Dreyfus New Leaders
Fund, Inc.
ANNUAL REPORT December 31, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by Dreyfus and
the fund's other service providers do not properly process and calculate
date-related information from and after January 1, 2000. Dreyfus has taken steps
designed to avoid year 2000-related problems in its systems and to monitor the
readiness of other service providers. 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.
Contents
THE FUND
- --------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
13 Financial Highlights
14 Notes to Financial Statements
19 Report of Independent Auditors
20 Important Tax Information
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus New Leaders Fund, Inc.
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus New Leaders Fund, Inc.,
covering the 12-month period from January 1, 1999 through December 31, 1999.
Inside, you' ll find valuable information about how the fund was managed,
including a discussion with the fund's portfolio managers, Hilary Woods and Paul
Kandel.
The past year has been both highly volatile and rewarding for investors in U.S.
stocks, including the mid-capitalization sector of the market. On December 31,
the last trading day of 1999, most major stock market indices hit new highs,
including the Dow Jones Industrial Average, the S&P 500 Index of large-cap
stocks, the technology-heavy Nasdaq 100 and the Russell 2000 Index of
small-capitalization stocks.
These simultaneous highs masked the remarkable narrowness of the stock market's
advance in 1999, however. Growth-oriented midcap stocks handily outperformed
value-oriented midcap stocks. Indeed, the market' s stellar performance was
generally limited to a handful of highly valued technology and
telecommunications companies, some of which had no earnings. In our view, many
fundamentally sound midcap companies in other market sectors may now be selling
at attractive valuations.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus New Leaders Fund, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
January 14, 2000
DISCUSSION OF FUND PERFORMANCE
Hilary Woods and Paul Kandel, Portfolio Managers
How did Dreyfus New Leaders Fund, Inc. perform relative to its benchmark?
For the 12-month period ended December 31, 1999, Dreyfus New Leaders Fund, Inc.
produced a total return of 37.42%.(1) The fund's 12-month performance exceeded
the Russell 2500 Index, which produced a total return of 24.15% for the same
period.(2)
We attribute the fund' s performance to our success in identifying attractive
individual investment opportunities among a diverse range of sectors, industries
and investment styles. In addition, the fund succeeded in emphasizing some of
the market's strongest sectors.
What is the fund's investment approach?
The fund invests primarily in a diversified portfolio of midcap companies,
focusing on new leaders in their industries that offer products or services that
we believe enhance prospects for growth of future earnings. We also base
investment decisions on economic or political conditions that we believe are
likely to affect a stock' s performance, and on the impact of changes in a
company's management or organizational structure.
Our investment approach targets both growth-oriented stocks (those of companies
with earnings that are expected to grow faster than the overall market), and
value-oriented stocks (those that appear underpriced according to a variety of
financial measurements) . We further diversify among the market' s various
industries and sectors, supervising a team of sector managers who each make buy
and sell decisions within their respective areas of expertise.
What other factors influenced the fund's performance?
The fund achieved high returns overall, particularly in the consumer products
sector, because of high levels of consumer confidence throughout the period. Our
best performers included Hispanic The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
Broadcasting, which benefited from the growth of targeted marketing to the
fast-growing Spanish community in the United States; Gemstar International, the
maker of VCR Plus and satellite TV programming guides; and Tiffany & Co., the
luxury retailer.
The fund was also affected by the U.S. economy, which exhibited consistent
strength throughout the period. Most global economies showed signs of a cyclical
resurgence as well. Increasing global economic activity led to a growing demand
for energy, communications and basic industrial resources. Many of the companies
in which the fund invested benefited as a result.
Rising energy prices fueled advances in our holdings of oil drilling and service
companies, such as Noble Drilling and Weatherford International. Among
utilities, we connected with telecommunications-related stocks, including
Metromedia Fiber Network, Cl. A., which provides telephone companies and
corporations with the increased bandwidth required for data-intensive
communications. In the materials and processing sector, we produced solid
returns with investments in companies benefiting from increasing global
industrial activity. Our strongest performers in the sector included metals
mining and development companies, such as Freeport-McMoRan Copper, and Bowater,
a leading producer of newsprint. Other profitable sectors for investment
included transportation and technology.
Of course not every company in the fund's portfolio showed positive returns.
Some stocks lagged, even among our best-performing sectors. The fund also
experienced weak performance throughout the period from two sectors in
particular: health care and finance. The health care sector was battered by an
increasingly restrictive regulatory environment and the prospect for further
government-imposed limitations on Medicare and Medicaid reimbursements. The fund
benefited from holdings of stocks such as Allergan, a growing pharmaceutical
company, and Centocor, an advanced-stage biotech company. However, those gains
were more than matched by losses in health services companies such as
Healthsouth, a provider of outpatient surgery and rehabilitation, which we sold
during the reporting period.
Financial stocks generally suffered in 1999's rising interest-rate environment.
As a result, many of the fund's financial company holdings failed to show strong
gains, and some, such as Enhance Financial and Berkley Insurance,
underperformed. Both of these holdings were sold during the reporting period.
Exceptions included UnionBanCal, which benefited from effective cost cutting and
accelerating local growth, and market maker Knight/Trimark Group, which rose on
news of its market share gains.
What is the fund's current strategy?
As of the end of the reporting period, the fund remained more heavily weighted
than its benchmark in the sectors that provided the strongest performance during
1999, including technology, consumer products, energy, utilities, and materials
and processing. We remained underweighted in last year' s relatively
weak-performing sectors of health care and financial services. Of course, there
is no guarantee how these sectors will perform in 2000.
We continue to believe that midcap stocks of fast-growing new leaders in their
industries offer the potential for strong growth and above-average capital
appreciation. Accordingly, we have continued to target such stocks while
adhering to our blended growth-and-value investment strategy in seeking to
outperform the Russell 2500 Index.
We remain sanguine on technology and energy given the strong earnings growth
prospects for these two groups and their historically strong first quarter
performance. We are sticking with our caution on financial services near term in
view of likely continued unfriendly Fed policy.
January 14, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS
PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
(2) SOURCE: FACTSET RESEARCH SYSTEMS, INC. -- 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. THE RUSSELL 3000 INDEX IS COMPOSED OF THE LARGEST U.S. COMPANIES BY
MARKET CAPITALIZATION.
The Fund
<TABLE>
<CAPTION>
FUND PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus New Leaders Fund,
Inc. and the Russell 2500 Index
- --------------------------------------------------------------------------------
Average Annual Total Returns AS OF 12/31/99
Inception From
Date 1 Year 5 Years 10 Years Inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FUND 1/29/85 37.42% 19.16% 14.69% 15.98%
(+) SOURCE: FACTSET RESEARCH SYSTEMS, INC.
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS NEW LEADERS FUND,
INC. ON 1/29/85 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE RUSSELL
2500 INDEX ON THAT DATE. FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON
1/31/85 IS USED AS THE BEGINNING VALUE ON 1/29/85. ALL DIVIDENDS AND CAPITAL
GAIN DISTRIBUTIONS ARE REINVESTED.
THE FUND'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL
APPLICABLE FEES AND EXPENSES. THE RUSSELL 2500 INDEX IS AN UNMANAGED INDEX AND
IS COMPOSED OF THE 2,500 SMALLEST COMPANIES IN THE RUSSELL 3000 INDEX. THE
RUSSELL 3000 INDEX IS COMPOSED OF 3,000 OF THE LARGEST U.S. COMPANIES BY MARKET
CAPITALIZATION. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER
EXPENSES. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE
REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION
OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
December 31, 1999
COMMON STOCKS--97.2% Shares Value ($)
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AUTO RELATED--3.0%
<S> <C> <C>
Expeditors International of Washington 250,000 10,953,125
Navistar International 200,000 (a) 9,475,000
20,428,125
CONSUMER--21.0%
AMFM 170,000 (a) 13,302,500
Gemstar International 340,000 (a) 24,225,000
Hispanic Broadcasting 210,000 (a) 19,365,938
Infinity Broadcasting, Cl. A 487,500 (a) 17,641,406
Mandalay Resort Group 425,000 (a) 8,553,125
Meredith 250,000 10,421,875
Ticketmaster Online-CitySearch, Cl. B 250,000 (a) 9,609,375
Tiffany & Co. 270,000 24,097,500
USA Networks 255,000 (a) 14,088,750
141,305,469
ELECTRONIC TECHNOLOGY--11.9%
ASM Lithography Holding 165,000 (a) 18,768,750
Altera 230,000 (a) 11,399,375
National Semiconductor 375,000 (a) 16,054,688
Teradyne 280,000 (a) 18,480,000
Vitesse Semiconductor 290,000 (a) 15,206,875
79,909,688
ENERGY--8.1%
Apache 165,000 6,094,687
ENSCO International 375,000 8,578,125
Noble Drilling 475,000 (a) 15,556,250
USX-U.S. Steel Group 335,000 11,055,000
Weatherford International 335,000 (a) 13,379,062
54,663,124
FINANCE--11.3%
Charter One Financial 325,237 6,220,158
Compass Bancshares 300,000 6,693,750
Dime Bancorp 200,000 3,025,000
First Tennessee National 275,000 7,837,500
First Virginia Banks 195,000 8,385,000
Knight/Trimark Group, Cl. A 200,000 (a) 9,200,000
Protective Life 265,000 8,430,312
T. Rowe Price Associates 225,000 8,310,938
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
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FINANCE (CONTINUED)
UnionBanCal 240,000 9,465,000
XL Capital, Cl. A 170,000 8,818,750
76,386,408
FOREST & PAPER PRODUCTS--1.4%
Consolidated Papers 300,000 9,543,750
HEALTH CARE--7.3%
Allergan 220,000 10,945,000
Bard (C.R.) 170,000 9,010,000
Sepracor 85,000 (a) 8,430,938
Teva Pharmaceutical Industries, ADR 165,000 11,828,437
Watson Pharmaceuticals 240,000 (a) 8,595,000
48,809,375
MATERIALS & PROCESSING--8.2%
Bowater 150,000 8,146,875
Eastman Chemical 175,000 8,345,312
Engelhard 500,000 9,437,500
Fluor 200,000 9,175,000
Freeport-McMoRan Copper, Cl. B 550,000 (a) 11,618,750
International Flavors & Fragrances 225,000 8,493,750
55,217,187
PRODUCER DURABLES--3.9%
CNH Global 60,900 810,731
Cordant Technologies 200,000 6,600,000
Grainger (W.W.) 175,000 8,367,188
Howmet International 125,000 (a) 2,257,812
Northrop Grumman 150,000 8,109,375
26,145,106
TECHNOLOGY--14.4%
Adaptec 275,000 (a) 13,715,625
Ciena 250,000 (a) 14,375,000
Citrix Systems 135,000 (a) 16,605,000
Flextronics International 240,000 (a) 11,040,000
Intuit 300,000 (a) 17,981,250
Lexmark International Group, Cl. A 115,000 (a) 10,407,500
Scientific-Atlanta 225,000 12,515,625
96,640,000
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
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UTILITIES & OTHER--6.7%
Illinova 280,000 9,730,000
ITC DeltaCom 520,000 (a) 14,365,000
Metromedia Fiber Network, Cl. A 350,000 (a) 16,778,125
Nicor 120,000 3,900,000
Separation Technologies 81,984 (a,b,c) 311,539
45,084,664
TOTAL COMMON STOCKS
(cost $372,438,826) 654,132,896
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PREFERRED STOCKS--.1%
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Separation Technologies,
Ser. A, 6%, Cum. Conv.
(cost $931,463) 243,385 (a,b,c) 924,863
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Principal
SHORT-TERM INVESTMENTS--3.6% Amount ($) Value ($)
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U.S. TREASURY BILLS:
5.18%, 1/13/2000 10,277,000 10,263,743
5.05%, 1/20/2000 4,117,000 4,107,984
5%, 2/3/2000 6,729,000 6,702,218
5.05%, 3/16/2000 269,000 266,232
5.07%, 3/30/2000 3,247,000 3,206,510
TOTAL SHORT-TERM INVESTMENTS
(cost $24,535,857) 24,546,687
TOTAL INVESTMENTS (cost $397,906,146) 100.9% 679,604,446
LIABILITIES, LESS CASH AND RECEIVABLES (.9%) (6,253,643)
NET ASSETS 100.0% 673,350,803
(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 $1,236,402 REPRESENTS APPROXIMATELY .18%
OF NET ASSETS:
</TABLE>
<TABLE>
<CAPTION>
Acquisition Purchase
Issuer Date Price ($) Net Assets (%) Valuation ($)(+)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Separation Technologies 1/13/95 3.80 .04 3.80
Separation Technologies,
Ser. A, 6%, Cum. Conv. 7/12/93-1/13/95 3.80 .14 3.80
(+) THE VALUATION OF THESE SECURITIES HAS BEEN DETERMINED IN GOOD FAITH UNDER
THE DIRECTION OF THE BOARD OF DIRECTORS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 397,906,146 679,604,446
Cash 32,514
Dividends receivable 594,349
Receivable for shares of Common Stock subscribed 133,645
Prepaid expenses 27,530
680,392,484
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 595,363
Payable for shares of Common Stock redeemed 5,581,422
Payable for investment securities purchased 781,025
Accrued expenses 83,871
7,041,681
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NET ASSETS ($) 673,350,803
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 358,995,740
Accumulated net realized gain (loss) on investments 32,656,763
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 281,698,300
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NET ASSETS ($) 673,350,803
- --------------------------------------------------------------------------------
SHARES OUTSTANDING
(100 million shares of $.01 par value Common Stock authorized) 13,287,897
NET ASSET VALUE, offering and redemption price per share--Note 3(d) ($)
50.67
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended December 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Cash dividends (net of $13,009 foreign taxes withheld at source) 5,122,333
Interest 1,366,017
TOTAL INCOME 6,488,350
EXPENSES:
Management fee--Note 3(a) 4,658,175
Shareholder servicing costs--Note 3(b) 2,067,950
Custodian fees--Note 3(b) 58,362
Prospectus and shareholders' reports 57,404
Professional fees 49,870
Registration fees 49,034
Directors' fees and expenses--Note 3(c) 42,885
Loan commitment fees--Note 2 5,531
Miscellaneous 10,845
TOTAL EXPENSES 7,000,056
INVESTMENT (LOSS) (511,706)
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments 105,055,980
Net unrealized appreciation (depreciation) on investments 94,099,759
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 199,155,739
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 198,644,033
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31,
----------------------------------
1999 1998
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment (loss) (511,706) (1,678,401)
Net realized gain (loss) on investments 105,055,980 (83,704)
Net unrealized appreciation (depreciation)
on investments 94,099,759 (27,003,995)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 198,644,033 (28,766,100)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
NET REALIZED GAIN ON INVESTMENTS (71,263,590) (20,245,621)
- --------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 187,240,492 327,144,836
Dividends reinvested 68,092,489 19,379,693
Cost of shares redeemed (394,139,085) (472,441,525)
Redemption fee 28,029 143,546
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL STOCK TRANSACTIONS (138,778,075) (125,773,450)
TOTAL INCREASE (DECREASE) IN NET ASSETS (11,397,632) (174,785,171)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 684,748,435 859,533,606
END OF PERIOD 673,350,803 684,748,435
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 4,044,076 7,407,474
Shares issued for dividends reinvested 1,379,412 517,921
Shares redeemed (8,710,510) (10,732,055)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (3,287,022) (2,806,660)
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
Year Ended December 31,
--------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 41.31 44.35 40.74 37.39 31.33
Investment Operations:
Investment income (loss)--net (.04)(a) (.10) (.14) (.05) .06
Net realized and unrealized
gain (loss) on investments 15.33 (1.78) 7.99 6.47 9.17
Total from Investment Operations 15.29 (1.88) 7.85 6.42 9.23
Distributions:
Dividends from investment income--net -- -- -- -- (.07)
Dividends from net realized gain
on investments (5.93) (1.17) (4.24) (3.07) (3.10)
Total Distributions (5.93) (1.17) (4.24) (3.07) (3.17)
Redemption fee added to paid-in capital .00(b) .01 -- -- --
Net asset value, end of period 50.67 41.31 44.35 40.74 37.39
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TOTAL RETURN (%) 37.42 (3.95) 19.54 17.31 29.80
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets 1.13 1.14 1.12 1.17 1.19
Ratio of net investment income (loss)
to average net assets (.08) (.21) (.33) (.15) .17
Decrease reflected in above expense ratios
due to undertakings by
The Dreyfus Corporation -- -- -- -- .02
Portfolio Turnover Rate 95.49 107.38 82.28 102.22 108.80
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 673,351 684,748 859,534 780,999 606,945
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) AMOUNT REPRESENTS LESS THAN $.01.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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" ), which is a wholly-owned subsidiary of Mellon Financial
Corporation. 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, cur
rency 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 received net
earnings credits of $8,785 during the period ended December 31, 1999 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
(d) Affiliated issuers: Issuers in which the fund held 5% or more of the
outstanding voting securities are defined as "affiliated" in the Act. The
following summarizes non-controlled affiliated issuers during the period ended
December 31, 1999:
<TABLE>
<CAPTION>
Shares
----------------------------------------------
Beginning End of Dividend Market
Name of issuer of Period Purchases Sales Period Income ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Separation
<S> <C> <C> <C>
Technologies 81,984 -- -- 81,984 -- 311,539
(Common)
Separation
Technologies 243,385 -- -- 243,385 -- 924,863
(Conv. Preferred)
</TABLE>
(e) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net and dividends from net realized capital
gain are normally declared and paid annually, but the fund may make
distributions on a more frequent basis to comply
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). 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, 1999, the fund increased accumulated
undistributed investment income-net by $511,706, decreased paid-in capital by
$28,029 and decreased accumulated net realized gain (loss) on investments by
$483,677. Net assets were not affected by this reclassification.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the fund at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended
December 31, 1999, 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 year the aggregate expenses of the fund, 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, 1999, 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, 1999, the fund was charged $1,552,725 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, 1999, the fund was charged $343,409 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, 1999, the fund was
charged $58,362 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.
(d) A 1% redemption fee is charged and retained by the fund on shares redeemed
within six months following the date of issuance, including redemptions made
through the use of the fund's exchange privilege.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(e) During the period ended December 31, 1999, the fund incurred total brokerage
commissions of $1,694,409, of which $7,750 was paid to Dreyfus Brokerage
Services, a wholly-owned subsidiary of Mellon Financial Corporation.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended December 31, 1999, amounted to
$566,231,393 and $776,743,577, respectively.
At December 31, 1999, accumulated net unrealized appreciation on investments was
$281,698,300, consisting of $286,618,884 gross unrealized appreciation and
$4,920,584 gross unrealized depreciation.
At December 31, 1999, 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).
REPORT OF 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, 1999, 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 auditing standards generally accepted
in the United States. 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, 1999 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, 1999, 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 accounting principles generally accepted
in the United States.
New York, New York
February 8, 2000
The Fund
IMPORTANT TAX INFORMATION (Unaudited)
For Federal tax purposes, the fund hereby designates $5.6930 per share as a
long-term capital gain distribution of the $5.8100 per share paid on December
23, 1999 and also designates $.1200 per share as a long-term capital gain
distribution paid on March 31, 1999.
The fund also designates 100% of the ordinary dividends paid during the fiscal
year ended December 31, 1999 as qualifying for the corporate dividends received
deduction.
For More Information
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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 2000 Dreyfus Service Corporation 085AR9912
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN DREYFUS NEW LEADERS FUND, INC.
AND THE RUSSELL 2500 INDEX
EXHIBIT A:
DREYFUS
PERIOD RUSSELL 2500 NEW LEADERS
INDEX * FUND, INC.
1/29/85 10,000 10,000
12/31/85 11,824 13,415
12/31/86 13,240 15,093
12/31/87 12,620 14,320
12/31/88 15,489 17,663
12/31/89 18,498 23,189
12/31/90 15,746 20,440
12/31/91 23,099 29,717
12/31/92 26,838 32,519
12/31/93 31,277 38,069
12/31/94 30,947 38,012
12/31/95 40,757 49,340
12/31/96 48,514 57,880
12/31/97 60,331 69,192
12/31/98 60,562 66,460
12/31/99 75,241 91,331
*Source: FactSet Research Systems, Inc.
