DREYFUS NEW LEADERS FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
The following letter is the first to be sent to shareholders of Dreyfus
New Leaders Fund since the untimely death in October 1996 of Thomas A. Frank,
who headed the Portfolio management team.
As most of you are probably aware, Tom Frank embraced a team approach
toward investment management. Dreyfus New Leaders Fund is now managed jointly
by Paul Kandel and Hilary R. Woods, both of whom were personally selected by
Tom to be his successors. Both had worked closely with Tom for a number of
years and share his management philosophy.
Paul Kandel serves as co-primary portfolio manager for the Small Cap
Group. In addition, he is a senior sector manager for the technology and
telecommunications industries in the Small Capitalization Equity Group at
Dreyfus. Prior to joining Dreyfus in October of 1994, Mr. Kandel was a
manager at Ark Asset Management where he researched and recommended stocks
and IPOs in the telecommunications, technology and selected media industries.
From 1988 to 1992, he was an assistant vice president at Bankers Trust
Company responsible for the telecommunications, electric utility, cellular
and technology industries. Mr. Kandel is a member of the Software Analysts
and Communication Technology Investment Analysts Splinter Groups.
Hilary Woods also serves as co-primary portfolio manager for the Small
Cap Group. In addition, she is a sector manager for the capital goods
industries in the Small Capitalization Equity Group. Ms. Woods joined Dreyfus
in 1987 as senior securities analyst for value securities and the capital
goods industries. Previously, Ms. Woods was with Neuberger & Berman for six
and a half years, most recently as an assistant portfolio manager and
analyst. Ms. Woods is a chartered financial analyst (CFA) and a member of the
Machinery Analysts of New York, Inc.
We have full confidence in the ability of Paul and Hilary to continue
managing your Fund in the manner to which you are accustomed.
Sincerely,
[Stephen E. Canter signature logo]
Stephen E. Canter
Chief Investment Officer
The Dreyfus Corporation
DREYFUS NEW LEADERS FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
Equities continue to be the asset class of choice, and in 1996, stock
market investors once again enjoyed robust double digit returns. Dreyfus New
Leaders Fund finished the year with a total return of 17.31%.* This compares
with the return of 16.50% for the Russell 2000 Index of small capitalization
stocks.**
ECONOMIC REVIEW
The much-heralded "Goldilocks" phase of the U.S. economy - not too hot
and not too cold - may be ending. First, the slowdown to 2% GDP growth seems
to have been confined to the summer and recent data depict faster growth for
the fourth quarter of 1996. Second, inflation has begun a cyclical climb,
although there is yet little linkage to the tight labor market. The economy
is operating with very little slack near the close of its sixth year of
expansion. Hence, the resumption of faster growth quickly restored a rising
trend to bond yields and pulled short-term rates above their December lows.
As yet there is little expectation of tighter Federal Reserve policy,
although sustained above-trend growth would probably justify higher rates
during 1997. Modest tightening in 1997 would in our opinion help allay
inflation fears and sustain another year of economic growth.
Although the economy grew near its 2.4% long-term trend rate in 1996, it
was nonetheless quite volatile during the year. After a strong first half,
and then the summer slowdown, the return to faster growth late in the year is
not broad-based. Strong sectors are in manufacturing, exports, services and
construction. By contrast, some retailers found Christmas sales disappointing
and capital goods orders are mixed. However, inventories are quite lean and
this tilts the odds towards yet another year of growth in 1997. While
corporate profit growth slowed in 1996, profits still tended to surprise on
the upside and should maintain steady growth in 1997 too.
Accelerating wage growth in 1996 did not fuel higher prices. And surging
energy prices have failed to lift inflation elsewhere. Indeed, core inflation
(excluding food and energy) decelerated last year. The general price
structure has so far ignored the higher oil price, responding to it as
temporary. However, oil prices have been rising now for a year and, at some
point, their ability to raise the overall price level may become worrisome,
especially if the Fed finds them significant.
Both long-term and short-term interest rates were quite volatile in 1996.
The strength of the economy prompted rising rates through summer's end, but
bond yields then fell 90 basis points after the economy slowed. That period
of low rates may have ended now that faster growth is again apparent.
We believe the economy has reverted to a period of growth above the
long-term average. Key issues are whether faster growth will fuel higher
inflation this time and at what point rising oil prices would disturb price
stability. The economy will shortly begin a seventh expansion year and
continued volatility in growth and in sentiment is likely.
MARKET OVERVIEW
The stock market in 1996 was a mixture of agony and ecstasy, with the
accent for most of the year on the more desirable of those two alternatives.
By the end of the year, the Standard & Poor's 500 Composite Stock Price Index
had registered a gain of 22.95%, while the blue chip Dow Jones Industrial
Average ("DJIA") gained 28.91%.*** The road leading to those impressive
year-end gains was not a smooth one, however.
The market year began haltingly, in the wake of shaky business conditions
at the end of the previous year. As 1996 unfolded, however, the market picked
up steam. The economy took on characteristics that continued for much of the
year - low inflation, moderate growth and relatively low interest rates. This
was a combination that investors liked, perhaps too much. By midyear,
satisfaction with the economy turned into fear that economic growth might be
overdone.
The prevailing nervousness about potential inflation served to boost
interest rates temporarily, without the need for Federal Reserve
intervention. This was a temporary setback for large capitalization stocks,
but more damaging to Nasdaq issues and particularly to the smaller
capitalization stocks measured by the Russell 2000 Index.
As summer turned into fall, interest rates eased and inflation remained
at bay. The benign economic environment allowed many stocks to resume their
upward course, causing a string of record-breaking performances by the DJIA
and other broad market indexes. In mid-fall the prospect that government
would continue divided in Washington, with a Democratic President and a
Republican-controlled Congress, appeared to be another plus factor for the
market. Stocks continued to surge, hardly pausing for breath when Chairman
Alan Greenspan raised a caution signal in early December by referring to
"irrational exuberance" in the equity markets.
Stock market veterans issued a stream of warnings that what goes up so
strongly and consistently must, at some point, come down. Nonetheless, a
fairly steady flow of new money coming into stocks from people putting money
aside for retirement seemed to be fueling the boom. While at the very end of
the year, caution caused a softening of stock prices, which backed away from
the year's record of 6560.91 on the DJIA, that record was surpassed in early
1997, when the average surpassed 6700.
Among the best performing groups for 1996 were oil drillers,
semi-conductors, computers, financial enterprises and consumer nondurables.
Corporate earnings were very strong for much of the year, but showed signs of
flagging as the year wore on. This raised questions in the minds of many
market observers whether the scorching pace of the past year could be
maintained.
PORTFOLIO FOCUS
When Dreyfus set out in 1985 on the initiative of managing this Fund, it
was in the belief that a simple style of investing in good companies with
good fundamentals at appropriate valuations would provide results that would
sooner or later gain broad acceptance by the investing public. We are pleased
to report that our efforts have borne fruit, with the Fund's assets now
approaching $900 million dollars. We are thankful for your support, and have
enjoyed working with you on this journey.
1996 can be characterized by two different investment environments for
small cap stocks. For the first half of the year, the Russell 2000 Index, our
benchmark, outperformed the more popular Standard & Poor's 500 Composite
Stock Price Index (the S&P 500). New money flows sought out aggressive growth
and smaller capitalization funds. After a significant setback midyear,
however, investors lost some of their nerve and showed a marked preference
for the perceived safety of the more liquid, blue chip names that populate
the S&P 500. For the full year, the Russell 2000 Index underperformed the S&P
500 by 645 basis points as cited earlier in this letter.
ENERGY
The Energy sector was the year's big winner on an absolute basis, and we
remained overweighted in this sector throughout 1996. The best individual
stock in your Fund was, by far, the exploration and production company Flores
& Rucks. Other big winners were offshore construction producer Global
Industries; oil service company Dreco Energy Services; and Unit Corp.,
another exploration and production company. There was only one poor energy
performer: the exploration and production firm Cairn Energy. We continue to
feel that an overweight in energy is appropriate in 1997. We believe the
fundamentals continue to improve in this group, and the valuations are still
compelling.
FINANCIAL SECTOR
Credit-sensitive stocks also had an outstanding year. Top stocks included
savings bank Greenpoint Financial, and insurance companies Everest
Reinsurance Holdings, Ace, Enhance Financial Services Group and Capital Re.
Standard Federal Bancorp was acquired by ABN AMRO, and National Re by General
Re. The only financial stocks that lost money for your Fund during this
period were broker Alexander & Alexander Services, and property and casualty
reinsurer Trenwick Group. Exposure to REITs would have enhanced the Fund's
performance.
CONSUMER STOCKS
Another strong group was the diverse Consumer Discretionary sector. The
best performing consumer stock was Consolidated Stores Corp., followed by
Jones Apparel Group, Tiffany & Co., Culligan Water Technologies and Sola
International, a manufacturer of eyeglass lenses. Disappointing stocks
included gambling plays Sun International Hotels and Station Casinos. Our
sector analysts continue to prospect in this area with the goal of
discovering 1997's big winners. It is an eclectic group with many potential op
portunities.
CAPITAL GOODS
Superior stock selection in the Capital Goods sector added significantly
to your Fund's returns. A major theme of the Fund has been riding the
commercial aerospace cycle by owning the suppliers to Boeing and Airbus.
These stocks included Coltec Industries, Rohr Inc. and Thiokol. Other winners
in the capital goods segment were Manitowoc, a crane and ice machine
manufacturer, USA Waste Service and special chemical producer Crompton &
Knowles. Two underperformers were Titan Wheel International, a manufacturer
of agricultural tires and wheels, and IMCO Recycling, both of which
disappointed with lower 1996 earnings. We remain constructive on the capital
goods segment in 1997 due to the length of the aerospace cycle and the
positive producer economy.
HEALTH CARE
Health care stocks were a minefield in 1996. This was the only Russell
2000 sector that posted negative returns for the year; however, your Fund
made money with its investments. We were fortunate to avoid most of the
losers, and picked a number of winners. Top holding Mentor, a special medical
products company, was the stellar performer for the year; followed by Guidant
Corp., a cardiovascular device company; and Universal Health Services Cl.B.,
a hospital management company. Losses were purged from the portfolio but
included Orthologic, an orthopedic device company; Heartport Inc., a heart
surgery products manufacturer; and Living Centers of America, an operator of
long-term health centers. We had been underrepresented in health care all
year, but are increasing our exposure for 1997 based on our belief that the
valuations have now reached reasonable levels.
TECHNOLOGY
The trickiest sector always seems to be Technology. Some of our best and
worst stocks fall into this group. After exhibiting leadership in the first
half of 1996, the second half of the year was not kind to small cap
technology stocks. Here it is critical to have, as we believe we do, a sector
analyst out in front in an industry that changes rapidly. Winners for the
year included Aspect Telecommunications, McAfee Associates, Securities
Dynamics and Vanstar Corporation. Losers included three software companies:
Intervoice, FTP Software, and Aurum Software. It is interesting to note that
most of these companies were high multiple software companies. We go into
1997 slightly overweight in technology with hopes that our selected dynamic
companies will deliver on their high potential.
In conclusion, small and medium-sized companies will, in our opinion,
continue to prosper in the current environment, so we remain very
constructive on small cap equities. We believe there is opportunity for
growth in the industries in which we invest and the niche markets in which
these companies are positioned. We want to assure our investors, both old and
new, that we will direct our resources to discover the companies and
industries that we hope will propel your Fund into the millennium.
We thank you for your interest. You may be sure we will exert our best
efforts on your behalf.
Sincerely,
[Paul Kandel signature logo]
Paul Kandel
Co-Portfolio Manager
[Hilary Woods signature logo]
Hilary Woods
Co-Portfolio Manager
January 16, 1997
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions.The
Russell 2000 Index is a widely accepted unmanaged index of small cap stock
performance.
*** SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment
of income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance. The Dow Jones Industrial
Average (DJIA) is a price-weighted average of 30 actively traded blue chip
stocks.
Dreyfus New Leaders Fund, Inc. December 31, 1996
[Exhibit A]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS NEW LEADERS
FUND, INC. AND
THE RUSSELL 2000 INDEX
Dollars
$57,880
Dreyfus New Leaders
Fund
$39,422
Russell 2000 Index*
*Source: Lipper Analytical Services, Inc.
[Exhibit A]
<TABLE>
<CAPTION>
Average Annual Total Returns
One Year Ended Five Years Ended Ten Years Ended From Inception (1/29/85)
December 31, 1996 December 31, 1996 December 31, 1996 to December 31, 1996
__________________ __________________ __________________ __________________________
<S> <C> <C> <C>
17.31% 14.26% 14.39% 15.87%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus New Leaders
Fund, Inc. on 1/29/85 (Inception Date) to a $10,000 investment made in the
Russell 2000 Index on that date. For comparative purposes, the value of the
Index on 1/31/85 is used as the beginning value on 1/29/85. All dividends and
capital gain distributions are reinvested.
The Fund's performance shown in the line graph takes into account all
applicable fees and expenses. The Russell 2000 Index is an unmanaged index
and is composed of the 2,000 smallest companies in the Russell 3000 Index.
The Russell 3000 Index is composed of 3,000 of the largest U.S. companies by
market capitalization. The Index does not take into account charges, fees and
other expenses. Further information relating to Fund performance, including
expense reimbursements, if applicable, is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
<TABLE>
<CAPTION>
DREYFUS 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>
<TABLE>
<CAPTION>
DREYFUS NEW LEADERS FUND, INC.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return,
ratios to average net assets and other supplemental data for each period
indicated. This information has been derived from the Fund's financial
statements.
Year Ended December 31,
__________________________________________________________________
PER SHARE DATA: 1996 1995 1994 1993 1992
_________ _________ _________ _________ _________
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $37.39 $31.33 $34.13 $32.17 $32.29
_________ _________ _________ _________ _________
Investment Operations:
Investment income (loss)-net................ (.05) .06 .10 .07 .14
Net realized and unrealized gain (loss)
on investments............................. 6.47 9.17 (.22) 5.30 2.81
_________ _________ _________ _________ _________
Total from Investment Operations.......... 6.42 9.23 (.12) 5.37 2.95
_________ _________ _________ _________ _________
Distributions:
Dividends from investment income-net........ - (.07) (.08) (.07) (.14)
Dividends from net realized gain on investments (3.07) (3.10) (2.60) (3.34) (2.93)
_________ _________ _________ _________ _________
Total Distributions.......................... (3.07) (3.17) (2.68) (3.41) (3.07)
_________ _________ _________ _________ _________
Net asset value, end of period............... $40.74 $37.39 $31.33 $34.13 $32.17
========= ========= ========= ========= =========
___ ___ ___ ___ ___
TOTAL INVESTMENT RETURN......................... 17.31% 29.80% (.15%) 17.07% 9.43%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets..... 1.17% 1.19% 1.16% 1.22% 1.21%
Ratio of net investment income (loss)
to average net assets...................... (.15%) .17% .30% .19% .43%
Decrease reflected in above expense ratios
due to undertakings by the Manager..... - .02% .05% .04% .04%
Portfolio Turnover Rate...................... 102.22% 108.80% 94.21% 127.97% 119.45%
Average commission rate paid (1)........ $.0568 - - - -
Net Assets, end of period (000's Omitted).... $780,999 $606,945 $391,625 $338,967 $233,619
(1) For fiscal years beginning January 1, 1996, the Fund is required to
disclose its average commission rate paid per share for
purchases and sales of investment securities.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS 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
DREYFUS NEW LEADERS FUND, INC.
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes, the Fund hereby designates $1.99 per share as a
long-term capital gain distribution of the $2.985 per share paid on December
27, 1996. The Fund also designates $.055 per share as a long-term capital
gain distribution of the $.085 per share paid on September 16, 1996.
[Dreyfus Lion "d" logo]
DreYFUS NEW LEADERS FUND, INC.
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 085AR9612
[Dreyfus logo]
New Leaders
Fund, Inc.
Annual Report
December 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN DREYFUS NEW LEADERS FUND, INC.
AND THE RUSSELL 2000 INDEX
EXHIBIT A:
DREYFUS
PERIOD RUSSELL 2000 NEW LEADERS
INDEX * FUND
1/29/85 10,000 10,000
12/31/85 11,571 13,415
12/31/86 12,228 15,093
12/31/87 11,156 14,320
12/31/88 13,932 17,663
12/31/89 16,195 23,189
12/31/90 13,035 20,440
12/31/91 19,038 29,717
12/31/92 22,543 32,519
12/31/93 26,804 38,069
12/31/94 26,322 38,012
12/31/95 33,840 49,340
12/31/96 39,422 57,880
*Source: Lipper Analytical Services, Inc.
