DREYFUS BALANCED FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
Dreyfus Balanced Fund completed its latest semi-annual reporting period
for the six months ended February 28, 1998. Your Fund produced a total return
of 7.45%.* This underperformed our benchmark, a customized blended index
composed of common stocks, bonds and U.S. Treasury Bills, which had a total
return of 11.36% for the same period.** The Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500")*** and the Lehman Brothers Aggregate Bond
Index had a total return of 17.61% and 5.72%, respectively, during the
period.
In the stock markets, large-capitalization growth stocks have continued
to lead the markets higher and as a result our investments in mid-to-large
capitalization value stocks have not kept pace with the broad market averages
like the S&P 500. As we write, this situation is reversing and "value" stocks
are starting to outperform their growth counterparts. The one constant
feature appears to be capitalization. Large-capitalization value stocks are
now leading the parade. While we may witness a seesaw battle between these
two basic investment styles and capitalization this year, we remain convinced
in our belief that our value approach will produce above-average long-term
results. We continue to actively seek investments in companies whose earnings
growth potential is greater, and projected price-earnings ratio is less, than
the S&P 500.
Economic Review
Accumulating evidence indicates that the economy may have started a shift
toward slower growth this winter. Unlike the late phases of other postwar
business cycles, this year's shift to slower real economic growth is
occurring in tandem with decelerating price inflation. Hence, growth in the
nominal dollar economy (before adjusting for inflation), which determines
overall corporate revenues, could slow considerably. Meanwhile, wage growth
began to accelerate last fall. Slower revenue growth and rising costs have
begun to squeeze profit margins in some sectors, although overall corporate
profit growth has stayed positive. Earlier this year the Federal Reserve
Board (the "Fed") shifted to a neutral policy stance, abandoning last year's
tightening bias. This stable policy has kept short-term rates steady,
thwarting market expectations for a sustained drop in long-term rates.
The shift to slower economic growth is not broad-based. Rather, the
available evidence shows that it predominantly affects manufacturers. This is
indicated by falling export orders, sluggish capital goods orders, weak
automobile production and a shorter manufacturing workweek. By contrast,
strength in the service-producing sector persists unabated. While employment
costs seem well controlled in the manufacturing sector, wages and benefits
paid to service sector workers began to accelerate last fall. The picture
emerging is of late-cycle inflation pressures developing for services in the
domestic economy alongside deterioration in the traded goods economy.
Overall corporate profits posted positive surprises throughout 1997. For
manufacturers, profits were boosted by strong demand as well as higher
productivity and lower unit labor costs. This year, many manufacturers face a
deterioration of their gross revenues. For service sector companies, last
year's profits were boosted by strong demand growth. This year, some service
companies may enjoy a window of opportunity to raise prices, but the risk to
profit growth is that power to counteract rising labor costs by raising
prices may be diminished.
The above hot and cold mix to slower economic growth has kept the Fed's
policy neutral, at least for now. Although long-term bond yields are below
year-ago levels, substantially lower yields have proven difficult to attain
in the absence of lower short-term rates.
This kind of environment can foster a healthy economic outlook for the
long run, but may be vulnerable to short-term surprises.
Market Overview
Only four months after enduring the largest-ever one-day drop in the Dow
Jones Industrial Average, the stock market was again setting new records by
the end of February.
The widely followed Dow Jones Industrials had broken new ground, and the
more widely based S&P 500 had also achieved a new record. Smaller stocks as
represented by the Russell 2000 Index had not recouped the ground lost last
fall, and the NASDAQ Composite, while close to its previous high, had not
climbed all the way back. Yet signs of market strength continued into early
March, especially for the largest stocks.
How solid was this recovery from last October's lows? One lesson to be
learned was that the market was highly sensitive to any bad news, especially
about corporate profits. Despite the market's resilience, a number of stocks
- - particularly in the electronic sector - suffered reverses when companies
forecast lower earnings for the early months of 1998.
In late 1997, large stocks, particularly heavily capitalized global
corporations, had been depressed in price by the so-called "Asian flu" - the
severe financial problems affecting Japan, Korea, Singapore, Thailand,
Indonesia and the Philippines. In the new year, however, many of these
companies have rebounded from their depressed price levels. In addition, very
large companies were sought out by investors as offering a better refuge in
uncertain times than small and medium-size companies.
And the weapons-inspection crisis with Iraq, though it eased with an
agreement at the close of the fiscal period, provided more reasons for
investors to seek out the large, well-established stocks.
As the stock market approached its spring quarter, there was no shortage
of reasons to worry whether the recent strength could be maintained. For one,
there was the ever-present fear that the Fed might try to curb ebullience in
the market - and the U.S. economy - by raising interest rates again. Also,
there were predictions that the Asian flu had yet to make its full force felt
in the American economy. Then there were the uncertainties brought on by the
White House scandals, continued defiance by Iraq's Saddam Hussein, and the
advance shadow of the approaching mid term elections.
Even though interest rates have crept up in early 1998, the average price
of stocks in the S&P 500 stood at 26 times operating earnings at the end of
February compared to 20.7 a year earlier. And the dividend yield of stocks in
the S&P 500 was at an all-time low of 1.51%.
Nonetheless, the resilience of the stock market was supported by a number
of impressive factors. Inflation is lower than at any time in a generation.
Interest rates, though edging higher, are low by most recent standards. And
corporate profits, though likely to be lower than last year, have still been
growing at double-digit rates. In addition, cash flows into mutual funds and
into stocks have been setting new records.
Market bears interpret these developments as signs that a market "top" is
close at hand. However, recent swings in stock prices indicate that many
investors still regard drops in the market as a good opportunity to acquire
more shares at reasonable prices.
Portfolio Focus
Asset Allocation
The Fund held approximately 60% of its net assets in equity-type
investments for the six months ended February 28, 1998, close to the Fund's
allowable maximum allocation of 65%. This allocation to equity added to the
Fund's relative performance, as stocks in general outperformed bonds and cash
equivalents.
While long-term prospects for stocks remain very positive, equity
valuation levels relative to interest rates are currently a concern. Ample
liquidity and foreign buying are helping to fuel equity price gains, but our
next move is more likely to be a reduction in the percentage of assets
allocated to equity.
Equity Holdings
Equity investment results during the first six months were positively
impacted by two primary factors - financials and issue selection. The
greatest impact came once again from the financial holdings, with Allstate,
BankAmerica, Equitable Cos. and Travelers Group producing outstanding
results. Led by the retail sector, where holdings in American Stores, Dayton
Hudson, General Nutrition and Pier 1 Imports recorded well-above-average
gains, issue selection was the other positive factor. The latter two stocks
have been sold from the portfolio as their P/E ratios became too high to
justify their retention based on our low P/E approach.
On the other side of the ledger, issue selection and a mid-cap bias hurt
results. Although technology stocks, such as Adaptec and 3Com, were the
hardest hit, an assortment of stocks from varied industries, including
Georgia-Pacific, Raychem, PacifiCare Health Systems, Cl.B, Pennzoil, and
Nike, Cl.B, also registered negative results.
In an equity environment currently favoring large-capitalization growth
stocks, issue selection should be the key factor determining investment
success. We continue to find stocks with good long-term earnings-growth
potential that are attractively priced relative to the broad market average.
Examples of recently purchased stocks meeting our investment criteria include
Leggett & Platt, a maker of components and related products for bedding,
furniture and various other furnishings, and Masco, a maker of building and
home improvement products (e.g., Delta faucets, Thermador cooking
appliances). Purchased in September 1997 at a 12% and 20% P/E discount to the
S&P 500, respectively, each company is expected to grow its earnings at a 15%
to 20% rate over the next 2 years and 14% longer term, more than double the
market's projected growth.
Fixed-Income Holdings
We have maintained a flexible duration posture in structuring the
fixed-income portion of the portfolio during the past six months. On balance,
we have added value through modest duration adjustments, being longer than
the Lehman Aggregate Index benchmark during periods of falling interest
rates, and shorter during rising interest rates. Currently the duration is
4.3 years. That is modestly shorter than the Lehman Aggregate Index duration
of 4.5 years.
The most significant structural change in the fixed-income portion of the
Fund has been an increase in both commercial and residential mortgage-backed
securities. These securities performed much better than comparably rated
corporate bonds due to generally improving real estate markets, changing
rating agency underwriting guidelines, and strong investor demand. We expect
to increase this exposure over time, if yield spreads widen toward those of
comparably rated corporates. Additionally, we continue to de-emphasize U.S.
Treasury securities, favoring instead corporate and mortgage-backed bonds for
their additional yield and price-appreciation potential. Portfolio holdings,
of course, are subject to change in response to changing market conditions.
Over time, we believe our tested investment approach should once again be
rewarding for our investors. Thank you for your confidence in Dreyfus
portfolio management.
Sincerely,
[Douglas D. Ramos, CFA signature logo]
Douglas D. Ramos, CFA
Portfolio Manager
March 25, 1998
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
** The Customized Blended Index is composed of the Standard & Poor's 500
Composite Stock Price Index, 50%, the Lehman Brothers Aggregate Bond Index,
40%, and the Merrill Lynch 91-Day U.S. Treasury Bill Index, 10%. Reflects the
reinvestment of income dividends and, where applicable, capital gain
distributions.
*** 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, unmanaged index of corporate, government, and government
agency debt instruments, mortgage-backed securities and asset-backed
securities.
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS FEBRUARY 28, 1998 (UNAUDITED)
Principal
Bonds and Notes-43.6% Amount Value
______________ ______________
Banking-4.0% Barnett Cap. Trust 2, Deb.,
<S> <C> <C> <C>
7.95%, 2026.......................... $ 2,500,000 $ 2,634,530
IBJ Preferred Capital, Bond,
8.79%, 2049.......................... 13,000,000 (a) 12,667,707
MMCA Auto Trust,
Asset Backed Ctfs.,
Ser. 1995-1A, 5.70%, 2000............ 501,460 501,119
_____________
15,803,356
_____________
Consumer Non-Durables-.5% Philip Morris Cos., Notes,
6.95%, 2001.......................... 2,000,000 2,063,864
_____________
Finance-4.0% Evans Withycombe Residential, Notes,
7.50%, 2004.......................... 3,450,000 (b) 3,611,957
First Union, Deb.,
8.04%, 2026.......................... 2,000,000 2,092,198
Sumitomo Bank Treasury Company, Bond,
9.40%, 2049 ......................... 10,000,000 (a) 10,220,120
_____________
15,924,275
_____________
Industrial-5.2% Belo (A.H.), Sr. Notes,
6.875%, 2002......................... 3,000,000 (b) 3,058,911
Dual Drilling, Sr. Sub. Notes,
9.875%, 2004......................... 2,650,000 2,862,000
EES Coke Battery, Sr. Notes,
7.125%, 2002......................... 1,885,000 (a) 1,888,781
Loews, Sub. Notes,
3.125%, 2007......................... 2,500,000 2,415,625
PDV America, Sr. Notes,
7.25%, 1998.......................... 3,000,000 (b) 3,015,195
Rockwell International, Deb.,
5.20%, 2098.......................... 5,000,000 3,781,250
Tosco, Notes,
7.25%, 2007.......................... 3,150,000 3,306,678
_____________
20,328,440
_____________
Oil & Gas-.8% Apache Financial Properties, Notes,
6.50%, 2007.......................... 3,000,000 2,967,600
_____________
Pharmaceutical-.8% Bayer, Deb.,
6.65%, 2028.......................... 3,000,000 (a) 2,981,250
_____________
Real Estate-2.0% Crescent Real Estate Trust, Notes,
7.125%, 2007......................... 5,000,000 (a) 5,106,565
Spieker Properties Trust, Notes,
8%, 2005............................. 2,750,000 2,938,821
_____________
8,045,386
_____________
Retail Trade-Drug Stores-.4% Rite Aid, Conv. Sub. Notes,
5.25%, 2002.......................... 1,500,000 (a) 1,741,875
_____________
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
______________ ______________
Telecommunications-1.8% Scandinavian Brothers, Sub. Deb.,
7%, 2004............................. $ 2,000,000 $ 2,130,000
Sci Television, Sr. Notes,
11%, 2005............................ 5,000,000 5,138,910
_____________
7,268,910
_____________
Transportation-2.1% American West Airlines, Pass-Through Ctfs.,
Ser. 1997, 1C, 7.53%, 2004........... 2,930,229 3,003,485
Continental Airlines, Pass-Through Ctfs.,
6.80%, 2007.......................... 5,000,000 5,045,500
_____________
8,048,985
_____________
Utilities-1.8% Indiantown Cogeneration, L.P., First Mortgage,
9.77%, 2020.......................... 2,500,000 3,089,102
PTTEP International, Deb.,
7.625%, 2006......................... 2,500,000 (a) 2,022,202
Realty Income, Notes,
7.75%, 2007.......................... 2,000,000 2,158,012
_____________
7,269,316
_____________
Foreign-.5% Republic of Columbia, Bonds,
8.70%, 2016.......................... 1,000,000 977,224
Sultan of Oman, Deb.,
7.125%, 2002......................... 1,000,000 (a) 1,017,500
_____________
1,994,724
_____________
Other-7.7% Commercial Mortgage,
Pass-Through Ctfs.:
Ser. 1997-TZH, Cl. C, 7.724%, 2025 5,000,000 (a) 5,228,600
Ser. 1997-TZH, Cl. D, 7.902%, 2027 3,000,000 (a) 3,133,590
GMAC Commercial Mortgage Securities,
Asset Backed Ctfs.,
Ser. 1996-C1, Cl. E, 7.86%, 2006..... 3,000,000 3,048,750
GS Mortgage Securities Corp. II, Sub. Deb.,
Ser. 1997-GL, Cl. G, 7.785%, 2030.... 6,000,000 6,211,875
NSCOR, Residential Mortgage Securities,
Ser. 1997-11, B1, 7%, 2027........... 3,993,945 3,998,938
Ser. 1997-11, B2, 7%, 2027........... 348,424 344,287
Ser. 1998-2, B2, 6.50%, 2028......... 752,000 724,035
New York City Tax Lien,
Collateralized Bonds:
Ser. 1996-1, Cl. C, 7.11%, 2005...... 362,420 (a) 363,553
Ser. 1997-1, Cl. D, 6.90%, 2005...... 2,064,404 (a) 2,081,823
Residential Funding Mortgage Securities I,
Pass-Through Ctfs.:
Ser. 1996-S18, Cl. M3, 8%, 2026 2,423,550 2,513,343
Ser. 1996-S22, Cl. M3, 8%, 2026 2,410,308 2,490,877
_____________
30,139,671
_____________
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
______________ ______________
U.S. Government &
Agencies-12.0% Federal Home Loan Mortgage Corp.,
Real Estate Mortgage Investment Conduit:
Ser. 1497, Cl. FF, 6.50%, 8/15/2021 $ 1,650,000 $ 1,648,350
6.50%, 3/1/2028.................... 10,000,000 (c) 9,906,200
Federal National Mortgage Association,
Real Estate Mortgage Investment Conduit:
Ser. 1996-M3, Cl. A1, 7.385%, 3/25/2021 4,667,253 4,858,319
9%, 6/1/2026............... 2,269,124 2,415,891
Government National Mortgage Association,
Mortgage Backed Ctfs.:
5%, 3/20/2028 10,000,000 (c) 9,931,200
7.50%, 4/15/2037 2,000,000 (c) 2,090,620
U.S. Treasury Bonds,
6.125%, 11/15/2027................... 1,500,000 1,542,422
U.S. Treasury Notes,
5.50%, 2/28/2003..................... 15,000,000 14,928,885
_____________
47,321,887
_____________
TOTAL BONDS AND NOTES
(cost $170,571,764).................. $171,899,539
=============
Common Stocks-58.9% Shares
_____________
Consumer Durables-2.5% Harman International................... 81,000 $ 3,766,500
Leggett & Platt........................ 118,000 5,922,125
_____________
9,688,625
_____________
Consumer Non-Durables-5.8% Kimberly-Clark.......................... 92,900 5,173,369
NIKE, Cl. B............................ 38,000 1,667,250
Philip Morris Cos...................... 114,000 4,951,875
RJR Nabisco Holdings................... 136,300 4,710,869
Warnaco Group, Cl. A................... 168,700 6,262,987
_____________
22,766,350
_____________
Electronic Technology-6.8% Adaptec................................ 98,500 (d) 2,604,094
Digital Equipment...................... 1,300 (d) 74,019
Gateway 2000........................... 20,400 (d) 897,600
Harris................................. 86,000 4,359,125
Lockheed Martin........................ 51,000 5,951,062
Micron Technology...................... 69,000 (d) 2,289,937
Sundstrand............................. 96,000 5,808,000
United Technologies.................... 56,000 5,001,500
_____________
26,985,337
_____________
Energy Minerals-4.4% British Petroleum, A.D.S............... 64,000 5,292,000
Mobil.................................. 51,200 3,708,800
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1998 (UNAUDITED)
Common Stocks (continued) Shares Value
_____________ _____________
Energy Minerals (continued) Pennzoil............................... 60,600 $ 4,056,413
Tosco.................................. 113,400 4,209,975
_____________
17,267,188
_____________
Finance-13.1% Allstate............................... 53,000 4,942,250
BankAmerica............................ 61,600 4,774,000
Bankers Trust New York................. 38,000 4,493,500
Chase Manhattan........................ 24,500 3,039,531
Chelsea GCA Realty..................... 90,400 3,378,700
Cheung Kong Holdings................... 372,000 2,606,691
Chubb.................................. 63,000 5,028,187
Equitable Cos.......................... 115,000 6,015,938
Equity Office Properties Trust......... 44,700 1,318,650
First Union............................ 88,500 4,662,844
NationsBank............................ 59,000 4,041,500
Sun Hung Kai Properties................ 372,000 2,786,877
Travelers Group........................ 78,600 4,381,950
_____________
51,470,618
_____________
Health Services-3.0% Allegiance............................. 133,000 4,638,375
Beverly Enterprises.................... 384,000 (d) 5,832,000
PacifiCare Health Systems, Cl. B....... 7,600 (d) 475,000
Pharmerica............................. 69,619 905,047
_____________
11,850,422
_____________
Health Technology-1.7% Biogen................................. 132,000 5,824,500
Genzyme-General Division............... 35,900 1,061,294
_____________
6,885,794
_____________
Non-Energy Minerals-1.7%. ISPAT International.................... 87,300 (d) 2,149,763
Lone Star Industries................... 75,000 4,518,750
_____________
6,668,513
_____________
Process Industries-5.0% Archer-Daniels-Midland................. 203,000 4,554,812
Great Lakes Chemical................... 106,000 5,154,250
Owens-Illinois......................... 111,000 (d) 4,259,625
Praxair................................ 123,100 5,885,719
_____________
19,854,406
_____________
Producer Manufacturing-5.1% AlliedSignal........................... 108,000 4,596,750
General Signal......................... 120,800 4,907,500
Masco.................................. 89,300 4,855,687
Xerox.................................. 62,700 5,560,706
_____________
19,920,643
_____________
Retail Trade-3.3% American Stores........................ 233,000 5,868,688
Dayton Hudson.......................... 64,000 4,948,000
Federated Department Stores............ 48,200 (d) 2,259,375
_____________
13,076,063
_____________
DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1998 (UNAUDITED)
Common Stocks (continued) Shares Value
_____________ _____________
Transportation-1.2% CNF Transportation..................... 120,000 $ 4,695,000
_____________
Utilities-5.3% AT&T................................... 78,000 4,748,250
Coastal................................ 71,700 4,561,913
Dominion Resources..................... 117,000 4,665,375
El Paso Natural Gas.................... 62,700 4,161,713
Texas Utilities........................ 71,600 2,895,325
_____________
21,032,576
_____________
TOTAL COMMON STOCKS
(cost $191,419,867).................. $232,161,535
=============
Convertible Preferred Stocks-2.3%
Banking-1.3% Sanwa Fin., 1.25% (Units).............. 215 (a) $ 5,255,650
_____________
Energy Minerals-1.0% Petroleo Brasileiro-Petrobras, 2.174% 17,000 3,851,668
_____________
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $8,047,692).................... $ 9,107,318
=============
Principal
Short-Term Investments-4.0% Amount
_____________
U.S. Treasury Bills: 4.99%, 4/2/1998........................ $ 4,552,000 (b,e) $ 4,530,879
5.10%, 4/23/1998....................... 8,787,000 (b) 8,717,670
4.93%, 4/30/1998....................... 2,529,000 2,506,593
_____________
TOTAL SHORT-TERM INVESTMENTS
(cost $15,761,034)................... $ 15,755,142
=============
TOTAL INVESTMENTS (cost $385,800,357)....................................... 108.8% $ 428,923,534
===== =============
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (8.8%) $ (34,715,718)
===== =============
NET ASSETS.................................................................. 100.0% $394,207,816
===== =============
Notes to Statement of Investments:
</TABLE>
(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 institutional buyers.
At February 28, 1998, these securities amounted to $53,709,216 or
approximately 13.6% net assets.
(b) Held by the custodian in a segregated account as collateral for
securities purchased on a forward commitment basis.
(c) Purchased on a forward commitment basis.
(d) Non-income producing.
(e) Held by custodian in a segregated account as collateral for open
Financial Futures positions.
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF FINANCIAL FUTURES FEBRUARY 28, 1998 (UNAUDITED)
Market Value Unrealized
Covered (Depreciation)
Financial Futures Short Contracts by Contracts Expiration at 2/28/98
____________________ __________ ____________ ___________ _____________
<S> <C> <C> <C> <C>
30 Year U.S. Treasury Bonds.................. 135 $(16,263,281) June '98 $ (13,984)
=============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1998 (UNAUDITED)
Cost Value
_____________ ____________
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $385,800,357 $428,923,534
Cash....................................... 538,823
Receivable for investment securities sold.. 5,794,385
Interest and dividends receivable.......... 2,005,625
Receivable for shares of Common Stock subscribed 14,491
Prepaid expenses........................... 14,390
_____________
437,291,248
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates...... 225,086
Payable for investment securities purchased........ 42,737,962
Payable for futures variation margin-Note 4(a)..... 37,969
Payable for shares of Common Stock redeemed........ 4,975
Accrued expenses................................... 77,440
_____________
43,083,432
_____________
NET ASSETS.................................................................. $394,207,816
=============
REPRESENTED BY: Paid-in capital............................ $345,955,432
Accumulated undistributed investment income-net......... 2,106,592
Accumulated net realized gain (loss) on investments..... 3,036,599
Accumulated net unrealized appreciation (depreciation)..
on investments and foreign currency transactions.......
[including ($13,984) net unrealized (depreciation).....
on financial futures]-Note 4(b)........................ 43,109,193
_____________
NET ASSETS.................................................................. $394,207,816
=============
SHARES OUTSTANDING
(300 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED)............. 23,121,263
NET ASSET VALUE, offering and redemption price per share.................... $17.05
=======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BALANCED FUND, INC.
STATEMENT OF OPERATIONS SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)
INVESTMENT INCOME
INCOME: Interest................................... $ 4,752,062
Cash dividends (net of $4,533 foreign taxes
withheld at source).................... 1,630,374
____________
Total Income......................... $ 6,382,436
EXPENSES: Management fee-Note 3(a)................... 1,082,384
Shareholder servicing costs-Note 3(b)...... 515,729
Registration fees.......................... 38,768
Custodian fees-Note 3(b)................... 25,947
Prospectus and shareholders' reports....... 24,947
Professional fees.......................... 20,121
Directors' fees and expenses-Note 3(c)..... 13,314
Loan commitment fees-Note 2................ 907
Miscellaneous.............................. 2,484
____________
Total Expenses....................... 1,724,601
____________
INVESTMENT INCOME-NET....................................................... 4,657,835
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments and
foreign currency transactions.......... $12,389,754
Net realized gain (loss) on
forward currency exchange contracts.... 23,005
Net realized gain (loss) on financial futures:
Short transactions..................... 555,372
____________
Net Realized Gain (Loss)............. 12,968,131
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions (including $11,485
net unrealized appreciation on financial futures)..... 9,085,866
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 22,053,997
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $26,711,832
============
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BALANCED FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
February 28, 1998 Year Ended
(Unaudited) August 31, 1997
_________________ _______________
OPERATIONS:
Investment income-net............................................... $ 4,657,835 $ 8,259,529
Net realized gain (loss) on investments............................. 12,968,131 33,359,808
Net unrealized appreciation (depreciation) on investments........... 9,085,866 32,330,537
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations... 26,711,832 73,949,874
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net............................................... (4,453,403) (7,851,890)
Net realized gain on investments.................................... (41,779,620) (11,090,177)
_____________ _____________
Total Dividends................................................... (46,233,023) (18,942,067)
_____________ _____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold....................................... 137,389,592 114,567,348
Dividends reinvested................................................ 45,374,137 18,584,915
Cost of shares redeemed............................................. (116,294,026) (110,769,614)
_____________ _____________
Increase (Decrease) in Net Assets from Capital Stock Transactions. 66,469,703 22,382,649
_____________ _____________
Total Increase (Decrease) in Net Assets......................... 46,948,512 77,390,456
NET ASSETS:
Beginning of Period................................................. 347,259,304 269,868,848
_____________ _____________
End of Period....................................................... $394,207,816 $347,259,304
============= =============
UNDISTRIBUTED INVESTMENT INCOME-NET................................... $ 2,106,592 $ 1,902,160
_____________ _____________
Shares Shares
_____________ _____________
CAPITAL SHARE TRANSACTIONS:
Shares sold......................................................... 7,662,126 6,833,342
Shares issued for dividends reinvested.............................. 2,788,675 1,161,022
Shares redeemed..................................................... (6,466,752) (6,696,371)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding..................... 3,984,049 1,297,993
============= =============
</TABLE>
SEE 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
February 28,1998 Year Ended August 31,
______________________________________________
PER SHARE DATA: (Unaudited) 1997 1996 1995 1994 1993(1)
______________ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $18.15 $15.13 $15.61 $13.72 $13.28 $12.50
_______ _______ _______ _______ _______ _______
Investment Operations:
Investment income-net.............. . .22 .45 .51 .54 .41 .39
Net realized and unrealized gain (loss)
on investments................... 1.00 3.65 .29 1.99 .59 .71
_______ _______ _______ _______ _______ _______
Total from Investment Operations... 1.22 4.10 .80 2.53 1.00 1.10
_______ _______ _______ _______ _______ _______
Distributions:
Dividends from investment income-net... (.23) (.44) (.53) (.51) (.42) (.32)
Dividends from net realized gain on investments (2.09) (.64) (.75) (.13) (.14) -
_______ _______ _______ _______ _______ _______
Total Distributions................ (2.32) (1.08) (1.28) (.64) (.56) (.32)
_______ _______ _______ _______ _______ _______
Net asset value, end of period..... $17.05 $18.15 $15.13 $15.61 $13.72 $13.28
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN................ 7.45%(2) 28.06% 5.19% 19.03% 7.73% 8.88%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets. 47%(2) .96% 1.00% 1.04% .69% . 23%(2)
Ratio of net investment income
to average net assets............ 1.28%(2) 2.71% 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............ 92.07%(2) 235.56% 186.23% 72.42% 58.22% 46.42%(2)
Average commission rate paid(3).... $.0535 $.0587 $.0684 - - -
Net Assets, end of period (000's Omitted) $394,208 $347,259 $269,869 $165,909 $82,848 $48,315
</TABLE>
(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.
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 securuties, sales of foreign currencies, currency
gains or losses realized on securities transactions, and 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 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.
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
On March 30, 1998, the Board of Directors declared a cash dividend of
$.12 per share from undistributed investment income-net, payable on March 31,
1998 (ex-dividend date), to shareholders of record as of the close of business
on March 30, 1998.
(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. During the
period ended February 28, 1998, 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, 1998, the Fund was charged $448,373
pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the
period ended February 28, 1998, the Fund was charged $33,757 pursuant to the
transfer agency agreement.
The Fund compensates Mellon under a custody agreement to provide
custodial services for the Fund. During the period ended February 28, 1998,
the Fund was charged $25,947 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, 1998 amounted to
$377,520,598 and $332,809,756, respectively.
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
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 counter party nonperformance on these forward
currency exchange contracts which is typically limited to the unrealized gain
on each open contract. At February 28, 1998, there were no open forward
currency exchange contracts.
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. Contracts
open at February 28, 1998, and their related unrealized depreciation are set
forth in the Statement of Financial Futures.
(b) At February 28, 1998, accumulated net unrealized appreciation on
investments and financial futures was $43,109,193, consisting of $47,961,196
gross unrealized appreciation and $4,852,003 gross unrealized depreciation.
At February 28, 1998, 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).
Registration Mark
[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. 222SA982
Registration Mark
[Dreyfus logo]
Balanced Fund, Inc.
Semi-Annual
Report
February 28, 1998
