LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide the annual report for Dreyfus Balanced Fund,
Inc. Since the Fund's inception on September 30, 1992, the assets have grown
rapidly and are now over $80 million. This includes an increase of over 70%
in assets during the past fiscal year. The stock market remains near its
all-time high, but prices on long-term Treasury issues have eroded sharply in
the last 12 months. As we indicated in our last report, we are maintaining a
cautious outlook toward the markets and have emphasized capital preservation.
As a result, the Fund closed its year with 41% in equities, 48% in
fixed-income securities and 11% in cash equivalents.
For the 12-month period ended August 31, 1994, the Fund provided a total
return of 7.73%.* This compares with a total return of 5.46% for the Standard
and Poor's 500 Composite Stock Price Index** and -1.51% for the Lehman
Brothers Aggregate Bond Index for the same period.***
While the asset allocation at the end of the fiscal year was unchanged
from a year ago, it was altered throughout this period as both the stock and
bond markets were presented with many challenges. In fact, investors were
confronted with a new obstacle when the Federal Reserve Board signaled a
change in monetary policy by increasing rates in February. By the end of
August, the Federal Reserve had raised the Federal Funds rate on five
occasions and the discount rate twice. Their policy shift was enacted in
order to slow economic growth to a more sustainable level and to prevent a
reemergence of inflation. It also put the markets, especially fixed income,
into a tailspin. Long-term Treasury Bond yields rose to 7.75% from 5.75% in
less than one year. In price terms, that meant the 25-year Treasury Bond fell
more than 15 points or $150 for every $1,000 bond held. The stock market was
generally unchanged in the past year, but was subject to a great deal of
volatility. The Dow Jones Industrial Average moved higher and flirted with
the 4,000 level early in 1994 before succumbing to a correction of almost 500
points. A summer rally helped to pare that loss by August, but we retain our
cautious view.
The Fund's equity return resulted from employing our disciplines to
identify undervalued issues with favorable prospects. The pharmaceutical and
health care sectors bounced back sharply as sweeping health care reform in
Washington became more uncertain. We utilized this period of turmoil in the
drug sector to reposition our holdings by deleting Allergan, Wellpoint Health
Networks and Upjohn while adding Merck & Co. and Johnson & Johnson. We also
increased our positions in Amgen and Schering-Plough. As always, special
situations played a key role in our strategy. McDonnell Douglas was sold
after nearly doubling in value. Gains were also realized in Gap Stores and
Microsoft after the price of each rose faster than the underlying earnings.
Technology was also a sector where the Fund profited. Teradyne was a stock
whose price rose to a new high during the year, and we reduced the position.
It fell back in price, and we reacquired shares. The stock has again moved
back to near its historic high. Intel was added after the stock fell sharply,
and our holding of IBM was increased on a number of occasions.
Exposure to the energy sector was initiated with Atlantic Richfield, a
candidate for corporate and financial restructuring, and Schlumberger Ltd,
the world's premier service technology company. Near the year's end, we added
Wal-Mart Stores and Toys R Us to take advantage of historically low valuation
levels. Finally, the Fund was a large holder of American Cyanamid. In August,
1994 American Home Products and American Cyanamid agreed to a merger whereby
American Cyanamid's holders will receive $101 per share in a cash tender. The
acquisition value is twice the cost of the shares in the Fund.
Our fixed-income tactics shifted to capital preservation when the Federal
Reserve changed course. We emphasized AAA rated asset-backed securities with
short maturities, floating rate notes where the interest
coupon will rise as market rates increase and step-up issues. These unique
instruments have a predetermined interest rate increase built in that will
step up on an annual basis. The defensive characteristics of all three of
these asset classes is expected to lead to faster repayment of principal and
market values that should be fairly stable as rates climb.
We expect our third year to be equally as challenging. Stocks typically
increase only a modest amount after interest rates move upward. While the
stock market still looks very risky to us, we will continue to apply our
selection criteria to uncover attractive, undervalued stocks. We will
continue to maintain a defensive, cautious approach with our fixed-income
investments.
We appreciate your interest in Dreyfus Balanced Fund, Inc. and look
forward to serving your investment needs in the future.
Sincerely,
(Peter A. Santoriello Signature Logo)
Peter A. Santoriello
Portfolio Manager
September 20, 1994
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of stock market performance.
*** The Lehman Brothers Aggregate Bond Index is a widely accepted unmanaged
index of corporate, government and government agency debt instruments.
PERFORMANCE
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS BALANCED FUND,
INC.,
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX * AND
THE LEHMAN BROTHERS AGGREGATE BOND INDEX **
[Exhibit A]
* Source: Lipper Analytical Services, Inc.
** Source: Lehman Brothers
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
ONE YEAR ENDED SINCE INCEPTION (9/30/92)
AUGUST 31, 1994 TO AUGUST 31, 1994
------------------ ---------------------------
<S> <C> <C>
7.73% 8.66
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in the Dreyfus Balanced
Fund on 9/30/92 (Inception Date) to a $10,000 investment made in the Standard
and Poor's 500 Composite Stock Price Index and a $10,000 investment made in
the Lehman Brothers Aggregate Bond Index on that date. All dividends and
capital gain distributions are reinvested.
Dreyfus Balanced Fund seeks long-term capital growth and current income
through investment in equity and debt securities. The Fund's performance
takes into account all applicable fees and expenses. Further information
relating to Fund performance, including expense reimbursements, if
applicable, is contained in the Condensed Financial Information section of
the Prospectus and elsewhere in this report. The Standard and Poor's 500
Composite Stock Price Index is a widely-accepted, unmanaged index of overall
stock market performance. The Lehman Brothers Aggregate Bond Index is a
widely-accepted, unmanaged index of corporate, government and government
agency debt instruments. Both indices do not take into account charges, fees
and other expenses.
<TABLE>
DREYFUS BALANCED FUND, INC.
ASSET ALLOCATION AS OF AUGUST 31, 1994
[Exhibit B]
FIVE LARGEST SECTORS
AS OF AUGUST 31, 1993 AS OF AUGUST 31, 1994
<S> <C> <C> <C>
U.S. Government and Agencies.. 26.1% U.S. Government and Agencies.. 27.3%
Consumer...................... 8.2 Other......................... 10.2
Pharmaceuticals............... 6.8 Pharmaceuticals............... 8.9
Technology.................... 6.0 Consumer...................... 6.8
Other......................... 5.8 Chemicals..................... 5.0
</TABLE>
<TABLE>
TEN LARGEST EQUITY HOLDINGS AS OF AUGUST 31, 1994
<S> <C> <C>
American Cyanamid.............................................. 3.3%
Atlantic Richfield............................................. 2.4
Teradyne....................................................... 2.4
Horizon Outlet Centers......................................... 2.2
International Business Machines................................ 2.1
Merck & Co..................................................... 2.1
Intel.......................................................... 2.0
Nike, Cl. B.................................................... 1.9
Pet............................................................ 1.9
Amgen.......................................................... 1.9
TEN LARGEST FIXED INCOME SECURITY HOLDINGS AS OF AUGUST 31, 1994
U.S. Treasury Bonds, 7 1/4%, 5/15/2016......................... 5.5%
U.S. Treasury Bonds, 7 1/2%, 11/15/2016........................ 3.0
First USA Credit Card Master Trust,
Asset Backed Ctfs., Ser. 1994-5, Cl. A, 4.952%, 2000....... 2.4
Ameritech Capital Funding, Notes
(Gtd. by Ameritech), 4.925%, 1998.......................... 2.4
Premier Auto Trust 1994-2,
Asset Backed Ctfs., Cl. A-3, 6.35%, 2000 .................. 2.4
Federal Home Loan Mortgage Corp., Deb.,
6.54%, 6/28/2001........................................... 2.4
U.S. Treasury Notes,
6 3/8%, 1/15/2000......................................... 2.3
Student Loan Marketing Association, Notes,
5.315%, 6/30/1995......................................... 2.2
Case Equipment Loan Trust 1994-A,
Asset Backed Ctfs., Cl. A-2, 4.65%,1999 .................. 1.9
Signet Master Trust,
Asset Backed Ctfs., Ser. 1994-1, Cl. A, 4.8125%, 1999..... 1.8
All percentages shown above are based on Total Net Assets.
</TABLE>
<TABLE>
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS AUGUST 31, 1994
PRINCIPAL
BONDS AND NOTES--48.0% AMOUNT VALUE
------------- -------------
<S> <C> <C> <C>
BANKING--2.6% Fleet Mortgage Group, Medium-Term Notes,
4.975%, 1996.................. $ 650,000 (a) $ 649,090
Nationsbank, Sr. Medium-Term Notes,
4 5/8%, 1995................... 1,500,000 (a) 1,499,055
-------------
2,148,145
-------------
CONSUMER--1.8% Joseph E. Seagram & Sons, Deb.
(Gtd. by Seagram Ltd.),
7%, 2008....................... 1,000,000 915,000
Nabisco, Deb.,
7 3/4%, 2003................... 82,000 77,490
RJR Nabisco, Notes,
8 5/8%, 2002................... 525,000 486,453
-------------
1,478,943
-------------
FINANCE--3.6% Ameritech Capital Funding, Notes
(Gtd. by Ameritech),
4.925%, 1998................... 2,000,000 (a) 1,993,740
CoreStates Capital, Sr. Medium-Term Notes,
5.35%, 1996.................... 1,000,000 (a) 996,000
-------------
2,989,740
-------------
OIL AND GAS--.8% Southern California Gas, First Mortgage,
Ser. DD, 7 1/2%, 2023.......... 700,000 640,905
-------------
POLLUTION CONTROL--.9% Waste Management, Notes,
4 5/8%, 1996................... 750,000 732,016
-------------
TELECOMMUNICATIONS--.6% Southern Bell Telephone & Telegraph, Deb.,
8 1/2%, 2029................... 500,000 496,772
-------------
FOREIGN--.2% Korea Development Bank, Bonds,
7.90%, 2002.................... 150,000 148,417
-------------
OTHER--10.2% Case Equipment Loan Trust 1994-A,
Asset Backed Ctfs.,
Cl. A-2, 4.65%, 1999........... 1,620,000 1,585,069
First USA Credit Card Master Trust,
Asset Backed Ctfs.,
Ser. 1994-5, Cl. A, 4.952%, 2000 2,000,000 (a) 1,998,750
GMAC 1993-B Grantor Trust,
Asset Backed Ctfs.,
Cl. A, 4%, 1998................ 451,397 442,225
Household Affinity Credit Card Master Trust 1,
Credit Card Participation Ctfs.,
Ser. 1994-1, Cl. A, 4.837%, 2001 950,000 (a) 942,073
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1994
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------- -------------
OTHER (CONTINUED) Premier Auto Trust 1994-2,
Asset Backed Ctfs.,
Cl. A-3, 6.35%, 2000........... $ 1,985,000 $ 1,965,770
Signet Master Trust,
Asset Backed Ctfs.,
Ser. 1994-1, Cl. A, 4.8125%, 1999 1,500,000 (a) 1,500,000
World Omni 1992-A Grantor Trust,
Asset Backed Ctfs.,
Cl. A, 4 3/4%, 1998............ 22,950 22,762
-------------
8,456,649
-------------
U.S. GOVERNMENT Federal Farm Credit Banks,
AND AGENCIES--27.3% Consolidated Systemwide
Medium-Term Notes,
5.60%, 8/26/1997........... 250,000 242,682
Federal Home Loan Mortgage Corp., Deb.:
4.65%, 6/30/1998............... 1,200,000 (a) 1,192,500
6.54%, 2/28/2001............... 2,000,000 1,950,626
Federal National Mortgage Association,
Principal Strips, Real Estate Mortgage
Investment Conduit:
Ser. 93-146B, Zero Coupon,
1/31/1997(b)........... 900,000 729,000
Ser. 93-128B, Zero Coupon,
6/30/1999(c)c.......... 1,000,000 705,000
Student Loan Marketing Association, Notes,
5.315%, 6/30/1995.............. 1,800,000 1,801,748
U.S. Treasury Bonds:
7 1/4%, 5/15/2016.............. 4,750,000 4,565,733
7 1/2%, 11/15/2016............. 2,500,000 2,467,188
U.S. Treasury Notes:
4 5/8%, 11/30/1994............. 800,000 799,687
5 7/8%, 5/15/1995.............. 750,000 752,813
7 1/2%, 1/31/1996.............. 750,000 766,875
5 1/2%, 7/31/1997.............. 750,000 732,539
6%, 11/30/1997................. 750,000 738,985
5 5/8%, 1/31/1998.............. 700,000 680,532
5 1/8%, 3/31/1998.............. 350,000 333,922
6 3/8%, 1/15/1999.............. 750,000 740,742
6 3/8%, 1/15/2000.............. 1,970,000 1,929,676
7 1/2%, 5/15/2002.............. 750,000 769,922
5 3/4%, 8/15/2003.............. 800,000 726,250
-------------
........................... 22,626,420
-------------
TOTAL BONDS AND NOTES
(cost $41,453,468)............. $39,718,007
=============
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1994
COMMON STOCKS--40.5% SHARES VALUE
------------- -------------
AUTOMOBILES--1.0% Excel Industries................. 50,800 $ 838,200
-------------
CHEMICALS--5.0% American Cyanamid................ 28,000 2,702,000
Grow Group....................... 92,700 1,471,613
-------------
4,173,613
-------------
CONSUMER--5.0% Fluor............................ 17,700 938,100
Nike, Cl. B...................... 25,000 1,609,375
Pet.............................. 79,000 1,599,750
-------------
4,147,225
-------------
ELECTRONICS--2.4% Teradyne......................... 66,200 (d) 1,969,450
-------------
ENTERTAINMENT--1.8% Blockbuster Entertainment........ 56,800 1,469,700
-------------
FINANCIAL SERVICES--1.1% Equifax.......................... 30,500 892,125
-------------
HOUSING--.9% Beazer Homes USA................. 47,900 (d) 712,512
-------------
OIL AND GAS--4.1% Atlantic Richfield............... 18,400 1,971,100
Schlumberger Ltd................. 25,000 1,425,000
-------------
3,396,100
-------------
PHARMACEUTICALS--8.9% Amgen............................ 30,000 (d) 1,582,500
Johnson & Johnson................ 20,900 1,047,613
Manor Care....................... 55,000 1,512,500
Merck & Co....................... 50,000 1,706,250
Schering-Plough.................. 21,700 1,516,288
-------------
7,365,151
-------------
REAL ESTATE--4.0% Chelsea GCA Realty............... 54,600 1,535,625
Horizon Outlet Centers........... 66,900 1,806,300
-------------
3,341,925
-------------
RETAIL--2.3% Toys R Us........................ 25,600 (d) 944,000
Wal-Mart Stores.................. 38,400 945,600
-------------
1,889,600
-------------
TECHNOLOGY--4.0% Intel............................ 25,000 1,643,750
International Business Machines.. 25,000 1,715,625
-------------
3,359,375
-------------
TOTAL COMMON STOCKS
(cost $28,633,968)............. $33,554,976
=============
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1994
PRINCIPAL
SHORT-TERM INVESTMENTS--9.8% AMOUNT VALUE
------------- -------------
U.S. GOVERNMENT Federal National Mortgage Association,
AND AGENCIES: 3.38%, 9/1/1994 $ 1,000,000 $ 1,000,000
U.S Treasury Bills,
3.15%, 9/1/1994................ 7,151,000 7,151,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $8,151,000).............. $ 8,151,000
=============
TOTAL INVESTMENTS (cost $78,238,436)........................................ 98.3% $81,423,983
====== =============
CASH AND RECEIVABLES (NET).................................................. 1.7% $ 1,424,341
====== =============
NET ASSETS.................................................................. 100.0% $82,848,324
====== =============
NOTES TO STATEMENT OF INVESTMENTS:
(a) Variable rate security--interest rate subject to periodic change.
(b) This date represents the projected maturity date, the stated
maturity date is 5/25/2023.
(c) This date represents the projected maturity date, the stated
maturity date is 7/25/2023.
(d) Non-income producing.
See notes to financial statements.
</TABLE>
<TABLE>
DREYFUS BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1994
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $78,238,436)-see statement...................................... $81,423,983
Cash.................................................................... 1,014,274
Interest and dividends receivable....................................... 521,230
Receivable for investment securities sold............................... 326,911
Prepaid expenses........................................................ 40,670
Due from The Dreyfus Corporation........................................ 120,834
-------------
83,447,902
LIABILITIES:
Payable for Common Stock redeemed....................................... $521,248
Accrued expenses and other liabilities.................................. 78,330 599,578
---------- -------------
NET ASSETS ................................................................ ` $82,848,324
=============
REPRESENTED BY:
Paid-in capital......................................................... $78,642,151
Accumulated undistributed investment income_net......................... 429,136
Accumulated undistributed net realized gain on investments.............. 591,490
Accumulated net unrealized appreciation on investments_Note 3........... 3,185,547
-------------
NET ASSETS at value applicable to 6,037,435 shares outstanding
(300 million shares of $.001 par value Common Stock authorized)......... $82,848,324
=============
NET ASSET VALUE, offering and redemption price per share
($82,848,324 / 6,037,435 shares)........................................ $13.72
=======
See notes to financial statements.
</TABLE>
<TABLE>
DREYFUS BALANCED FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1994
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest.............................................................. $2,071,653
Cash dividends........................................................ 548,600
------------
TOTAL INCOME.................................................... $2,620,253
EXPENSES:
Management fee-Note 2(a).............................................. 398,658
Shareholder servicing costs-Note 2(b)................................. 195,943
Registration fees..................................................... 29,174
Auditing fees......................................................... 24,299
Prospectus and shareholders' reports.................................. 18,368
Directors' fees and expenses-Note 2(c)................................ 15,902
Legal fees............................................................ 14,164
Custodian fees........................................................ 13,417
Miscellaneous......................................................... 16,743
------------
726,668
Less_reduction in management fee due to
undertakings-Note 2(a)............................................ 269,761
------------
TOTAL EXPENSES.................................................. 456,907
------------
INVESTMENT INCOME--NET.......................................... 2,163,346
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments_Note 3................................. $1,084,707
Net unrealized appreciation on investments.............................. 1,806,069
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 2,890,776
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $5,054,122
===========
See notes to financial statements.
</TABLE>
<TABLE>
DREYFUS BALANCED FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
-----------------------------
1993* 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 740,662 $ 2,163,346
Net realized gain on investments........................................ 101,817 1,084,707
Net unrealized appreciation on investments for the year................. 1,379,478 1,806,069
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 2,221,957 5,054,122
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net................................................... (477,477) (1,997,395)
Net realized gain on investments........................................ ___ (595,034)
------------- -------------
TOTAL DIVIDENDS....................................................... (477,477) (2,592,429)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 50,779,731 70,591,550
Dividends reinvested.................................................... 472,700 2,564,031
Cost of shares redeemed................................................. (4,781,533) (41,084,328)
------------- -------------
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS................ 46,470,898 32,071,253
------------- -------------
TOTAL INCREASE IN NET ASSETS...................................... 48,215,378 34,532,946
NET ASSETS:
Beginning of year....................................................... 100,000 48,315,378
------------- -------------
End of year (including undistributed investment income-net:
$263,185 in 1993 and $429,136 in 1994)................................ $48,315,378 $82,848,324
============= =============
SHARES SHARES
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 3,963,947 5,252,861
Shares issued for dividends reinvested.................................. 36,706 194,979
Shares redeemed......................................................... (369,261) (3,049,797)
------------- -------------
NET INCREASE IN SHARES OUTSTANDING.................................... 3,631,392 2,398,043
============= =============
- ----------------------------------
* From September 30, 1992 (commencement of operations) to August 31, 1993.
See notes to financial statements.
</TABLE>
<TABLE>
DREYFUS BALANCED 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 year indicated. This information
has been derived from the Fund's financial statements.
YEAR ENDED AUGUST 31,
------------------------
PER SHARE DATA: 1993(1) 1994
------ ------
<S> <C> <C>
Net asset value, beginning of year.............................................. $12.50 $13.28
------ ------
INVESTMENT OPERATIONS:
Investment incomenet........................................................... .39 .41
Net realized and unrealized gain on investments................................. .71 .59
------ ------
TOTAL FROM INVESTMENT OPERATIONS.............................................. 1.10 1.00
------ ------
DISTRIBUTIONS:
Dividends from investment income--net........................................... (.32) (.42)
Dividends from net realized gain on investments................................. -- (.14)
------ ------
TOTAL DISTRIBUTIONS........................................................... (.32) (.56)
------ ------
Net asset value, end of year.................................................... $13.28 $13.72
====== ======
TOTAL INVESTMENT RETURN............................................................. 8.88%(2) 7.73%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......................................... .23%(2) .69%
Ratio of net investment income to average net assets............................ 3.46%(2) 3.26%
Decrease reflected in above expense ratios due to undertakings
by the Manager................................................................ 1.13%(2) .41%
Portfolio Turnover Rate......................................................... 46.42%(2) 58.22%
Net Assets, end of year (000's Omitted)......................................... $48,315 $82,848
- -------------------------------
(1) From September 30, 1992 (commencement of operations) to August 31, 1993.
(2) Not annualized.
See notes to financial statements.
</TABLE>
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a non-diversified open-end management investment company. Dreyfus Service
Corporation until August 24, 1994, acted as the exclusive distributor of the
Fund's shares, which are sold to the public without a sales charge. Dreyfus
Service Corporation is a wholly-owned subsidiary of The Dreyfus Corporation
("Manager"). Effective August 24, 1994, the Manager became a direct
subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. ("Premier") was
engaged as the Fund's distributor. Premier, located at One Exchange Place,
Boston, Massachusetts 02109, is a wholly-owned subsidiary of Institutional
Administration Services, Inc., a provider of mutual fund administration
services, the parent company of which is Boston Institutional Group, Inc.
(A) PORTFOLIO VALUATION: Most debt securities (excluding short-term
investments) are valued each business day by an independent pricing service
("Service") approved by the Board of Directors. Debt securities for which
quoted bid prices in the judgement of the Service are readily available and
are representative of the bid side of the market are valued at the mean
between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon
its evaluation of the market for such securities). Other debt securities are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Other securities are valued at the average of
the most recent bid and asked prices in the market in which such securities
are primarily traded, or at the last sales price for securities traded primari
ly on an exchange or the national securities market. In the absence of
reported sales of securities traded primarily on an exchange or national
securities market, the average of the most recent bid and asked prices is
used. 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. Short-term
investments are carried at amortized cost, which approximates value.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(B) 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.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid quarterly.
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. 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.
On September 30, 1994, the Board of Directors declared a cash dividend of
$.11 per share from undistributed investment income-net, payable on October
3, 1994 (ex-dividend date), to shareholders of record as of the close of
business on September 30, 1994.
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2--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 .60 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
provides that the Fund may deduct from the fee to be paid to the Manager, or
the Manager will bear such excess expense, to the extent required by state
law, should the Fund's aggregate expenses, exclusive of taxes, brokerage,
interest on borrowings and extraordinary expenses, exceed the expense
limitation of any state having jurisdiction over the Fund. The most stringent
state expense limitation applicable to the Fund presently requires
reimbursement of expenses in any full fiscal year that such expenses
(exclusive of certain expenses as described above) exceed 2 1/2% of the first
$30 million, 2% of the next $70 million and 1 1/2% of the excess over $100
million of the average value of the Fund's net assets in accordance with
California "blue-sky" regulations. However, the Manager had undertaken from
September 1, 1993 through August 18, 1994, to reduce the management fee paid
by the Fund, to the extent that these expenses (excluding certain expenses as
described above) exceeded specified annual percentages of the Fund's average
daily net assets. The reduction in management fee, pursuant to the
undertakings, amounted to $269,761 for the year ended August 31, 1994.
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation an amount not to exceed an annual rate of .25 of
1% of the value of the Fund's average daily net assets for servicing
shareholder accounts. 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. During the year ended
August 31, 1994, the Fund was charged an aggregate of $165,454 pursuant to
the Shareholder Services Plan.
(C) Prior to August 24, 1994 certain officers and directors of the Fund
were "affiliated persons," as defined in the Act, of the Manager and/or
Dreyfus Service Corporation. Each director who is not an "affiliated person"
receives an annual fee of $1,000 and an attendance fee of $250 per meeting.
NOTE 3--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
other than short-term securities, during the year ended August 31, 1994,
amounted to $61,082,912 and $34,056,121, respectively.
At August 31, 1994, accumulated net unrealized appreciation on
investments was $3,185,547, consisting of $5,293,126 gross unrealized
appreciation and $2,107,579 gross unrealized depreciation.
At August 31, 1994, 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 BALANCED FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS BALANCED FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus Balanced Fund, Inc., including the statement of investments, as of
August 31, 1994, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1994 by correspondence with the custodian.
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 Balanced Fund, Inc. at August 31, 1994, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
Ernst & Young LLP Signature Logo
New York, New York
October 4, 1994
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates $.0051 per share as a
long-term capital gain distribution of the $.238 per share paid on December
21, 1993.
(Dreyfus Logo)
Balanced
Fund, Inc.
Annual Report
August 31, 1994
(Dreyfus Lion Logo)
(Dreyfus `D' Logo)
DREYFUS BALANCED FUND, INC.
144 Glenn Curtiss Boulevard
Uniondale, NY 11556
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 222AR948
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS BALANCED FUND, INC., THE STANDARD & POOR'S
500 COMPOSITE STOCK PRICE INDEX * AND THE
LEHMAN BROTHERS AGGREGATE BOND INDEX **
EXHIBIT A:
_________________________________________________________
| | STANDARD | LEHMAN | |
| | & POOR'S 500 | BROTHERS | DREYFUS |
| PERIOD |COMPOSITE STOCK| AGGREGATE | BALANCED |
| | PRICE INDEX * |BOND INDEX ** | FUND |
|-----------|---------------|--------------|--------------|
| 9/30/92 | 10,000 | 10,000 | 10,000 |
| 11/30/92 | 10,375 | 9,870 | 10,016 |
| 2/28/93 | 10,735 | 10,398 | 10,297 |
| 5/31/93 | 10,982 | 10,527 | 10,500 |
| 8/31/93 | 11,385 | 10,968 | 10,888 |
| 11/30/93 | 11,422 | 10,945 | 11,191 |
| 2/28/94 | 11,629 | 10,959 | 11,341 |
| 5/31/94 | 11,450 | 10,602 | 11,268 |
| 8/31/94 | 12,006 | 10,802 | 11,730 |
- -----------------------------------------------------------
* Source: Lipper Analytical Services, Inc.
** Source: Lehman Brothers
Dreyfus Balanced Fund, Inc.
Asset Allocation as of August 31, 1994
|---------------------------------------------------------|
|Bonds and Notes 48.0%|
|Common Stocks 40.5%|
|Cash Equivalents 11.5%|
|---------------------------------------------------------|
