DREYFUS NEW LEADERS FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1997
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus New Leaders Fund, Inc. (the "Fund"), dated May 1, 1997, as it may be
revised from time to time. To obtain a copy of the Fund's Prospectus, please
write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-
0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies................B-2
Management of the Fund......................................B-9
Management Agreement........................................B-13
Purchase of Shares..........................................B-15
Shareholder Services Plan...................................B-15
Redemption of Shares........................................B-16
Shareholder Services........................................B-18
Determination of Net Asset Value............................B-21
Dividends, Distributions and Taxes..........................B-22
Portfolio Transactions......................................B-24
Performance Information.....................................B-25
Information About the Fund..................................B-26
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors..........................B-26
Financial Statements........................................B-27
Report of Independent Auditors..............................B-38
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the Fund"
and "Appendix."
Portfolio Securities
Repurchase Agreements. The Fund's custodian or sub-custodian will have
custody of, and will hold in a segregated account, securities acquired by the
Fund under a repurchase agreement. Repurchase agreements are considered by
the staff of the Securities and Exchange Commission to be loans by the Fund.
In an attempt to reduce the risk of incurring a loss on a repurchase
agreement, the Fund will enter into repurchase agreements only with domestic
banks with total assets in excess of $1 billion, or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below the resale price.
Convertible Securities. Although to a lesser extent than with fixed-
income securities, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stock. A unique feature of convertible
securities is that as the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield basis,
and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
Convertible securities are investments that provide for a stable stream
of income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance
of capital appreciation, however, because securities prices fluctuate.
Convertible securities, however, generally offer lower interest or dividend
yields than non-convertible securities of similar quality because of the
potential for capital appreciation.
Illiquid Securities. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not readily
marketable, the Fund will endeavor, to the extent practicable, to obtain the
right to registration at the expense of the issuer. Generally, there will be
a lapse of time between the Fund's decision to sell any such security and the
registration of the security permitting sale. During any such period, the
price of the securities will be subject to market fluctuations. However,
where a substantial market of qualified institutional buyers develops for
certain unregistered securities purchased by the Fund pursuant to Rule 144A
under the Securities Act of 1933, as amended, the Fund intends to treat such
securities as liquid securities in accordance with procedures approved by the
Fund's Board. Because it is not possible to predict with assurance how the
market for specific restricted securities sold pursuant to Rule 144A will
develop, the Fund's Board has directed the Manager to monitor carefully the
Fund's investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. To the extent that, for a period of time qualified
institutional buyers cease purchasing restricted securities pursuant to Rule
144A, the Fund's investing in such securities may have the effect of
increasing the level of illiquidity in its investment portfolio during such
period.
Zero Coupon Securities. The Fund may invest in zero coupon U.S.
Treasury securities, which are Treasury Notes and Bonds that have been
stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. Zero coupon securities are issued by corporations
and financial institutions and constitute a proportionate ownership of the
issuer's pool of underlying U.S. Treasury securities. A zero coupon security
pays no interest to its holder during its life and is sold at a discount to
its face value at maturity. The amount of the discount fluctuates with the
market price of the security. The market prices of zero coupon securities
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having similar
maturities and credit qualities.
Management Policies
Short-Selling. Until the Fund closes its short position or replaces the
borrowed security, it will: (a) maintain a segregated account, containing
permissible liquid assets, at such a level that the amount deposited in the
account plus the amount deposited with the broker as collateral always equals
the current value of the security sold short; or (b) otherwise cover its
short position.
Lending Portfolio Securities. In connection with its securities lending
transactions, the Fund may return to the borrower or a third party which is
unaffiliated with the Fund, and which is acting as a "placing broker," a part
of the interest earned from the investment of collateral received for
securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must be
able to terminate the loan at any time; (4) the Fund must receive reasonable
interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection with
the loan; and (6) while voting rights on the loaned securities may pass to
the borrower, the Fund's Board must terminate the loan and regain the right
to vote the securities if a material event adversely affecting the investment
occurs.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest than
"traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease
the level of risk, or change the character of the risk, to which its
portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated with
Derivatives purchased on an exchange. By contrast, no clearing agency
guarantees over-the-counter Derivatives. Therefore, each party to an over-
the-counter Derivative bears the risk that the counterparty will default.
Accordingly, the Manager will consider the creditworthiness of counterparties
to over-the-counter Derivatives in the same manner as it would review the
credit quality of a security to be purchased by the Fund. Over-the-counter
Derivatives are less liquid than exchange-traded Derivatives since the other
party to the transaction may be the only investor with sufficient
understanding of the Derivative to be interested in bidding for it.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell,
the underlying security or securities at the exercise price at any time
during the option period, or at a specific date. Conversely, a put option
gives the purchaser of the option the right to sell, and obligates the writer
to buy, the underlying security or securities at the exercise price at any
time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written by
the Fund is covered when, among other things, cash or liquid securities
having a value equal to or greater than the exercise price of the option are
placed in a segregated account with the Fund's custodian to fulfill the
obligation undertaken. The principal reason for writing covered call and put
options is to realize, through the receipt of premiums, a greater return than
would be realized on the underlying securities alone. The Fund receives a
premium from writing covered call or put options which it retains whether or
not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may cease
to exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other unforeseen events, at
times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading rotations,
restrictions on certain types of orders or trading halts or suspensions in
one or more options. There can be no assurance that similar events, or
events that may otherwise interfere with the timely execution of customers'
orders, will not recur. In such event, it might not be possible to effect
closing transactions in particular options. If, as a covered call option
writer, the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise or it
otherwise covers its position.
Specific Options Transactions. The Fund may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities exchanges or
traded in the over-the-counter market. An option on a stock index is similar
to an option in respect of specific securities, except that settlement does
not occur by delivery of the securities comprising the index. Instead, the
option holder receives an amount of cash if the closing level of the stock
index upon which the option is based is greater than, in the case of a call,
or less than, in the case of a put, the exercise price of the option. Thus,
the effectiveness of purchasing or writing stock index options will depend
upon price movements in the level of the index rather than the price of a
particular stock.
The Fund may purchase and sell call and put options on foreign currency.
These options convey the right to buy or sell the underlying currency at a
price which is expected to be lower or higher than the spot price of the
currency at the time the option is exercised or expires.
Successful use by the Fund of options will be subject to the ability of
the Manager to predict correctly movements in the prices of individual stocks
or the stock market generally. To the extent such predictions are incorrect,
the Fund may incur losses.
Future Developments. The Fund may take advantage of opportunities in
the area of options and any other Derivatives which are not presently
contemplated for use by the Fund or which are not currently available but
which may be developed, to the extent such opportunities are both consistent
with the Fund's investment objective and legally permissible for the Fund.
Before entering into such transactions or making any such investment, the
Fund will provide appropriate disclosure in its Prospectus or Statement of
Additional Information.
Forward Commitments. The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate that will be received on a forward
commitment or when-issued security are fixed when the Fund enters into the
commitment, but the Fund does not make payment until it receives delivery
from the counterparty. The Fund will commit to purchase such securities only
with the intention of actually acquiring the securities, but the Fund may
sell these securities before the settlement date if it is deemed advisable.
A segregated account of the Fund consisting of cash, cash equivalents or U.S.
Government securities or other high quality liquid debt securities at least
equal at all times to the amount of the commitments will be established and
maintained at the Fund's custodian bank.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the
issuer and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when-issued basis may expose
the Fund to risks because they may experience such fluctuations prior to
their actual delivery. Purchasing securities on a when-issued basis can
involve the additional risk that the yield available in the market when the
delivery takes place actually may be higher than that obtained in the
transaction itself. Purchasing securities on a forward commitment or when-
issued basis when the Fund is fully or almost fully invested may result in
greater potential fluctuation in the value of the Fund's net assets and its
net asset value per share.
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 15 as
fundamental policies, which cannot be changed without approval by the holders
of a majority (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) of the Fund's outstanding voting shares. Investment
restrictions numbered 16 and 17 are not fundamental policies and may be
changed by a vote of a majority of the Fund's Board members at any time. The
Fund may not:
1. Purchase the securities of any issuer (other than a bank) if such
purchase would cause more than 5% of the value of its total assets to be
invested in securities of such issuer, or invest more than 15% of its assets
in the obligations of any one bank, except that up to 25% of the value of the
Fund's total assets may be invested, and securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities may be purchased,
without regard to such limitations.
2. Purchase the securities of any issuer if such purchase would cause
the Fund to hold more than 10% of the outstanding voting securities of such
issuer. This restriction applies only with respect to 75% of the Fund's
assets.
3. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.
4. Purchase securities of closed-end investment companies, except (a)
in the open market where no commission except the ordinary broker's
commission is paid, which purchases are limited to a maximum of (i) 3% of the
total voting stock of any one closed-end investment company, (ii) 5% of its
net assets with respect to any one closed-end investment company and (iii)
10% of its net assets in the aggregate, or (b) those received as part of a
merger or consolidation. The Fund has no present intention of investing in
securities of closed-end investment companies. The Fund may not purchase or
retain securities issued by open-end investment companies other than itself.
5. Purchase or retain the securities of any issuer if the officers or
Board members of the Fund or of the Manager who individually own beneficially
more than 1/2 of 1% of the securities of such issuer together own
beneficially more than 5% of the securities of such issuer.
6. Purchase, hold or deal in commodities or commodity contracts or in
real estate, but this shall not prohibit the Fund from investing in
securities of companies engaged in real estate activities or investments.
7. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of the
Fund's total assets).
8. Lend any funds or other assets, except through the purchase of a
portion of an issue of publicly distributed bonds, debentures or other debt
securities, or the purchase of bankers' acceptances and commercial paper of
corporations. However, the Fund may lend its portfolio securities in any
amount not to exceed 10% of the value of its total assets. Any loans of
portfolio securities will be made according to guidelines established by the
Securities and Exchange Commission and the Fund's Board.
9. Act as an underwriter of securities of other issuers.
10. Invest in the securities of a company for the purpose of exercising
management or control, but the Fund will vote the securities it owns in its
portfolio as a shareholder in accordance with its views.
11. Purchase securities on margin, but the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and
sales of securities.
12. Engage in the purchase and sale of put, call, straddle or spread
options or in writing such options, except that the Fund (a) may purchase put
and call options to the extent that the premiums paid by it on all
outstanding options at any one time do not exceed 5% of its total assets and
may enter into closing sale transactions with respect to such options and (b)
may write and sell covered call option contracts on securities owned by the
Fund not exceeding 20% of the value of its net assets at the time such option
contracts are written. The Fund also may purchase call options without
regard to the 5% limitation set forth above to enter into closing purchase
transactions. In connection with the writing of covered call options, the
Fund may pledge assets to an extent not greater than 20% of the value of its
total assets at the time such options are written.
13. Invest more than 25% of its assets in investments in any particular
industry or industries, provided that, when the Fund has adopted a temporary
defensive posture, there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, bankers' acceptances of domestic issuers, time deposits
and certificates of deposit.
14. Purchase warrants in excess of 2% of net assets. For purposes of
this restriction, such warrants shall be valued at the lower of cost or
market, except that warrants acquired by the Fund in units or attached to
securities shall not be included within this 2% restriction.
15. Invest in interests in oil, gas or mineral exploration or
development programs.
16. Pledge, mortgage, hypothecate or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the
extent related to the purchase of securities on a when-issued or forward
commitment basis and the deposit of assets in escrow in connection with
writing covered put and call options and collateral and initial or variation
margin arrangements with respect to options and forward contracts, including
those relating to indices, and options on indices.
17. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid if, in
the aggregate, more than 15% of the value of the Fund's net assets would be
so invested.
While not a fundamental policy, the Fund will not invest in oil, gas,
and other mineral leases, or real estate limited partnerships.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in values or
assets will not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best interest
of the Fund and its shareholders, the Fund reserves the right to revoke the
commitment by terminating the sale of Fund shares in the state involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
Board Members of the Fund
DAVID W. BURKE, Board Member. Chairman of the Board of Governors, an
independent board within the United States Information Agency, since
August 1995. From August 1994 to December 1994, Mr. Burke was a
Consultant to the Manager and, from October 1990 to August 1994, he was
Vice President and Chief Administrative Officer of the Manager. From
1977 to 1990, Mr. Burke was involved in the management of national
television news, as Vice-President and Executive Vice President of ABC
News, and subsequently as President of CBS News. He is 61 years old and
his address is Box 654, Eastham, Massachusetts 02642.
HODDING CARTER, III, Board Member. Chairman of MainStreet, a television
production company. Since 1995, Knight Professor of public affairs
journalism, The University of Maryland. From 1985 to 1986, he was
editor and chief correspondent of "Capitol Journal," a weekly Public
Broadcasting System ("PBS") series on Congress. From 1981 to 1984, he
was anchorman and chief correspondent for PBS' "Inside Story," a
regularly scheduled half-hour critique of press performance. From 1977
to July 1980, Mr. Carter served as Assistant Secretary of State for
Public Affairs and as Department of State spokesman. He is 62 years old
and his address is c/o Main Street, 918 Sixteenth Street, N.W.,
Washington, D.C. 20006.
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is also
Chairman of the Board of Directors of Noel Group, Inc., a venture
capital company; and a director of The Muscular Dystrophy Association,
HealthPlan Services Corporation, Carlyle Industries, Inc. (formerly,
Belding Heminway Company, Inc.), a button packager and distributor,
Curtis Industries Inc., a national distributor of security products,
chemicals, automotive and other hardware, and Staffing Resources, Inc.
For more than five years prior to January 1995, he was President, a
director and, until August 1994, Chief Operating Officer of the Manager
and Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until August
24, 1994, the Fund's distributor. From August 1994 to December 31,
1994, he was a director of Mellon Bank Corporation. He is 53 years old
and his address is 200 Park Avenue, New York, New York 10166.
EHUD HOUMINER, Board Member. Since July 1991, Professor and Executive-in-
Residence at the Columbia Business School, Columbia University. Since
January 1996, principal of Lear, Yavitz and Associates, a management
consultant firm. He was President and Chief Executive Officer of Philip
Morris USA, manufacturers of consumer products, from December 1988 until
September 1990. He also is a Director of Avnet Inc. He is 56 years old
and his address is c/o Columbia Business School, Columbia University,
Uris Hall, Room 526, New York, New York 10027.
RICHARD C. LEONE, Board Member. President of The Twentieth Century Fund,
Inc., a tax exempt research foundation engaged in the study of economic,
foreign policy and domestic issues. From April 1990 to March 1994, he
was Chairman and, from April 1988 to March 1994, a Commissioner of The
Port Authority of New York and New Jersey. A member in 1985, and from
January 1986 to January 1989, Managing Director of Dillon, Read & Co.
Inc. Mr. Leone is also a director of Resource Mortgage Capital, Inc.
He is 57 years old and his address is 41 East 70th Street, New York, New
York 10021.
HANS C. MAUTNER, Board Member. Chairman, Trustee and Chief Executive Officer
of Corporate Property Investors, a real estate investment company.
Since January 1986, a Director of Julius Baer Investment Management,
Inc., a wholly-owned subsidiary of Julius Baer Securities, Inc. He is
59 years old and his address is 305 East 47th Street, New York, New York
10017.
ROBIN A. SMITH, Board Member. Since 1993, Vice President, and from March
1992 to October 1993, Executive Director, of One to One Partnership,
Inc., a national non-profit organization that seeks to promote mentoring
and economic empowerment for at-risk youths. From June 1986 to February
1992, she was an investment banker with Goldman, Sachs & Co. She is
also a Trustee of Westover School and a Board member of the Jacobs A.
Riis Settlement House. She is 33 years old and her address is 399 Park
Avenue, 19th Floor, New York, New York 10022.
JOHN E. ZUCCOTTI, Board Member. Since November 1996, Chairman and Chief
Executive Officer of World Financial Properties, Inc. From 1990 to
November 1996, he was the President and Chief Executive Officer of
Olympia & York Companies (U.S.A.). From 1986 to 1990, he was a partner
in the law firm of Brown & Wood, and from 1978 to 1986, a partner in the
law firm of Tufo & Zuccotti. First Deputy Mayor of the City of New York
from December 1975 to June 1977, and Chairman of the City Planning
Commission for the City of New York from 1973 to 1975. Mr. Zuccotti is
also a Director of Olympia & York Companies (U.S.A.), Starrett Housing
Corporation, a construction, development and real estate properties
corporation, and Capstone Pharmacy Services, Inc. He is 59 years old
and his address is 1 Liberty Plaza, 6th Floor, New York, New York 10006.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the Fund
who are not "interested persons" of the Fund, as defined in the 1940 Act,
will be selected and nominated by the Board members who are not "interested
persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by the Fund and by all other funds in
The Dreyfus Family of Funds for which such person is a Board member (the
number of which is set forth in parenthesis next to each Board member's total
compensation) for the year ended December 31, 1996, is as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund(1) Board Member
--------------- ------------------ ---------------------
David W. Burke $5,000 $232,699 (51)
Hodding Carter, III $5,000 $ 39,325 (7)
Joseph S. DiMartino $6,250 $517,075 (93)
Ehud Houminer $5,000 $ 48,769 (11)
Richard C. Leone $4,500 $ 38,825 (7)
Hans C. Mautner $4,500 $ 36,325 (7)
Robin A. Smith $5,000 $ 39,325 (7)
John E. Zuccotti $4,500 $ 39,325 (7)
(1) Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $3,443 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. She is 39 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992 to
July 1994, he served as Counsel for The Boston Company Advisors, Inc.
He is 32 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor of
Treasury Services and Administration of Funds Distributor, Inc. and an
officer of other investment companies advised or administered by the
Manager. From April 1993 to January 1995, he was a Senior Fund
Accountant for Investors Bank & Trust Company. From December 1991 to
March 1993, he was employed as a Fund Accountant at The Boston Company,
Inc. He is 28 years old.
RICHARD W. INGRAM, Vice President and Assistant Secretary. Senior Vice
President and Director of Client Services and Treasury Operations of
Funds Distributor, Inc. and an officer of other investment companies
advised or administered by the Manager. From March 1994 to November
1995, he was Vice President and Division Manager for First Data Investor
Services Group. From 1989 to 1994, he was Vice President, Assistant
Treasurer and Tax Director - Mutual Funds at The Boston Company, Inc.
He is 41 years old.
MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of
the Distributor and an officer of other investment companies advised or
administered by the Manager. Prior to August 1993, he was employed as
an Associate Examiner at the National Association of Securities Dealers,
Inc. He is 28 years old.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor since September 1995, and an officer of
other investment companies advised or administered by the Manager. She
is 27 years old.
MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer. Director of
Strategic Client Initiatives for Funds Distributor, Inc. and an officer
of other investment companies advised or administered by the Manager.
From December 1989 through November 1996, he was employed by GE
Investments where he held various financial, business development and
compliance positions. He also served as Treasurer of the GE Funds and
as Director of the GE Investment Services. He is 35 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of the Funds
Distributor, Inc. and an officer of other investment companies advised
or administered by the Manager. From September 1989 to July 1994, she
was an Assistant Vice President and Client Manager for The Boston
Company, Inc. She is 33 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor and
an officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The Boston
Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 34 years old.
The address of all officers of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1% of
the Fund's voting securities outstanding on April 18, 1997.
The following entity is known by the Fund to own 5% or more of the
Fund's outstanding voting securities as of April 18, 1997: Charles Schwab &
Co. Inc., Reinvestment Account, Mutual Funds Department, 101 Montomery
Street, San Francisco, California 94104-4122, was the record owner of 7.342%
of the Fund's outstanding shares.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the
Fund, provided that in either event its continuance also is approved by a
majority of the Board members who are not "interested persons" (as defined in
the 1940 Act) of the Fund or the Manager, by vote cast in person at a meeting
called for the purpose of voting on such approval. The Agreement was
approved by shareholders on August 4, 1994, and was last approved by the
Fund's Board, including a majority of the Board members who are not
"interested persons" of any party to the Agreement, at a meeting held on
October 28, 1996. The Agreement is terminable without penalty, on not more
than 60 days' notice, by the Fund's Board or by vote of the holders of a
majority of the Fund's outstanding voting shares, or, on not less than 90
days' notice, by the Manager. The Agreement will terminate automatically in
the event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E. Canter,
Vice Chairman, Chief Investment Officer and a director; Lawrence S. Kash,
Vice Chairman-Distribution and a director; William T. Sandalls, Jr., Senior
Vice President and Chief Financial Officer; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Patrice M. Kozlowski, Vice President-Corporate
Communications; Mary Beth Leibig, Vice President-Human Resources; Jeffrey N.
Nachman, Vice President-Mutual Fund Accounting; Andrew S. Wasser, Vice
President-Information Systems; William V. Healey, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt and Frank V. Cahouet, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions, and provides the
Fund with portfolio managers who are authorized by the Board to execute
purchases and sales of securities. The Fund's portfolio managers are Paul
Kandel, Elaine Rees and Hilary R. Woods. The Manager also maintains a
research department with a professional staff of portfolio managers and
securities analysts who provide research services for the Fund and for other
funds advised by the Manager. All purchases and sales are reported for the
Board's review at the meeting subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures using its own resources, as it from time to time
deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The expenses
borne by the Fund include: taxes, interest, brokerage fees and commissions,
if any, fees of Board members who are not officers, directors, employees or
holders of 5% or more of the outstanding voting securities of the Manager,
Securities and Exchange Commission fees, state Blue Sky qualification fees,
advisory fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association fees, outside
auditing and legal expenses, costs of maintaining corporate existence, costs
of independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing stockholders, costs of shareholder
reports and corporate meetings and any extraordinary expenses. In addition,
Fund shares are subject to an annual service fee. See "Shareholder Services
Plan."
As compensation for the Manager's services, the Fund pays the Manager a
monthly management fee at the annual rate of .75 of 1% of the value of the
Fund's average daily net assets. For the fiscal years ended December 31,
1994, 1995 and 1996, the management fees payable to the Manager amounted to
$2,798,513, $3,734,387 and $5,339,903, respectively.
The Manager has agreed that if in any fiscal year the aggregate expenses
of the Fund, exclusive of taxes, brokerage, interest on borrowings and (with
the prior written consent of the necessary state securities commissions)
extraordinary expenses, but including the management fee, exceed 1-1/2% the
average value of the Fund's net assets for the fiscal year, the Fund may
deduct from the payment to be made to the Manager under the Agreement, or the
Manager will bear, such excess expense. Such deduction or payment, if any,
will be estimated daily, reconciled and effected or paid, as the case may be,
on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor on a
best efforts basis pursuant to an agreement which is renewable annually. The
Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies. In some states,
certain financial institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year in which the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
SHAREHOLDER SERVICES PLAN
The following information are supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services Plan."
The Fund has adopted a Shareholder Services Plan, pursuant to which the
Fund pays the Distributor for the provision of certain services to the
holders of Fund shares. 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 such shareholder accounts. Under the
Shareholder Services Plan, the Distributor may make payments to certain
financial institutions (which include banks), securities dealers and other
financial industry professionals (collectively, "Service Agents") in respect
of these services.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Board members for their review. In addition, the
Shareholder Services Plan provides that material amendments must be approved
by the Fund's Board, and by the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Fund and have no direct or
indirect financial interest in the operation of the Shareholder Services Plan
or in any agreements entered into in connection with the Shareholder Services
Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Shareholder Services Plan is subject to
annual approval by such vote of the Board members cast in person at a meeting
called for the purpose of voting on the Shareholder Services Plan. The
Shareholder Services Plan was last so approved on October 28, 1996. The
Shareholder Services Plan is terminable at any time by vote of a majority of
the Board members who are not "interested persons" and who have no direct or
indirect financial interest in the operation of the Shareholder Services Plan
or in any agreements entered into in connection with the Shareholder Services
Plan.
For the fiscal year ended December 31, 1996, the Fund was charged
$1,779,968 pursuant to the Shareholder Services Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Redemption Fee. The Fund will deduct a redemption fee equal to 1% of
the net asset value of Fund shares redeemed (including redemptions through
the use of the Fund Exchanges service) less than six months following the
issuance of such shares. The redemption fee will be deducted from the
redemption proceeds and retained by the Fund. For the fiscal year ended
December 31, 1996, the Fund retained $77,895 in redemption fees.
No redemption fee will be charged on the redemption or exchange of
shares (1) through the Fund's Automatic Withdrawal Plan or Dreyfus Auto-
Exchange Privilege, (2) through accounts that are reflected on the records of
the Transfer Agent as omnibus accounts approved by Dreyfus Service
Corporation, (3) through accounts established by Service Agents approved by
Dreyfus Service Corporation that utilize the National Securities Clearing
Corporation's networking system, or (4) acquired through the reinvestment of
dividends or capital gain distributions. The redemption fee may be waived,
modified or terminated at any time.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent acting on the
investor's behalf, and reasonably believed by the Transfer Agent to be
genuine. Ordinarily, the Fund will initiate payment for shares redeemed
pursuant to the Privilege on the next business day after receipt by the
Transfer Agent of a redemption request in proper form. Redemption proceeds
($1,000 minimum) will be transferred by Federal Reserve wire only to the
commercial bank account specified by the investor on the Account Application
or Shareholder Services Form, or to a correspondent bank if the investor's
bank is not a member of the Federal Reserve System. Fees ordinarily are
imposed by such bank and borne by the investor. Immediate notification by
the correspondent bank to the investor's bank is necessary to avoid a delay
in crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have also selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through the
Automated Clearing House ("ACH") system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Shares--Dreyfus
TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each owner
of a joint account, and each signature must be guaranteed. Signatures on
endorsed certificates submitted for redemption also must be guaranteed. The
Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations, as well as from participants in the New York Stock Exchange
Medallion Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-Guaranteed"
must appear with the signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators, trustees or
guardians, and may accept other suitable verification arrangements from
foreign investors, such as consular verification. For more information with
respect to signature-guarantees, please call one of the telephone numbers
listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the value of the Fund's
net assets at the beginning of such period. Such commitment is irrevocable
without the prior approval of the Securities and Exchange Commission. In the
case of requests for redemption in excess of such amount, the Fund's Board
reserves the right to make payments in whole or part in securities (which may
include non-marketable securities) or other assets of the Fund in case of an
emergency or any time a cash distribution would impair the liquidity of the
Fund to the detriment of the existing shareholders. In such event, the
securities would be valued in the same manner as the Fund's portfolio is
valued. If the recipient sold such securities, brokerage charges would be
incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods
as the Securities and Exchange Commission by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. A 1% redemption fee will be charged upon an exchange of
Fund shares where the exchange occurs less than six months following the
issuance of such shares. Shares of other funds purchased by exchange, will
be purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a sales load
will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively referred
to herein as "Purchased Shares") may be exchanged for shares of
other funds sold with a sales load (referred to herein as "Offered
Shares"), provided that, if the sales load applicable to the
Offered Shares exceeds the maximum sales load that could have been
imposed in connection with the Purchased Shares (at the time the
Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor or the investor's Service Agent
acting on the investor's behalf must give exchange instructions to the
Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the Account
Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions (including
over The Dreyfus Touchr automated telephone system) from any person
representing himself or herself to be the investor, and reasonably believed
by the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For
Dreyfus-sponsored Keogh Plans, IRAs and IRA's set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among the
funds in the Dreyfus Family of Funds. To exchange shares held in personal
retirement plans, the shares exchanged must have a current value of at least
$100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is available
only for existing accounts. Shares will be exchanged on the basis of
relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor will
be notified if his account falls below the amount designated to be exchanged
under this Privilege. In this case, an investor's account will fall to zero
unless additional investments are made in excess of the designated amount
prior to the next Auto-Exchange transaction. Shares held under IRA and other
retirement plans are eligible for this Privilege. Exchanges of IRA shares
may be made between IRA accounts and from regular accounts to IRA accounts,
but not from IRA accounts to regular accounts. With respect to all other
retirement accounts, exchanges may be made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or the
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield
on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the Dreyfus
Family of Funds of which the investor is a shareholder. Shares of other
funds purchased pursuant to this privilege will be purchased on the basis of
relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested without
imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum
sales load charged by the fund from which dividends or distributions
are being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in shares
of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Personal Retirement Plans. The
Fund makes available to corporations a variety of prototype pension and
profit-sharing plans including a 401(k) Salary Reduction Plan. In addition,
the Fund makes available Keogh Plans, IRAs, including SEP-IRAs, and IRA
"Rollover Accounts," and 403(b)(7) Plans. Plan support services are also
available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is $2,500
with no minimum on subsequent purchases. The minimum initial investment for
Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only
one participant is normally $750, with no minimum on subsequent purchases.
Individuals who open an IRA also may open a non-working spousal IRA with a
minimum investment of $250.
Each shareholder should read the prototype retirement plan and the
appropriate form of custodial agreement for further details as to
eligibility, service fees and tax implications, and should consult a tax
adviser.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
Valuation of Portfolio Securities. Portfolio securities, including
covered call options written, are valued at the last sale price on the
securities exchange or national securities market on which such securities
primarily are traded. Securities not listed on an exchange or national
securities market, or securities in which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available. Short-term investments are carried at
amortized cost, which approximates value. Market quotations for foreign
securities in foreign currencies are translated into U.S. dollars at the
prevailing rates of exchange. Any securities or other assets for which
recent market quotations are not readily available are valued at fair value
as determined in good faith by the Fund's Board. Expenses and fees,
including the management fee and fees under the Shareholder Services Plan,
are accrued daily and taken into account for the purpose of determining the
net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions
and Taxes."
Management believes that the Fund qualified as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"),
for the fiscal year ended December 31, 1996 and the Fund intends to continue
to so qualify if such qualification is in the best interests of its
shareholders. As a regulated investment company, the Fund will pay no
Federal income tax on net investment income and net realized securities gains
to the extent that such income and gains are distributed to shareholders in
accordance with applicable provisions of the Code. To qualify as a regulated
investment company, the Fund must distribute at least 90% of its net income
(consisting of net investment income and net short-term capital gain) to its
shareholders, derive less than 30% of its annual gross income from gain on
the sale of securities held for less than three months, and meet certain
asset diversification and other requirements. The term "regulated investment
company" does not imply the supervision of management or investment practices
or policies by any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the aggregate net asset value of the shares
below the cost of the investment. Such a dividend or distribution would be a
return of investment in an economic sense, although taxable as stated above.
In addition, the Code provides that if a shareholder holds shares of the Fund
for six months or less and has received a capital gain distribution with
respect to such shares, any loss incurred on the sale of such shares will be
treated as long-term capital loss to the extent of the capital gain
distribution received.
Depending upon the composition of the Fund's income, all or a portion of
the dividends paid by the Fund from net investment income may qualify for the
dividends received deduction allowable to certain U.S. corporate shareholders
("dividends received deduction"). In general, dividend income of the Fund
distributed to qualifying corporate shareholders will be eligible for the
dividends received deduction only to the extent that the Fund's income
consists of dividends paid by U.S. corporations. However, Section 246(c) of
the Code provides that if a qualifying corporate shareholder has disposed of
Fund shares not held for 46 days or more and has received a dividend from net
investment income with respect to such shares, the portion designated by the
Fund as qualifying for the dividends received deduction will not be eligible
for such shareholder's received deduction. In addition, the Code provides
other limitations with respect to the ability of a qualifying corporate
shareholder to claim the dividends received deduction in connection with
holding Fund shares.
The Fund may qualify for and may make an election permitted under
Section 853 of the Code so that shareholders may be eligible to claim a
credit or deduction on their Federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of qualified taxes paid or incurred by the Fund to foreign countries
(which taxes relate primarily to investment income). The Fund may make an
election under Section 853, provided that more than 50% of the value of the
Fund's total assets at the close of the taxable year consists of securities
in foreign corporations, and the Fund satisfies the applicable distribution
provisions of the Code. The foreign tax credit available to shareholders is
subject to certain limitations imposed by the Code.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains or losses. However, a portion of the gain or
loss realized from the disposition of foreign currencies (including foreign
currency denominated bank deposits) and non-U.S. dollar denominated
securities (including debt instruments and certain forward contracts and
options) may be treated as ordinary income or loss under Section 988 of the
Code. In addition, all or a portion of any gains realized from the sale or
other disposition of certain market discount bonds will be treated as
ordinary income under Section 1276 of the Code. Finally, all or a portion of
the gain realized from engaging in "conversion transactions" may be treated
as ordinary income under Section 1258 of the Code. "Conversion transactions"
are defined to include certain forward, futures, options and straddle
transactions, transactions marketed or sold to produce capital gains, or
transactions described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain forward contracts and options transactions will be treated as
60% long-term capital gain or loss and 40% short-term capital gain or loss.
Gain or loss will arise upon exercise or lapse of such contracts and options
as well as from closing transactions. In addition, any such contracts or
options remaining unexercised at the end of the Fund's taxable year will be
treated as sold for their then fair market value, resulting in additional
gain or loss to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain foreign currency
forward contracts or options may constitute "straddles." "Straddles" are
defined to include "offsetting positions" in actively traded personal
property. The tax treatment of "straddles" is governed by Sections 1092 and
1258 of the Code, which, in certain circumstances, overrides or modifies the
provisions of Sections 1256 and 988 of the Code. As such, all or a portion
of any short- or long-term capital gain from certain "straddle" transactions
may be recharacterized as ordinary income.
If a Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles" were
governed by Section 1256 of the Code. The Fund may make one or more
elections with respect to "mixed straddles." Depending on which election is
made, if any, the results to the Fund may differ. If no election is made, to
the extent the "straddle" and conversion transaction rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result
of the "straddle" and conversion transaction rules, short-term capital loss
on "straddle" positions may be recharacterized as long-term capital loss, and
long-term capital gains may be treated as short-term capital gains or
ordinary income.
If the Fund invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result in
the imposition of certain Federal income taxes on the Fund. In addition,
gain realized from the sale or other disposition of PFIC securities may be
treated as ordinary income under Section 1291 of the Code.
PORTFOLIO TRANSACTIONS
The Manager supervises the placement of orders on behalf of the Fund for
the purchase or sale of portfolio securities. Allocation of brokerage
transactions, including their frequency, is made in the best judgment of the
Manager and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders at the most favorable net
price. Subject to this consideration, the brokers selected include those
that supplement the Manager's research facilities with statistical data,
investment information, economic facts and opinions. Information so received
is in addition to and not in lieu of services required to be performed by the
Manager and the Manager's fee is not reduced as a consequence of the receipt
of such supplemental information. Such information may be useful to the
Manager in serving both the Fund and other funds which it manages and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to the Manager in carrying out its obligations to
the Fund.
Sales of Fund shares by a broker may be taken into consideration, and
brokers also will be selected because of their ability to handle special
executions such as are involved in large block trades or broad distributions,
provided the primary consideration is met. Large block trades may, in
certain cases, result from two or more funds in the Dreyfus Family of Funds
being engaged simultaneously in the purchase or sale of the same security.
Certain of the Fund's transactions in securities of foreign issuers may not
benefit from the negotiated commission rates available to the Fund for
transactions in securities of domestic issuers. When transactions are
executed in the over-the-counter market, the Fund will deal with the primary
market makers unless a more favorable price or execution otherwise is
obtainable. Foreign exchange transactions are made with banks or
institutions in the intrabank market at prices reflecting a mark-up or mark-
down and/or commission.
Portfolio turnover may vary from year to year, as well as within a year.
In periods in which extraordinary market conditions prevail, the Manager will
not be deterred from changing the Fund's investment strategy as rapidly as
needed, in which case, higher turnover rates can be anticipated which would
result in greater brokerage expenses. The overall reasonableness of
brokerage commissions paid is evaluated by the Manager based upon its
knowledge of available information as to the general level of commissions
paid by other institutional investors for comparable services.
In connection with its portfolio securities transactions for the fiscal
years ending 1994, 1995 and 1996, the Fund paid brokerage commissions of
$1,060,625, $1,464,060 and $1,602,234, respectively, none of which was paid
to the Distributor. The above figures for brokerage commissions paid do not
include gross spreads and concessions on principal transactions, which, where
determinable, amounted to $2,322,853, $4,301,177 and $3,835,482 in 1994, 1995
and 1996, respectively, none of which was paid to the Distributor.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance Information."
The Fund's average annual total return for the 1, 5 and 10 year periods
ended December 31, 1996, was 17.31%, 14.26% and 14.39%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number of
years in the period) and subtracting 1 from the result.
The Fund's total return for the period January 29, 1985 to December 31,
1996 was 478.80%. Total return is calculated by subtracting the amount of
the Fund's net asset value per share at the beginning of a stated period from
the net asset value per share at the end of the period (after giving effect
to the reinvestment of dividends and distributions during the period), and
dividing the result by the net asset value per share at the beginning of the
period. From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analysis supporting such ratings.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio managers and may refer to,
or include commentary by a portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors. Fund
advertisements also, from time to time, may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and nonassessable. Fund shares
are of one class and have equal rights as to dividends and in liquidation.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-of-
pocket expense. For the fiscal year ended December 31, 1996, the Fund paid
the Transfer Agent $406,516.
Mellon Bank, N.A. (the "Custodian"), the Manager's parent, One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's
investments. Under a custody agreement with the Fund, the Custodian holds
the Fund's securities and keeps all necessary accounts and records. For its
custody services, the Custodian receives a monthly fee based on the market
value of the Fund's domestic assets held in custody and receives certain
securities transactions charges. For the period May 10, 1996 (effective date
of custody agreement) through December 31, 1996, the Fund paid the Custodian
$45,299.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-
4982, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the Fund.
<TABLE>
<CAPTION>
DREYFUS NEW LEADERS FUND, INC.
STATEMENT OF INVESTMENTS DECEMBER 31, 1996
Common Stocks-95.6% Shares Value
__________ __________
<S> <C> <C>
Commerical Services-1.0%Boise Cascade Office Products................ (a) 115,000 $ 2,415,000
Robert Half International.............. (a) 150,000 5,156,250
____________
7,571,250
____________
Consumer Durables-2.5% Champion Enterprises................... (a) 250,000 4,875,000
Outboard Marine........................ 350,000 5,775,000
Sola International..................... (a) 225,000 8,550,000
____________
19,200,000
____________
Consumer Non-Durables-1.7% Bush Boake Allen....................... (a) 150,000 3,993,750
Warnaco Group, Cl. A................... 325,000 9,628,125
____________
13,621,875
____________
Consumer Services-5.2% Cox Radio, Cl. A....................... (a) 125,000 2,187,500
Individual Investors Group............. (a,b,c) 307,692 2,007,690
Meredith............................... 200,000 10,550,000
Primadonna Resorts..................... (a) 203,500 3,459,500
Scholastic............................. (a) 130,000 8,742,500
Station Casinos........................ (a) 480,000 4,860,000
Sun International Hotels............... (a) 150,000 5,475,000
Univision Communications, Cl. A........ (a) 100,000 3,700,000
____________
40,982,190
____________
Electronic Technology-9.2% Altera................................. (a) 80,000 5,815,000
Aspect Telecommunications.............. (a) 160,000 10,160,000
Auspex Systems......................... (a) 270,000 3,138,750
Read-Rite.............................. (a) 260,000 6,565,000
Rohr................................... (a) 500,000 11,312,500
Sanmina................................ (a) 115,000 6,497,500
Thermotrex............................. (a) 165,000 4,516,875
Thiokol................................ 250,000 11,187,500
VLSI Technology........................ (a) 250,000 5,968,750
Vitesse Semiconductor.................. (a) 150,000 6,825,000
____________
71,986,875
____________
Energy Minerals-3.3% Flores & Rucks......................... (a) 225,000 11,981,250
Nuevo Energy........................... (a) 49,100 2,553,200
Parker & Parsley Petroleum............. 300,000 11,025,000
____________
25,559,450
____________
Finance-20.3% ACE.................................... 150,000 9,018,750
Amerin................................. (a) 310,000 7,982,500
Berkley (W.R.)......................... 135,000 6,851,250
Capital Re............................. 225,000 10,490,625
CapMAC Holdings........................ 250,000 8,281,250
Charter One Financial.................. 145,100 6,094,200
Chittenden............................. 256,250 6,117,969
Colonial BancGroup, Cl. A.............. 122,000 4,880,000
CorVel................................. (a) 185,000 5,365,000
Dime Bancorp........................... (a) 440,000 6,490,000
Enhance Financial Services Group....... 250,000 9,125,000
Dreyfus New Leaders Fund, Inc.
Statement of Investments (continued) December 31, 1996
Common Stocks (continued) Shares Value
__________ __________
Finance (continued) Everest Reinsurance Holdings........... 367,800 $ 10,574,250
Executive Risk......................... 250,000 9,250,000
FINOVA Group........................... 148,000 9,509,000
Frontier Insurance Group............... 240,000 9,180,000
Greenpoint Financial................... 160,000 7,580,000
Hibernia, Cl. A........................ 405,000 5,366,250
Ohio Casualty.......................... 150,000 5,325,000
Presidential Life...................... 400,000 4,825,000
Reliance Group Holdings................ 810,000 7,391,250
Western National....................... 475,000 9,143,750
____________
158,841,044
____________
Health Services-3.3% Allegiance............................. 200,000 5,525,000
OccuSystems............................ (a) 100,000 2,700,000
Physician Sales & Service.............. (a) 260,000 3,737,500
Transition Systems..................... (a) 377,500 5,332,187
Universal Health Services, Cl. B....... (a) 310,000 8,873,750
____________
26,168,437
____________
Health Technology-8.5% Acuson................................. (a) 150,000 3,656,250
ChiRex................................. 365,000 4,380,000
Guilford Pharmaceuticals............... (a) 199,200 4,631,400
Mentor................................. 470,000 13,865,000
Nellcor Puritan Bennett................ (a) 250,000 5,468,750
STERIS................................. (a) 200,000 8,700,000
Sepracor............................... (a) 375,000 6,234,375
Trex Medical........................... (a) 91,500 1,189,500
Varian Associates...................... 175,000 8,903,125
Watson Pharmaceuticals................. (a) 200,000 8,987,500
____________
66,015,900
____________
Industrial Services-5.6% Culligan Water Technologies............ (a) 250,000 10,125,000
Dailey Petroleum Services.............. (a,b) 320,000 3,360,000
Global Industries...................... (a) 730,000 13,596,250
IMCO Recycling......................... 285,000 4,168,125
Philip Environmental................... (a) 400,000 5,800,000
Separation Technologies................ (a,b,c) 81,984 311,539
USA Waste Service...................... (a) 200,000 6,375,000
____________
43,735,914
____________
Non-Energy Minerals-1.9% Minerals Technologies.................. 150,000 6,150,000
Santa Fe Pacific Gold.................. 562,500 8,648,437
____________
14,798,437
____________
Process Industries-7.8%Albany International, Cl. A................... 300,000 6,937,500
Applied Extrusion Technologies......... (a) 250,000 2,625,000
Cabot.................................. 125,000 3,140,625
Cambrex................................ 255,000 8,351,250
Crompton & Knowles..................... 615,000 11,838,750
International Specialty Products....... (a) 220,000 2,695,000
Dreyfus New Leaders Fund, Inc.
Statement of Investments (continued) December 31, 1996
Common Stocks (continued) Shares Value
__________ __________
Process Industries (continued) OM Group............................... 247,500 $ 6,682,500
Spartech............................... 565,000 6,285,625
Westpoint Stevens...................... (a) 200,000 5,975,000
Witco.................................. 220,000 6,710,000
____________
61,241,250
____________
Producer Manufacturing-9.4% Coltec Industries...................... (a) 650,000 12,268,750
Crane.................................. 270,000 7,830,000
Harnischfeger Industries............... 150,000 7,218,750
Huntco, Cl. A.......................... 157,100 2,317,225
Keystone International................. 400,000 8,050,000
MagneTek............................... (a) 650,000 8,368,750
Manitowoc.............................. 225,000 9,112,500
Osmonics............................... (a) 114,800 2,525,600
Stewart & Stevenson Services........... 290,000 8,446,250
Titan Wheel International.............. 550,000 7,012,500
____________
73,150,325
____________
Retail Trade-4.7% Consolidated Stores.................... (a) 310,000 9,958,750
Pep Boys-Manny, Moe & Jack............. 200,000 6,150,000
Stein Mart............................. (a) 230,000 4,657,500
Talbots................................ 215,000 6,154,375
Tiffany & Co........................... 260,000 9,522,500
____________
36,443,125
____________
Technology Services-7.8% Aspect Development..................... (a) 180,000 4,905,000
Aurum Software......................... (a) 180,000 4,162,500
Citrix Systems......................... (a) 160,000 6,250,000
Manchester Equipment................... 175,000 1,312,500
McAfee Associates...................... (a) 225,000 9,900,000
Pixar.................................. (a) 250,000 3,250,000
Rational Software...................... (a) 185,000 7,319,063
Safeguard Scientifics.................. (a) 65,000 2,063,750
Simulation Sciences.................... (a) 30,000 446,250
Summit Design.......................... (a) 460,000 4,715,000
VIASOFT................................ (a) 144,500 6,827,625
Vanstar................................ (a) 397,800 9,746,100
____________
60,897,788
____________
Utilities-3.4% Calpine................................ (a) 500,000 10,000,000
ENSERCH................................ 450,000 10,350,000
Premisys Communications................ (a) 175,000 5,906,250
____________
26,256,250
____________
TOTAL COMMON STOCKS
(cost $587,427,771).................. $746,470,110
============
Dreyfus New Leaders Fund, Inc.
Statement of Investments (continued) December 31, 1996
Preferred Stocks-.2% Shares Value
_________ _________
Industrial Services-.1% Separation Technologies,
Ser. A, 6%, Cum. Conv................ (a,b,c) 243,385 $ 924,863
____________
Technology-.1% Crystal Dynamics, Ser. D............... (a,c) 180,000 675,000
____________
TOTAL PREFERRED STOCKS
(cost $2,281,463).................... $ 1,599,863
============
Principal
Short-Term Investments-6.1% Amount
____________
U.S. Treasury Bill 4.98%, 3/6/1997
(cost $47,838,286)................... $..48,263,000 $ 47,837,320
============
TOTAL INVESTMENTS (cost $637,547,520)....................................... 101.9% $795,907,293
======== ============
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (1.9%) $ (14,907,830)
======== ============
NET ASSETS.................................................................. 100.0% $780,999,463
======== ============
Notes to Statement of Investments:
(a) Non-income producing.
(b) Investment in non-controlled affiliates (cost $5,579,112)-see Note
1(d).
(c) Securities restricted as to public resale. Investments in restricted
securities, with an aggregate value of $3,919,092, represents
approximately .50% of net assets:
</TABLE>
<TABLE>
<CAPTION>
Acquisition Purchase Percentage of
Issuer Date Price Net Assets Valuation*
____ _________ _______ ___________ ___________
<S> <C> <C> <C> <C>
Crystal Dynamics, Ser. D........... 7/10/95 $7.50 .08% $3.75
Individual Investors Group......... 12/15/93 3.25 .26 10% Discount to
Market Value
Separation Technologies............ 1/13/95 3.80 .04 3.80
Separation Technologies,
Ser. A, 6% Cum. Conv.......... 7/12/93-1/13/95 3.80 .12 3.80
* The valuation of these securities has been determined in good faith
under the direction of the Board of Directors.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS NEW LEADERS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996
Cost Value
__________ __________
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $637,547,520 $795,907,293
Cash....................................... 3,265,908
Receivable for investment securities sold.. 3,676,776
Dividends and interest receivable.......... 434,581
Receivable for shares of Common Stock subscribed 248,723
Prepaid expenses........................... 59,849
____________
803,593,130
____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 544,905
Due to Distributor......................... 164,895
Payable for shares of Common Stock redeemed 17,193,421
Payable for investment securities purchased 4,471,192
Accrued expenses........................... 219,254
____________
22,593,667
____________
NET ASSETS.................................................................. $780,999,463
============
REPRESENTED BY: Paid-in capital............................ $612,976,561
Accumulated net investment (loss) and distributions in
....excess of investment income-net (1,115,451)
Accumulated net realized gain (loss)
` ....on investments 10,778,580
Accumulated net unrealized appreciation (depreciation)
.................... on investments-Note 4(b) 158,359,773
____________
NET ASSETS.................................................................. $780,999,463
============
SHARES OUTSTANDING
(100 million shares of $.01 par value Common Stock authorized).............. 19,170,631
NET ASSET VALUE, offering and redemption price per share-Note 3(d).......... $40.74
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS NEW LEADERS FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Cash dividends............................. $ 4,657,574
Interest................................... 2,596,715
____________
Total Income......................... $ 7,254,289
EXPENSES: Management fee-Note 3(a)................... 5,339,903
Shareholder servicing costs-Note 3(b)...... 2,637,824
Registration fees.......................... 84,124
Custodian fees-Note 3(b)................... 70,920
Professional fees.......................... 65,962
Directors' fees and expenses-Note 3(c)..... 43,027
Prospectus and shareholders' reports....... 42,784
Miscellaneous.............................. 13,304
____________
Total Expenses....................... 8,297,848
______________
INVESTMENT (LOSS)-NET....................................................... (1,043,559)
______________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments:
Long transactions:
Unaffiliated issuers................. $ 65,426,041
Affiliated issuers................... 661,851
Short sale transactions................ (490,058)
____________
Net Realized Gain (Loss)............... 65,597,834
Net unrealized appreciation (depreciation) on investments:
Unaffiliated issuers................... 51,212,015
Affiliated issuers..................... (2,747,249)
______________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 114,062,600
______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $113,019,041
==============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS NEW LEADERS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1996 December 31, 1995
_____________________ _____________________
<S> <C> <C>
OPERATIONS:
Investment income (loss)-net................................... $ (1,043,559) $ 838,637
Net realized gain (loss) on investments........................ 65,597,834 46,627,417
Net unrealized appreciation (depreciation) on investments...... 48,464,766 81,828,227
___________________ ____________________
Net Increase (Decrease) in Net Assets Resulting from Operations 113,019,041 129,294,281
___________________ ____________________
DIVIDENDS TO SHAREHOLDERS:
From investment income-net..................................... __ (969,861)
In excess of investment income-net............................. __ (71,892)
From net realized gain on investments.......................... (55,873,648) (46,321,288)
___________________ ____________________
Total Dividends.............................................. (55,873,648) (47,363,041)
___________________ ____________________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.................................. 384,662,435 208,486,040
Dividends reinvested........................................... 54,550,741 46,258,284
Cost of shares redeemed........................................ (322,304,093) (121,356,015)
___________________ ____________________
Increase (Decrease) in Net Assets from Capital Stock Transactions 116,909,083 133,388,309
___________________ ____________________
Total Increase (Decrease) in Net Assets.................... 174,054,476 215,319,549
NET ASSETS:
Beginning of Period............................................ 606,944,987 391,625,438
___________________ ____________________
End of Period.................................................. $780,999,463 $606,944,987
================== ===================
Distributions in excess of investment income (loss)-net.......... $ (1,115,451) $ (71,892)
___________________ ____________________
Shares Shares
___________________ ____________________
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................................... 9,444,204 5,863,111
Shares issued for dividends reinvested......................... 1,359,096 1,274,764
Shares redeemed................................................ (7,865,709) (3,403,602)
___________________ ____________________
Net Increase (Decrease) in Shares Outstanding................ 2,937,591 3,734,273
================== ===================
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS NEW LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated May 1, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS NEW LEADERS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-Significant Accounting Policies:
Dreyfus New Leaders Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company. The Fund's investment objective is to maximize capital
appreciation. 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") acts as
the distributor of the Fund's shares, which are sold to the public without a
sales charge.
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 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) 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 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, the difference between
the amounts 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 on investments, is recognized on
the accrual basis.
(D) AFFILIATED ISSUERS: Issuers in which the Fund held 5% or more of the
outstanding voting securities are defined as "affiliated" in the Act. The
following summarizes affiliated issuers during the period ended December 31,
1996:
<TABLE>
<CAPTION>
Shares
______________________________________________________________________________________
Beginning End of Dividend Market
Name of Issuer of Period Purchases Sales Period Income Value
_____________ ___________ _________ ____________ __________ _________
<S> <C> <C> <C> <C>
Dailey Petroleum Services........ - 320,000 - 320,000 $ - $3,360,000
Dreco Energy Services, Cl.A...... 377,500 - 377,500 - - __
Individual Investor Group........ 307,692 - - 307,692 - 2,007,690
Separation Technologies-Common... - 81,984 - 81,984 - 311,539
Separation Technologies-Preferred 243,385 - - 243,385 - 924,863
</TABLE>
(E) 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
Dreyfus New Leaders Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
Code. This may result in distributions that are in excess of investment
income-net and net realized gain on a fiscal year basis. 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.
(F) 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 $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the meeting of redemptions. Interest is charged to the
Fund at rates which are related to the Federal Funds rate in effect at the
time of borrowings. For the period ended December 31, 1996, the Fund did not
borrow under the line of credit.
NOTE 3-Management Fee and Other Transactions With Affiliates:
(A) Pursuant to a management agreement ("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. The Agreement
provides that if in any full fiscal year the aggregate expenses, exclusive of
taxes, brokerage, interest on borrowings (which, in the view of Stroock &
Stroock & Lavan, counsel to the Fund, also contemplates dividends on
securities sold short), and extraordinary expenses, exceed 11\2% of the value
of the Fund's average net assets, the Fund may deduct from the payments to be
made to the Manager, or the Manager will bear such excess expense. There was
no expense reimbursement for the period ended December 31, 1996.
(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 December 31, 1996, the Fund was charged
$1,779,968 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 $406,516 during the period ended December 31, 1996.
Effective May 10, 1996, the Fund entered into a custody agreement with
Mellon to provide custodial services for the Fund. During the period ended
December 31, 1996, $45,299 was paid to Mellon pursuant to the custody
agreement.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation and the Director Emeritus receive 50% of such compensation.
(D) A 1% redemption fee is charged on certain redemptions of Fund shares
(including redemptions through use of the Exchange Privilege) where the
shares being redeemed were issued subsequent to a specified effective date
and the redemption or exchange occurs within a six-month period following the
date of issuance. During the period ended December 31, 1996, redemption fees
amounted to $77,895.
Dreyfus New Leaders Fund, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4-Securities Transactions:
(A) The following summarizes the aggregate amount of purchases and sales
of investment securities and securities sold short, excluding short-term
securities, during the period ended December 31, 1996:
<TABLE>
<CAPTION>
Purchases Sales
________________ ________________
<S> <C> <C>
Long transactions:
Unaffiliated issuers........................................... $752,321,272 $677,496,499
Affiliated issuers............................................. __ 1,276,769
________________ ________________
752,321,272 678,773,268
Short sale transactions.......................................... 4,941,429 3,735,325
________________ ________________
Total.......................................................... $757,262,701 $682,508,593
================ ================
</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 custodian, of cash and/or U.S. Government securities
sufficient to cover its short position. At December 31, 1996, there were no
securities sold short outstanding.
(B) At December 31, 1996, accumulated net unrealized appreciation on
investments was $158,359,773, consisting of $182,916,088 gross unrealized
appreciation and $24,556,315 gross unrealized depreciation.
At December 31, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS NEW LEADERS FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS NEW LEADERS FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus New Leaders Fund, Inc., including the statement of investments, as of
December 31, 1996, 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. Our procedures included verification by
examination of securities held by the custodian as of December 31, 1996 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 New Leaders Fund, Inc. at December 31, 1996, 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
February 3, 1997
