DREYFUS BALANCED FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
One of my more pleasant duties as portfolio manager of the Dreyfus
Balanced Fund, Inc. is writing this letter to the shareholders. This report
covers the six-month period ended February 28, 1997 during which the Fund's
total return was 16.42%.* 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 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 returna of 22.52% and 5.38%, respectively, during this
period. A more accurate measure of the performance of the Fund is against its
benchmark index which is a blend of the S & P 500 Index, 50%, the Lehman
Brothers Aggregate Bond Index, 40%, and the Merrill Lynch 91-Day U.S.
Treasury Bill Index, 10%. This benchmark index returned 13.67% during the
period, providing a favorable performance comparison for the Fund.+
ECONOMIC REVIEW
Economic evidence in early 1997 indicates that real GDP growth has not
slowed significantly. A key economic risk now developing lies in a further
escalation of labor market tightness which could fuel faster wage inflation.
This is reigniting fears of higher future price inflation, even while current
prices are held low by the strong dollar. Market interest rates have recently
been led higher by rising expectations for a Federal Reserve tightening in
coming months, which could help temper demand and would support our view that
we are still in a long economic cycle.
In the household sector, confidence is soaring, job insecurity is
disappearing and real wages are rising. Hence, consumer spending growth
appears fairly solid in early 1997. Simultaneously, a rebound in production
of consumer goods is underway, both to meet the demand and replenish
inventories left depleted at year-end. Elsewhere, capital goods orders have
been slowing since last fall, while export orders are less strong in early
1997, somewhat hurt by the higher dollar. However, a rise in demand for consum-
er goods typically will attract imports, bolstering growth overseas; better
foreign economic growth may help offset the higher dollar to sustain demand
for U.S. exports.
Although wages have been on the rise since the fall of 1996, price
inflation has continued to decelerate. Hence, real wages are rising,
rewarding productivity in many instances. The risks for the future from wage
hikes that are driven by labor shortages are twofold: first, they may fuel
overheating in the economy, ultimately promoting price inflation; second,
they may slow profits for some companies. Profits are also vulnerable this
year for import-competing companies and at multinationals that have not
hedged their foreign currency exposure. Nonetheless, we expect overall
profits to sustain steady growth in 1997.
Market interest rates have shifted higher recently. Short-term rates
are taking their cue from the Fed, expecting a tightening within a few
months. Long-term rates, still within the trading range established over the
last 12 months, have nevertheless trended higher. Announcement of a balanced
Federal budget agreement would represent a positive development that could
curtail the rise in bond yields.
The economy will shortly begin its seventh expansion year, a trend that
we believe could continue. A step by the Federal Reserve to tighten interest
rates could prolong this favorable business cycle.
MARKET OVERVIEW
The stock market activity encompassed by the six-month fiscal period
under review was remarkable, by any standard. The Dow Jones Industrials began
the period in early September in the 5700s, broke through 6000 by
mid-October, churned around a bit in December, then resumed a steady rise,
breaking the 7000-point barrier Valentine's week. But that was not the end of
the story. In February, Federal Reserve Chairman Alan Greenspan returned to a
theme he had initiated earlier - his worries about stock market excesses,
which could bring about a need for raising interest rates. By the end of
February, the market mood had changed. Investors were preoccupied with
Greenspan's warnings, even though the Fed Chairman explained that the ongoing
business expansion was moderate and did not appear to be inflationary.
Nonetheless, a sell-off occurred in the last week of February, costing
the DJIA 53.88 points for the week and sending the Standard & Poor's 500 down
10.95 points, the Nasdaq Composite 25.32 points and the Russell 2000 Index of
small cap stocks 6.32 points. Even so, as February ended, the DJIA still held
a gain of 1,341 points for the preceding twelve months, the S&P 500 was up by
146.45 and Nasdaq by 222.92. Small caps, however, as measured by the Russell
2000, were showing an increase of only 35.95 points for the twelve-month
period.
As these varying results indicate, the market is a highly selective
one, closely attuned to such factors as interest rates and corporate profits.
In this climate, larger companies appeared to fare better than smaller ones,
and "value" stocks - sought after for their low price valuations - stood up
better than growth stocks.
Stock market sell-offs, when they occurred, were, however, gratifyingly
short-lived. It appeared that some fundamentals gave the market resilience.
One such factor was the continued high demand for stocks, particularly from
those putting money away for retirement. The Investment Company Institute,
the trade association of the mutual fund industry, reported that in January,
1997, mutual funds took in $29.39 billion in new money from investors. This
smashed all previous records.
Another supportive factor is corporate profits. The Wall Street Journal
calculated that, among the stocks in the Dow Jones Industry Groups, profits
in the fourth quarter of 1996 were above security analysts' average estimates
for 56% of the companies, below estimates for 27% and matched the estimates
for 17% of companies analyzed.
To judge by the market's performance, however, investors can quickly
ignore the market's fundamental strengths, particularly when scared by a hint
of higher interest rates, or by specific cases of disappointing profits. This
latter factor has affected such market keystones as AT&T, but also shows up
in recent valuations of some technology stocks, particularly the smaller
capitalized ones.
Thus, as the fiscal half-year ended, the mood of investors appeared to
be hopeful, but very wary.
TEAM EFFORT
Managing your investment assets is certainly a team effort. In our last
shareholder's letter I described our research work and the significant part
our team of analysts plays in selecting investments for your Fund. The effort
employed to manage your assets is much broader, and this letter will review
some of the other hard work involved on your behalf.
Your Dreyfus Balanced Fund is managed in a disciplined manner. It is a
balanced mutual fund, and you should realize that by owning this Fund you
will always have both stock market and bond market exposure. These exposures
are provided within the Fund in a balanced mix, with some, but not extensive,
asset allocation changes between these major asset classes.
In selecting both the actual stock and bond investments for your Fund,
we seek value.
With stocks, all investment managers look for companies which are
growing; a value manager looks for these growing companies, but is price-
sensitive and does not want to pay much for them. Further, your Fund often
buys and sells stocks based on the level of interest rates, in a disciplined
process designed to both protect your assets in a potentially negative stock
market environment, and to allow market participation in a potentially
positive stock market environment. Your Fund has various established buy and
sell criteria which help maintain this disciplined process of managing the
Fund. Both an extensive team of research analysts and proprietary computer
models are employed in this process. Lastly, the experience of your portfolio
manager provides both the final determination about whether to buy or sell a
security, and the overall structure of the portfolio of investments.
With bonds, the overall duration (weighted average time to maturity of
all cash flows, or a more exact measure of time to maturity) of the fixed
income portfolio of your Fund is positioned against a benchmark index
designed to represent the overall bond marketplace. When we believe that
interest rates will decline, which results in bond prices going up, we
maintain a duration longer than the benchmark index. When we believe that
interest rates will rise, which results in bond prices going down, we maintain
a duration shorter than the benchmark index. Further, we look for value in
individual bonds by anticipating which bonds will improve in price more than
a U.S. Treasury bond of similar duration.
Trading is another area where we attempt to add value. Dreyfus has
dedicated security traders who focus on implementing the investment decisions
of the portfolio manager. This team of traders works hard to achieve the best
prices possible when the securities in your Fund are bought or sold. Both the
experience of these traders and the portfolio manager's guidelines for each
trade are part of this process. Additionally, the traders provide a flow of
timely information to the analysts and portfolio manager.
The accounting team at Dreyfus also works hard to make sure that, among
other duties, security trades settle properly, that available cash is
properly calculated, and that the daily value of the Fund is exact. Our legal
staff seeks to monitor compliance with all legal and regulatory requirements,
and to keep us all apprised of new legal developments. Finally, our marketing
team makes sure that our shareholders receive regular communication on the
Fund and other pertinent information.
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
The Fund generally maintained an equity allocation close to the top of
the permitted asset range during the entire period. We believed that the
investment environment for the stock market remained positive, and wanted to
maximize the Fund's participation. This strategy in asset allocation
generally added to performance results.
Bonds composed the vast remainder of the Fund's assets during the
period, while cash equivalents were kept to a minimum. Cash equivalents
provided a low yield, and we were generally positive toward the bond markets
during this period. This strategy also benefited performance.
Equity Holdings
Equity investment results during this semi-annual period benefited from
holdings such as Reebok International, Warnaco Group, Kimberly Clark, EMC
Corp., Micron Technology, Tosco, H.F. Ahmanson, BankAmerica, Nationsbank,
Great Western Financial, McKesson, Allegiance, Warner-Lambert, Cooper
Cameron, Lone Star Industries, Avery Dennison, Xerox, and Telebras, the
Brazilian telephone company. Relative performance results were penalized by
holdings including Topps, La Quinta Inns, Novell, Cabletron Systems, Amdahl,
Mobil, Mallinckrodt, Olin, General Signal, and Consolidated Freightways.
Fixed Income Holdings
The fixed income portfolio was positioned with a duration less than the
Lehman Aggregate Index benchmark during the first part of the semi-annual
period. At the beginning of December, we transitioned the portfolio to a
duration posture longer than this benchmark. The timing of these moves was
generally beneficial to the Fund's returns.
Also benefiting the Fund was continued de-emphasis of U.S. Treasury
bonds in favor of corporate bonds and mortgages. In particular, a new type of
bond issued primarily by banks and a new form of mortgage related to
commercial property both delivered relatively higher returns.
Also helpful was our continuing use of Yankee bonds, bonds issued in
the United States by foreign entities. Of special note were bonds issued by
the Republic of Colombia which, during the period we held them, saw the yield
spread (yield difference versus U.S. Treasuries) narrow a full percentage
point, resulting in a significant gain in price of the bonds.
It is both an honor and a pleasure to be managing your investment
assets.
Sincerely,
[Timothy M. Ghriskey signature logo]
Timothy M. Ghriskey
Portfolio Manager
March 19, 1997
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.
+ SOURCE: MERRILL LYNCH, PIERCE, FENNER AND SMITH, INC. - This index is
calculated using Treasury bills that mature closest to, but not beyond, 91
days.
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED)
Principal
Bonds and Notes-37.8% Amount Value
------- -------
<S> <C> <C> <C>
Banking-4.2% Bank Boston Cap. Trust 2, Deb.,
6.75%, 2026.......................... $ 2,000,000 (a) $1,927,500
Banque Paribas, Sub. Notes,
6.875%, 2019......................... 2,300,000 2,178,910
Barnett Cap. Trust 2, Deb.,
7.95%, 2026.......................... 2,500,000 (a) 2,465,625
MBNA Global Cap., Jr. Sub. Deb.,
6.363%, 2027......................... 4,000,000 (b) 3,963,992
PNC Institutional Cap. A, Deb.,
7.95%, 2026.......................... 2,000,000 (a) 1,960,000
-------
12,496,027
-------
Chemicals-1.0% Millennium America, Sr. Notes,
7%, 2006............................. 3,000,000 2,915,898
-------
Consumer Non-Durables-.4% Philip Morris Cos., Notes,
6.95%, 2006.......................... 1,200,000 1,212,940
-------
Finance-1.6% First Union, Deb.,
8.04%, 2026.......................... 2,000,000 1,952,500
harf Cap. International Limited, Notes,
8.875%, 2004......................... 2,600,000 2,718,838
-------
4,671,338
-------
Industrial-1.0% PDV America, Sr. Notes,
7.25%, 1998.......................... 3,000,000 3,017,133
-------
Oil & Gas-.8% Halliburton, Notes,
6.75%, 2007.......................... 2,500,000 2,484,240
-------
Utilities-3.2% BellSouth Cap. Funding, Deb.,
6.04%, 2001.......................... 3,000,000 2,963,610
Chilinger, Notes,
6.50%, 2006.......................... 1,975,000 1,871,761
Indianton Cogeneration, L.P.,
9.77%, 2020.......................... 2,500,000 2,811,933
Wisconsin Bell, Deb.,
6.35%, 2026.......................... 2,000,000 1,947,470
-------
9,594,774
-------
Foreign-3.2% Bangkok Bank, Sub. Notes,
8.375%, 2027......................... 4,000,000 (a) 4,001,496
United Mexican States, Notes,
7.625%, 2001......................... 5,500,000(a,b) 5,561,875
-------
9,563,371
-------
Other-4.3% Asset Securitization Corp.,
Asset Backed Ctfs.:
Ser. 1996-D3, Cl. A4, 8.008%, 2026 2,000,000 2,057,188
Ser. 1996-MD6, Cl. A7, 7.662%, 2026 4,500,000 4,445,156
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
------- -------
Other (continued) Chase Commercial Mortgage Securities Corp.,
Asset Backed Ctfs.,
Ser. 1996-2, Cl. D, 6.90%, 2006...... $ 2,182,951 $ 2,073,377
GMAC 1993-B Grantor Trust,
Asset Backed Ctfs.,
Cl. A, 4%, 1998...................... 49,315 48,879
GMAC Commercial Mortgage Securities,
Asset Backed Ctfs.,
Ser. 1996-C1, Cl. E, 7.86%, 2006..... 3,000,000 2,905,313
MMCA Auto Owner Trust,
Asset Backed Ctfs.,
Ser. 1995-1, Cl. A, 5.70%, 2000...... 1,355,288 1,351,479
-------
12,881,392
-------
U.S. Government &
Agencies-18.1% Federal Home Loan Mortgage Corp.,
Real Estate Mortgage Investment Conduit,
Ser. 1497, Cl. FF, 6.50%, 8/15/2021.. 1,650,000 1,596,755
Federal National Mortgage Association,
Real Estate Mortgage Investment Conduit:
7.13%, 1/1/2012....................... 3,997,305 3,937,346
Ser. 1996-M3, Cl. A1, 7.385%, 3/25/2021 4,922,953 4,995,258
9%, 6/1/2026.......................... 3,030,206 3,195,898
Government National Mortgage Association,
Mortgage Backed Ctfs.:
7.375%, 1/15/2032..................... 2,498,806 2,486,312
7.50%, 2/15/2032...................... 3,494,000 3,488,514
Overseas Private Investment,
7.63%, 7/15/2002..................... 2,040,497 2,089,122
Student Loan Marketing Association,
2.90%, 2/20/2000..................... 2,450,000 (b) 2,443,875
U.S. Treasury Bonds,
6.50%, 11/15/2026.................... 2,000,000 1,909,375
U.S. Treasury Notes:
5.875%, 11/15/1999................... 7,300,000 7,240,688
5.875%, 2/15/2000.................... 1,120,000 1,109,500
6.25%, 1/31/2002..................... 10,990,000 10,921,313
6.25%, 2/15/2003..................... 1,215,000 1,203,799
6.50%, 10/15/2006.................... 7,500,000 7,447,266
-------
54,065,021
-------
TOTAL BONDS AND NOTES
(cost $113,944,253).................. $112,902,134
=======
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997 (UNAUDITED)
Common Stocks-58.8% Shares Value
------- -------
Consumer Services-1.0% La Quinta Inns........ 152,000 $ 3,002,000
-------
Consumer Durables-2.3% D. R. Horton.......... 385,000 4,812,500
Topps....................................... 490,900 (c) 2,086,325
-------
6,898,825
-------
Consumer Non-Durables-8.1% Authentic Fitness 300,000 4,350,000
Cott........................................ 295,000 2,903,906
Fruit of the Loom, Cl. A............... 78,000 (c) 3,188,250
Kimberly-Clark......................... 28,400 3,010,400
Philip Morris Cos...................... 26,000 3,513,250
Reebok International................... 75,000 3,506,250
Warnaco Group, Cl. A................... 115,000 3,665,625
-------
24,137,681
-------
Electronic Technology-7.5% Amdahl............ 207,000 (c) 2,044,125
Cabletron Systems...................... 80,600 (c) 2,418,000
EMC......................................... 131,900 (c) 4,748,400
Harris...................................... 78,000 5,752,500
Micron Technology...................... 82,500 3,093,750
Novell...................................... 415,000 (c) 4,201,875
-------
22,258,650
-------
Energy Minerals-3.7% Mobil................... 23,300 2,860,075
Phillips Petroleum..................... 69,000 2,854,875
Titan Exploration...................... 220,700 (c) 2,317,350
Tosco....................................... 113,400 3,161,025
-------
11,193,325
-------
Finance-8.9% Ahmanson (H.F.)................. 100,000 4,112,500
Allstate............................... 47,500 3,010,312
BankAmerica............................ 30,800 3,503,500
Chase Manhattan........................ 34,500 3,454,312
Chelsea GCA Realty..................... 170,400 5,814,900
Great Western Financial................ 70,100 3,075,637
NationsBank............................ 59,000 3,532,625
-------
26,503,786
-------
Health Services-2.4% Allegiance.............. 133,000 3,507,875
McKesson............................... 56,500 3,743,125
-------
7,251,000
-------
Health Technology-3.9% Mallinckrodt Group.... 127,600 5,423,000
Warner-Lambert......................... 75,000 6,300,000
-------
11,723,000
-------
Industrial Services-1.1% Cooper Cameron...... 48,000 (c) 3,144,000
-------
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997 (UNAUDITED)
Common Stocks (continued) Shares Value
------- -------
Non-Energy Minerals-1.6% Lone Star Industries 75,000 $ 3,253,125
Reynolds Metals........................ 24,000 1,506,000
-------
4,759,125
-------
Process Industries-2.9% Avery Dennison....... 24,400 985,150
Corning................................ 125,400 4,718,175
duPont (E.I.) de Nemours............... 27,500 2,949,375
-------
8,652,700
-------
Producer Manufacturing-4.2% Data Documents... 100,000 1,037,500
General Signal......................... 64,800 2,826,900
Masco....................................... 81,000 2,845,125
Olin........................................ 55,000 2,200,000
Xerox....................................... 56,200 3,512,500
-------
12,422,025
-------
Retail Trade-2.2% Dayton Hudson.............. 80,000 3,360,000
Pier 1 Imports......................... 180,000 3,127,500
-------
6,487,500
-------
Technology Services-.9% BA Merchant Services, Cl. A 175,400 (c) 2,718,700
-------
Transportation-1.9% Airborne Freight......... 105,000 2,874,375
Consolidated Freightways............... 118,000 2,920,500
-------
5,794,875
-------
Utilities-6.2% Coastal....................... 64,000 2,912,000
El Paso Natural Gas.................... 62,700 3,362,288
Hong Kong Telecommunications, A.D.R.... 174,000 3,023,250
NorAm Energy........................... 164,000 2,460,000
Telecomunicacoes Brasileiras-Telebras, A.D.R 35,000 3,395,000
Tenaga Nasional Berhad................. 682,000 3,271,180
-------
18,423,718
-------
TOTAL COMMON STOCKS
(cost $148,426,695).................. $175,370,910
=======
Convertible Preferred Stocks-1.2%
Energy Minerals; Petroleo Brasileiro S/A- Petrobras
(cost $2,912,751).................... 17,000 $ 3,477,971
=======
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997 (UNAUDITED)
Principal
Short-Term Investments-1.8% Amount Value
------- -------
U.S. Treasury Bills: 5.12%, 4/24/97.......... $ 445,000 $ 441,645
5.26%, 5/15/97......................... 118,000 116,756
5.05%, 5/22/97......................... 708,000 699,844
5.30%, 5/29/97......................... 4,051,000 4,000,038
-------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,258,922).................... $ 5,258,283
=======
TOTAL INVESTMENTS (cost $270,542,621)....................................... 99.6% $297,009,298
==== =======
CASH AND RECEIVABLES (NET).................................................. .4% $ 1,186,113
==== =======
NET ASSETS.................................................................. 100.0% $298,195,411
==== =======
</TABLE>
Notes to Statement of Investments:
(a)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 instiutional buyers. At February 28,
1997, these securities amounted to $15,916,496 or approximately 5.3% of
net assets.
(b) Variable rate security-interest rate subject to periodic change.
(c) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997 (UNAUDITED)
Cost Value
-------- --------
<S> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $270,542,621 $297,009,298
Cash....................................... 3,262,446
Interest and dividends receivable.......... 1,540,772
Receivable for shares of Common Stock subscribed 112,625
Receivable for investment securities sold.. 59,233
Prepaid expenses........................... 15,943
--------
302,000,317
--------
LIABILITIES: Due to The Dreyfus Corporation and affiliates 44,072
Payable for investment securities purchased 3,549,686
Payable for shares of Common Stock redeemed 130,357
Accrued expenses........................... 80,791
--------
3,804,906
--------
NET ASSETS.................................................................. $298,195,411
========
REPRESENTED BY: Paid-in capital............................ $257,531,898
Accumulated undistributed investment income-net....... 1,480,483
Accumulated net realized gain (loss) on investments 12,716,272
Accumulated net unrealized appreciation (depreciation) on
investments and foreign currency transactions 26,466,758
--------
NET ASSETS.................................................................. $298,195,411
========
SHARES OUTSTANDING
(300 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED)............. 17,850,843
NET ASSET VALUE, offering and redemption price per share.................... $16.70
========
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BALANCED FUND, INC.
STATEMENT OF OPERATIONS SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
INVESTMENT INCOME
INCOME: Interest................................... $ 3,930,989
Cash dividends (net of $6,183 foreign taxes
withheld at source).................... 1,284,685
-------
Total Income......................... $ 5,215,674
EXPENSES: Management fee-Note 3(a)................... 841,130
Shareholder servicing costs-Note 3(b)...... 433,036
Professional fees.......................... 20,822
Registration fees.......................... 16,641
Custodian fees-Note 3(b)................... 16,401
Prospectus and shareholders' reports....... 15,654
Directors' fees and expenses-Note 3(c)..... 13,097
Miscellaneous.............................. 9,070
-------
Total Expenses....................... 1,365,851
-------
INVESTMENT INCOME-NET....................................................... 3,849,823
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.... $14,037,079
Net realized gain (loss) on
forward currency exchange contracts.... 59,233
Net realized gain (loss) on financial futures:
Long transactions...................... 129,131
Short transactions..................... 2,549
-------
Net Realized Gain (Loss)............... 14,227,992
Net unrealized appreciation (depreciation) on
investments and foreign currency transactions 24,773,968
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 39,001,960
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $42,851,783
=======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BALANCED FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
February 28, 1997 Year Ended
(Unaudited) August 31, 1996
---------- ---------
OPERATIONS:
Investment income-net.................................................. $ 3,849,823 $ 7,484,059
Net realized gain (loss) on investments................................ 14,227,992 10,594,753
Net unrealized appreciation (depreciation) on investments.............. 24,773,968 (10,694,194)
-------- -------
Net Increase (Decrease) in Net Assets Resulting from Operations...... 42,851,783 7,384,618
-------- -------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net.................................................. (3,863,861) (7,065,294)
Net realized gain on investments....................................... (11,090,177) (9,035,826)
-------- -------
Total Dividends...................................................... (14,954,038) (16,101,120)
-------- -------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.......................................... 52,622,379 212,974,684
Dividends reinvested................................................... 14,682,633 15,726,554
Cost of shares redeemed................................................ (66,876,194) (116,025,180)
-------- -------
Increase (Decrease) in Net Assets from Capital Stock Transactions.... 428,818 112,676,058
-------- -------
Total Increase (Decrease) in Net Assets.......................... 28,326,563 103,959,556
NET ASSETS:
Beginning of Period.................................................... 269,868,848 165,909,292
-------- -------
End of Period.......................................................... $298,195,411 $269,868,848
======== =======
UNDISTRIBUTED INVESTMENT INCOME-NET........................................ $ 1,480,483 $ 1,494,521
-------- -------
Shares Shares
-------- -------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 3,256,600 13,678,706
Shares issued for dividends reinvested................................. 931,665 1,029,914
Shares redeemed........................................................ (4,176,643) (7,500,481)
-------- -------
Net Increase (Decrease) in Shares Outstanding........................ 11,622 7,208,139
======== =======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<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
February 28, 1997 Year Ended August 31,
----------------------------------------
PER SHARE DATA: (Unaudited) 1996 1995 1994 1993(1)
------------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $15.13 $15.61 $13.72 13.28 $12.50
---- ---- ---- ---- ----
Investment Operations:
Investment income-net........................ .22 .51 .54 .41 .39
Net realized and unrealized gain (loss)
on investments............................. 2.21 .29 1.99 .59 .71
---- ---- ---- ---- ----
Total from Investment Operations............. 2.43 .80 2.53 1.00 1.10
---- ---- ---- ---- ----
Distributions:
Dividends from investment income-net......... (.22) (.53) (.51) (.42) (.32)
Dividends from net realized gain on investments (.64) (.75) (.13) (.14) -
---- ---- ---- ---- ----
Total Distributions.......................... (.86) (1.28) (.64) (.56) (.32)
---- ---- ---- ---- ----
Net asset value, end of period............... $16.70 $15.13 $15.61 $13.72 $13.28
==== ==== ==== ==== ====
TOTAL INVESTMENT RETURN.......................... 16.42%(2) 5.19% 19.03% 7.73% 8.88%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .48%(2) 1.00% 1.04% .69% .23%(2)
Ratio of net investment income
to average net assets...................... 1.36%(2) 3.37% 3.99% 3.26% 3.46%(2)
Decrease reflected in above expense ratios
due to undertakings by the Manager......... - - - .41% 1.13%(2)
Portfolio Turnover Rate...................... 129.71%(2) 186.23% 72.42% 58.22% 46.42%(2)
Average commission rate paid (3)............. $.0608 $.0684 - - -
Net Assets, end of period (000's Omitted).... $298,195 $ 269,869 $165,909 $82,848 $48,315
___________________________________
(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 (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. ("Mellon"). Premier Mutual Fund Services, Inc. is the distributor of the
Fund's shares, which are sold to the public without a sales charge.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(a) Portfolio valuation: 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 (including financial futures)
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. Forward currency exchange contracts are
valued at the forward rate.
(B) FOREIGN CURRENCY TRANSACTIONS: The Fund does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from change in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized on securities transactions, the difference between
the amounts of dividends, interest and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise from
changes in the value of assets and liabilities other than investments in
securities, resulting from changes in exchange rates. Such gains and losses
are included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(d) 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
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 27, 1997, the Board of Directors declared a cash dividend of
$.10 per share from undistributed investment income-net, payable on March 31,
1997 (ex-dividend date), to shareholders of record as of the close of
business on March 27, 1997.
(e) 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 $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion
of this Facility. Interest is charged to the Fund at rates based on
prevailing market rates in effect at the time of borrowings. For the period
ended February 28, 1997, the Fund did not borrow under the Facility.
NOTE 3-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(a) Pursuant to a management 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.
(b) Under the 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 period ended February 28, 1997, the Fund was charged an aggregate
of $350,470 pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $36,518, during the period ended February 28, 1997.
The Fund compensates Mellon under a custody agreement to provide
custodial services for the Fund. During the period ended February 28, 1997,
$16,401 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:
(a) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, financial futures and forward currency
exchange contracts during the period ended February 28, 1997 amounted to
$361,561,043 and $370,246,334, respectively.
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Fund enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency
exchange rates on its foreign portfolio holdings. When executing forward
currency exchange contracts, the Fund is obligated to buy or sell a foreign
currency at a specified rate on a certain date in the future. With respect to
sales of forward currency exchange contracts, the Fund would incur a loss if
the value of the contract increases between the date the forward contract is
opened and the date the forward contract is closed. The Fund realizes a gain
if the value of the contract decreases between those dates. With respect to
purchases of forward currency exchange contracts, the Fund would incur a loss
if the value of the contract decreases between the date the forward contract
is opened and the date the forward contract is closed. The Fund realizes a
gain if the value of the contract increases between those dates. The Fund is
also exposed to credit risk associated with counterparty nonperformance on
these forward currency exchange contracts which is typically limited to the
unrealized gain on each contract. At February 28, 1997, there were no forward
currency exchange contracts outstanding.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Fund is exposed to
market risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the Fund to "mark to
market" on a daily basis, which reflects the change in the market value of
the contracts at the close of each day's trading. Typically, variation margin
payments are received or made to reflect daily unrealized gains or losses.
When the contracts are closed, the Fund recognizes a realized gain or loss.
These investments require initial margin deposits with a custodian, which
consist of cash or cash equivalents, up to approximately 10% of the contract
amount. The amount of these deposits is determined by the exchange or Board
of Trade on which the contract is traded and is subject to change. At
February 28, 1997, there were no financial futures contracts outstanding.
(b) At February 28, 1997, accumulated net unrealized appreciation on
investments was $26,466,677, consisting of $29,572,737 gross unrealized
appreciation and $3,106,060 gross unrealized depreciation.
At February 28, 1997, 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).
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[Dreyfus lion "d" logo]
Registration Mark
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. 222SA972
[Dreyfus logo]
Registration Mark
Balanced
Fund, Inc.
Semi-Annual
Report
February 28, 1997
