<PAGE>
Dreyfus
Balanced Fund, Inc.
Semi-Annual
Report
February 28, 1999
<PAGE>
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the fund's other service providers do not properly
process and calculate date-related information from and after January 1,
2000. The Dreyfus Corporation is working to avoid Year 2000-related problems
in its systems and to obtain assurances from other service providers that
they are taking similar steps. In addition, issuers of securities in which
the fund invests may be adversely affected by Year 2000-related problems.
This could have an impact on the value of the fund's investments and its
share price.
<PAGE>
Dreyfus Balanced Fund, Inc.
- -----------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
The Dreyfus Balanced Fund, Inc. produced a positive total return of
13.22% for the six-month period ended February 28, 1999.* Due to the
structure of the fund, composed of a mix of common stocks, bonds and U.S.
Treasury Bills, we think that an accurate measure of the performance of the
fund is against our Customized Blended Index, which had a total return of
16.01%.** Performance varied among various asset classes, with the Lehman
Brothers Aggregate Bond Index, a broad measure of bond performance, producing
a total return of 1.61% for the same period.*** Large-capitalization stocks,
as measured by the Standard & Poor's 500 Composite Stock Price Index (S&P
500), had a total return of 30.27%,+ while small-cap stocks returned 16.78%,
as measured by the Russell 2000 Index.++
Economic Review
Stresses in the financial system, combined with slowing economic growth,
convinced the Federal Reserve Board to lower short-term interest rates three
times during the fall of 1998: at the end of September, in mid-October, and
in mid-November. As the calendar year ended, the Fed's official stance toward
rates was neutral, since they believed that they had successfully stabilized
the financial system and overall economic growth.
February of 1999 saw the bond market send interest rates higher,
however, as investors worried about an acceleration in economic strength and
the possibility that the Fed might have to reverse itself and raise rates to
slow economic growth. During February, Fed Chairman Greenspan publicly
worried that the Board had gone too far with its mid-November action, which
in retrospect may not have been needed to stimulate the economy and may have
actually caused some overstimulation. The problem with too much growth is
that it can become uncontrollable and result in price inflation and,
ultimately, in a recession.
Inflation, the Fed's other worry, remained well contained throughout the
period. The decline in inflation and the lower interest rates benefited
companies that sell to the consumer, as more income was left over after price
increases to buy goods and services, and the cost of debt was reduced. Home
mortgages could be refinanced at lower rates, thus putting more discretionary
income in consumers' pockets. As consumers spent more, consumer-oriented
companies benefited.
The industrial sector has not been as fortunate. Weak Asian economies
have continued to put a damper on demand in a number of sectors, such as
world-traded commodities (paper producers, for example) and exporters of
goods (some computer equipment manufacturers, for example).
Stock Market Overview
The six-month period ended February 28, 1999 was highlighted in U.S.
stock markets by a drop in security prices during the summer months, and a
rebound in prices during the fall. Stocks declined over the summer due to the
implosion of the Russian financial system and the collapse of a major U.S.
hedge fund, causing the Federal Reserve Board to take its first action
lowering interest rates during the period, which generally stabilized equity
prices. The two subsequent interest rate reductions by the Fed during the
fall were probably more directly related to worries about economic growth,
and helped send stock prices up.
Over the six-month period, large-cap growth stocks (the largest and most
expensively priced securities) turned in the highest returns, followed by
large-cap stocks in general, then large-cap value stocks (the largest
companies selling at value prices), midcap stocks (midsized companies) and
finally small-cap stocks. For example, the total return for the period on the
Russell 1000 Growth Index (574 high-growth companies) was 37.89%, with the
Russell 1000 Index (1,000 of the largest companies) returning 30.45%, and the
Russell 1000 Value Index (710 value-priced companies) returning 22.53%. The
return on the Russell Midcap Index was 21.70%, while the small-cap Russell
2000 Index return was 16.78%.+++
<PAGE>
Expectations for slower profit growth at corporations have contributed
to the significant outperformance by a select few megacap growth stocks.
Investors have had more confidence in the consistent earnings growth from
this small group of stocks than for the broader stock market.
Portfolio Focus
Asset Allocation
The fund held approximately 62% of its assets in equity investments as
of February 28, 1999, close to the fund's allowable maximum allocation of
65%. This allocation to equity also added to the fund's performance for the
reporting period relative to the benchmark, as stocks outperformed bonds and
cash equivalents. Bonds represented 37% of the fund's assets, while
investments in short-term money market-type holdings were kept to a minimum
of 1%.
Equity Holdings
Although we continued to manage the portfolio with a value orientation,
we focused primarily on large-capitalization stocks with above-average
earnings growth potential and moderate valuations relative to the S&P 500.
The key investment drivers in the market were liquidity and concerns about
earnings growth. This led to an investment environment where performance
continued to be narrowly driven by large-cap stocks, with an emphasis on
growth stocks. During the past six months, technology was the best-performing
sector, with Perkin-Elmer, Lexmark International Group, International
Business Machines and Sun Microsystems leading the group. Healthcare produced
the second-largest positive contribution to the fund but was dominated by the
outstanding performance of one stock -- Biogen. Finally, financial and
communication services were the other two top-performing sectors, with
BankAmerica and American International leading the financial group and AT&T
and SBC Communications leading the communications sector. On the other side
of the ledger, issue selection and a small- to midcap bias hurt results. An
assortment of stocks from various industries (Warnaco Group, Owens-Illinois,
Lockheed Martin, Columbia HCA/Healthcare and Federated Department Stores)
registered the largest negative results.
In the equity environment that existed during the reporting period,
which favored a select number of large-capitalization growth stocks, issue
selection with a large-capitalization bias was the key factor determining
investment success. This market environment was a difficult one for a value-
oriented fund such as ours, but we continued to find stocks with above-
average long-term earnings growth potential that were attractively priced
relative to the broad market average. An example of a recently purchased
stock that met our investment criteria is Carnival. Carnival operates the
world's largest multiple-night cruise line under the names Carnival Cruise,
Holland America Line and Windstar Cruises; markets sightseeing tours; and
operates 14 hotels under the name Westmark Hotels. We originally purchased
this stock in October 1998 at a substantial discount to the market. At
purchase, the company's earnings were generally projected to grow at a mid-
to high teens rate.
Fixed-Income Holdings
Our strategy in fixed income during the reporting period was to maintain
a neutral duration strategy. As of February 28, 1999, the duration of the
fund was 4.8 years, which was neutral to the Lehman Brothers Aggregate Bond
Index. Our primary focus was to look to add value by adjusting our
allocations to the spread sectors of the fixed-income market -- these sectors
consist primarily of corporate bonds and mortgages -- and underweighting in
Treasuries. While we had a larger-than-normal allocation to mortgages, we
began slowly readjusting that allocation to add corporate exposure. The
corporate sector, in our opinion, represented the most value. Most corporate
securities have been slow to recover fully from the late-fall widening of
quality spreads.
<PAGE>
The most significant structural change in the fixed-income portion of
the fund was a reduction in commercial mortgage-backed securities (CMBs). For
most of 1998 CMBs performed well. However, in late fall, at the peak of the
financial market turmoil, CMBs' performance lagged. Since late November the
CMBs market regained some of the ground lost. We added exposure in the
corporate bond market by purchasing Clear Channel, Centaur Funding (Airtouch
Communications) and Frank Russell (Northwestern Mutual Life). There are a
number of reasons why we purchased these issues: Clear Channel, while well
known for its radio stations, is an extremely well-diversified company with
many different and rewarding revenue streams. Centaur Funding, on the other
hand, is a special-purpose convertible preferred security which was designed
to facilitate a possible buyout of Airtouch Communications. Its purchase was
a pure play on the likelihood Airtouch Communications would be taken over
(they were purchased by Vodaphone in mid-January 1999). Obviously, due to the
takeover, our Centaur Funding holding performed well. Lastly, a company like
Frank Russell has been an industry leader, with one of the better financial
pictures in the insurance industry. We will continue to look for exciting
opportunities in the corporate sector and strive to maintain a well-
diversified portfolio.
We are grateful for the opportunity to invest your capital and will be
working diligently on your behalf to achieve satisfying long-term investment
results.
Sincerely,
/s/ Douglas D. Ramos
Douglas D. Ramos, CFA
Portfolio Manager
March 19, 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%.
*** SOURCE: LEHMAN BROTHERS -- The Lehman Brothers Aggregate Bond Index is a
widely accepted unmanaged index of corporate, U.S. government and U.S.
government agency debt instruments, mortgage-backed securities and asset-
backed securities.
+ 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: LIPPER ANALYTICAL SERVICES, INC. -- Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Russell 2000 Index is a widely accepted unmanaged index of small-cap
stock performance, and is composed of the 2,000 smallest companies in the
Russell 3000 Index. The Russell 3000 Index is composed of 3,000 of the
largest U.S. companies by market capitalization.
+++ SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- The Russell 1000 Index
measures the performance of the 1,000 largest companies in the Russell
3000 Index, which represent approximately 89% of the total market
capitalization of the Russell 3000 Index. The Russell 1000 Growth Index
measures the performance of those Russell 1000 companies with higher
price-to-book ratios and higher forecasted growth values. The Russell
1000 Value Index measures the performance of those Russell 1000 companies
with lower price-to-book ratios and lower forecasted growth values. The
Russell Midcap Index consists of the bottom 800 securities in the Russell
1000 Index as ranked by total market capitalization, and is a widely
accepted measure of medium-cap stock market performance. The Russell 2000
Index is composed of the 2,000 smallest companies in the Russell 3000
Index. The Russell 3000 Index is composed of 3,000 of the largest U.S.
companies by market capitalization. All indices are unmanaged and include
reinvested dividends.
<PAGE>
Dreyfus Balanced Fund, Inc.
- -----------------------------------------------------------------------------
Statement of Investments February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Bonds and Notes--36.9% Amount Value
- ---------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Banking--.0% Mitsubishi MMCA Auto Trust, Pass - Through Ctfs.,
Ser. 1995 - 1A, 5.70%, 2000..................... $ 37,507 $ 37,544
-------------
Consumer Non Durables--1.7% Lowes, Notes,
6.50%, 2029..................................... 1,500,000 (a) 1,456,740
Philip Morris Cos., Notes,
6.95%, 2001..................................... 2,000,000 2,055,250
Stanley Works, Notes,
5.75%, 2004..................................... 1,500,000 1,490,250
-------------
5,002,240
-------------
Finance--.8% Frank Russell, Notes,
5.625%, 2009.................................... 2,500,000 (a) 2,409,010
-------------
Industrial--1.3% Dual Drilling, Sr. Sub. Notes,
9.875%, 2004.................................... 2,650,000 2,795,750
Saks, Deb.,
8.25%, 2008..................................... 1,100,000 1,210,000
-------------
4,005,750
-------------
Pharmaceutical--1.0% Bayer, Deb.,
6.65%, 2028..................................... 3,000,000 (a) 2,962,500
-------------
Real Estate--2.2% Crescent Real Estate Trust, Notes,
7.50%, 2007..................................... 5,000,000 4,513,110
Realty Income, Notes,
7.75%, 2007..................................... 2,000,000 1,976,142
-------------
6,489,252
-------------
Retail--.6% Penney (JC), Deb.,
7.125%, 2023..................................... 1,800,000 1,743,314
-------------
Telecommunications--1.7% Clear Channel:
Deb.,
6.875%, 2018................................... 1,500,000 1,439,088
Sr. Notes,
6.625%, 2008................................... 1,500,000 1,484,412
Scandinavian Brothers, Sub Deb.,
7%, 2004......................................... 2,000,000 (a) 2,110,000
-------------
5,033,500
-------------
Transportation--2.4% American West Airlines, Pass - Through Ctfs.,
Ser. 1997, 1C, 7.53%, 2004....................... 2,860,461 2,884,246
Continental Airlines, Sinking Fund Pass-Through Ctfs.,
6.80%, 2007...................................... 4,468,664 4,435,752
-------------
7,319,998
-------------
Utilities--.3% Enron, Notes,
7.625%, 2004..................................... 985,000 1,034,170
-------------
</TABLE>
<PAGE>
Dreyfus Balanced Fund, Inc.
- -----------------------------------------------------------------------------
Statement of Investments (continued) February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount Value
- ---------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Other--11.8% Asset Securitization Corp.,
Ser. 1997-D5, Cl. A1D, 6.85%, 2041................ $ 5,000,000 $ 5,069,531
Commercial Mortgage,
Pass-Through Ctfs.,
Ser. 1997-TZH, Cl. C, 7.724%, 2025................ 5,000,000 (a) 4,991,300
GMAC Commercial Mortgage Securities,
Asset Backed Ctfs.,
Ser. 1996-Cl. E, 7.86%, 2006...................... 4,000,000 3,526,250
GS Mortgage Securities Corp. II, Sub. Deb.,
Ser. 1998GLI, Cl. A, 6.562%, 2031................ 5,000,000 5,020,313
NSCOR, Residential Mortgage Securities:
Ser. 1997-11, B1, 7%, 2027....................... 3,955,679 3,822,926
Ser. 1997-11, B2, 7%, 2027....................... 345,086 315,492
Ser. 1998-2, B2, 6.50%, 2028..................... 744,452 667,913
New York City Tax Lien,
Collateralized Bonds:
Ser. 1996-1, Cl. C, 7.11%, 2005................ 52,594 (a) 52,594
Ser. 1997-1, Cl. D, 6.90%, 2005................ 1,064,221 (a) 1,056,240
Residential Funding Mortgage Securities I,
Pass-Through Ctfs.:
Ser. 1998-S9, Cl. M2,6.50%, 2013............... 2,008,327 1,980,090
Ser. 1998-S9, Cl. M3,6.50%, 2013............... 1,004,212 983,164
Ser. 1996-S18, Cl. M3, 8%, 2026................ 2,406,915 2,415,693
Ser. 1996-S22, Cl. M3, 8%, 2026................ 2,395,685 2,377,276
Salomon Brothers Commercial Mortgage,
Pass-Through Ctfs.,
Ser. 1997-TZH, Cl. D, 7.902%, 2022............. 3,000,000 (a) 2,944,380
-------------
35,223,162
-------------
U.S. Government & Federal Home Loan Mortgage Corp.,
Agencies--13.1% Real Estate Mortgage Investment Conduit,
Ser. 1497, Cl. FF, 6.50%, 8/15/2021............ 1,650,000 1,653,086
Federal National Mortgage Association,
Real Estate Mortgage Investment Conduit:
Ser. 1996-M3, Cl. A1, 7.385%, 3/25/2021........ 4,356,853 4,557,946
9%, 6/1/2026................................... 1,274,955 1,358,619
U.S. Treasury Bonds:
4.75%, 11/15/2008................................ 17,000,000 16,308,610
6.125%, 11/15/2027............................... 9,000,000 9,444,600
U.S. Treasury Notes,
4.25%, 11/15/2003................................ 500,000 479,550
U.S. Treasury Principal Strips,
Zero Coupon, 11/15/2009.......................... 10,000,000 5,399,600
-------------
39,202,011
-------------
TOTAL BONDS AND NOTES
(cost $113,145,287).............................. $ 110,462,451
-------------
-------------
</TABLE>
<PAGE>
Dreyfus Balanced Fund, Inc.
- -----------------------------------------------------------------------------
Statement of Investments (continued) February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks-62.1% Shares Value
- ---------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Commercial Services--.1% Fortune Brands .................................... 12,400 $ 373,550
-------------
Consumer Durables--4.6% Eastman Kodak....................................... 9,000 595,688
Ford Motor.......................................... 52,400 3,107,975
General Motors...................................... 49,000 4,045,563
Leggett & Platt..................................... 177,000 3,705,937
Newell.............................................. 51,400 2,184,500
-------------
13,639,663
-------------
Consumer Non-Durables--1.5% Anheuser-Busch Cos.................................. 27,000 2,070,562
ConAgra............................................. 30,300 912,787
Kimberly-Clark...................................... 18,900 893,025
Philip Morris Cos................................... 13,800 539,925
-------------
4,416,299
-------------
Consumer Services--2.8% Carvinal............................................ 187,200 5,193,150
Cendant............................................. 187,200 (b) 3,100,500
Gannett............................................. 3,600 228,600
-------------
8,522,250
-------------
Electronic Technology--8.0% Boeing.............................................. 21,000 746,813
Compaq Computer..................................... 37,000 1,304,250
Hewlett-Packard..................................... 32,500 2,159,219
Intel............................................... 23,000 2,758,562
International Business Machines..................... 29,000 4,930,000
Lexmark International Group, Cl. A.................. 46,700 (b) 4,818,856
Lockheed Martin..................................... 48,000 1,809,000
Perkin-Elmer........................................ 28,900 2,738,275
Seagate Technology.................................. 9,200 (b) 266,225
Sun Microsystems.................................... 17,000 (b) 1,654,312
United Technologies................................. 7,200 891,900
-------------
24,077,412
-------------
Energy Minerals--3.2% British Petroleum Amoco A.D.R....................... 11,000 935,000
Exxon............................................... 12,000 798,750
Mobil............................................... 26,200 2,179,513
Royal Dutch Petroleum............................... 78,000 3,422,250
Texaco.............................................. 31,000 1,443,437
USX Marathon Group.................................. 33,000 682,688
-------------
9,461,638
-------------
Finance--14.1% American General.................................... 4,300 314,975
American International Group........................ 47,281 5,387,136
Associates First Capital, Cl. A..................... 21,000 853,125
BankAmerica......................................... 48,000 3,135,000
CIGNA............................................... 29,300 2,300,050
Chase Manhattan..................................... 32,000 2,548,000
</TABLE>
<PAGE>
Dreyfus Balanced Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Investments (continued) February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ---------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Finance (continued) Citigroup........................................... 80,000 $ 4,700,000
Everest Reinsurance Holdings........................ 23,000 763,312
Federal Home Loan Mortgage.......................... 60,000 3,532,500
Federal National Mortgage Association............... 50,300 3,521,000
First Union......................................... 37,500 1,999,219
Fleet Financial Group............................... 76,000 3,263,250
Household International............................. 23,100 938,437
Morgan Stanley, Dean Witter......................... 22,600 2,045,300
UnionBanCAl......................................... 11,300 355,244
Wells Fargo......................................... 140,000 5,145,000
XL Capital,Cl. A.................................... 23,300 1,427,125
-------------
42,228,673
-------------
Health Services--1.3% Columbia HCA /Healthcare............................ 103,000 1,841,125
Wellpoint Health Networks........................... 26,400 (b) 2,082,300
-------------
3,923,425
-------------
Health Technology--3.7% American Home Products............................... 20,300 1,207,850
Becton, Dickinson.................................... 36,000 1,206,000
Pharmacia & Upjohn................................... 97,600 5,319,200
Zeneca............................................... 78,000 3,245,275
-------------
10,978,325
-------------
Industrial Services--1.4% Waste Management..................................... 86,025 4,204,472
-------------
Process Industries--.3% Mead................................................. 32,000 974,000
-------------
Producer Manufacturing--5.7% AlliedSignal......................................... 58,000 2,399,750
General Electric..................................... 31,000 3,109,688
Honeywell............................................ 23,000 1,608,563
Masco................................................ 163,600 4,294,500
Tyco International................................... 25,000 1,860,937
Xerox................................................ 69,400 3,830,013
-------------
17,103,451
-------------
Retail Trade--6.0% American Stores...................................... 147,000 4,961,250
Dayton Hudson........................................ 92,000 5,755,750
Federated Department Stores.......................... 24,200 (b) 921,112
May Department Stores................................ 63,000 3,732,750
TJX Cos.............................................. 86,300 2,464,944
-------------
17,835,806
-------------
Technology Services--.3% McKesson HBOC........................................ 15,000 1,020,000
-------------
Transportation--.3% CNF Transportation................................... 7,000 295,750
Union Pacific........................................ 11,500 539,063
-------------
834,813
-------------
</TABLE>
<PAGE>
Dreyfus Balanced Fund, Inc.
- -----------------------------------------------------------------------------
Statement of Investments (continued) February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ---------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Utilities--8.8% AT&T................................................. 54,000 $ 4,434,750
Bell Atlantic........................................ 51,000 2,929,312
Coastal.............................................. 83,400 2,668,800
Duke Energy.......................................... 15,000 853,125
El Paso Erergy....................................... 17,600 641,300
GTE.................................................. 61,000 3,957,375
MCI WorldCom......................................... 16,000 1,320,000
SBC Communications................................... 84,000 4,441,500
Sprint (FON Group)................................... 24,000 2,059,500
Texas Utilities...................................... 70,700 3,000,331
-------------
26,305,993
-------------
TOTAL COMMON STOCKS
(cost $158,217,067................................ $ 185,899,770
-------------
-------------
Principal
Short-Term Investments--.7% Amount
- ------------------------------------------------------------------------------------ ------------------
U.S. Treasury Bills: 4.42%, 3/18/1999..................................... 1,247,000 (c) $ 1,244,103
4.67%, 4/22/1999..................................... 696,000 (c) 691,041
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,935,703).................................. $ 1,935,144
-------------
-------------
TOTAL INVESTMENTS (cost $273,298,057)................................................ 99.7% $ 298,297,365
------ -------------
------ -------------
CASH AND RECEIVABLES (NET)........................................................... .3% $ 878,660
------ -------------
------ -------------
NET ASSETS........................................................................... 100.0% $ 299,176,025
------ -------------
------ -------------
Notes to Statement of Investments:
- ------------------------------------------------------------------------------
<FN>
(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,
1999, these securities amounted to $17,982,764 or approximately 6.0% net
assets.
(b) Non-income producing.
(c) Partially held by custodian in a segregated account as collateral for
open financial futures positions.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Balanced Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Financial Futures February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
Unrealized
Market Value Appreciation
Covered (Depreciation)
Financial Futures Short Contracts by Contracts Expiration at 2/28/1999
- ----------------------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C>
5 Year U.S. Treasury Notes.............. 130 $(14,373,125) March '99 $ 252,156
10 Year U.S. Treasury Notes............. 215 (24,664,531) March '99 879,875
-----------
$1,132,031
-----------
-----------
Financial Futures Long
- ----------------------
30 Year U.S. Treasury Bonds.............. 7 850,281 March '99 $ (437)
-----------
-----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Balanced Fund, Inc.
- -----------------------------------------------------------------------------
Statement of Assets and Liabilities February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
Cost Value
------------- ------------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments... $273,298,057 $298,297,365
Cash...................................................... 1,584,820
Receivable for investment securities sold................. 5,249,904
Interest and dividends receivable......................... 1,540,831
Receivable for shares of Common Stock subscribed.......... 12,945
Net unrealized appreciation on forward currency
exchange contracts--Note 4(a)........................... 101,988
Prepaid expenses.......................................... 10,938
------------
306,798,791
------------
LIABILITIES: Due to The Dreyfus Corporation and affiliates............. 157,451
Payable for investment securities purchased............... 6,733,132
Payable for shares of Common Stock redeemed............... 622,681
Payable for futures variation margin--Note 4(a)........... 66,242
Accrued expenses.......................................... 43,260
------------
7,622,766
------------
NET ASSETS..................................................................... $299,176,025
------------
------------
REPRESENTED BY: Paid-in capital........................................... $276,280,007
Accumulated undistributed investment income--net.......... 1,769,544
Accumulated net realized gain (loss) on investments....... (5,106,416)
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions
(including $1,131,594 net unrealized appreciation
on financial futures)--Note 4(b)................. 26,232,890
------------
NET ASSETS..................................................................... $299,176,025
------------
------------
SHARES OUTSTANDING
(300 million shares of $.001 par value Common Stock authorized)................ 18,868,197
NET ASSET VALUE, offering and redemption price per share....................... $15.86
------
------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Balanced Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Operations Six Months Ended February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Interest $ 4,203,459
Cash dividends (net of $3,800 foreign taxes
withheld at source)............................... 1,680,591
------------
Total Income...................................... $ 5,884,050
EXPENSES: Management fee--Note 3(a).................................. 995,550
Shareholder servicing costs--Note 3(b)..................... 377,375
Prospectus and shareholders' reports....................... 24,462
Professional fees.......................................... 20,338
Custodian fees--Note 3(b).................................. 18,500
Directors' fees and expenses--Note 3(c).................... 13,631
Registration fees.......................................... 12,853
Interest expense--Note 2................................... 3,081
Loan commitment fees--Note 2............................... 1,009
Miscellaneous.............................................. 2,706
------------
Total Expenses.................................... 1,469,505
-------------
INVESTMENT INCOME--NET.......................................................... 4,414,545
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments and
foreign currency transactions..................... $ (5,692,238)
Net realized gain (loss) on financial futures.............. 130,021
------------
Net Realized Gain (Loss).......................... (5,562,217)
Net unrealized appreciation (depreciation)
on investments and foreign currency transactions
(including $2,617,132 net unrealized appreciation
on financial futures)............................. 45,596,313
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.......................... 40,034,096
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $44,448,641
-------------
-------------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Balanced Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1999 Year Ended
(Unaudited) August 31, 1998
----------------- ---------------
<S> <C> <C>
OPERATIONS:
Investment income--net..................................................... $ 4,414,545 $ 10,641,316
Net realized gain (loss) on investments.................................... (5,562,217) 30,510,001
Net unrealized appreciation (depreciation) on investments.................. 45,596,313 (53,386,750)
------------- -------------
Net Increase (Decrease) in Net Assets Resulting from Operations........ 44,448,641 (12,235,433)
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net..................................................... (5,305,191) (9,883,286)
Net realized gain on investments........................................... (20,122,668) (41,779,620)
------------- -------------
Total Dividends....................................................... (25,427,859) (51,662,906)
------------- -------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.............................................. 103,923,663 192,954,235
Dividends reinvested....................................................... 24,345,668 50,648,271
Cost of shares redeemed.................................................... (207,634,957) (167,442,602)
------------- -------------
Increase (Decrease) in Net Assets from Capital Stock Transactions.... (79,365,626) 76,159,904
------------- -------------
Total Increase (Decrease) in Net Assets........................... (60,344,844) 12,261,565
NET ASSETS:
Beginning of Period........................................................ 359,520,869 347,259,304
------------- -------------
End of Period.............................................................. $299,176,025 $359,520,869
------------- -------------
------------- -------------
Undistributed investment income--net.......................................... $ 1,769,544 $ 2,660,190
------------- -------------
Shares Shares
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold ............................................................... 6,493,965 10,899,523
Shares issued for dividends reinvested..................................... 1,546,531 3,094,784
Shares redeemed............................................................ (12,840,310) (9,463,510)
------------- -------------
Net Increase (Decrease) in Shares Outstanding........................ (4,799,814) 4,530,797
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
<PAGE>
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.
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1999 Year Ended August 31,
--------------------------------------------------------
PER SHARE DATA: (Unaudited) 1998 1997 1996 1995 1994
----------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ... $15.19 $18.15 $15.13 $15.61 $13.72 $13.28
------ ------ ------ ------ ------ ------
Investment Operations:
Investment income--net................... .23 .47 .45 .51 .54 .41
Net realized and unrealized gain (loss)
on investments...................... 1.77 (.88) 3.65 .29 1.99 .59
------ ------ ------ ------ ------ ------
Total from Investment Operations......... 2.00 (.41) 4.10 .80 2.53 1.00
------ ------ ------ ------ ------ ------
Distributions:
Dividends from investment income--net.... (.25) (.46) (.44) (.53) (.51) (.42)
Dividends from net realized gain
on investments...................... (1.08) (2.09) (.64) (.75) (.13) (.14)
------ ------ ------ ------ ------ ------
Total Distributions...................... (1.33) (2.55) (1.08) (1.28) (.64) (.56)
------ ------ ------ ------ ------ ------
Net asset value, end of period........... $15.86 $15.19 $18.15 $15.13 $15.61 $13.72
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN...................... 13.22%* (2.99%) 28.06% 5.19% 19.03% 7.73%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets... .44%* .91% .96% 1.00% 1.04% .69%
Ratio of net investment income to average
net assets.............................. 1.32%* 2.76% 2.71% 3.37% 3.99% 3.26%
Decrease reflected in above expense ratios
due to undertakings by the Manager...... -- -- -- -- -- .41%
Portfolio Turnover Rate................... 75.08%* 177.85% 235.56% 186.23% 72.42% 58.22%
Net Assets, end of period (000's Omitted). $299,176 $359,521 $347,259 $269,869 $165,909 $82,848
- -----------
<FN>
* Not annualized.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
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, as amended (the "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 (the "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 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. Under the terms of the custody agreement, the Fund receives
net earnings credits based on available cash balances left on deposit.
<PAGE>
Dreyfus Balanced Fund, Inc.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(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 of 1986, as
amended (the "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.
(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 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 the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings.
The average daily amount of borrowings outstanding during the period ended
February 28, 1999 was approximately $116,000, with a related weighted average
annualized interest of 5.28%.
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, 1999, the Fund was charged $286,924 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, 1999, the Fund was charged $29,889 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement for providing
custodial services for the Fund. During the period ended February 28, 1999, the
Fund was charged $18,500 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, 1999, amounted to
$232,712,370 and $307,507,366, respectively.
<PAGE>
Dreyfus Balanced Fund, Inc.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following summarizes open forward currency exchange contracts at
February 28, 1999:
<TABLE>
<CAPTION>
Foreign
Currency Unrealized
Forward Currency Exchange Contracts Amounts Proceeds Value Appreciation
- ----------------------------------- --------- -------- --------- ------------
<S> <C> <C> <C> <C>
Sales:
British Pounds, expiring 3/24/99..... 656,560 $1,100,000 $1,051,816 $ 48,184
British Pounds, expiring 4/15/99..... 1,464,799 2,400,000 2,346,196 53,804
---------
Total............................ $ 101,988
---------
---------
</TABLE>
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 counter party nonperformance on these forward currency exchange
contracts which is typically limited to the unrealized gain on each open
contract.
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, 1999 are set forth in the Statement of Financial Futures.
(b) At February 28, 1999, accumulated net unrealized appreciation on
investments, forward currency exchange contracts and financial futures was
$26,232,890, consisting of $33,421,586 gross unrealized appreciation and
$7,188,696 gross unrealized depreciation.
At February 28, 1999, 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).
<PAGE>
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. 222SA992
