N-30D 1 pn30d327.txt SEMI-ANNUAL REPORT Dreyfus Emerging Markets Fund SEMIANNUAL REPORT November 30, 2001 The views expressed herein are current to the date of this report. These views and the composition of the fund's portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 15 Financial Highlights 16 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Emerging Markets Fund LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for Dreyfus Emerging Markets Fund, covering the six-month period from June 1, 2001 through November 30, 2001. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, D. Kirk Henry Even before the devastating terrorist attacks of September 11, a slowing global economy and a return to more normal valuations had taken their toll on stocks that had previously risen too high, too fast. After the attacks, the investment environment became even more volatile. Recent events have prolonged existing global economic weakness, but we believe that many industrialized nations may begin to see signs of economic recovery in the months ahead. In the meantime, there is little doubt that the investment environment will continue to be challenging. At times like these, emotions should be set aside in favor of an objective, rational view of prevailing risks and opportunities. It is important during any time of market uncertainty to seek professional management and professional advice, both of which are cornerstones of our investment approach. We encourage you to contact your financial advisor for information about ways to refine your investment strategies. For additional market perspectives, we have created "Investing In Uncertain Markets," a publication designed to help you weather the storm through the long-term application of four fundamental principles of successful investing. Visit www.dreyfus.com to order or download a copy. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation December 14, 2001 DISCUSSION OF FUND PERFORMANCE D. Kirk Henry, Portfolio Manager How did Dreyfus Emerging Markets Fund perform relative to its benchmark? For the six-month period ended November 30, 2001, Dreyfus Emerging Markets Fund produced a -5.41% total return.(1) In comparison, the fund's benchmark, the Morgan Stanley Capital International Emerging Markets Free Index ("MSCI EMF Index" ), produced a -9.93% total return for the same period.(2) We attribute the market and fund' s performance to a difficult investment environment. However, we are pleased that our stock selection strategy enabled us to produce higher returns than the MSCI EMF Index. We were also encouraged that emerging markets produced generally better returns than the developed markets, including the United States and many European countries. What is the fund's investment approach? We use a value-oriented and research-driven approach to security selection within each market, investing in companies located in emerging market countries as represented in our benchmark, the MSCI EMF Index, or in any other country that we believe has an emerging market or economy. Countries currently represented in the benchmark include Argentina, Brazil, Chile, China, Colombia, the Czech Republic, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Pakistan, Peru, the Philippines, Poland, Russia, Sri Lanka, South Africa, Taiwan, Thailand, Turkey and Venezuela. When choosing stocks for the fund, we begin by conducting fundamental and quantitative research that focuses on individual companies rather than broad economic and industry trends. More specifically, we look for investment opportunities by focusing on three key factors: VALUE, or how a stock is valued relative to its intrinsic worth based on traditional measures; BUSINESS HEALTH, or a company' s overall efficiency and The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) profitability as measured by its return on assets and return on equity; and BUSINESS MOMENTUM, or the presence of a catalyst that will potentially trigger an increase in the stock's price in the near- or midterm. What other factors influenced the fund's performance? The fund was primarily influenced by events that took place outside of the emerging markets. When the reporting period began, the emerging markets were adversely affected by the economic slowdown in the United States. Later in the reporting period, the September 11 terrorist attacks intensified U.S. economic weakness, pushing any prospect of recovery into 2002. Because the emerging markets rely heavily on exports to industrialized nations for their own economic growth, weakening demand from Europe and the United States led to lower stock prices. However, many analysts were surprised by the resilience of the U.S. stock market in the wake of the terrorist attacks. Ultimately, that resilience resulted in a healthy rebound in the emerging markets as well. In fact, while emerging markets fell sharply in the weeks immediately following September 11, by the end of September they had made up some losses, and all of the losses and more were made up by the end of November. Many emerging market investors apparently believed that the worst was over, and that they would be best served by looking past the economic slowdown. Another factor that greatly influenced the fund was the compellingly low valuations found in the emerging markets, especially when compared to stocks in U.S. and European markets. When developed markets began to falter, many investors sold their emerging market positions because they expected them to fall as well. That sell-off, which occurred at the beginning of the reporting period, drove stock prices down further, resulting in what we thought were very attractive valuations. In this environment, we made few changes to the fund's sector and geographical allocations. As "bottom-up" stock pickers, we choose stocks based on their individual merits rather than trying to fill a quota of stocks in any particular industry group or country. That said, how- ever, utilities stocks detracted most from the fund's returns, primarily because the fund held a greater percentage of utilities stocks than the MSCI EMF Index. These stocks suffered when oil and gas prices fell and a weakening economy reduced demand for electricity. On the other hand, consumer discretionary stocks made the most positive contribution to the fund's performance, primarily because lower global interest rates helped spur retail spending. What is the fund's current strategy? We are very pleased with the recent positive returns in the emerging markets. We are also encouraged by improving prospects for a global economic recovery, which, if sustained, should benefit the emerging markets. As of the end of the reporting period, we have found many companies with solid fundamentals that we believe are selling at attractive valuations. Among them are an Indian petroleum and chemical company, a Korean automobile manufacturer, a Mexican soda and beer bottling company and a Taiwanese semiconductor company. In our view, these four companies are excellent examples of the fund's strategy of investing in a diverse group of industries and countries. December 14, 2001 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF GROSS DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE (MSCI EMF) INDEX IS A MARKET CAPITALIZATION-WEIGHTED INDEX COMPOSED OF COMPANIES REPRESENTATIVE OF THE MARKET STRUCTURE OF EMERGING MARKET COUNTRIES IN EUROPE, LATIN AMERICA AND THE PACIFIC BASIN. The Fund STATEMENT OF INVESTMENTS November 30, 2001 (Unaudited)
COMMON STOCKS--90.7% Shares Value ($) ---------------------------------------------------------------------------------------------------------------------------- ARGENTINA--.5% Banco Hipotecario 197,290 (a) 604,663 Telecom Argentina Stet - France Telecom, ADR 130,250 781,500 1,386,163 BRAZIL--6.9% Companhia de Saneamento Basico do Estado de Sao Paulo 45,280 (a) 2,404,649 Companhia Vale do Rio Doce, ADR 126,700 2,717,715 Petroleo Brasileiro, ADR 133,700 2,707,425 Tele Celular Sul Participacoes, ADR 113,550 1,544,280 Tele Norte Leste Participacoes, ADR 189,439 2,510,067 Telecomunicacoes Brasileiras, ADR 79,300 2,773,121 Ultrapar Participacoes, ADR 210,200 1,397,830 Unibanco, GDR 83,900 1,661,220 Votorantim Celulose e Papel, ADR 72,000 1,083,600 18,799,907 CHILE--1.6% Compania de Telecomunicaciones de Chile, ADR 196,933 (a) 2,264,729 Quinenco, ADR 310,700 (a) 2,019,550 4,284,279 CHINA--2.6% PetroChina, Cl. H 4,019,000 685,423 PetroChina, ADR 78,600 1,382,574 Qingling Motors, Cl. H 9,215,000 1,595,211 Shandong International Power Development, Cl. H 7,364,000 1,605,283 Sinopec Yizheng Chemical Fibre, Cl. H 13,117,400 1,682,041 6,950,532 CROATIA--1.2% Pliva d.d., GDR 323,300 (b) 3,168,340 CZECH REPUBLIC--.4% CEZ 442,700 958,528 Komercni Banka, GDR 2 (a,b) 18 958,546 EGYPT--2.7% Commercial International Bank, GDR 434,800 (b) 2,609,017 Misr International Bank, ADR 546,075 (b) 1,187,713 Orascom Construction Industries 123,283 933,984 Paints & Chemical Industries, GDR 669,700 (a,b) 652,958 Suez Cement, GDR 268,131 (b) 1,917,137 7,300,809 COMMON STOCKS (CONTINUED) Shares Value ($) ---------------------------------------------------------------------------------------------------------------------------- GREECE--.0% Hellenic Telecommunications Organization 595 10,089 HONG KONG--3.5% Brilliance China Automotive 5,285,000 1,077,534 CNOOC 1,147,000 1,081,035 CNOOC, ADR 56,300 1,074,204 China Mobile (Hong Kong), ADR 58,000 (a) 1,024,280 China Pharmaceutical Enterprise and Investment 8,592,000 (a) 859,365 Hengan International 5,217,400 1,488,583 Mandarin Oriental International 1,925,000 741,125 Shanghai Industrial Holdings 1,174,900 2,101,668 9,447,794 HUNGARY--2.7% EGIS 29,994 1,242,567 MOL Magyar Olaj-es Gazipari 58,341 1,048,570 Magyar Tavkozlesi 781,173 2,552,244 OTP Bank 45,100 2,503,995 7,347,376 INDIA--11.8% BSES, GDR 161,300 (b) 2,096,900 Bajaj Auto, GDR 311,400 (b) 2,646,900 Gas Authority of India, GDR 378,400 (b) 3,169,100 Grasim Industries, GDR 160,200 (b) 1,021,275 ICICI, ADR 129,500 778,295 Indian Hotels 357,579 1,211,212 Indian Hotels, GDR 105,950 (b) 516,506 Mahanagar Telephone Nigam, ADR 941,500 5,488,945 Mahindra & Mahindra, GDR 901,400 (b) 1,599,985 NIIT 224,700 989,611 Reliance Industries 149,200 879,368 Reliance Industries, GDR 38,100 (b) 480,060 State Bank of India, GDR 322,000 (b) 2,817,500 Tata Engineering & Locomotive, GDR 1,296,300 (a,b) 2,735,193 Videsh Sanchar Nigam, ADR 592,822 5,400,608 31,831,458 INDONESIA--1.7% PT Indah Kiat Pulp & Paper 20,851,000 (a,c) 313,811 PT Indofood Sukses Makmur 23,842,000 1,423,913 PT Indonesian Satellite, ADR 142,100 1,146,747 The Fund STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ---------------------------------------------------------------------------------------------------------------------------- INDONESIA (CONTINUED) PT Indo-Rama Synthetics 500 (a) 20 PT Telekomunikasi Indonesia 1,500,000 394,171 PT Telekomunikasi Indonesia, ADR 253,900 1,353,287 4,631,949 ISRAEL--2.8% AudioCodes 210,900 (a) 826,728 Bank Hapoalim 2,625,900 5,364,675 ECI Telecom 318,000 1,494,600 7,686,003 MALAYSIA--3.0% Berjaya Sports Toto 1,095,000 1,772,171 Genting 777,100 2,004,100 Perusahaan Otomobil Nasional 138,000 268,737 Petronas Gas 801,000 1,285,816 Sime Darby 2,426,800 2,848,297 8,179,121 MEXICO--10.3% Alfa, Ser. A 2,253,300 2,468,499 Apasco 793,100 3,523,551 Consorcio ARA 910,600 (a) 1,474,620 Controladora Comercial Mexicana 1,344,300 918,606 Controladora Comercial Mexicana, GDR 63,900 870,957 Desc, Ser. B 6,052,600 2,232,099 Fomento Economico Mexicano, ADR 55,200 1,879,008 Grupo Continental 1,386,450 1,804,588 Grupo Financiero Banorte 242,700 (a) 462,261 Kimberly-Clark de Mexico, Cl. A 1,754,600 4,853,007 Pepsi-Gemex, GDR 483,200 (a) 2,222,720 Telefonos de Mexico, Ser. L, ADR 157,300 5,271,123 27,981,039 PANAMA--1.1% Banco Latinoamericano de Exportaciones, Cl. E 91,200 2,850,000 PHILIPPINES--3.1% Bank of the Philippine Islands 1,307,825 1,296,496 First Philippine Holdings 430,660 (a) 223,827 La Tondena Distillers 1,353,500 631,807 Manila Electric, Cl. B 5,405,264 (a) 3,329,518 Philippine Long Distance Telephone 51,870 426,842 COMMON STOCKS (CONTINUED) Shares Value ($) ---------------------------------------------------------------------------------------------------------------------------- PHILIPPINES (CONTINUED) Philippine Long Distance Telephone, ADR 203,150 1,600,822 San Miguel, Cl. B 254,300 252,097 Universal Robina 7,937,160 656,974 8,418,383 POLAND--1.9% KGHM Polska Miedz 701,790 2,426,636 Polski Koncern Naftowy Orlen 294,100 1,339,022 Powszechny Bank Kredytowy 54,617 1,431,524 5,197,182 RUSSIA--.9% LUKOIL, ADR 54,800 2,433,463 SOUTH AFRICA--5.8% ABSA 511,182 1,728,851 Aveng 548,800 435,938 Barloworld, ADR 40 224 Edgars Consolidated Stores 415,550 1,093,553 Foschini 1,517,123 1,123,795 Metro Cash and Carry 6,623,005 (a) 1,452,413 Nampak 2,323,000 2,716,959 Nedcor 295,600 3,432,921 Sage 543,639 474,227 Steinhoff International 320,371 243,557 Tiger Brands 355,000 2,262,866 Woolworths 1,990,587 785,758 15,751,062 SOUTH KOREA--12.9% Cheil Communications 11,320 1,080,221 Cheil Jedang 42,400 1,471,293 Hyundai Motor 29,810 597,140 Kookmin Bank, ADR 139,655 (a) 5,572,235 Korea Electric Power 353,400 6,410,252 Korea Electric Power, ADR 64,500 648,870 Korea Fine Chemical 56,556 869,749 Korea Telecom, ADR 73,200 1,701,900 Pohang Iron & Steel 23,200 1,957,729 Pohang Iron & Steel, ADR 190,600 4,040,720 SK 508,199 6,112,015 Samsung 356,820 2,135,855 The Fund STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ---------------------------------------------------------------------------------------------------------------------------- SOUTH KOREA (CONTINUED) Samsung Electronics 13,490 2,319,259 34,917,238 TAIWAN--7.9% Advanced Semiconductor Engineering 3,441,100 (a) 2,369,380 Bank Sinopac 4,885,000 (a) 1,915,965 China Steel 4,626,750 1,774,349 China Steel, ADR 102,643 (b) 795,483 Compal Electronics 2,298,375 2,403,879 D-Link 1,173,100 1,431,441 Elan Microelectronics 1,272,500 1,549,034 Nan Ya Plastic 4,297,140 2,509,370 Nien Hsing Textile 1,640,000 (a) 995,816 Standard Foods Taiwan 3,316,984 674,576 Standard Foods Taiwan, GDR 978 (b) 1,003 Taiwan Semiconductor Manufacturing 1,192,400 (a) 2,528,913 United Microelectronics 2,087,000 (a) 2,395,017 21,344,226 THAILAND--1.9% Hana Microelectronics 643,800 996,436 PTT Exploration and Production 525,300 1,339,105 Saha-Union 2,220,300 651,915 Thai Farmers Bank 4,372,600 (a) 2,119,867 5,107,323 TURKEY--1.5% Akcansa Cimento 177,832,200 1,070,120 Hurriyet Gazetecilik ve Matbaacilik 578,854,680 (a) 1,369,838 Turk Ekonomi Bankasi, ADR 299,525 (a,b) 486,728 Uzel Makina Sanayii, ADR 290,050 (a) 210,286 Yapi ve Kredi Bankasi 401,187,100 (a) 1,003,646 4,140,618 UNITED KINGDOM--2.0% Old Mutual 1,896,400 2,864,311 South African Breweries 385,000 2,633,215 5,497,526 TOTAL COMMON STOCKS (cost $286,921,886) 245,620,426 PREFERRED STOCKS--2.1% Shares Value ($) ---------------------------------------------------------------------------------------------------------------------------- BRAZIL: Companhia Energetica de Minas Gerais 309,557 ( a) 3,785,409 Petroleo Brasileiro 97,000 1,908,898 TOTAL PREFERRED STOCKS (cost $6,442,910) 5,694,307 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--4.2% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. TREASURY BILLS: 1.98%, 12/6/2001 1,804,000 1,803,711 2.03%, 12/13/2001 3,407,000 3,405,228 1.92%, 12/20/2001 5,807,000 5,801,948 2.15%, 12/27/2001 301,000 300,636 2.16%, 1/17/2002 102,000 101,745 TOTAL SHORT-TERM INVESTMENTS (cost $11,411,552) 11,413,268 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $304,776,348) 97.0% 262,728,001 CASH AND RECEIVABLES (NET) 3.0% 8,231,185 NET ASSETS 100.0% 270,959,186 (A) NON-INCOME PRODUCING. (B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT NOVEMBER 30, 2001, THESE SECURITIES AMOUNTED TO $27,901,816 OR 10.3% OF NET ASSETS. (C) SECURITY RESTRICTED AS TO PUBLIC RESALE. INVESTMENT IN THE RESTRICTED SECURITY, WITH AN AGGREGATE VALUE OF $313,811 REPRESENTING .1% OF NET ASSETS IS AS FOLLOWS:
Acquisition Purchase Price Net ISSUER Date Proceeds ($) Assets (%) Valuation ($)* ------------------------------------------------------------------------------------------------------------------------------------ PT Indah Kiat Pulp & Paper 8/21/1997-2/1/2001 0.21 0.1 0.015 * THE VALUATION OF THESE SECURITIES HAS BEEN DETERMINED IN GOOD FAITH UNDER THE DIRECTION OF THE BOARD OF DIRECTORS.
SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF ASSETS AND LIABILITIES November 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 304,776,348 262,728,001 Cash 813,058 Cash denominated in foreign currencies 7,290,433 7,351,513 Receivable for shares of Common Stock subscribed 1,383,315 Receivable for investment securities sold 1,311,124 Dividends receivable 438,316 Prepaid expenses 16,029 274,041,356 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 327,021 Payable for investment securities purchased 2,071,177 Payable for shares of Common Stock redeemed 471,362 Net unrealized depreciation on forward currency exchange contracts--Note 4(a) 13,641 Accrued expenses 198,969 3,082,170 -------------------------------------------------------------------------------- NET ASSETS ($) 270,959,186 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 334,470,374 Accumulated undistributed investment income--net 4,464,138 Accumulated net realized gain (loss) on investments and foreign currency transactions (26,003,679) Accumulated net unrealized appreciation (depreciation) on investments and foreign currency transactions--Note 4(b) (41,971,647) -------------------------------------------------------------------------------- NET ASSETS ($) 270,959,186 -------------------------------------------------------------------------------- SHARES OUTSTANDING (100 million shares of $.001 par value Common Stock authorized) 24,598,129 NET ASSET VALUE, offering and redemption price per share--Note 3(d) ($) 11.02 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended November 30, 2001 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $327,071 foreign taxes withheld at source) 4,601,137 Interest 31,316 TOTAL INCOME 4,632,453 EXPENSES: Management fee--Note 3(a) 1,528,238 Shareholder servicing costs--Note 3(b) 413,945 Custodian fees 216,726 Registration fees 22,436 Professional fees 14,787 Prospectus and shareholders' reports 14,420 Directors' fees and expenses--Note 3(c) 7,998 Loan commitment fees--Note 2 2,300 Miscellaneous 10,637 TOTAL EXPENSES 2,231,487 INVESTMENT INCOME--NET 2,400,966 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments and foreign currency transactions (5,925,797) Net realized gain (loss) on forward currency exchange contracts (245,239) NET REALIZED GAIN (LOSS) (6,171,036) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (9,686,195) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (15,857,231) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (13,456,265) SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Six Months Ended November 30, 2001 Year Ended (Unaudited) May 31, 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 2,400,966 2,473,982 Net realized gain (loss) on investments (6,171,036) (14,701,456) Net unrealized appreciation (depreciation) on investments (9,686,195) 6,577,994 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (13,456,265) (5,649,480) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net -- (2,498,924) Net realized gain on investments -- (29,726,012) TOTAL DIVIDENDS -- (32,224,936) -------------------------------------------------------------------------------- CAPITAL STOCK TRANSACTIONS ($): Net proceeds from shares sold 77,961,233 206,504,644 Dividends reinvested -- 25,171,939 Cost of shares redeemed (50,728,354) (162,750,915) Redemption fee -- 99,919 INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS 27,232,879 69,025,587 TOTAL INCREASE (DECREASE) IN NET ASSETS 13,776,614 31,151,171 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 257,182,572 226,031,401 END OF PERIOD 270,959,186 257,182,572 Undistributed investment income--net 4,464,138 2,063,172 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): Shares sold 7,412,906 15,872,502 Shares issued for dividends reinvested -- 2,282,134 Shares redeemed (4,888,784) (12,682,293) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 2,524,122 5,472,343 SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements.
Six Months Ended November 30, 2001 Year Ended May 31, ---------------------------------------------------------- (Unaudited) 2001 2000 1999 1998 1997(a) ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.65 13.61 12.55 11.18 14.21 12.50 Investment Operations: Investment income--net .10(b) .13(b) .22(b) .14 .04 .05 Net realized and unrealized gain (loss) on investments (.73) (.37) 1.95 1.33 (2.62) 1.70 Total from Investment Operations (.63) (.24) 2.17 1.47 (2.58) 1.75 Distributions: Dividends from investment income--net -- (.13) (.11) (.09) (.02) (.02) Dividends from net realized gain on investments -- (1.59) (1.01) (.02) (.24) (.02) Dividends in excess of net realized gain on investments -- (--) -- -- (.20) -- Total Distributions -- (1.72) (1.12) (.11) (.46) (.04) Redemption fee added to paid-in capital .00(c) .00(c) .01 .01 .01 -- Net asset value, end of period 11.02 11.65 13.61 12.55 11.18 14.21 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (5.41)(d) (.99) 16.54 13.56 (18.11) 14.07(d) ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .92(d) 1.79 1.85 1.88 1.94 1.85(d) Ratio of net investment income to average net assets .98(d) 1.02 1.48 1.42 .54 .70(d) Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- -- -- .00(e) .36(d) Portfolio Turnover Rate 29.74(d) 78.00 105.84 87.81 87.46 52.52(d) ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 270,959 257,183 226,031 94,354 74,828 50,382 (A) FROM SEPTEMBER 28, 1996 (COMMENCEMENT OF OPERATIONS) TO MAY 31, 1997. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) NOT ANNUALIZED. (E) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS. The Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1--Significant Accounting Policies: Dreyfus Emerging Markets Fund (the "fund") is a separate non-diversified series of Dreyfus International Funds, Inc. (the "Company"), which is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and operates as a series company currently offering one series, including the fund. The fund's investment objective is long-term capital appreciation. The Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A, which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, 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 series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund' s financial statements are prepared in accordance with accounting principles generally accepted in the United States, 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 curren- cies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amount of dividends, interest and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the fund received net earnings credits of $1,568 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized cap The Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) ital gain can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gain. (e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in 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. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility") to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended November 30, 2001, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (a) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of 1.25% of the value of the fund's average daily net assets and is payable monthly. (b) Under the Shareholder Services Plan, the fund pays the Distributor at an annual rate of .25 of 1% of the value of the fund's average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended November 30, 2001, the fund was charged $305,648 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 November 30, 2001, the fund was charged $38,966 pursuant to the transfer agency agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $40,000 and an attendance fee of $6,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Company's Emeritus Program Guidelines, Emeritus Boards members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. (d) A 1% redemption fee is charged and retained by the fund on shares redeemed within six months following the date of issuance, including redemptions made through the use of the fund's exchange privilege. NOTE 4--Securities Transactions: (a) The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward currency exchange contracts, during the period ended November 30, 2001, amounted to $94,390,256 and $69,253,425, respectively. The fund enters into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the fund would incur a loss if the value of the con- The Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) tract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward currency exchange contracts, the fund would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract. The following summarizes open forward currency exchange contracts at November 30, 2001:
Foreign Forward Currency Currency Unrealized Exchange Contracts Amounts Cost ($) Value ($) (Depreciation) ($) ------------------------------------------------------------------------------------------------------------------------------------ PURCHASES: South Africa Rand, expiring 12/3/2001 3,767,459 380,840 367,199 (13,641)
(b) At November 30, 2001, accumulated net unrealized depreciation on investments and forward currency exchange contracts was $42,061,988, consisting of $16,802,786 gross unrealized appreciation and $58,864,774 gross unrealized depreciation. At November 30, 2001, 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). For More Information Dreyfus Emerging Markets Fund 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-645-6561 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 BY E-MAIL Send your request to info@dreyfus.com ON THE INTERNET Information can be viewed online or downloaded from: http://www.dreyfus.com (c) 2002 Dreyfus Service Corporation 327SA1101