DREYFUS BALANCED FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
It is a pleasure to introduce Timothy M. Ghriskey, who was named
portfolio manager of the Dreyfus Balanced Fund, Inc. in March of this year.
Tim joined the investment staff of The Dreyfus Corporation in the summer
of 1995 as a Senior Equity Portfolio Manager. Before joining Dreyfus, he
spent ten years with Loomis, Sayles & Company as both an equity and a
balanced portfolio manager. At his prior firm, Tim was an Associate Managing
Partner and a member of the Investment Policy Committee and the Planning
Committee. He began his investment career as an equity analyst following a
number of industries, including beverage, tobacco, leisure, entertainment,
home products, cosmetics, metals and mining.
Tim is a graduate of Trinity College and received his M.B.A. from the
Darden School at the University of Virginia. He is a Chartered Financial
Analyst and a Chartered Investment Counselor.
We have great confidence in Tim Ghriskey's money management skills.
Sincerely,
(Stephen E. Canter Signature)
Stephen E. Canter
Chief Investment Officer
The Dreyfus Corporation
DREYFUS BALANCED FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
It is an honor to have been named Portfolio Manager of the Dreyfus
Balanced Fund, Inc., and to correspond with you in this annual report
covering the fiscal year ended August 31, 1996.
For that 12-month period, the Dreyfus Balanced Fund had a total return of
5.19%.* Due to the structure of the Fund, a balanced mix of stocks and bonds,
this return is not comparable to a market index composed entirely of either
common stocks or bonds. Two such indices, the Standard & Poor's 500 Composite
Stock Price Index ** and the Lehman Brothers Aggregate Bond Index, *** had
total returns of 18.72% and 4.10% respectively, during the Fund's fiscal
year.
ECONOMIC REVIEW
The robust pace of the U.S. economy in the first half of 1996 was broken
only temporarily by July's sluggishness. Somewhat faster growth is again
evident as summer ends. However, above-trend economic expansion this year has
raised fears of higher future inflation, even while reported inflation
remains tame. These inflation fears pushed bond yields higher and built
expectations for a Federal Reserve Board tightening.
This year's economic strength is due to robust domestic demand that has
kept inventories lean. Real Gross Domestic Product grew 3.4% in the first
half, driven largely by consumer spending and housing investment, although
homebuilding saw slower activity. Industrial output likewise surged, although
producers bent on meeting demand have been unable to also rebuild inventory.
Support for sustained consumer spending growth is coming from new jobs, wage
increases, low summer utility bills and a fall hike in the minimum wage. In
addition, new orders for exports and capital goods-both sluggish sectors this
summer-have recently reaccelerated. Corporate profits, however, are not
sharing this year's prosperity as profit growth is now decelerating.
Core consumer price inflation remains moderate, although rising food and
energy prices have begun to pull the overall inflation rate higher and wage
increases have accelerated in this year's tight labor market. As a result,
reports of a faster economic pace have boosted fears of accelerated
inflation, and bond yields have risen substantially; short-term market rates
have also surged on expectations of a Federal Reserve tightening in coming
months. So far, long-term rates have risen more than short-term rates,
forcing the yield curve to steepen. A steep yield curve is usually supportive
of sustained growth in the real economy.
MARKET OVERVIEW
The securities markets remained robust, as we said, through a good part
of the last 12 months but stumbled in late June and July of this year. The
summer sell-off was due to a number of factors, among them the higher price
levels and price-to-earnings ratios that many stocks had already achieved,
and indications that corporate profits might not be as strong in the last
half of the year as in the first half. The overriding influence, however, was
the market's anticipation of what the Federal Reserve might do about interest
rates.
In late 1995 and early 1996, the Fed was preoccupied with offsetting
economic weakness, and that occasioned the series of cuts in short-term rates
initiated by the Fed, the last one occurring at the end of January, 1996.
After that, through August 31, the Fed adopted a hands-off posture in regard
to interest rates. However, the stock and bond markets expected the Fed to
shift gears and slam on the monetary brakes as the economy continued to
expand.
These fears of an anti-inflation move by the Fed were particularly acute
in June and July, leading to a sharp shakeout in security prices-among bonds
as well as stocks. Technology stocks were affected the most, but large
capitalization blue chips also experienced setbacks. Bond prices slumped as
interest rates rose.
As July gave way to August, the markets appeared to make an adjustment to
the interest rate outlook, and regained some of the ground lost earlier.
However, high anxiety still prevailed as the country moved into the fall
season, bringing with it the unknowns of the pending Presidential and
Congressional elections.
FUND CHANGES
I was appointed Portfolio Manager on March 11, 1996, so just under half
of the fiscal year was under my direction. Restructuring of the Fund took
some time. These changes included revising the asset allocation ranges
permitted for the Fund in order to make them similar to other balanced mutual
funds. In other steps to strengthen the Fund's management, we recruited Kevin
McClintock, head of Taxable Fixed Income at Dreyfus, to support Matt Olson in
the construction of the fixed income portfolio of the Fund. Further, I became
involved in supporting Don Geogerian in the selection of securities for the
equity portfolio of the Fund. Finally, while I am the final decision-maker in
terms of the Fund's asset mix, I do seek the input of all Dreyfus Senior
Portfolio Managers during regular formal and informal meetings where we
review economic and financial data, including the outputs from our
econometric computer model. The concept of the Fund continues to be to
provide a fairly constant and balanced mix of both stocks and bonds.
FUNDAMENTAL ANALYSIS
We are practitioners of, and passionate believers in, fundamental
security analysis. This method of determining the value of a security starts
with our analysts and sometimes our portfolio managers communicating directly
with the management of companies which are either current investments or are
being considered for investment in Dreyfus mutual funds. Not only do we
interview management by telephone on a regular basis, but we also
periodically visit corporate headquarters, divisional headquarters, factories
and distribution outlets. We meet with senior management and talk with all
levels of employees, as well as customers and competitors. It is through the
mosaic of information collected in these meetings that investment decisions
begin to be made.
It is a massive undertaking for us, especially given the thousands of
securities which are available for investment on a worldwide basis. It can
only be accomplished with an experienced and dedicated team of security
analysts. Dreyfus currently employs 35 individuals who specialize in this
analytical work, one of the largest efforts of any mutual fund firm. Our
analysts are solely dedicated to finding the best investments for our
clients, the Dreyfus mutual fund shareholders. Their work is proprietary: It
is only distributed internally to our portfolio managers, and forms the basis
for security selection in the mutual funds.
Much like the complete and thorough mixture of information that we build
to make investment decisions, our analysts form a diverse mix of individuals.
Some are specialists in certain types of securities, while others are
industry specialists who concentrate on securities within a particular sector
of the economy. Most have actual industry experience in their particular
field of specialization prior to joining Dreyfus. For example, our
three-person health care team includes a retired physician, a former medical
researcher for the U.S. Army, and a former health care lobbyist to Congress.
Some of our analysts are relatively young and some are veterans, providing a
wonderful blend of energy and experience. All of
this diversity is beneficial to the investment process. Investments are best
made by thinking somewhat differently from everyone else who is making
similar investments. Ideally, one tries to make investment choices a bit
sooner than other investors make those same choices. The reason, of course,
is that through an increase in demand for ownership of a security the price
of that security increases.
PORTFOLIO FOCUS
There are basically three decision levels for the Dreyfus Balanced Fund:
the asset allocation mix, the equity holdings and the fixed income holdings.
Each is addressed below.
ASSET ALLOCATION MIX
The Fund started the fiscal year with a low allocation of assets to
equity securities, given worries about the length of the advance in stock
prices. By early 1996, however, with the rally remaining intact, equity
assets were moved close to the benchmark allocation. In the spring, we raised
stocks above the benchmark and, eventually, to near the maximum equity
exposure. In contrast to conventional wisdom at that time, we believed that
there was enough economic weakness to keep the Federal Reserve Board from
raising short-term interest rates. With some turbulence in the stock market
during July, the equity allocation was reduced back to the benchmark. These
changes in asset allocation generally added to performance results.
Bond holdings made up most of the remainder of the Fund's assets during
the fiscal year. Cash equivalents were generally a small part of holdings,
given the low yields available and our overall constructive view of the
equity and bond markets.
EQUITY HOLDINGS
Equity performance benefited from holdings such as Nike, Cl.B,
Warner-Lambert, Schering-Plough, First Interstate Bancorp, and NorAm Energy.
The latter two stocks received takeover offers which significantly boosted
the stock prices. Results were penalized by investments including Teradyne
and Grand Casinos, and both securities have been sold so that small problems
would not become big problems.
FIXED INCOME HOLDINGS
The fixed income portfolio of the Fund was positioned defensively for
much of the fiscal year, penalizing returns for much of the first half as
interest rates generally declined, and benefiting returns during much of the
second half as interest rates generally rose. Toward the end of the fiscal
year, portfolio durations (weighted average time to maturity of all cash
flows, or a more exact measure of time to maturity) were lengthened, again
benefiting returns as interest rates generally fell.
An important and beneficial feature for performance throughout most of
the fiscal year was an overweighting in mortgage-backed security holdings.
Mortgages offer more yield than both Treasury bonds and many investment grade
corporate bonds of comparable duration. Mortgages possess none of the event
risks (e.g., takeovers, restructuring, share repurchases) characteristic of
corporate bonds.
More recently, we have found some of the best fixed income opportunities
and resulting profits in the Yankee sector of the market. These are foreign
bonds which trade and pay interest in U.S. dollars. The issues we have bought
have collateral and debt service coverage many times that of comparable U.S.
issues, significantly reducing many forms of risk. One of the disappointing
holdings during the fiscal year,
however, was Republic of Colombia where political problems in that Latin
American country have restrained this bond's total return. We continue to
believe that this bond's risk is controllable and that the potential reward
more than justifies the holding.
OUTLOOK
We remain positive on the long-term outlook for financial assets. We
believe we are in an extended period of secular decline in interest rates and
inflation, and of controlled economic growth. Furthermore, corporate
managements have become more active in taking steps that directly benefit
companies' owners, the holders of the common stock. This group includes
owners of mutual fund shares, our clients.
Thank you for your trust and the privilege of managing your assets. All
of Dreyfus continues to work diligently on your behalf.
Sincerely,
(Timothy M. Ghriskey Signature)
Timothy M. Ghriskey
Portfolio Manager
September 12, 1996
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
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
*** SOURCE: LEHMAN BROTHERS - The Lehman Brothers Aggregate Bond Index is a
widely accepted Index of corporate, government and government agency debt
instruments.
DREYFUS BALANCED FUND, INC. AUGUST 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS BALANCED FUND,
INC. WITH
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX AND
THE LEHMAN BROTHERS AGGREGATE BOND INDEX
Dollars
$17,306
Standard & Poor's 500 Composite Stock
Price Index*
$14,686
Dreyfus Balanced Fund
$12,516
Lehman Brothers
Aggregate Bond Index**
* Source: Lipper Analytical Services, Inc.
**Source: Lehman Brothers
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR ENDED FROM INCEPTION (9/30/92)
AUGUST 31, 1996 TO AUGUST 31, 1996
________________ __________________________
5.19% 10.30%
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus Balanced Fund,
Inc. on 9/30/92 (Inception Date) to a $10,000 investment made in the Standard
and Poor's 500 Composite Stock Price Index on that date as well as to the
Lehman Brothers Aggregate Bond Index which are described below. 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
shown in the line graph takes into account all applicable fees and expenses.
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. The Indices do not take
into account charges, fees and other expenses. Further information relating
to Fund performance, including expense reimbursements, if applicable, is
contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS AUGUST 31, 1996
PRINCIPAL
BONDS AND NOTES-44.0% AMOUNT VALUE
__________________ _______________
<S> <C> <C>
BANKING-.9%. Citicorp, Sr. Medium-Term Notes,
7.07%, 2000.......................... $ 2,500,000 $ 2,496,363
______________
FINANCE-4.7% Associates Sr. Notes,
6 3/4%, 2001......................... 3,650,000 3,592,012
Fleet Mortgage Group, Notes,
6 1/2%, 2000......................... 2,500,000 2,451,978
Household Finance:
Sr. Medium-Term Notes,
7%, 2000............................. 2,500,000 2,493,195
Sr. Notes,
7 1/8%, 1999......................... 1,600,000 1,611,483
Wharf Capital International Limited, Notes,
8 7/8%, 2004......................... 2,600,000 2,651,431
______________
12,800,099
______________
INDUSTRIAL-3.1% Hydro Quebec, Deb.,
8.05%, 2006.......................... 2,750,000 2,886,208
PDV America, Sr. Notes,
7 1/4%, 1998......................... 3,000,000 2,969,424
Sears Roebuck Acceptance Corp.,
Medium-Term Notes,
6.86%, 2001.......................... 2,500,000 2,468,713
______________
8,324,345
______________
UTILITIES-1.7% Chilgener, Notes,
6 1/2%, 2006......................... 1,975,000 1,817,468
Indiantown Cogeneration, L.P.,
9.77%, 2020.......................... 2,500,000 2,757,031
______________
4,574,499
______________
FOREIGN-4.9% Republic of Columbia, Notes,
7 1/4%, 2003......................... 2,700,000 2,507,714
Republic of Italy, Deb.,
6 7/8%, 2023......................... 2,300,000 2,041,250
State of Israel, Bonds,
6 3/8%, 2005......................... 1,100,000 1,006,416
United Mexican States, Notes,
7.687%, 2001......................... 5,500,000(a,b) 5,522,550
Zhuhai Highway, Sr. Notes,
9 1/8%, 2006......................... 2,000,000(b) 2,042,500
______________
13,120,430
______________
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
________________ _______________
OTHER-2.9% Citibank Credit Card Master Trust,
Asset Backed Ctfs.,
Ser. 1996-1, Cl. A, Zero Coupon, 2003 $ 2,700,000 $ 1,959,660
GMAC 1993-B Grantor Trust,
Asset Backed Ctfs.,
Cl. A, 4%, 1998...................... 88,336 87,347
GS Mortgage Securities Corporation II,
Asset Backed Ctfs.,
Ser. 1996-PL, Cl. A1, 7.02%, 2027.... 2,861,686 2,824,127
MMCA Auto Owner Trust,
Asset Backed Ctfs.,
Ser. 1995-1, Cl. A, 5.70%, 2000...... 1,921,132 1,910,681
Structured Asset Securities Corporation,
Asset Backed Ctfs.,
Ser. 1996-CFL, Cl. A1B, 5.751%, 2028. 980,000 960,553
______________
7,742,368
______________
U.S. GOVERNMENT
AND AGENCIES-25.8% Federal Home Loan Mortgage Corp., Deb.,
6 1/2%, 8/15/2021.................... 1,650,000 1,538,559
Federal National Mortgage Association,
Real Estate Mortgage Investment Conduit:
Ser.93-146B, Zero Coupon,
1/31/1997 (c)................... 628,369 591,060
Ser.93-178, Cl. PB, 5%,
4/25/2006....................... 3,734 3,720
Ser.1996-M3, Cl. A1, 7.385%,
3/1/2021........................ 4,969,890 5,028,908
6 1/2%, 9/1/1999................ 2,006,526 1,980,180
6%, 5/1/2011.................... 14,067,754 13,188,520
6 1/2%, 11/1/2025............... 3,695,865 3,417,522
Overseas Private Investment,
7.63%, 7/15/2002..................... 2,314,891 2,352,393
U.S. Treasury Bonds,
7 1/4%, 5/15/2016.................... 16,750,000 16,718,594
U.S. Treasury Notes:
6 3/4%, 4/30/2000.................... 5,000,000 5,017,969
5 7/8%, 6/30/2000.................... 9,700,000 9,448,406
6 1/8%, 9/30/2000.................... 3,000,000 2,940,938
5 3/4%, 8/15/2003.................... 8,000,000 7,516,250
______________
69,743,019
______________
TOTAL BONDS AND NOTES
(cost $120,669,339).................. $118,801,123
==============
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
COMMON STOCKS-52.9% SHARES VALUE
________________ ________________
CONSUMER DURABLES-2.3% D.R. Horton,........................... 450,568 (d) $ 3,998,791
Topps.................................. 490,900 (d) 2,331,775
______________
6,330,566
______________
CONSUMER
NON-DURABLES-7.2% Authentic Fitness...................... 162,000 2,146,500
Dole Food ............................. 41,300 1,708,787
First Brands........................... 109,000 2,479,750
Jones Apparel Group.................... 86,800 (d) 4,806,550
Kimberly-Clark......................... 36,000 2,821,500
Philip Morris Cos...................... 26,000 2,333,500
Reebok International................... 84,000 3,024,000
______________
19,320,587
______________
CONSUMER SERVICES-2.4% Carnival, Cl. A........................ 97,000 2,740,250
Circus Circus Enterprises.............. 70,000 (d) 2,380,000
New York Times, Cl. A.................. 42,700 1,334,375
______________
6,454,625
______________
ELECTRONIC
TECHNOLOGY-6.1% Amdahl................................. 207,000 (d) 2,057,062
EMC.................................... 172,900 (d) 3,328,325
Harris................................. 78,000 4,797,000
International Business Machines........ 4,300 491,813
Perkin-Elmer........................... 56,000 2,905,000
United Technologies.................... 24,500 2,762,375
______________
16,341,575
______________
ENERGY MINERALS-4.1% Amerada Hess........................... 51,000 2,594,625
Phillips Petroleum..................... 69,000 2,794,500
Tosco.................................. 57,500 2,760,000
Unocal................................. 82,500 2,825,625
______________
10,974,750
______________
FINANCE-6.3% Ahmanson (H.F.)........................ 199,900 5,047,475
Bank of New York....................... 108,400 3,021,650
Chelsea GCA Realty..................... 170,400 4,962,900
Great Western Financial................ 120,100 2,972,475
Horizon Group.......................... 44,400 932,400
______________
16,936,900
______________
HEALTH SERVICES-.2% Collaborative Clinical Research........ 32,000 (d) 464,000
______________
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
COMMON STOCKS (CONTINUED) SHARES VALUE
_____________ _______________
HEALTH TECHNOLOGY-5.5% Glaxo Wellcome PLC, A.D.R. ............ 100,000 $ 2,850,000
Mallinckrodt Group..................... 127,600 5,167,800
Sandoz AG.............................. 2,060 2,448,339
Warner-Lambert......................... 75,000 4,462,500
______________
14,928,639
INDUSTRIAL SERVICES-1.0% Cooper Cameron......................... 52,000 (d) 2,743,000
______________
NON-ENERGY MINERALS-1.1% ASARCO................................. 54,400 1,407,600
Lone Star Industries................... 45,500 1,478,750
______________
2,886,350
______________
PROCESS INDUSTRIES-5.1% Avery Dennison......................... 34,600 1,768,925
Boise Cascade.......................... 50,100 1,690,875
Corning................................ 150,400 5,602,400
First Mississippi...................... 72,300 1,943,062
Hoechst................................ 79,000 2,766,599
______________
13,771,861
______________
PRODUCER
MANUFACTURING-1.9% Data Documents......................... 100,000 (d) 1,100,000
Loews.................................. 20,900 1,562,275
Masco.................................. 83,000 2,417,375
______________
5,079,650
______________
RETAIL TRADE- 2.7% Limited................................ 99,875 1,847,688
Pier 1 Imports......................... 180,000 3,015,000
Price/Costco........................... 123,000 (d) 2,444,625
______________
7,307,313
______________
TECHNOLOGY SERVICES-.6% Metromail.............................. 99,000 (d) 1,732,500
______________
TRANSPORTATION-.5% Airborne Freight....................... 62,500 1,476,563
______________
UTILITIES-5.9% AT&T................................... 29,700 1,559,250
British Telecommunications, A.D.R. .... 48,000 2,814,000
Century Telephone Enterprise........... 85,000 2,879,375
GTE.................................... 65,000 2,559,375
Hong Kong Telecommunications, A.D.R. .. 145,000 2,446,875
NorAm Energy........................... 254,000 3,714,750
______________
15,973,625
______________
TOTAL COMMON STOCKS
(cost $139,161,498).................. $142,722,504
==============
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
SHORT-TERM INVESTMENTS-.2% AMOUNT VALUE
________________ ___________________
REPURCHASE AGREEMENTS; Lanston (Aubrey G.) & Co., Inc.,
5.15%, dated 8/30/1996, due 9/3/1996 in the
amount of $600,343 (fully collateralized
by $612,000 U.S. Treasury Bills due 10/17/1996,
value $607,716)
(cost $600,000)........................ $ 600,000 $ 600,000
=================
TOTAL INVESTMENTS (cost $260,430,837) ................................. 97.1% $262,123,627
========= =================
CASH AND RECEIVABLES (NET).................................................. 2.9% $ 7,745,221
========= =================
NET ASSETS.................................................................. 100.0% $269,868,848
========= =================
NOTES TO STATEMENT OF INVESTMENTS:
(a) Variable rate security-interest rate subject to periodic change.
(b) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
August 31,1996, these securities amounted to $7,565,050 or approximately
2.8% of net assets.
(c) This date represents the projected maturity date. The stated
maturity date is 5/25/2023.
(d) Non-income producing.
See notes to financial statements.
DREYFUS BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
ASSETS:
Investments in securities, at value
(cost $260,430,837)-see statement..................................... $262,123,627
Receivable for investment securities sold............................... 15,140,396
Interest and dividends receivable....................................... 1,849,859
Receivable for shares of Common Stock subscribed........................ 5,000
Prepaid expenses........................................................ 28,398
______________
279,147,280
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 149,139
Due to Custodian........................................................ 482,520
Payable for investment securities purchased............................. 8,493,187
Payable for Common Stock redeemed....................................... 2,528
Accrued expenses and other liabilities.................................. 151,058 9,278,432
_______________ ____________
NET ASSETS ................................................................ $269,868,848
============
REPRESENTED BY:
Paid-in capital......................................................... $257,103,080
Accumulated undistributed investment income-net......................... 1,494,521
Accumulated undistributed net realized gain on investments.............. 9,578,457
Accumulated net unrealized appreciation on investments-Note 4........... 1,692,790
___________
NET ASSETS at value applicable to 17,839,221 shares outstanding
(300 million shares of $.001 par value Common Stock authorized)......... $269,868,848
============
NET ASSET VALUE, offering and redemption price per share
($269,868,848 / 17,839,221 shares)...................................... $15.13
============
See notes to financial statements.
DREYFUS BALANCED FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1996
INVESTMENT INCOME:
INCOME:
Interest.............................................................. $ 7,584,035
Cash dividends (net of $24,048 foreign taxes withheld at source)...... 2,125,660
_______________
TOTAL INCOME...................................................... $9,709,695
EXPENSES:
Management fee-Note 3(a).............................................. 1,331,747
Shareholder servicing costs-Note 3(b)................................. 693,736
Registration fees..................................................... 73,707
Professional fees..................................................... 50,218
Custodian fees-Note 3(b).............................................. 29,112
Directors' fees and expenses-Note 3(c)................................ 25,630
Prospectus and shareholders' reports.................................. 3,458
Miscellaneous......................................................... 18,028
_______________
TOTAL EXPENSES.................................................... 2,225,636
_______________
INVESTMENT INCOME-NET............................................. 7,484,059
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS-Note 4:
Net realized gain on investments........................................ $ 10,594,753
Net unrealized (depreciation) on investments............................ (10,694,194)
_______________
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (99,441)
_______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $7,384,618
===============
See notes to financial statements.
DREYFUS BALANCED FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
_________________________________________
1995 1996
__________________ __________________
OPERATIONS:
Investment income-net................................................... $ 4,614,250 $ 7,484,059
Net realized gain on investments........................................ 8,267,726 10,594,753
Net unrealized appreciation (depreciation) on investments for the year.. 9,201,437 (10,694,194)
__________________ __________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 22,083,413 7,384,618
__________________ __________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (3,967,630) (7,065,294)
Net realized gain on investments........................................ (839,686) (9,035,826)
__________________ __________________
TOTAL DIVIDENDS....................................................... (4,807,316) (16,101,120)
__________________ __________________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 96,785,162 212,974,684
Dividends reinvested.................................................... 4,709,482 15,726,554
Cost of shares redeemed................................................. (35,709,773) (116,025,180)
__________________ __________________
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS................ 65,784,871 112,676,058
__________________ __________________
TOTAL INCREASE IN NET ASSETS...................................... 83,060,968 103,959,556
NET ASSETS:
Beginning of year....................................................... 82,848,324 165,909,292
__________________ __________________
End of year (including undistributed investment income-net:
$1,075,756 in 1995 and $1,494,521 in 1996)............................ $ 165,909,292 $ 269,868,848
================== ==================
SHARES SHARES
__________________ ___________________
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 6,733,976 13,678,706
Shares issued for dividends reinvested.................................. 336,603 1,029,914
Shares redeemed......................................................... (2,476,932) (7,500,481)
__________________ ___________________
NET INCREASE IN SHARES OUTSTANDING.................................... 4,593,647 7,208,139
================== ===================
</TABLE>
See notes to financial statements.
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.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
______________________________________________________
PER SHARE DATA: 1993(1) 1994 1995 1996
-------- -------- ------ ------
<S> <C> <C> <C> <C>
Net asset value, beginning of year....................... $12.50 $13.28 $13.72 $15.61
-------- -------- ------ ------
INVESTMENT OPERATIONS:
Investment income-net.................................... .39 .41 .54 .51
Net realized and unrealized gain on investments.......... .71 .59 1.99 .29
-------- -------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS....................... 1.10 1.00 2.53 .80
-------- -------- ------ ------
DISTRIBUTIONS:
Dividends from investment income-net..................... (.32) (.42) (.51) (.53)
Dividends from net realized gain on investments.......... -- (.14) (.13) (.75)
-------- -------- ------ ------
TOTAL DISTRIBUTIONS.................................... (.32) (.56) (.64) (1.28)
-------- -------- ------ ------
Net asset value, end of year............................. $13.28 $13.72 $15.61 $15.13
============ =========== ========== ===========
TOTAL INVESTMENT RETURN...................................... 8.88%(2) 7.73% 19.03% 5.19%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................. .23%(2) .69% 1.04% 1.00%
Ratio of net investment income to average net assets..... 3.46%(2) 3.26% 3.99% 3.37%
Decrease reflected in above expense ratios due to undertakings
by the Manager......................................... 1.13%(2) .41% -- --
Portfolio Turnover Rate.................................. 46.42%(2) 58.22% 72.42% 186.23%
Average commission rate paid(3).......................... -- -- -- $.0684
Net Assets, end of year (000's Omitted).................. $48,315 $82,848 $165,909 $269,869
(1) From September 30, 1992 (commencement of operations) to August 31, 1993.
(2) Not annualized.
(3) For fiscal years beginning September 1, 1995, the Fund is required to
disclose its average commission rate paid per
share for purchases and sales of investment securities.
</TABLE>
See notes to financial statements.
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Balanced Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company. The Fund's investment objective is to provide
investors with long-term capital growth and current income, consistent with
reasonable investment risk. The Dreyfus Corporation ("Manager") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A. ("Mellon") Premier Mutual Fund Services, Inc. acts as the distributor of
the Fund's shares, which are sold to the public without a sales charge.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: 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 are readily available and are representative of the bid
side of the market in the judgment of the Service 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. 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.
The Fund may enter into repurchase agreements with financial
institutions, deemed to be creditworthy by the Fund's Manager, subject to the
seller's agreement to repurchase and the Fund's agreement to resell such
securities at a mutually agreed upon price. Securities purchased subject to
repurchase agreements are deposited with the Fund's custodian and, pursuant
to the terms of the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. If the value of the underlying securities falls below the value of the
repurchase price plus accrued interest, the Fund will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Fund maintains the right to sell the underlying securities at
market value and may claim any resulting loss against the seller.
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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 27, 1996, the Board of Directors declared a cash dividend of
$.126 per share from undistributed investment income-net, payable on
September 30, 1996 (ex-dividend date), to shareholders of record as of the
close of business on September 27, 1996.
(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-BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed Funds in a 300 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
Fund at rates which are related to the Federal Funds rate in effect at the
time of borrowings. For the period ending August 31, 1996 the Fund did not
borrow under the line of credit.
NOTE 3-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 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 of the Fund,
exclusive of taxes, brokerage, interest on borrowings and extraordinary
expenses, exceed the expense limitation of any state having jurisdiction over
the Fund, the Fund may deduct from payments to be made to the Manager, or the
Manager will bear the amount of such excess to the extent required by state
law. 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 21\2%
of the first $30 million, 2% of the next $70 million and 11\2% of the excess
over $100 million of the average value of the Fund's net assets in accordance
with California "blue sky" regulations. There was no expense reimbursement
for the year ended August 31, 1996.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for certain allocated expenses of providing personal
services and/or maintaining 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, 1996, the Fund was charged an aggregate of
$554,895 pursuant to the Shareholder Services Plan.
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a
transfer agency agreement for providing personnel and facilities to perform
transfer agency services for the Fund. Such compensation amounted to $42,084,
for the period from December 1, 1995 through August 31, 1996.
Effective May 10, 1996, the Fund entered into a custody agreement with
Mellon to provide custodial services for the Fund. For the period from May
10, 1996 through August 31, 1996, $3,436 was paid to Mellon pursuant to the
custody agreement.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended August 31, 1996
amounted to $499,940,393 and $397,252,189, respectively.
At August 31, 1996, accumulated net unrealized appreciation on
investments was $1,692,790, consisting of $8,598,009 gross unrealized
appreciation and $6,905,219 gross unrealized depreciation.
At August 31, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS 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, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1996 by correspondence with the
custodian and brokers. 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, 1996, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
(Ernst & Young LLP Signature)
New York, New York
October 2, 1996
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates $.541 per share as a
long-term capital gain distribution of the $.911 per share paid on December
19, 1995.
(Dreyfus Lion D Logo)
DREYFUS BALANCED 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. 222AR968
(Dreyfus Logo)
Balanced
Fund, Inc.
Annual Report
August 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS BALANCED FUND, INC. WITH 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 |
| 8/31/93 | 11,384 | 10,967 | 10,888 |
| 8/31/94 | 12,006 | 10,802 | 11,730 |
| 8/31/95 | 14,577 | 12,023 | 13,961 |
| 8/31/96 | 17,306 | 12,516 | 14,686 |
|----------------------------------------|------------|
* Source: Lipper Analytical Services, Inc.
** Source: Lehman Brothers
