YEAR 2000 ISSUES (UNAUDITED)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the fund' s other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The Dreyfus Corporation is working to avoid Year 2000-related problems in its
systems and to obtain assurances from other service providers that they are
taking similar steps. In addition, issuers of securities in which the fund
invests may be adversely affected by Year 2000-related problems. This could have
an impact on the value of the fund's investments and its share price.
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report for The Dreyfus New Leaders
Fund, Inc. for the 12-month period ended December 31, 1998. Over the period,
your Fund produced a total return of -3.95% .* For the same period, the Russell
2000 Index had a total return of -2.55%,** and the Russell 2500 Index had a
total return of 0.38% .*** As you may recall, the Fund's Board of Directors
approved management policy changes to allow the Fund to expand its investments
into the mid-cap sector of the market. As a result, the Fund's benchmark now is
the Russell 2500 Index ("the Index").
In your Fund, we have assembled what we believe are some of the
better-positioned small- and mid-capitalization companies in the country, but
the investing public is uninterested. For five straight years, the bulk of
investors has chosen to plow their hard-earned money into the same "nifty 50"
stocks without regard to traditional valuation methods. What do we do? What we
always do. To paraphrase Warren Buffett, if one buys undervalued assets, sooner
or later something good will happen to them. As investors continue to neglect
smaller, well-managed companies, our menu of investment opportunities continues
to expand, and we believe the future payoff potential should be worthwhile for
the long-term investor.
MARKET OVERVIEW
Volatility was the overriding characteristic of equity markets in the year
ended December 31. There was stock market strength during the early part of the
year. Small-cap indices started to erode in the spring and were joined by
large-cap indices by midsummer. Indices declined sharply until the end of
August, followed by a rebound and then a renewed decline amid financial fears
until early October. A strong rally followed in the last three months of the
year in response to the easing of monetary policy. Over the 12-month period, the
total return on the Standard and Poor's 500 Composite Stock Price Index was
28.60% .((+) ) Returns on mid-cap and small-cap stock indices continued to be
weaker, with a negative total return on small-cap indices.
Three key trends influenced stock market behavior during the year. First, the
Federal Reserve kept the Federal Funds rate flat at 5.5% for nearly nine months
of the year, but then began a succession of easing moves. Second, weakness in
the economies of emerging countries contributed to declining commodity prices
and a drop in long-term Treasury bond yields to multidecade lows. Third,
expectations for corporate profits dropped, first in the sectors sensitive to
Asian developments such as oil, basic materials and exports and then for a
broader list of stocks.
The trigger for the sharp decline in stocks in August appeared to be the
Russian default that month. This resulted in deepening concerns about weaker
economic growth and corporate profits. There was also a global margin call on
risky assets held by hedge funds and financial institutions. This raised the
cost of debt financing for many corporations and many emerging countries.
Expectations for economic activity in emerging countries in Asia and Latin
America sank; those for U.S. corporate profits were put on hold. Despite the
fall in Treasury bond yields, financial stocks led the summer sell-off due to
concerns that financial difficulties might spread among emerging countries, who
might fail to repay loans. However, in the last three months of the year, these
fears began to ebb in response to the Federal Reserve's move to ease rates.
The erosion of expectations for corporate profit growth over the last year
contributed to an outperformance by a small group of "supercap" growth stocks
for much of the year. Investors had more confidence in the prospect for strong
persistent earnings growth for this small group of stocks than for the broad
market. Value stocks, which often have greater cyclical sensitivity to earnings
fluctuations, lagged behind these "supercap" growth stocks. In addition, many of
the financial stocks that fall into the value category fell sharply following
the Russian default and global margin call concerns, before rebounding strongly
after the Federal Reserve's move to ease rates.
The year ended December 31, 1998 was characterized by very different
performances of the various market sectors. For example, the total return for
the year on the Russell 1000 Index, with a heavy large-cap representation, was
27.02%, while the Russell 1000 Growth Index returned 38.71% and the Russell 1000
Value Index returned 15.63%.((+)(+)) The return on the Russell Midcap Index was
10.09%((+)(+)) while the small-cap Russell 2000 Index return was -2.55%.**
Another pattern in 1998 was that high-quality assets outperformed medium- and
low-quality assets. Treasury bonds outperformed junk bonds; U.S. and European
stocks outperformed emerging market stocks; blue chip stocks, especially major
growth stocks, generally rose more than the average stock. In an environment of
concern about financial risks, the high-grade assets were the market leaders.
PORTFOLIO FOCUS
The biggest winner by far for your Fund in 1998 was telecommunications utility
Metromedia Fiber Network, Cl. A. Tapping into the increase in demand for
bandwidth by telephone companies and corporations, Metromedia Fiber Network, Cl.
A has installed fiber rings in over 40 major metropolitan areas. Another
telecommunications utility, ITC DeltaCom, provides retail long distance to
midsize and large businesses in Bell South's territories. Unfortunately, not all
lines in a fiber network are paved in gold. We mistimed our investment in
NEXTLINK Communications, Cl. A, a provider of local facilities-based
telecommunications services to small and medium-sized businesses. Additionally,
as is often the case with utilities, Illinova, the holding company for the
Illinois Power Company, has stumbled in its nuclear exit strategy and
quasi-reorganization. In spite of these two misses, the Utility sector provided
the largest impetus for positive performance in the Fund for the year.
Healthcare was a good segment for the Russell 2500 Index, and your Fund.
Winners for the Fund in this sector included Allergan, Perkin-Elmer, and
McKesson. The increase in Allergan's share price reflects its transformation
into a growth pharmaceutical company. Perkin-Elmer is another company in
transition from an analytical investment manufacturer to a higher growth, higher
multiple, life sciences company. McKesson has emerged as the leader in the
burgeoning and consolidating healthcare-distribution industry. Our losers in
this sector prevented our selections from outperforming this sector of the
Index. The shares of Gilead Sciences sold off sharply when concerns arose about
the safety of its lead HIV drug, Preveon. We sold the stock of Varian
Associates, the healthcare systems, analytical instruments, and semiconductor
equipment business, when the recovery of the semiconductor industry and the
breakup of the company was delayed. Beverly Enterprises, as the largest nursing
home provider, is having trouble adjusting to the new Medicare reimbursement
rules and is being investigated by the Federal government.
The broad consumer segment was another sector where your portfolio benefited
from fortuitous stock picking. The standout performer was Outdoor Systems, a
leading major-market billboard company, which was a winner in 1997. Not to be
outclassed, Tiffany brought home the silver in this category as its Asian sales
held up better than many expected in view of the Asian crisis and as its
holiday-season sales in the U.S. were better than expected. Another winner,
Chancellor Media, Cl. A, which was our best consumer stock in 1997, entered 1998
as one of the pure-play U.S. radio broadcasters and exited the year a true
multimedia company. Some consumer concepts ran into rough spots last year.
Consolidated Stores, which was a big winner for your Fund in 1997, experienced
disappointing traffic in their Odd Lots/Big Lots stores and a competitive toy
environment for the all-important Christmas season in its KB Toys division. A
stock which we mistimed was Premier Parks, the world's largest operator of
regional theme parks.
The technology sector was the best performer of the Russell 2500 Index, and
although our stock picks produced good results for your Fund, our selections did
not outperform that sector of the Index. We are overweight in technology as we
enter 1999 because we think investors will continue to pay a premium for unit
growth and pricing power, which are scarce in a slowing global environment. As
is typical for this sector, there were some huge winners. Networks Associates
has been a top contributor to your Fund in each of the past three years. It has
benefited as concerns about computer viruses and network security have fueled
demand for the software products it designs. Intuit produces Quicken and
TurboTax and is expanding into financial services over the Internet. Lexmark
International Group, Cl. A manufactures and sells laser printers and print
cartridges, and has benefited from strong sales of PCs. We no longer own any
shares of the three worst-performing technology stocks in the Fund's portfolio
in 1998: CBT Group PLC, A.D.R., Aspect Telecommunications and Citrix Systems.
After two stupendous years of outsized returns in the Fund from the Energy
sector, our luck ran out in 1998. The group was the worst performer by far in
the Index for the year, and we overstayed our welcome in all of our selections
in this sector. The weakening global economy, worldwide overproduction and OPEC
in-fighting have caused commodity prices to drop to their lowest levels in 12
years. Our best stock was ERG Spa, an Italian refining and marketing company
that floated a successful initial public offering. More indicative of the
sector, Ocean Energy was a Fund holding that performed poorly. While it was a
big stock for us in 1996 and 1997, the company's merger with United Meridian,
another exploration and production outfit, has resulted in more financial and
operating leverage in an industry environment that has deteriorated from the
time of the merger.
After several years of writing to you about the combined tailwinds of industry
consolidation and declining interest rates which made investing in financial
services stocks extremely profitable, 1998 was a year in which your Fund
significantly underperformed in this sector. A notable exception was First
Tennessee National, a Memphis-based bank holding company that had a successful
1998 in its mortgage banking and capital markets group. Frontier Insurance
Group, a writer of specialty property/casualty insurance programs, is facing the
transition from the recently deceased founder to his son. These winners were
more than offset by companies whose businesses took an adverse turn in 1998: for
example; Amerin, Capital Re and Alabama-based Colonial BancGroup. We remain
underweighted in the Financial Services sector because we think insurance
pricing will stay competitive, the banking cycle is waning, and interest rates
are unlikely to decline any further.
We have become more sanguine about opportunities in the Material and
Processing sector. This segment, which includes companies in the process
industries such as steels, papers and chemicals, has borne the brunt of the
Asian crisis. Much of the demand for these essentially commodity products comes
from this region. Industry participants have reacted to global overcapacity by
merging with their major competitors and taking high cost capacity out of the
system. A better supply/demand balance could enable industry pricing to improve
if the global economic picture merely stabilizes. Cement producer Southdown and
the Montreal-based Alcan Aluminum were the two best stocks in this segment of
your portfolio last year. On the negative side, Freeport-McMoRan Copper & Gold,
Cl.B. continues to have three strikes against it: copper, gold and massive
reserves in politically and economically unstable Indonesia.
In conclusion, small and medium-sized companies generally should, in our
opinion, continue to grow their businesses in the current market environment.
Therefore, we remain very positive on small and medium-sized 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 direct our resources into those companies
and industries that we believe will propel your Fund into the new millennium.
We thank you for your interest. You may be sure we will continue to exert our
best efforts on your behalf.
Sincerely,
[Hilary R. Woods signature] [Paul Kandel signature]
Hilary R. Woods Paul Kandel
Co-Portfolio Manager Co-Portfolio Manager
January 21, 1999
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
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.
***SOURCE: THE FRANK RUSSELL COMPANY -- Reflects the reinvestment of income
dividends and where applicable, capital gain distributions. The Russell 2500
Index is a widely accepted unmanaged index of small- to mid-cap stock
performance and is composed of the 2,500 smallest companies in the Russell 3000
Index.
(+) SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
dividends and, where applicable, capital gain distributions. The Standard &
Poor' s 500 Composite Stock Price Index is a widely accepted unmanaged index of
overall U.S. stock market performance.
(+)(+)The Russell 1000 Index measures the performance of the 1,000 largest
companies in the Russell 3000 index, which represent approximately 89% of the
total market capitalization of the Russell 3000 Index. The Russell 1000 Growth
Index measures the performance of those Russell 1000 companies with higher
price-to-book ratios and higher forecasted growth values. The Russell 1000 Value
Index measures the performance of those Russell 1000 companies with lower
price-to-book ratios and lower forecasted growth values. The Russell Midcap
Index consists of the bottom 800 securities in the Russell 1000 Index as ranked
by total market captialization and is a widely accepted measure of medium-cap
stock market performance. All indices are unmanaged and include reinvested
dividends.
DREYFUS NEW LEADERS FUND, INC. DECEMBER 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS NEW LEADERS FUND,
INC. WITH THE RUSSELL 2000 INDEX AND THE RUSSELL 2500 INDEX
Dollars
$66,460
Dreyfus New Leaders Fund, Inc.
$60,562
Russell 2500 Index**
$47,010
Russell 2000 Index*
* Source: Lipper Analytical Services, Inc.
** Source: The Frank Russell Company
<TABLE>
<CAPTION>
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended Five Years Ended Ten Years Ended From Inception (1/29/85)
December 31, 1998 December 31, 1998 December 31, 1998 to December 31, 1998
___________________ ___________________ ___________________ ____________________
<S> <C> <C> <C>
-3.95% 11.79% 14.17% 14.58%
- ------------------------
</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 on that date in
the Russell 2000 Index as well as to the Russell 2500 Index which are described
below. 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 composed of the 2,000 smallest
companies in the Russell 3000 Index, while The Russell 2500 Index is composed of
the 2,500 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
Indices are both unmanaged and do not take into account charges, fees and other
expenses. At the meeting of the Fund's Board of Directors on February 2, 1998,
the Board approved changes to the Fund's management policies to increase the
maximum market capitalization of companies in which the Fund can invest from
$1.5 billion to $5 billion at the time of investment. By expanding the Fund's
investment focus to the small- and mid-cap sectors of the equity market, the
Fund has selected the Russell 2500 Index as its primary benchmark. Pursuant to
applicable regulations, performance for the Russell 2000 Index also is being
provided this year. Subsequently, performance information for the Russell 2000
Index will not pe presented in this comparison. 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, 1998
Common Stocks--97.1% Shares Value
- ------------------------------------------------------- _____________ _____________
<S> <C> <C> <C> <C>
Commercial Services--2.7% Outdoor Systems . . . . . . . . . . . . . . . . . (a) 440,000 $ 13,200,000
Robert Half International . . . . . . . . . . . . (a) 125,000 5,585,938
_____________
18,785,938
_____________
Consumer Non-Durables--3.4% Jones Apparel Group . . . . . . . . . . . . . . . (a) 365,000 8,052,813
UST . . . . . . . . . . . . . . . . . . . . . . . . . 245,000 8,544,375
Warnaco Group, Cl. A . . . . . . . . . . . . . . . . . 265,000 6,691,250
_____________
23,288,438
_____________
Consumer Services--9.9% Chancellor Media, Cl. A . . . . . . . . . . . . . (a) 265,000 12,686,875
Heftel Broadcasting, Cl. A . . . . . . . . . . . . (a) 210,000 10,342,500
Meredith . . . . . . . . . . . . . . . . . . . . . . . 250,000 9,468,750
Premier Parks . . . . . . . . . . . . . . . . . . (a) 300,000 9,075,000
Sun International Hotels . . . . . . . . . . . . . (a) 200,000 9,087,500
USA Networks . . . . . . . . . . . . . . . . . . . (a) 300,000 9,937,500
Wendy's International . . . . . . . . . . . . . . . . 340,000 7,416,250
_____________
68,014,375
_____________
Electronic Technology--15.4% Adaptec . . . . . . . . . . . . . . . . . . . . . (a) 400,000 7,025,000
Altera . . . . . . . . . . . . . . . . . . . . . . (a) 250,000 15,218,743
Cordant Technologies . . . . . . . . . . . . . . . . . 200,000 7,500,000
Lexmark International Group, Cl. A. . . . . . . . (a) 135,000 13,567,500
Northrop Grumman . . . . . . . . . . . . . . . . . . . 100,000 7,312,500
Perkin-Elmer . . . . . . . . . . . . . . . . . . . . . 150,000 14,634,375
Quantum . . . . . . . . . . . . . . . . . . . . . (a) 450,000 9,562,500
Sundstrand . . . . . . . . . . . . . . . . . . . . . . 175,000 9,078,125
Teradyne . . . . . . . . . . . . . . . . . . . . . (a) 250,000 10,593,750
Vitesse Semiconductor . . . . . . . . . . . . . . (a) 240,000 10,950,000
_____________
105,442,493
_____________
Energy Minerals--2.6% Anadarko Petroleum . . . . . . . . . . . . . . . . . . 280,000 8,645,000
Apache . . . . . . . . . . . . . . . . . . . . . . . . 100,000 2,531,250
Enron Oil & Gas . . . . . . . . . . . . . . . . . . . 400,000 6,900,000
_____________
18,076,250
_____________
Finance--19.8% ACE Limited . . . . . . . . . . . . . . . . . . . . . 240,000 8,265,000
Bank United, Cl. A . . . . . . . . . . . . . . . . . . 200,000 7,850,000
Bear Stearns Cos. . . . . . . . . . . . . . . . . . . 200,000 7,475,000
Boston Properties . . . . . . . . . . . . . . . . . . 250,000 7,625,000
Charter One Financial . . . . . . . . . . . . . . . . 309,750 8,595,563
Colonial BancGroup, Cl. A . . . . . . . . . . . . . . 600,000 7,200,000
Dime Bancorp . . . . . . . . . . . . . . . . . . . . . 300,000 7,931,250
Enhance Financial Services Group . . . . . . . . . . . 240,000 7,200,000
Everest Reinsurance Holdings . . . . . . . . . . . . . 295,000 11,486,563
Executive Risk . . . . . . . . . . . . . . . . . . . . 150,000 8,240,625
First Tennessee National . . . . . . . . . . . . . . . 275,000 10,467,188
Reliance Group Holdings . . . . . . . . . . . . . . . 600,000 7,725,000
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------- _____________ _____________
Finance (continued) ReliaStar Financial . . . . . . . . . . . . . . . . . 230,000 $ 10,608,750
Terra Nova (Bermuda) Holdings, Cl. A . . . . . . . . . 350,000 8,837,500
Torchmark . . . . . . . . . . . . . . . . . . . . . . 225,000 7,945,313
Berkley (W.R.) . . . . . . . . . . . . . . . . . . . . 245,000 8,345,313
_____________
135,798,065
_____________
Health Services--2.5% HEALTHSOUTH . . . . . . . . . . . . . . . . . . . (a) 625,000 9,648,438
Universal Health Services, Cl. B . . . . . . . . . . . 150,000 7,781,250
_____________
17,429,688
_____________
Health Technology--4.9% Allergan . . . . . . . . . . . . . . . . . . . . . . . 165,000 10,683,750
ALZA . . . . . . . . . . . . . . . . . . . . . . . (a) 97,000 5,068,250
Centocor . . . . . . . . . . . . . . . . . . . . . (a) 165,000 7,445,625
Forest Laboratories . . . . . . . . . . . . . . . (a) 200,000 10,637,500
_____________
33,835,125
_____________
Industrial Services--1.4% BJ Services . . . . . . . . . . . . . . . . . . . (a) 385,000 6,015,625
Global Industries . . . . . . . . . . . . . . . . (a) 535,000 3,276,875
Separation Technologies . . . . . . . . . . . (a,b,c) 81,984 311,539
_____________
9,604,039
_____________
Non-Energy Minerals--5.7% Alcan Aluminium . . . . . . . . . . . . . . . . . . . 325,000 8,795,313
Allegheny Teledyne . . . . . . . . . . . . . . . . . . 500,000 10,218,750
Freeport-McMoRan Copper & Gold, Cl. B . . . . . . . . 500,000 5,218,750
Nucor . . . . . . . . . . . . . . . . . . . . . . . . 170,000 7,352,500
Phelps Dodge . . . . . . . . . . . . . . . . . . . . . 145,000 7,376,875
_____________
38,962,188
_____________
Process Industries--5.0% Bowater . . . . . . . . . . . . . . . . . . . . . . . 200,000 8,287,500
OM Group . . . . . . . . . . . . . . . . . . . . . . . 250,000 9,125,000
Owens-Illinois . . . . . . . . . . . . . . . . . . (a) 250,000 7,656,250
Westpoint Stevens . . . . . . . . . . . . . . . . (a) 280,000 8,837,500
_____________
33,906,250
_____________
Producer Manufacturing--1.9% Howmet International . . . . . . . . . . . . . . . (a) 785,000 12,658,125
_____________
Retail Trade--3.8% Bed Bath & Beyond . . . . . . . . . . . . . . . . (a) 300,000 10,237,500
Consolidated Stores . . . . . . . . . . . . . . . (a) 145,000 2,927,188
Tiffany . . . . . . . . . . . . . . . . . . . . . . . 250,000 12,968,750
_____________
26,133,438
_____________
Technology Services--7.0% Aspect Development . . . . . . . . . . . . . . . . (a) 120,000 5,317,500
Excite . . . . . . . . . . . . . . . . . . . . . . (a) 220,000 9,253,750
Intuit . . . . . . . . . . . . . . . . . . . . . . (a) 190,000 13,775,000
Networks Associates . . . . . . . . . . . . . . . (a) 290,000 19,212,500
_____________
47,558,750
_____________
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------- _____________ _____________
Utilities--11.1% BEC Energy . . . . . . . . . . . . . . . . . . . . . . 225,000 $ 9,267,188
Illinova . . . . . . . . . . . . . . . . . . . . . . . 320,000 8,000,000
ITC DeltaCom . . . . . . . . . . . . . . . . . . . (a) 550,000 8,387,500
LG&E Energy . . . . . . . . . . . . . . . . . . . . . 315,000 8,918,438
Metromedia Fiber Network, Cl. A . . . . . . . . . (a) 770,000 25,795,000
Niagara Mohawk Power . . . . . . . . . . . . . . . . . 500,000 8,062,500
Pinnacle West Capital . . . . . . . . . . . . . . . . 170,000 7,203,750
_____________
75,634,376
_____________
TOTAL COMMON STOCKS
(cost $476,852,041) . . . . . . . . . . . . . . . $665,127,538
_____________
Preferred Stocks--.2%
- -------------------------------------------------------
Industrial Services--.1% Separation Technologies,
Ser. A, 6%, Cum. Conv. . . . . . . . . . . (a,b,c) 243,385 $ 924,863
Technology Services--.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--5.4% Amount
- ------------------------------------------------------- _____________
U.S. Treasury Bills: 3.57%, 1/07/1999 . . . . . . . . . . . . . . . . . . . $ 658,000 $ 657,617
3.76%, 1/14/1999 . . . . . . . . . . . . . . . . . . . 3,690,000 3,685,214
4.41%, 1/21/1999 . . . . . . . . . . . . . . . . . . . 2,839,000 2,832,059
4.08%, 1/28/1999 . . . . . . . . . . . . . . . . . . . 2,172,000 2,165,897
4.32%, 2/04/1999 . . . . . . . . . . . . . . . . . . . 14,484,000 14,424,630
4.38%, 3/18/1999 . . . . . . . . . . . . . . . . . . . 4,988,000 4,943,856
4.46%, 4/01/1999 . . . . . . . . . . . . . . . . . . . 8,245,000 8,155,130
_____________
TOTAL SHORT-TERM INVESTMENTS
(cost $36,859,759) . . . . . . . . . . . . . . . . $ 36,864,403
_____________
TOTAL INVESTMENTS (cost $515,993,263). . . . . . . . . . . . . . . . . . . . . . . . . . . 102.7% $703,591,804
_______ _____________
LIABILITIES, LESS CASH AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . (2.7%) $ (18,843,369)
_______ _____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $684,748,435
_______ _____________
</TABLE>
<TABLE>
<CAPTION>
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
(b) Investments in non-controlled affiliates (cost $1,243,000)--see Note 1(d).
(c) Securities restricted as to public resale. Investments in restricted
securities, with an aggregate value of $1,911,402, represents approximately
.28% of net assets:
Acquisition Purchase Percentage of
Issuer Date Price Net Assets Valuation*
_____ __________ ________ ____________ _________
<S> <C> <C> <C> <C>
Crystal Dynamics, Ser. D, Conv.. . . . . . . . . . . 7/10/95 $7.50 .10% $3.75
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 .14 3.80
</TABLE>
- --------------
*The valuation of these securities has been determined in good faith under the
direction of the Board of Directors.
<TABLE>
<CAPTION>
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
_____________ _____________
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . $515,993,263 $703,591,804
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 13,840
Receivable for shares of Common Stock subscribed . . . . 10,807,039
Interest receivable . . . . . . . . . . . . . . . . . . . 490,895
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 62,828
_____________
714,966,406
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 473,524
Due to Distributor . . . . . . . . . . . . . . . . . . . 141,294
Payable for shares of Common Stock redeemed . . . . . . . 17,685,133
Payable for investment securities purchased . . . . . . . 11,817,660
Accrued expenses . . . . . . . . . . . . . . . . . . . . 100,360
_____________
30,217,971
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $684,748,435
_____________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $497,801,844
Accumulated net realized gain (loss) on investments . . . (651,950)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 . . . . . . . . . . . . . . . . 187,598,541
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $684,748,435
_____________
SHARES OUTSTANDING
(100 MILLION SHARES OF $.01 PAR VALUE COMMON STOCK AUTHORIZED) . . . . . . . . . . . . . . 16,574,919
NET ASSET VALUE, offering and redemption price per share--Note 3(d). . . . . . . . . . . . $41.31
_______
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
INCOME: Cash dividends (net of $7,313 foreign taxes
withheld at source) . . . . . . . . . . . . . $ 5,437,239
Interest . . . . . . . . . . . . . . . . . . . 1,942,056
____________
Total Income . . . . . . . . . . . . . . . $ 7,379,295
EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . 5,968,082
Shareholder servicing costs--Note 3(b) . . . . . 2,764,193
Prospectus and shareholders' reports . . . . . . 86,755
Custodian fees--Note 3(b) . . . . . . . . . . . . 78,442
Registration fees . . . . . . . . . . . . . . . . 53,793
Professional fees . . . . . . . . . . . . . . . . 45,157
Directors' fees and expenses--Note 3(c) . . . . . 43,582
Loan commitment fees--Note 2 . . . . . . . . . . 6,144
Miscellaneous . . . . . . . . . . . . . . . . . . 11,548
____________
Total Expenses . . . . . . . . . . . . . . 9,057,696
_____________
INVESTMENT (LOSS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,678,401)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . $ (83,704)
Net unrealized appreciation (depreciation)
on investments . . . . . . . . . . . . . . . . (27,003,995)
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . (27,087,699)
_____________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . $(28,766,100)
_____________
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1998 December 31, 1997
_________________ _________________
OPERATIONS:
Investment (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,678,401) $ (2,637,097)
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . (83,704) 88,188,933
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . (27,003,995) 56,242,763
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . (28,766,100) 141,794,599
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . (20,245,621) (75,672,264)
_____________ _____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 327,144,836 467,417,822
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,379,693 72,972,658
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (472,441,525) (527,978,672)
Redemption fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,546 ----
_____________ _____________
Increase (Decrease) in Net Assets from Capital Stock Transactions . . . . . . (125,773,450) 12,411,808
_____________ _____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . (174,785,171) 78,534,143
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 859,533,606 780,999,463
_____________ _____________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 684,748,435 $ 859,533,606
_____________ _____________
Shares Shares
_____________ _____________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,407,474 10,396,629
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . 517,921 1,671,965
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,732,055) (11,857,646)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . (2,806,660) 210,948
_____________ _____________
</TABLE>
<TABLE>
<CAPTION>
SEE NOTES TO FINANCIAL STATEMENTS.
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: 1998 1997 1996 1995 1994
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . $44.35 $40.74 $37.39 $31.33 $34.13
_______ _______ _______ _______ _______
Investment Operations:
Investment income (loss)--net . . . . . . . . . . . . . . (.10) (.14) (.05) .06 .10
Net realized and unrealized gain (loss) on investments . (1.78) 7.99 6.47 9.17 (.22)
_______ _______ _______ _______ _______
Total from Investment Operations . . . . . . . . . . . . (1.88) 7.85 6.42 9.23 (.12)
_______ _______ _______ _______ _______
Distributions:
Dividends from investment income--net . . . . . . . . . . -- -- -- (.07) (.08)
Dividends from net realized gain on investments . . . . . (1.17) (4.24) (3.07) (3.10) (2.60)
_______ _______ _______ _______ _______
Total Distributions . . . . . . . . . . . . . . . . . . . (1.17) (4.24) (3.07) (3.17) (2.68)
_______ _______ _______ _______ _______
Redemption fee added to paid-in capital . . . . . . . . . .01 -- -- -- --
_______ _______ _______ _______ _______
Net asset value, end of period . . . . . . . . . . . . . $41.31 $44.35 $40.74 $37.39 $31.33
_______ _______ _______ _______ _______
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . (3.95%) 19.54% 17.31% 29.80% (.15%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . . . . . 1.14% 1.12% 1.17% 1.19% 1.16%
Ratio of net investment income (loss) to average net assets . . (.21%) (.33%) (.15%) .17% .30%
Decrease reflected in above expense ratios
due to undertakings by the Manager . . . . . . . . . -- -- -- .02% .05%
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . 107.38% 82.28% 102.22% 108.80% 94.21%
Net Assets, end of period (000's Omitted) . . . . . . . . $684,748 $859,534 $780,999 $606,945 $391,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus New Leaders Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as a diversified open-end
management investment company. The Fund's investment objective is to maximize
capital appreciation. The Dreyfus Corporation (the "Manager") serves as the
Fund' s investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A. (" 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. Under the terms of the custody agreement, the Fund receives net
earnings credits based on available cash balances left on deposit.
(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,
1998:
<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>
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
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
make distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended (the "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 Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes.
During the period ended December 31, 1998, the Fund reclassified $1,678,401
between paid-in capital and accumulated undistributed investment income-net. Net
assets were not affected by this reclassification.
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, 1998, 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 1 1/2% 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, 1998, 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, 1998, the Fund was charged $1,989,361 pursuant to the Shareholder
Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the period
ended December 31, 1998, the Fund was charged $358,021 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended December 31, 1998, the Fund was
charged $78,442 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.
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) A 1% redemption fee is charged and retained by the Fund on shares redeemed
within a six-month period of their issuance, including on redemptions made
through the use of the Fund Exchange privilege.
NOTE 4--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended December 31, 1998,
amounted to $809,872,129 and $943,951,738, respectively.
At December 31, 1998, accumulated net unrealized appreciation on investments
was $187,598,541, consisting of $195,865,346 gross unrealized appreciation and
$8,266,805 gross unrealized depreciation.
At December 31, 1998, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
DREYFUS 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, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund' s management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of December 31, 1998 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus New Leaders Fund, Inc. at December 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
New York, New York
February 4, 1999
DREYFUS NEW LEADERS FUND, INC.
- -----------------------------------------------------------------------------
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates $1.1169 per share as a
long-term capital gain distribution of the $1.1676 per share paid on September
14, 1998.
[reg.tm logo]
(reg.tm)
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. 085AR9812
New Leaders
Fund, Inc.
Annual Report
December 31, 1998
