900 604,419
____________
TOTAL INVESTMENTS (cost $115,484,974). . . . . . . . . . . . . . . . . . . . . . . . . . . 99.6% $79,973,741
======= ============
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4% $ 326,521
======= ============
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $80,300,262
======= ============
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998
Cost Value
_____________ _____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . $115,484,974 $ 79,973,741
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 114,600
Receivable for investment securities sold . . . . . . . . 1,977,664
Dividends and interest receivable . . . . . . . . . . . . 118,358
Receivable for shares of Common Stock subscribed . . . . 20,800
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 27,411
_____________
82,232,574
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 79,211
Due to Distributor . . . . . . . . . . . . . . . . . . . 21,691
Payable for shares of Common Stock redeemed . . . . . . . 1,024,726
Payable for investment securities purchased . . . . . . . 489,131
Bank loan payable--Note 2 . . . . . . . . . . . . . . . . 250,000
Interest payable--Note 2 . . . . . . . . . . . . . . . . 1,039
Accrued expenses . . . . . . . . . . . . . . . . . . . . 66,514
_____________
1,932,312
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,300,262
=============
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $107,874,703
Accumulated net realized gain (loss) on investments
and securities sold short . . . . . . . . . . . . . . . 7,936,792
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4(b) . . . . . . . . . . . . . . . (35,511,233)
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,300,262
=============
SHARES OUTSTANDING
(100 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED). . . . . . . . . . . . . . 5,217,372
NET ASSET VALUE, offering and redemption price per share--Note 3(d). . . . . . . . . . . . $15.39
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1998
INVESTMENT INCOME
INCOME: Cash dividends (net of $13,953 foreign taxes
<S> <C> <C>
withheld at source) . . . . . . . . . . . . . . . . . $ 1,208,205
Interest . . . . . . . . . . . . . . . . . . . . . . . . 110,341
____________
Total Income . . . . . . . . . . . . . . . . . . . $ 1,318,546
EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . . . . . 941,508
Shareholder servicing costs--Note 3(b) . . . . . . . . . 522,432
Registration fees . . . . . . . . . . . . . . . . . . . . 55,327
Prospectus and shareholders' reports . . . . . . . . . . 38,440
Professional fees . . . . . . . . . . . . . . . . . . . . 29,030
Custodian fees--Note 3(b) . . . . . . . . . . . . . . . . 23,738
Interest expense--Note 2 . . . . . . . . . . . . . . . . 16,017
Directors' fees and expenses--Note 3(c) . . . . . . . . . 8,437
Dividends on secuities sold short . . . . . . . . . . . . 989
Loan commitment fees--Note 2 . . . . . . . . . . . . . . 606
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 2,062
____________
Total Expenses . . . . . . . . . . . . . . . . . . 1,638,586
____________
INVESTMENT (LOSS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (320,040)
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments:
Long transactions . . . . . . . . . . . . . . . . . . $ 9,946,689
Short sale transactions . . . . . . . . . . . . . . . (377,025)
____________
Net Realized Gain (Loss) . . . . . . . . . . . . . 9,569,664
Net unrealized appreciation (depreciation) on
investments and securities sold short . . . . . . . . (41,688,800)
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . (32,119,136)
____________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $(32,439,176)
============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
August 31, 1998 August 31, 1997
______________ _______________
OPERATIONS:
<S> <C> <C>
Investment (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (320,040) $ (34,284)
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . 9,569,664 4,862,897
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . (41,688,800) 6,128,925
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . (32,439,176) 10,957,538
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (14,466)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,040,421) (632,898)
_____________ _____________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,040,421) (647,364)
_____________ _____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,448,114 87,803,219
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,763,416 637,529
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (94,925,810) (20,848,171)
_____________ _____________
Increase (Decrease) in Net Assets from Capital Stock Transactions . . . . . . . . . 37,285,720 67,592,577
_____________ _____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . (1,193,877) 77,902,751
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,494,139 3,591,388
_____________ _____________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,300,262 $ 81,494,139
============= =============
Shares Shares
_____________ _____________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,669,980 4,544,579
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . 274,710 37,348
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,393,602) (1,142,930)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . . . 1,551,088 3,438,997
============= =============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
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 each period indicated. This information has been
derived from the Fund's financial statements.
Year Ended August 31,
________________________________
PER SHARE DATA: 1998 1997 1996(1)
______ ______ ______
<S> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . $22.23 $15.80 $12.50
______ ______ ______
Investment Operations:
Investment income (loss)--net . . . . . . . . . . . . . . . . . . . . . . . . (.06)(2) (.01) .08
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5.73) 8.23 3.28
______ ______ ______
Total from Investment Operations . . . . . . . . . . . . . . . . . . . . . . (5.79) 8.22 3.36
______ ______ ______
Distributions:
Dividends from investment income--net . . . . . . . . . . . . . . . . . . . . -- (.04) (.04)
Dividends from net realized gain on investments . . . . . . . . . . . . . . . (1.05) (1.75) (.02)
______ ______ ______
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.05) (1.79) (.06)
______ ______ ______
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . $15.39 $22.23 $15.80
====== ====== ======
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27.32%) 55.45% 26.88%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets . . . . . . . . . . . . . . 1.29% 1.25% 1.18%(3)
Ratio of interest expense, loan commitment fees and
dividends on securities sold short to average net assets . . . . . . . . .01% .01% .01%(3)
Ratio of net investment income (loss)
to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . (.25%) (.14%) .56%(3)
Decrease reflected in above expense ratios
due to undertakings by the Manager . . . . . . . . . . . . . . . . . . . -- .26% 1.13%(3)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 168.72% 154.92% 266.80%(3)
Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . . . . $80,300 $81,494 $3,591
- -----------------------------
(1) From September 29, 1995 (commencement of operations) to August 31, 1996.
(2) Based on average shares outstanding at each month end.
(3) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Midcap Value Fund (the "Fund") is a separate diversified series of
Dreyfus Growth and Value Funds, Inc. (the "Company") which is registered under
the Investment Company Act of 1940, as amended (the "Act") as an open-end
management investment company and operates as a series company currently
offering eight series, including the Fund. 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 (the "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
funds' operations; expenses which are applicable to all funds are allocated
among them on a pro rata basis.
The Fund' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities exchange
on which such securities are primarily traded or at the last sales price on the
national securities market. Securities not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices, except for open
short positions, where the asked price is used for valuation purposes. Bid price
is used when no asked price is available. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Directors. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
(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. Under the terms of the custodian agreement, the Fund receives net
earnings credits based on available cash balances left on deposit.
(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 of 1986, as amended (the "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 Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes.
As of August 31, 1998, the Fund reclassified certain components of net assets.
The reclassifications resulted in a net decrease to accumulated net investment
loss of $359,282, a decrease in accumulated net realized gain (loss) on
investments of $358,226 and a decrease in paid-in capital of $1,056. Net assets
were not affected by these reclassifications.
DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BANK LINES OF CREDIT:
In accordance with an agreement with a bank, the Fund may borrow up to $10
million for leveraging purposes under a short-term unsecured line of credit.
Interest on borrowings is charged at rates which are related to the Federal
Funds rate in effect from time to time.
The Fund also participates with other Dreyfus-managed funds in a $600 million
redemption credit facility
(the "Facility" ) primarily to be utilized for temporary or emergency purposes,
including the financing of redemptions. In connection therewith, the Fund has
agreed to pay commitment fees on its pro rata portion of the Facility. Interest
is charged to the Fund at rates based on prevailing market rates in effect at
the time of borrowings. During the period ended August 31, 1998, the Fund did
not borrow under the Facility.
The average daily amount of borrowings outstanding under the leveraging
arrangement during the period ended August 31, 1998 was approximately $263,000,
with a related weighed average annualized interest rate of 6.09%.
NOTE 3--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement with the Manager, the management fee is
computed at the annual rate of .75 of 1% of the value of the Fund's average
daily net assets and is payable monthly.
(B) Under the 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, 1998, the Fund was charged $313,836 pursuant to the Shareholder
Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the period
ended August 31, 1998, the Fund was charged $99,998 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended August 31, 1998, the Fund was
charged $23,738 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) A 1% redemption fee is charged and retained by the Fund on certain
redemptions of Fund shares (including redemptions through use of the Fund
Exchanges service) where the shares being redeemed were issued subsequent to a
specified effective date and the redemption or exchange occurs less than fifteen
days following the date of issuance.
<TABLE>
DREYFUS MIDCAP VALUE FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 1998 is summarized as follows:
Purchases Sales
_____________ _____________
<S> <C> <C>
Long transactions. . . . . . . . . . . . . . . . . . . . . . . . . . $234,706,039 $202,370,176
Short sale transactions. . . . . . . . . . . . . . . . . . . . . . . 1,721,100 1,261,831
_____________ _____________
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $236,427,139 $203,632,007
============ =============
</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 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, 1998 there were no securities sold short outstanding.
(B) At August 31, 1998, accumulated net unrealized depreciation on investments
was $35,511,233, consisting of $992,521 gross unrealized appreciation and
$36,503,754 gross unrealized depreciation.
At August 31, 1998, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
DREYFUS 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 statement of investments, of Dreyfus Midcap Value Fund (one of the
Series constituting Dreyfus Growth and Value Funds, Inc.) as of August 31, 1998,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended, and
financial highlights for each of the years indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held as of August 31, 1998 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 Midcap Value Fund at August 31, 1998, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the indicated
years, in conformity with generally accepted accounting principles.
New York, New York
October 5, 1998
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates $.015 per share as a
long-term capital gain distribution (of which 33.33% is subject to the 20%
maximum Federal tax rate) of the $1.045 per share paid on December 5, 1997.
The Fund also designates 5.182% of the ordinary dividends paid during the
fiscal year ended August 31, 1998 as qualifying for the corporate dividends
received deduction. Shareholders will receive notification in January 1999 of
the percentage applicable to the preparation of their 1998 income tax returns.
[dreyfus lion "d" logoreg.tm]
[dreyfus logo reg.tm]
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. 258AR988
Midcap Value
Fund
Annual Report
August 31, 1998
C:\personal\midcapgraph
Dreyfus Midcap Value Fund August 31, 1998
Comparison of change in value of $10,000 investment in Dreyfus Midcap Value
Fund and the Russell Midcap Index
EXHIBIT A
Dreyfus Russell
Midcap Midcap
Period Value Fund Index
- ----------------------------------------------------------------------------
9/29/95 10,000 10,000
8/31/96 12,688 11,058
8/31/97 19,724 14,827
8/31/98 14,335 13,835
- ----------------------------------------------------------------------------
* Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
One Year Ended From Inception (9/29/95)
August 31, 1998 to August 31, 1998
(27.32%) 13.13%
