<PAGE>
Dreyfus
New Leaders
Fund, Inc.
Annual Report
December 31, 1997
<PAGE>
Dreyfus New Leaders Fund, Inc.
- ------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
We are pleased to provide you with this annual report for Dreyfus New
Leaders, Inc. for the 12-month period ended December 31, 1997. During this
period that saw a strong upsurge in small capitalization stocks, followed by a
strong downturn, your Fund produced a total return of 19.54%*. This compares
with a total return of 22.36% for our benchmark, the Russell 2000 Index.**
Economic Review
In 1997, the U.S. economy put in its best growth performance of this business
cycle to date. In tandem, the labor market tightened markedly, marginally
boosting wage inflation towards year end. Yet price inflation decelerated and
bond yields fell. Although corporate profit growth was robust for much of the
year, strains began to appear in the second half in some sectors. The Federal
Reserve Board (the "Fed") tightened credit early in the year, then subsequently
stayed on hold, torn between strong economic reports at home and worsening
financial crises overseas.
Real Gross Domestic Product (GDP) grew 3.8% in 1997, its best annual growth
since 1988. Almost all the major sectors contributed to growth. Households
enjoyed rising real incomes as wage increases outpaced price inflation. Moderate
interest rates buoyed housing demand. Tightening factory capacity boosted
capital spending, and until late in the year, steady foreign growth kept exports
robust. That all these sectors grew simultaneously in a late phase of the
business cycle was unusual. The year 1997 also saw a dramatic narrowing of the
Federal budget deficit. It is likely that the associated drop in Federal
borrowing boosted the supply of credit available to the private sector.
As mentioned, overall corporate profit growth rebounded in 1997, after
slowing in 1996. Profits from domestic sources generally did well. However,
profits from international sources began to show strains in the second half,
impacted by the rising dollar and by financial stresses overseas. More recently,
profits at some companies have been slowed by price weakness.
Economic data this winter showed that the economy was still quite strong
although some leading statistics have begun to signal somewhat slower economic
growth for 1998. First, recently slowing export orders and rising import orders
imply a widening trade deficit. Second, the number of announced layoffs has
begun to rise, indicating some future easing of labor market pressures. Should
these leading statistics actually show up in a slowing of the economy, market
expectations may shift to anticipate the possibility of a move by the Federal
Reserve to ease credit. At the start of 1998, there was uncertainty about both
the severity of Asian stresses and their impact on the U.S. economy.
Market Overview
By virtually every measurement, 1997 was a historically favorable year for
stocks. The 12-month gains, despite setbacks along the way, were impressive.
However, the year ended on a note of uncertainty with no assurance that the
gains of 1997 could be repeated in 1998.
Index figures (price changes only, without including income) help tell the
story: For the 12 months ended December 31, 1997, the Dow Jones Industrial
Average (DJIA) rose by 22.64%, the broader Standard & Poor's 500 Composite Stock
Index was up 31.01%, the Nasdaq Composite was up 21.64% and the Russell 2000,
representing small capitalization stocks, gained 20.52%.
The economic background, at least until October when Asia's troubles
surfaced, was clearly favorable. So much so that economic commentators talked of
the "Goldilocks economy" -- not too hot and not too cold. Unemployment was low,
industrial production and other output measures continued to grow, yet price and
wage inflation were not problems. By the end of the year, there was even talk
that the next economic problem might be a touch of deflation.
<PAGE>
The market began the year by rebounding from earlier weakness. The signs in
the market and the economy were so bullish that Chairman Alan Greenspan of the
Federal Reserve Board (the "Fed") warned against "irrational exuberance" in
December 1996, then followed that up on March 25, 1997 with an increase in
short-term interest rates. That cooled off the stock market temporarily, but not
for long. By early August, major stock market averages reached all-time record
highs.
As summer turned into autumn, however, doubts began to appear. There were
worries about the profit outlook and worries that inflation might resume. The
biggest negative influences, however, were the financial setbacks in Asia,
starting with Thailand, Malaysia, the Philippines, Hong Kong and Indonesia, then
spreading to South Korea and Japan. This raised questions for American investors
about how our export orders might be affected, how the profits of U.S.
multinationals would fare, and whether devaluation of Asian currencies would
cause a flood of cheaper imported goods into the U.S.
In view of these unsettling questions, it was impressive that the damage to
U.S. stocks by year-end was comparatively limited. On October 27, the DJIA sank
to 7161.15, a one-day loss of 7.18%, the worst since the big market sinking
spell of ten years earlier. Yet by the end of the year, the Dow had bounced back
to 7908.25, with other major indexes and averages following suit.
For much of the year, large capitalization companies were in favor, though
small caps staged an impressive rally in midyear. Among the best-performing
industry groups were banks and other financial stocks, broadcasting,
advertising, airlines, home construction and trucking. Consumer software,
precious metals (particularly gold) and heavy industrial materials were among
the laggards.
Mergers and acquisitions were the driving force for some key stocks,
particularly in the communications, finance and broadcasting industries. The
merger pace was such that it seemed likely to carry over into 1998.
The boom of 1997 gave rise to such terms as "new era" and "new paradigm" to
describe the phenomenon of a stock market making new highs for three years in a
row. Yet the clouds that appeared on the horizon late in the year place the
burden of proof for 1998 on the "new era" advocates.
Portfolio Focus
1997 was the third year in a row in which the small-capitalization stocks of
the Russell 2000 Index underperformed the more popular Standard & Poor's 500
Composite Stock Price Index, which returned 33.35% in 1997. Small cap stocks
dramatically outperformed the S&P 500 for a period last year when investors
recognized that these younger companies possessed superior profit growth
vis-a-vis larger cap stocks and that they would have less of an impact from a
stronger U.S. dollar than multinational companies that derive a greater
percentage of their sales from overseas. Unfortunately the Asian crises
intervened, which caused investors to become more risk averse and concerned
about the liquidity of small cap stocks. We remain optimistic about small caps,
however, because we anticipate that the market will ultimately be disappointed
by the impact that the Asian crises will have on the earnings of the large
multinationals.
A benign interest rate scenario combined with rapid industry consolidation
propelled the financial services sector to be the largest contributor to your
Fund's performance for the year. Executive Risk, an underwriter of liability
insurance, was the biggest winner in this category followed by Dime Bancorp, the
holding company for the Dime Savings Bank of New York which has been a
successful turnaround story. The third best financial stock was Bank United
Cl.A, a Texas thrift. Rounding out the winner's circle was Enhance Financial
Services Group, a provider of financial guaranty insurance, and a top performer
for a second year in a row. Our stock selection in this segment was such that
there were no losing positions.
<PAGE>
The capital goods segment continued to be the beneficiary of strong domestic
economic growth and takeover activity, and we remained overweight in this sector
all year. Valve manufacturer Keystone International was acquired by industrial
conglomerate Tyco International at a substantial premium in September. Titan
International, a manufacturer of agricultural and industrial tires and wheels,
was a notable underperformer in 1996. In 1997, however, the company saw its
stock price benefit from the repurchase of its own stock and the introduction of
its revolutionary new tire. For the benefit of new shareholders, a major theme
of the Portfolio for over two years has been riding the commercial aerospace
cycle, and it continues to pay dividends. Thiokol, a top performer last year,
was the best performing stock in this sector as a result of the turnaround of
its fastener division combined with its exposure to the strong commercial
aerospace cycle. Another winner from last year, Rohr, agreed to be acquired by
aerospace/chemical conglomerate B.F. Goodrich in September. On the other hand,
Manitowoc, an ice machine and crane manufacturer which was one of our winners
last year, underperformed when concerns that the Asian crisis would create a
more competitive environment for its crane operation surfaced. We sold
Harnischfeger Industries when the Asian crisis unfolded as we concluded that the
stock would underperform with its paper machinery business' dependence on Asia.
Wyman-Gordon is seeing its earnings suppressed by the need for downtime at one
of its highest capacity forging presses during peak aerospace demand.
In last year's letter, we mentioned our interest in increasing our exposure
to health care. This proved to be a profitable endeavor for the Fund even though
this was one of the Russell's poorer performing groups. In fact, health care
stocks were one of the top contributors to your Fund's performance in 1997. The
winner was Sepracor, where investors recognized the company's expertise in
developing improved versions of existing drugs. Hospital management company
Universal Health Services, Cl.B, was a top performer for the second year in a
row. Watson Pharmaceuticals enjoyed a multiple expansion resulting from its
transition toward becoming a balanced generic and branded drug company. Two
stocks which we mistimed were STERIS and Forest Laboratories, Inc.
The energy sector has lubricated the portfolio for a second year in a row.
Global Industries was the best individual stock in your portfolio on top of
being a very strong performer the year before. Other gushers were oilfield
driller Pride International and west Texas oil and gas exploration and
production company Titan. On the minus side, the initial public offering of
Bayard Drilling was our biggest disappointment. Ocean Energy, which had been a
terrific stock in 1996 and for most of last year, has underperformed as a result
of weakening oil and gas prices and its announced merger with United Meridian
Corp. We support the merger but management has indicated that patience may be
needed near-term. Finally, we remain overweighted in the energy sector for the
third year in a row. We believe that the Asian crisis will not derail the strong
fundamentals which should propel this sector to the next millennium.
The consumer sector has had some notable successes, although our selections
matched but did not outperform their peer group. Our biggest winner was
Chancellor Media Cl.A, which, as a result of the merger of Chancellor
Broadcasting, Evergreen Media, and Viacom's radio division is now the second
largest radio broadcaster after CBS Radio. Outdoor Systems, a leading major
market billboard company, saw its share price appreciate smartly as it
consolidated the outdoor advertising business. Consolidated Stores is the East
Coast's leading participant in the highly profitable close-out retailing
category. Book publisher Scholastic was a disappointment as its Goosebumps
children's series was not well received in the marketplace. Finally, classic
clothing retailer Talbots has not been able to effect an earnings turnaround
despite its strong franchise. Our management style is to prune our losers, and
if Talbots' new management doesn't improve the situation over the next two
quarters, we will make the stock someone else's problem.
<PAGE>
We have some long-standing investments in the material and processing segment
that continue to work well. A top performer last year, Crompton & Knowles, was
again a winner, and it was joined this year by two other specialty chemical
companies, Cambrex and OM Group. Disappointments included Osmonics, which is
still trying to turn around within the highly competitive fluid processing
industry, and the cyclically depressed polypropylene packaging manufacturer
Applied Extrusion Technologies.
The last 18 months have not been kind to small cap technology. The technology
sector was the worst performer in 1997 for the Russell 2000 Index, and we remain
underweighted going into 1998. Having said this, there are some notable success
stories. Aspect Development, a provider of component and supplier management
solutions to manufacturers, was the best performing technology stock in the
portfolio. Other fortuitous endeavors included Novellus Systems, a supplier of
capital equipment in the semiconductor industry, and Network Associates, a
software concern created by the merger of McAfee Associates (one of our top
performers in 1996) and Network General. On the negative side, the embedded
software supplier, Rational Software, and corporate reseller, Vanstar
Corporation (one of our winners in 1996) had earnings disappointments. Finally,
Remedy, a supplier of help desk software, did not provide a cure for the
portfolio, as investors became concerned about the acquisition of one of its
competitors.
It is incumbent upon us as we enter 1998 to be somewhat skeptical. It has
escaped neither us nor our shareholders that the stock market has just completed
three record-setting years. Selectivity and sticking to our time-tested money
management disciplines will be critical in 1998. In this environment, we want to
assure you that we believe we have the people and the processes in place to
continue to generate competitive returns in the coming year.
Sincerely,
/s/ Hilary R. Woods /s/ Paul Kandel
Hilary R. Woods Paul Kandel
Co-Portfolio Manager 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.
<PAGE>
Dreyfus New Leaders Fund, Inc. December 31, 1997
- -------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
DREYFUS NEW LEADERS FUND, INC.
AND THE RUSSELL 2000 INDEX
Dollars
$69,192
Dreyfus
New Leaders Fund
$48,239
Russell 2000 Index*
*Source: Lipper Analytical Services, Inc.
<TABLE>
<CAPTION>
Average Annual Total Returns
- --------------------------------------------------------------------------------------------------------------
One Year Ended Five Years Ended Ten Years Ended From Inception (1/29/85)
December 31, 1997 December 31, 1997 December 31, 1997 to December 31, 1997
-------------------- -------------------- -------------------- --------------------------
<S> <C> <C> <C> <C>
19.54% 16.30% 17.06% 16.15%
<FN>
- --------------
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.
</FN>
</TABLE>
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments December 31, 1997
<TABLE>
<CAPTION>
Common Stocks--96.1% Shares Value
- ------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Commercial Services--3.7% Outdoor Systems............................(a) 375,000 $ 14,390,625
Reynolds & Reynolds, Cl. A.................... 500,000 9,218,750
Robert Half International..................(a) 200,000 8,000,000
------------
31,609,375
-------------
Consumer Durables--2.2% Middleby ..................................(a) 350,000 2,734,375
Sola International.........................(a) 262,500 8,531,250
Toro.......................................... 175,000 7,459,375
------------
18,725,000
------------
Consumer Non-Durables--3.1% Bush Boake Allen...........................(a) 215,000 5,630,312
Movado........................................ 450,000 10,350,000
Warnaco Group, Cl. A.......................... 325,000 10,196,875
------------
26,177,187
------------
Consumer Services--8.5% Chancellor Media, Cl. A....................(a) 225,000 16,790,625
Cinar Films, Cl. B.........................(a) 78,500 3,051,688
Cracker Barrel Old Country Store.............. 275,000 9,178,125
Darden Restaurants............................ 838,700 10,483,750
Individual Investor Group..................(a) 307,692 1,923,075
Meredith...................................... 400,000 14,275,000
Rio Hotel & Casino.........................(a) 360,000 7,560,000
Sun International Hotels...................(a) 250,000 9,406,250
------------
72,668,513
------------
Electronic Technology--4.5% Applied Graphics Technology................(a) 126,000 6,709,500
Aspect Telecommunications..................(a) 410,000 8,558,750
FORE Systems ..............................(a) 450,000 6,862,500
Sanmina....................................(a) 80,000 5,420,000
Thiokol....................................... 140,000 11,375,000
------------
38,925,750
------------
Energy Minerals--4.3% Bayard Drilling Technologies...............(a) 450,000 7,312,500
EEX Corporation............................(a) 500,000 4,531,250
ERG Spa....................................... 1,681,600 6,266,313
Meridian Resource..........................(a) 865,080 8,272,328
Ocean Energy...............................(a) 218,000 10,750,125
------------
37,132,516
------------
Finance--22.0% Amerin.....................................(a) 400,000 11,200,000
Bank United, Cl. A............................ 250,000 12,234,375
Berkley (W.R.)................................ 270,000 11,846,250
Capital Re.................................... 140,000 8,688,750
CapMAC Holdings............................... 230,000 7,992,500
Charter One Financial......................... 194,500 12,277,813
</TABLE>
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) December 31, 1997
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Finance (continued) Chittenden..................................... 212,500 $ 7,437,500
Colonial BancGroup............................ 259,000 8,919,312
Dime Bancorp.................................. 400,000 12,100,000
Enhance Financial Services Group.............. 200,000 11,900,000
Everest Reinsurance Holdings.................. 300,000 12,375,000
Executive Risk................................ 211,900 14,793,268
Frontier Insurance Group...................... 374,800 8,573,550
Ohio Casualty................................. 145,000 6,470,625
Reliance Group Holdings....................... 810,000 11,441,250
Terra Nova (Bermuda) Holdings, Cl. A.......... 420,000 11,025,000
TIG Holdings.................................. 225,000 7,467,187
Western National.............................. 430,000 12,738,750
------------
189,481,130
-------------
Health Services--4.8% Beverly Enterprises........................(a) 800,000 10,400,000
Covance....................................(a) 500,000 9,937,500
ICN Pharmaceuticals........................... 160,000 7,810,000
PharMerica.................................(a) 295,815 3,069,081
Universal Health Services, Cl. B...........(a) 200,000 10,075,000
------------
41,291,581
------------
Health Technology--3.2% Heska......................................(a) 490,000 6,063,750
Mentor........................................ 239,500 8,741,750
Physio-Control International...............(a) 270,000 4,286,250
Varian Associates............................. 165,300 8,357,981
------------
27,449,731
------------
Industrial Services--3.9% Culligan Water Technologies................(a) 170,000 8,542,500
Global Industries..........................(a) 1,044,000 17,748,000
IMCO Recycling................................ 300,000 4,818,750
Separation Technologies................(a,b,c) 81,984 311,539
Superior Energy Services...................(a) 212,000 2,146,500
------------
33,567,289
------------
Non-Energy Minerals--2.1% Minerals Technologies......................... 190,000 8,633,125
Southdown..................................... 165,000 9,735,000
------------
18,368,125
------------
Process Industries--7.3% Albany International, Cl. A................... 330,000 7,590,000
Applied Extrusion Technologies.............(a) 190,000 1,282,500
Cambrex....................................... 231,400 10,644,400
Crompton & Knowles............................ 500,000 13,250,000
Goodrich (B.F.)............................... 253,120 10,488,660
OM Group...................................... 272,000 9,962,000
Westpoint Stevens..........................(a) 210,000 9,922,500
------------
63,140,060
------------
</TABLE>
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) December 31, 1997
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Producer Manufacturing--11.0% Coltec Industries..........................(a) 430,000 $ 9,970,625
Crane......................................... 180,000 7,807,500
CTB International..........................(a) 400,000 5,700,000
Gleason....................................... 332,300 8,951,331
Harsco........................................ 250,000 10,781,250
Howmet International.......................(a) 545,000 8,140,938
MagneTek...................................(a) 600,000 11,700,000
Osmonics...................................(a) 254,800 4,029,025
Titan International........................... 490,000 9,830,625
UNOVA .....................................(a) 500,000 8,218,750
Wyman-Gordon...............................(a) 500,000 9,812,500
------------
94,942,544
------------
Retail Trade--3.7% Consolidated Stores........................(a) 170,000 7,469,375
General Nutrition..........................(a) 330,000 11,220,000
Talbots....................................... 215,000 3,896,875
Tiffany....................................... 255,000 9,195,937
------------
31,782,187
------------
Technology Services--5.7% Aspect Development.........................(a) 190,000 9,880,000
CBT Group PLC, A.D.R.......................(a) 131,000 10,758,375
Intuit.....................................(a) 225,000 9,281,250
Network Associates.........................(a) 123,300 6,519,488
Remedy.....................................(a) 180,000 3,780,000
VIASOFT....................................(a) 204,000 8,619,000
------------
48,838,113
------------
Transportation--1.4% CNF Transportation............................ 200,000 7,675,000
Wisconsin Central Transportation...........(a) 191,300 4,471,638
------------
12,146,638
------------
Utilities--4.7% Calpine....................................(a) 329,000 4,893,875
Illinova...................................... 285,000 7,677,187
ITC DeltaCom...............................(a) 440,000 7,260,000
Metromedia Fiber Network, Cl. A............(a) 380,000 6,317,500
NEXTLINK Communications....................(a) 280,000 5,967,500
Premisys Communications....................(a) 314,000 8,203,250
------------
40,319,312
------------
TOTAL COMMON STOCKS
(cost $611,281,388)......................... $826,565,051
============
</TABLE>
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) December 31, 1997
<TABLE>
<CAPTION>
Preferred Stocks--.2% Shares Value
- ------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Industrial Services--.1% Separation Technologies,
Ser. A, 6%, Cum. Conv...............(a,b,c) 243,385 $ 924,863
------------
Technology--.1% Crystal Dynamics, Ser. D, Conv...........(a,c) 180,000 675,000
------------
TOTAL PREFERRED STOCKS
(cost $2,281,463).......................... $ 1,599,863
============
Principal
Short-Term Investments--4.0% Amount
- ------------------------------------------------------------------------------- -----------
U.S. Treasury Bills: 5.04%, 1/22/1998.............................. $15,174,000 $ 15,129,389
5.06%, 2/26/1998.............................. 7,293,000 7,236,625
5.20%, 3/5/1998............................... 4,542,000 4,501,077
5.17%, 3/19/1998.............................. 333,000 329,320
5.15%, 4/2/1998............................... 7,235,000 7,139,787
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $34,335,725).......................... $ 34,336,198
============
TOTAL INVESTMENTS (cost $647,898,576).......................................... 100.3% $862,501,112
====== ============
LIABILITIES, LESS CASH AND RECEIVABLES......................................... (.3%) $ (2,967,506)
====== ============
NET ASSETS..................................................................... 100.0% $859,533,606
====== ============
<FN>
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
(b) Investments in non-controlled affiliates (cost $1,243,002)--see Note 1(d).
(c) Securities restricted as to public resale. Investments in restricted
securities, with an aggregate value of $1,911,402, represent approximately .22%
of net assets.
</FN>
</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
Separation Technologies....................... 1/13/95 3.80 .03 3.80
Separation Technologies, Ser. A, 6% Cum. Conv. 7/12/93-1/13/95 3.80 .11 3.80
<FN>
- -----------------
*The valuation of these securities has been determined in good faith under the direction of the Board of Directors.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1997
<TABLE>
<CAPTION>
Cost Value
------------- -------------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $647,898,576 $862,501,112
Cash............................................. 7,788,143
Receivable for investment securities sold........ 13,095,329
Receivable for shares of Common Stock subscribed. 1,162,610
Dividends and interest receivable................ 314,144
Prepaid expenses................................. 92,080
------------
884,953,418
------------
LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 584,122
Due to Distributor............................... 178,820
Payable for shares of Common Stock redeemed...... 15,326,529
Payable for investment securities purchased...... 9,203,165
Accrued expenses................................. 127,176
------------
25,419,812
------------
NET ASSETS..................................................................... $859,533,606
============
REPRESENTED BY: Paid-in capital.................................. $625,253,695
Accumulated net realized gain (loss) on investments 19,677,375
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4.......................... 214,602,536
------------
NET ASSETS..................................................................... $859,533,606
============
SHARES OUTSTANDING
(100 million shares of $.01 par value Common Stock authorized)................. 19,381,579
NET ASSET VALUE, offering and redemption price per share--Note 3(d)............. $44.35
======
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Operations Year Ended December 31, 1997
INVESTMENT INCOME
<TABLE>
<S> <C> <C> <C>
INCOME: Cash dividends (net of $14,625 foreign taxes
withheld at source)...................... $ 4,256,472
Interest................................... 2,098,812
------------
Total Income.......................... $ 6,355,284
EXPENSES: Management fee--Note 3(a)................... 6,000,885
Shareholder servicing costs--Note 3(b)...... 2,700,389
Custodian fees--Note 3(b)................... 70,688
Prospectus and shareholders' reports....... 57,103
Professional fees.......................... 52,925
Registration fees.......................... 47,188
Directors' fees and expenses--Note 3(c)..... 45,673
Loan commitment fees--Note 2................ 7,819
Miscellaneous.............................. 9,711
------------
Total Expenses........................ 8,992,381
------------
INVESTMENT (LOSS)--NET.................................................... (2,637,097)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments:
Unaffiliated issuers..................... $88,252,214
Affiliated issuers....................... (63,281)
-----------
Net Realized Gain (Loss).............. 88,188,933
Net unrealized appreciation (depreciation)
on investments:
Unaffiliated issuers.................. 55,827,379
Affiliated issuers.................... 415,384 56,242,763
------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................... 144,431,696
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $141,794,599
============
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Investment (loss)--net................................................... $ (2,637,097) $ (1,043,559)
Net realized gain (loss) on investments................................. 88,188,933 65,597,834
Net unrealized appreciation (depreciation) on investments............... 56,242,763 48,464,766
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations...... 141,794,599 113,019,041
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net realized gain on investments........................................ (75,672,264) (55,873,648)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 467,417,822 384,662,435
Dividends reinvested.................................................... 72,972,658 54,550,741
Cost of shares redeemed................................................. (527,978,672) (322,304,093)
------------ ------------
Increase (Decrease) in Net Assets from Capital Stock Transactions.... 12,411,808 116,909,083
------------ ------------
Total Increase (Decrease) in Net Assets........................... 78,534,143 174,054,476
NET ASSETS:
Beginning of Period..................................................... 780,999,463 606,944,987
------------ ------------
End of Period........................................................... $859,533,606 $780,999,463
============ ============
Investment (loss).......................................................... -- $ (1,115,451)
------------ ------------
Shares Shares
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 10,396,629 9,444,204
Shares issued for dividends reinvested.................................. 1,671,965 1,359,096
Shares redeemed......................................................... (11,857,646) (7,865,709)
------------ ------------
Net Increase (Decrease) in Shares Outstanding........................ 210,948 2,937,591
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
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.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
PER SHARE DATA: 1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $40.74 $37.39 $31.33 $34.13 $32.17
------- ------- ------- ------- -------
Investment Operations:
Investment income (loss)--net...................... (.14) (.05) .06 .10 .07
Net realized and unrealized gain (loss) on investments 7.99 6.47 9.17 (.22) 5.30
------- ------- ------- ------- -------
Total from Investment Operations.................. 7.85 6.42 9.23 (.12) 5.37
------- ------- ------- ------- -------
Distributions:
Dividends from investment income--net.............. -- -- (.07) (.08) (.07)
Dividends from net realized gain on investments... (4.24) (3.07) (3.10) (2.60) (3.34)
------- ------- ------- ------- -------
Total Distributions............................... (4.24) (3.07) (3.17) (2.68) (3.41)
------- ------- ------- ------- -------
Net asset value, end of period.................... $44.35 $40.74 $37.39 $31.33 $34.13
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN.............................. 19.54% 17.31% 29.80% (.15%) 17.07%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........... 1.12% 1.17% 1.19% 1.16% 1.22%
Ratio of net investment income (loss) to average
net assets..................................... (.33%) (.15%) .17% .30% .19%
Decrease reflected in above expense ratios
due to undertakings by the Manager............. -- -- .02% .05% .04%
Portfolio Turnover Rate........................... 82.28% 102.22% 108.80% 94.21% 127.97%
Average commission rate paid*..................... $.0608 $.0568 -- -- --
Net Assets, end of period (000's Omitted)......... $859,534 $780,999 $606,945 $391,625 $338,967
<FN>
- -----------
*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.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
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") is 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 the market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities
of short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amount of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount 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,
1997:
<TABLE>
<CAPTION>
Shares
------------------------------------------------
Beginning End of Dividend Market
Name of Issuer of Period Purchases Sales Period Income Value
- ------------- --------- ---------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Daily Petroleum Services............. 320,000 -- 320,000 -- -- --
Individual Investor Group............ 307,692 -- -- 307,692* -- $1,923,075*
Separation Technologies--Common...... 81,984 -- -- 81,984 -- 311,539
Separation Technologies--Preferred... 243,385 -- -- 243,385 -- 924,863
<FN>
- ------------
* No longer an affiliated issuer at December 31, 1997.
</FN>
</TABLE>
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(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 Code. This may result in distributions that
are in excess of investment income-net and net realized capital 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.
As of December 31, 1997, the Fund reclassified certain components of net
assets. The reclassifications resulted in a net decrease to accumulated net
investment loss of $3,752,548, a decrease in accumulated net realized gains on
investments of $3,617,874 and a decrease in paid-in capital of $134,674. These
reclassifications were the result of permanenet book to tax differences,
primarily from operating losses. Net assets were not affected by these
reclassifications.
NOTE 2--Bank Line of Credit:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended
December 31, 1997, the Fund did not borrow under the Facility.
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, commitment fees, interest on borrowings (which, in the view of
Stroock & Stroock & Lavan LLP, 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. During the
period ended December 31, 1997, there was no expense reimbursement pursuant to
the Agreement.
(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, 1997, the Fund was charged $2,000,295 pursuant to the Shareholder
Services Plan.
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the period
ended December 31, 1997, the Fund was charged $411,527 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement to provide custodial
services for the Fund. During the period ended December 31, 1997, the Fund was
charged $70,688 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 receives 50% of such compensation.
(d) A 1% redemption fee is charged and retained by the Fund on certain
redemptions of Fund shares (including redemptions through use of the Fund
Exchanges service) where the shares being redeemed were issued subsequent to a
specified effective date and the redemption or exchange occurs within a
six-month period following the date of issuance. During the period ended
December 31, 1997, redemption fees amounted to $54,020.
NOTE 4--Securities Transactions:
The following summarizes the aggregate amount of purchases and sales of
investment securities, excluding short-term securities, during the period ended
December 31, 1997:
<TABLE>
<CAPTION>
Purchases Sales
------------ -----------
<S> <C> <C>
Unaffiliated issuers................................................. $625,568,489 $687,148,753
Affiliated issuers................................................... -- 1,685,944
------------ ------------
Total............................................................. $625,568,489 $688,834,697
============ ============
</TABLE>
At December 31, 1997, accumulated net unrealized appreciation on investments
was $214,602,536, consisting of $242,497,249 gross unrealized appreciation and
$27,894,713 gross unrealized depreciation.
At December 31, 1997, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
<PAGE>
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, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of December 31, 1997 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus New Leaders Fund, Inc. at December 31, 1997, 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
New York, New York
February 5, 1998
<PAGE>
Dreyfus New Leaders Fund, Inc.
- -------------------------------------------------------------------------------
Important Tax Information (Unaudited)
For Federal tax purposes the Fund hereby designates $3.680 per share as a
long-term capital gain distribution (of which 71.47% is subject to the 20%
maximum Federal tax rate) paid on December 29, 1997 and also designates $.350
per share as a long-term capital gain distribution of the $.560 per share paid
on September 15, 1997.
The Fund also designates 1.76% of the ordinary dividends paid during the
fiscal year ended December 31, 1997 as qualifying for the corporate dividends
received deduction.
<PAGE>
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. 085AR9712
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
12/31/97 48,239 69,192
*Source: Lipper Analytical Services, Inc.
