DREYFUS BALANCED FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
The Dreyfus Balanced Fund, Inc. completed its latest semi-annual fiscal
period on February 29, 1996. In this letter we provide you with a look at
general economic conditions that prevailed during the period, a description
of market conditions and, in the final section, an account of the Fund's
operations and performance.
ECONOMIC REVIEW
The U.S. economy has grown slightly below its 2.5% trend rate in the last
half year, reflecting an improvement compared to the early months of 1995.
Inflation was well behaved, reducing expectations for price increases in the
months ahead. Corporate profits, strong in most of 1995, slowed towards
year-end. Near-trend growth and low inflation helped pull interest rates down
sharply by January. Although short-term interest rates are still low,
long-term rates have risen in recent weeks. When long-term rates rise above
short-term rates, the yield curve steepens, and this is generally positive
for sustained economic growth. Thus, we believe that, given current market
conditions, the already five-year-old business growth cycle may last still
longer.
The picture, however, remained mixed as the growth in late 1995 was not
broad-based across economic sectors. Faster growth was chiefly due to strong
exports, to a rally in the housing sector, to the service sector, and to
business spending on technology. By contrast, consumer spending in retail
stores was sluggish, leaving stores with too much inventory, and a sharp drop
in truck sales slowed overall capital spending. These, in turn, kept
manufacturing slow and weakened imports, hurting foreign economies. In
addition, several events slowed the economy for a few months near year-end -
a strike at the Boeing Company, the Federal Government shutdown, and
January's snowstorm. These are now past. Recent evidence shows that the
excess inventories have cleared and that retail spending is improving. Thus,
a somewhat more broad-based profile now seems possible for economic growth in
coming months.
Low price inflation in the last six months has reduced market
expectations for inflation in future months. However, there is evidence of
pricing power in some sectors. Tight housing markets in some regions of the
country are boosting local housing prices; strong demand in the service
sector is prompting higher prices at hotels, cruise ships and airlines; and
crude oil prices are holding above year-ago levels. Moreover, recent months'
data show that a tightening labor market may finally be forcing increases in
real wages. Wages are emerging as a clear issue in this year's election,
making policy measures to repress rising wages unlikely.
Corporate profits fared well in the slow growth, low inflation
environment of 1995. Operating profits on S&P 500 companies rose an estimated
17% in the year, helped by a weaker dollar and more corporate restructuring.
However, they did slow somewhat in the fourth quarter, as rising wage costs
and foreign profit declines began to take their toll. Current market
expectations are that profits will grow only 4.3% in 1996. Key determinants
of 1996 profit growth will be how soon foreign economies start to pick up and
whether domestic companies will be able to pass higher wages into prices.
Interest rates fell substantially in 1995. Short-term market rates are
now below 5%, pulled down by the slow economy and three consecutive rate cuts
by the Federal Reserve Board. Long-term bond yields also fell considerably,
reaching a low of 5.96% by January. But long-term rates have moved upwards in
recent weeks for two key reasons. First, the economy has survived the several
obstacles discussed above. And second, hopes for an agreement to balance the
Federal budget are dampened, making this a contentious political issue to be
dealt with in the future.
MARKET OVERVIEW
The performance of the stock market during the past year reflected the
favorable conditions that governed the economy, as described in the preceding
section of this letter. The sharp drop in stock and bond valuations of March
8, 1996 occurred a week after the close of the fiscal period under review.
In the late months of 1995 and early 1996, stocks set a string of new
record highs. In large part, this reflected the low interest rates that
prevailed during the period, as well as hopes that interest levels might go
still lower.
To be sure, there was considerable volatility in the equity markets, and
shifting in leadership positions among various industry groups. In the fall
of 1995, many technology stocks suffered reverses, but as winter took hold,
optimism returned to this sector again. IBM, one of the most widely held
issues especially among institutional investors, showed impressive recovery
powers. This set the pace for strength in many technology issues. The retail
sector remained weak, reflecting consumer worries about job security and
related issues. Yet basic industry stocks and heavy manufacturing did well,
helped considerably by strong U.S. export sales.
While the market was setting new records, both for blue chip stocks and
smaller capitalization issues, some commentators cautioned that stock prices
were getting beyond historic highs in relationship to earnings, dividends and
return on capital investment. However, this did not affect stock prices until
early March, when the market was surprised by Government statistics
indicating that the labor market was tighter than had been assumed - which
raised fears that interest rates might reverse course, and that inflation
might reappear.
PORTFOLIO FOCUS
To take advantage of rising equity prices, and anticipating declines in
bonds, we shifted the allocation of the Fund strongly toward equities during
the latest six months. As of February 29, 1996, stocks comprised 48.6% of the
Fund's portfolio, bonds 46.0% and cash 5.4%. This contrasts with the
allocation six months earlier of 34.8% to stocks, 60.9% to bonds and 4.3% to
cash.
For the six-month fiscal period, the Dreyfus Balanced Fund had a total
return of 6.82%.* Due to the nature of the Fund, which holds a large (though
reduced) portion of assets in bonds, it customarily underperforms market
indexes composed entirely of common stocks. In the latest six-month period,
the Standard & Poor's 500 Composite Stock Price Index had a total return of
15.31%.**
FIXED INCOME
For several reasons, we adopted a defensive posture during the reporting
period in regard to the bond market. Rates had fallen to very near 20-year
lows. At those levels, price volatility can be high. Furthermore, we thought
that a pick-up in economic activity could be touched off by those low rates.
In addition, the bond market was expecting a consensus in Washington on a
balanced budget. Finally, it became evident that demand from Japan for U.S.
Treasury notes was putting downward pressure on rates. For all those reasons
we thought it was prudent to maintain the portfolio duration below that of
the Lehman Brothers Aggregate Bond Index.***
Events in February and March appear to be proving us right on all these
points. However, we turned defensive early, and accordingly lagged the market
slightly in our fixed-income holdings.
EQUITIES
The most notable development in the equity portion was the increase in
allocation to stocks. We did this because we saw evidence that the economy
was not faltering, prospects for 1996 earnings appeared to improve, and our
research uncovered a number of attractive equity opportunities during the
period.
Earlier, however, particularly in the third and part of the fourth
calendar quarters, the Fund was underweighted in equities. In addition, areas
that were overweighted, such as Technology and Retailing, went through a
period of underperformance which we now believe is coming to an end.
Primarily for these reasons, the equity portfolio lagged the overall market
in the latest six months.
At the same time, the portfolio's performance has been boosted by its
overweighting in Financial and Health Care stocks.
Despite their setbacks in recent months, both Technology and Retailing,
we believe, appear favorable. Therefore, we have increased Technology
holdings recently, and retain positions in Retailing.
New positions in Corning, New York Times Cl.A., Warner Lambert, Loews and
AT&T also appear to offer compelling value. Furthermore, managements of most
of these companies are taking steps to enhance share values.
Our market outlook remains cautiously positive. We believe that a benign
inflation environment provides a favorable investment backdrop, that security
valuations remain reasonable, and that corporate profits will continue to
grow. About the only factors holding us back are the length and magnitude of
the current rally.
We are very glad that you are one of our investors. We will continue to
serve your investment needs to the best of our ability.
Sincerely,
[ Ernest G. Wiggins signature logo]
Ernest G. Wiggins
Primary Portfolio Manager
[Donald C. Geogerian signature logo]
Donald C. Geogerian
Equity Portfolio Manager
[ C. Matthew Olson, CFA signature logo]
C. Matthew Olson, CFA
Debt Portfolio Manager
March 18, 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. Unlike
the Fund, which can invest in both debt and equity securities, the Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of stock market performance, which is composed of only equity securities.
*** The Lehman Brothers Aggregate Bond Index is a widely accepted,
unmanaged index of corporate, government and government agency debt
instruments.
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS FEBRUARY 29, 1996 (UNAUDITED)
PRINCIPAL
BONDS AND NOTES-46.0% AMOUNT VALUE
_______ _______
<S> <C> <C>
BANKING-3.6% Bayerische Landesbank, Sub. Notes,
6 3/8%, 2005......................... $ 3,000,000 $ 2,973,240
Citicorp. Sr. Medium-Term Notes,
7.07%, 2000.......................... 2,500,000 2,572,290
MBNA American Bank, Notes,
6.10%, 2000.......................... 2,500,000 2,477,325
__________
8,022,855
__________
FINANCE-4.3% AT&T Capital, Medium-Term Notes,
5.28%, 1997.......................... 750,000 746,347
Banco Commercial Italiano, Sub. Ctfs.,
8 1/4%, 2007......................... 3,025,000 3,248,735
Enhance Financial Services, Deb.,
6 3/4%, 2003......................... 3,000,000 3,015,342
Household Finance, Sr. Medium-Term Notes,
7%, 2000............................. 2,500,000 2,575,582
__________
9,586,006
__________
GOVERNMENTAL-3.2% Guaranteed Trade Trust, Notes,
7.39%, 2006.......................... 4,987,500 5,260,765
Republic of Columbia,
7 1/4%, 2003......................... 1,900,000 1,834,431
__________
7,095,196
__________
INDUSTRIAL-1.8% Hanson Overseas BV, Sr. Notes,
6 3/4%, 2005......................... 3,200,000 3,164,595
TCI Communications, Sr. Medium-Term Notes,
7.49%, 2003.......................... 800,000 814,667
__________
3,979,262
__________
UTILITIES-.8% Chilgener, Notes,
6 1/2%, 2006......................... 1,975,000 1,894,452
__________
FOREIGN-1.3% Swedish Export Credit, Eurobonds,
8 5/8%, 2006......................... 2,750,000 2,887,500
__________
OTHER-5.9% Chase Manhattan Grantor Trust,
Asset Backed Ctfs.,
Series 1996-A, Cl. A, 5.20%, 2002.... 2,025,000 2,007,598
Chemical Master Credit Card Trust,
Asset Backed Ctfs.,
Series 1996-1, Cl. A, 5.55%, 2003.... 3,100,000 3,035,094
First USA Credit Card Master Trust,
Asset Backed Ctfs.,
Ser. 1994-5, Cl. A, 5.43%, 2001...... 2,150,000 (a) 2,151,204
GMAC 1993-B Grantor Trust,
Asset Backed Ctfs.,
Cl. A, 4%, 1998...................... 146,309 144,831
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 29, 1996 (UNAUDITED)
BONDS AND NOTES (CONTINUED) PRINCIPAL AMOUNT VALUE
_______ _______
OTHER (CONTINUED) MMCA Auto Owner Trust,
Asset Backed Ctfs.,
Series 1995-1, Cl. A, 5.70%, 2000.... $ 2,604,794 $ 2,607,607
Premier Auto Trust 1995-3
Asset Backed Ctfs.,
Cl. A-3, 5.95%, 1998................. 2,330,000 2,342,722
Structured Asset Securities Corporation,
Asset Backed Ctfs.,
Series 1996-CFL, Cl. A1B, 5.751%, 2028 980,000 979,541
World Omni 1992-A Grantor Trust,
Asset Backed Ctfs.,
Cl. A, 4 3/4%, 1998.................. 4,946 4,938
__________
13,273,535
__________
U.S. GOVERNMENT
AND AGENCIES-25.1% Federal Home Loan Mortage Corp., Deb.,
6 1/2%, 8/15/2021.................... 1,650,000 1,586,607
Federal National Mortage Association,
Real Estate Mortage Investment Conduit:
Ser.91-169, Cl. PG, 6 3/4%, 8/15/1996 522,240 518,256
Ser.93-146B, Zero Coupon, 1/31/1997(b) 855,799 808,998
Ser.93-178, Cl. PB, 5%, 4/25/2006 580,240 575,117
6 1/2%, 1/1/2011 10,632,228 10,250,107
6 1/2%, 2/1/2011 2,959,920 2,930,321
6 1/2%, 11/1/2025 3,776,118 3,643,955
Overseas Private Investment,
7.63%, 7/15/2002..................... 2,410,714 2,519,196
U.S. Treasury Bonds;
7 1/4%, 5/15/2016.................... 10,150,000 10,892,218
U.S. Treasury Notes:
7 3/8%, 5/15/1996.................... 7,400,000 7,433,532
6 7/8%, 10/31/1996................... 3,000,000 3,031,875
5 7/8%, 7/31/1997.................... 3,000,000 3,021,563
5 1/2%, 9/30/1997.................... 1,500,000 1,502,812
5 1/4%, 12/31/1997................... 2,000,000 1,994,063
5 5/8%, 1/31/1998.................... 700,000 702,516
4 3/4%, 8/31/1998.................... 500,000 491,328
5 1/8%, 11/30/1998................... 1,000,000 989,688
6 7/8%, 3/31/2000.................... 2,800,000 2,920,750
__________
55,812,902
__________
TOTAL BONDS AND NOTES
(cost $102,423,659).................. $102,551,708
=============
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 29, 1996 (UNAUDITED)
COMMON STOCKS - 48.6% SHARES VALUE
_______ _______
BANKING-3.8% Bank of New York....................... 81,000 $ 4,201,875
Citicorp............................... 53,700 4,188,600
__________
8,390,475
__________
BUSINESS EQUIPMENT-.5% Data Documents......................... 100,000 (c) 1,025,000
__________
CHEMICALS-6.2% First Mississippi...................... 53,000 1,384,625
Mallinckrodt Group..................... 130,600 5,126,050
Olin................................... 56,600 4,683,650
Witco.................................. 83,900 2,737,237
__________
13,931,562
__________
COMPUTERS-1.2% Amdahl................................. 323,200 (c) 2,706,800
__________
CONSUMER-1.1% Topps.................................. 490,900 (c) 2,393,138
__________
CONSUMER CYCLICAL-.7% Ford Motor............................. 53,800 1,681,250
__________
ELECTRONICS-2.3% Teradyne............................... 247,800 (c) 5,048,925
__________
FINANCIAL-5.0% Equifax................................ 139,000 2,884,250
Lehman Brothers Holdings............... 116,000 2,871,000
Loews.................................. 62,800 5,338,000
__________
11,093,250
__________
FOOD & BEVERAGE-1.7% Dole Food.............................. 59,300 2,386,825
Wendy's International.................. 78,500 1,422,812
__________
3,809,637
__________
HEALTH CARE-8.4% Humana................................. 119,600 2,930,200
Merck & Co............................. 52,400 3,471,500
Pfizer................................. 32,200 2,121,175
Schering-Plough........................ 49,000 2,750,125
Value Health........................... 74,400 (c) 1,925,100
Warner-Lambert......................... 56,500 5,586,437
__________
18,784,537
__________
MACHINERY-1.5% Caterpillar............................ 24,800 1,658,500
Deere & Co............................. 41,700 1,631,513
__________
3,290,013
__________
MANUFACTURING-5.0% Avery Dennison......................... 52,400 2,823,050
Corning................................ 167,900 5,456,750
ITT Industries......................... 107,800 2,829,750
__________
11,109,550
__________
PUBLISHING-.8% New York Times, Cl. A.................. 64,700 1,779,250
__________
REAL ESTATE-3.1% Chelsea GCA Realty..................... 185,300 5,512,675
HGI Realty............................. 66,900 1,421,625
__________
6,934,300
__________
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 29, 1996 (UNAUDITED)
COMMON STOCKS (CONTINUED) SHARES VALUE
_______ _______
RETAIL-2.3% Limited................................ 109,900 $ 1,923,250
Price Costco........................... 187,500 3,234,375
__________
5,157,625
__________
TECHNOLOGY-4.2% EMC.................................... 285,100 (c) 6,272,200
International Business Machines........ 25,000 3,065,625
__________
9,337,825
__________
UTILITIES-.8% AT&T................................... 27,500 1,749,688
__________
TOTAL COMMON STOCKS
(cost $94,746,612)................... $108,222,825
============
PRINCIPAL
SHORT-TERM INVESTMENTS-4.0% AMOUNT
_______
U.S. TREASURY BILLS; 5.34%, 4/4/1996
(cost $8,958,520).................... $ 9,000,000 $ 8,958,150
============
TOTAL INVESTMENTS (cost $206,128,791) ................................. 98.6% $219,732,683
====== ============
CASH AND RECEIVABLES (NET) ......................................... 1.4% $ 3,056,076
====== ============
NET ASSETS.................................................................. 100.0% $222,788,759
====== ============
</TABLE>
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) Non-income producing.
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $206,128,791)-see statement..................................... $219,732,683
Cash.................................................................... 1,420,348
Interest and dividends receivable....................................... 1,710,392
Receivable for investment securities sold............................... 1,318,303
Receivable for shares of Common Stock subscribed........................ 62,500
Prepaid expenses........................................................ 31,292
__________
224,275,518
LIABILITIES:
Due to The Dreyfus Corporation and subsidiaries......................... $ 370
Payable for investment securities purchased............................. 1,385,346
Payable for Common Stock redeemed....................................... 700
Accrued expenses and other liabilities.................................. 100,343 1,486,759
________ __________
NET ASSETS ................................................................ $222,788,759
============
REPRESENTED BY:
Paid-in capital......................................................... $201,823,108
Accumulated undistributed investment income-net......................... 936,732
Accumulated undistributed net realized gain on investments.............. 6,425,027
Accumulated net unrealized appreciation on investments-Note 3........... 13,603,892
__________
NET ASSETS at value applicable to 14,305,687 outstanding shares of
Common Stock, equivalent to $15.57 per share (300 million shares of
$.001 par value authorized)............................................. $222,788,759
============
</TABLE>
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF OPERATIONS SIX MONTHS ENDED FEBRUARY 29, 1996 (UNAUDITED)
INVESTMENT INCOME:
<S> <C> <C>
INCOME:
Interest.............................................................. $3,663,874
Cash dividends........................................................ 736,606
___________
TOTAL INCOME...................................................... $ 4,400,480
EXPENSES:
Management fee-Note 2(a).............................................. 568,701
Shareholder servicing costs-Note 2(b)................................. 300,140
Registration fees..................................................... 40,255
Professional fees..................................................... 26,885
Custodian fees........................................................ 15,132
Directors' fees and expenses-Note 2(c)................................ 13,935
Miscellaneous......................................................... 3,360
___________
TOTAL EXPENSES.................................................... 968,408
__________
INVESTMENT INCOME-NET............................................. 3,432,072
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $7,441,324
Net unrealized appreciation on investments.............................. 1,216,908
___________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 8,658,232
__________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $12,090,304
============
</TABLE>
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
AUGUST 31, FEBRUARY 29, 1996
1995 (UNAUDITED)
_______ _________
<S> <C> <C>
OPERATIONS:
Investment income-net............................................. $ 4,614,250 $ 3,432,072
Net realized gain on investments.................................. 8,267,726 7,441,324
Net unrealized appreciation on investments for the period......... 9,201,437 1,216,908
__________ ___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ 22,083,413 12,090,304
__________ ___________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net............................................. (3,967,630) (3,571,096)
Net realized gain on investments.................................. (839,686) (9,035,827)
__________ ___________
TOTAL DIVIDENDS................................................. (4,807,316) (12,606,923)
__________ ___________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold..................................... 96,785,162 80,476,336
Dividends reinvested.............................................. 4,709,482 12,331,650
Cost of shares redeemed........................................... (35,709,773) (35,411,900)
__________ ___________
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS.......... 65,784,871 57,396,086
__________ ___________
`TOTAL INCREASE IN NET ASSETS..................................... 83,060,968 56,879,467
NET ASSETS:
Beginning of period............................................... 82,848,324 165,909,292
__________ ___________
End of period (including undistributed investment income-net:
$1,075,756 in 1995 and $936,732 in 1996)........................ $165,909,292 $222,788,759
============ ============
SHARES SHARES
__________ ___________
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................... 6,733,976 5,146,360
Shares issued for dividends reinvested............................ 336,603 809,801
Shares redeemed................................................... (2,476,932) (2,281,556)
__________ ___________
NET INCREASE IN SHARES OUTSTANDING.............................. 4,593,647 3,674,605
============ ============
</TABLE>
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
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 period indicated. This
information has been derived from the Fund's financial statements.
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, FEBRUARY 29, 1996
_________________________________
PER SHARE DATA: 1993(1) 1994 1995 (UNAUDITED)
_______ _______ _______ __________
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $12.50 $13.28 $13.72 $15.61
_______ _______ _______ ______
INVESTMENT OPERATIONS:
Investment income-net............................. .39 .41 .54 .28
Net realized and unrealized gain on investments... .71 .59 1.99 .74
______ ______ _______ ______
TOTAL FROM INVESTMENT OPERATIONS................ 1.10 1.00 2.53 1.02
______ ______ _______ ______
DISTRIBUTIONS:
Dividends from investment income-net.............. (.32) (.42) (.51) (.31)
Dividends from net realized gain on investments... - (.14) (.13) (.75)
______ ______ _______ ______
TOTAL DISTRIBUTIONS............................. (.32) (.56) (.64) (1.06)
______ ______ _______ ______
Net asset value, end of period.................... $13.28 $13.72 $15.61 $15.57
======= ====== ======= =======
TOTAL INVESTMENT RETURN............................... 8.88%(2) 7.73% 19.03% 6.82%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........... .23%(2) .69% 1.04% .51%(2)
Ratio of net investment income to average net assets 3.46%(2) 3.26% 3.99% 1.80%(2)
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% 81.01%(2)
Net Assets, end of period (000's Omitted)......... $48,315 $82,848 $165,909 $222,789
Average commission rate paid...................... $.0806
(1) From September 30, 1992 (commencement of operations) to August 31, 1993.
(2) Not annualized.
</TABLE>
See independent accountants' review report and notes to financial statements.
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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. Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares, which are sold to the public without a
sales charge.
(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
primarily 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.
(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 March 28, 1996, the Board of Directors declared a cash dividend of
$.114 per share from undistributed investment income-net, payable on March
29, 1996 (ex-dividend date), to shareholders of record as of the close of
business on March 28, 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.
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 value
of the Fund's average daily 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. There was no expense reimbursement during
the six months ended February 29, 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 six months ended February 29, 1996, the Fund was charged an
aggregate of $236,959 pursuant to the Shareholder Services Plan.
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 $12,037, for the period from
December 1, 1995 through February 29, 1996.
(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 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, for the six months ended February 29, 1996
amounted to $191,754,092 and $148,470,394, respectively.
At February 29, 1996, accumulated net unrealized appreciation on
investments was $13,603,892, consisting of $17,691,143 gross unrealized
appreciation and $4,087,251 gross unrealized depreciation.
At February 29, 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.
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS BALANCED FUND, INC.
We have reviewed the accompanying statement of assets and liabilities of
Dreyfus Balanced Fund, Inc., including the statement of investments, as of
February 29, 1996, and the related statements of operations and changes in
net assets and financial highlights for the six month period ended February
29, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
August 31, 1995 and financial highlights for each of the three years in the
period ended August 31, 1995 and in our report dated October 5, 1995, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
[Ernst & Young LLP signature logo]
New York, New York
April 8, 1996
[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
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 222SA962
[Dreyfus logo]
Balanced
Fund, Inc.
Semi-Annual
Report
February 29, 1996
