Dreyfus Balanced Fund, Inc.
ANNUAL REPORT August 31, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
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.
Contents
THE FUND
- --------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
14 Statement of Financial Futures
15 Statement of Assets and Liabilities
16 Statement of Operations
17 Statement of Changes in Net Assets
18 Financial Highlights
19 Notes to Financial Statements
24 Report of Independent Auditors
25 Important Tax Information
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus Balanced Fund, Inc.
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Balanced Fund, Inc.,
covering the 12-month period from September 1, 1998 through August 31, 1999.
Inside, you' ll find valuable information about how the fund was managed during
the reporting period, including a discussion with the fund's portfolio manager,
Douglas Ramos.
The past 12 months have been highly volatile for stocks and bonds, which began
the reporting period in the midst of a sharp correction caused primarily by the
spread of the global financial crisis in overseas markets. The Federal Reserve
Board responded to the crisis last fall by reducing short-term interest rates.
Their strategy apparently was effective, and the U.S. economy remained strong
through the remainder of the reporting period.
Because inflation is more likely to rise in a strong economy, the bond market
generally declined during the first eight months of 1999. To help forestall a
rise of inflation, the Federal Reserve Board raised short-term interest rates
twice during the summer of 1999, effectively reversing most of last fall's
interest-rate cuts.
These same economic conditions supported stock prices. Beginning in April,
higher interest rates caused many previously out-of-favor market sectors to
rally strongly. This helped narrow the valuation gap that had developed between
growth and value stocks.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Balanced Fund, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
September 14, 1999
DISCUSSION OF FUND PERFORMANCE
Douglas Ramos, Portfolio Manager
How did Dreyfus Balanced Fund, Inc. perform relative to its benchmark?
For the 12-month period ended August 31, 1999, Dreyfus Balanced Fund, Inc.
produced a total return of 19.37%.(1) This compares with the return provided by
the fund's Customized Blended Index (the "Index"), which produced a total return
of 20.70% . The Standard & Poor' s 500 Composite Stock Price Index, which
comprised 50% of the Index, had a total return of 39.81% for the 12 months ended
August 31, 1999.(2) The Lehman Brothers Aggregate Bond Index, which comprised
40% of the Index, produced a total return of 0.80%.(3) The Merrill Lynch 3-Month
U.S. Treasury Bill Index, which represented 10% of the Index, had a total return
of 4.78%.(4)
We attribute this performance to the rapid recovery of global capital markets in
the wake of last summer's decline, and to the broadening of market strength that
occurred during the second half of the reporting period. Additionally, in March,
we began to focus on stocks that were selling at what we believed were low and
moderate valuations, a strategy that produced positive results for the fund.
What is the fund's investment approach?
On the equity side, the portfolio invests primarily in mid- and large-sized
companies that we believe have above-average growth potential and are
attractively valued relative to the S&P 500 Index. While our investment universe
generally consists of companies with market capitalizations of $1 billion or
greater, over the past six months we have shifted our concentration slightly in
favor of stocks with market capitalizations of $5 billion or greater.
On the fixed-income side, the fund invests in a well-diversified mix of debt
instruments including corporate bonds, mortgage-backed securities, asset-backed
securities, U.S. Treasuries and U.S. government agency bonds, as well as
commercial mortgage-backed securities.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
Effective September 15, 1999, the fund modified its allocation parameters of
equity and fixed-income investments. The equity securities allocation range,
which was previously 45% to 65%, is now 40% to 75%. The fixed-income allocation
range, which was previously 25% to 55%, is now 25% to 60%. It is anticipated
that the normal allocation will be approximately 60% (up from 50%) in equity
investments and 40% in fixed-income investments. The fixed-income allocation
will include cash and cash equivalents in light of the deletion of the specific
cash and cash-equivalent allocation. Under adverse market conditions, the fund
would continue to be permitted to invest up to 100% of its assets in cash and
cash equivalents, including money market instruments.
As a result, going forward, the fund is changing its Customized Blended Index to
one composed of 60% S&P 500 Index and 40% Lehman Brothers Aggregate Bond Index.
We believe that this modification in asset allocation will provide the fund with
greater portfolio flexibility and, thereby, put the fund in a potentially better
position to take advantage of investment opportunities.
What other factors influenced the fund's performance?
In many ways, the first and second halves of the fund's one-year reporting
period experienced widely disparate equity market conditions. Many of the
factors that held back the fund's performance during the first six months of the
reporting period reversed themselves during the second six months, boosting the
fund' s overall returns. Most significantly, in April, market sentiment began to
shift away from domestic large-cap growth stocks to include a broader group of
companies, including smaller and value-oriented names.
The most notable events within the fixed-income markets during the period were
two interest rate hikes initiated by the Federal Reserve Board in June and
August, 1999. In a rising interest-rate environment, the strongest fixed-income
gains were produced by the corporate bond sector, followed by mortgage-backed
securities, asset-backed securities, U.S. government agency bonds and U.S.
Treasuries.
The portfolio's strongest and most consistent gains stemmed from the technology
sector, an area that we continued to emphasize throughout the period. In
particular, we' ve enjoyed significant gains from our holdings in International
Business Machines, Lexmark International Group, Cl.A., Sun Microsystems and
Texas Instruments. The fund's second largest gains during the 12-month reporting
period came from our healthcare stocks, with Biogen and Perkin-Elmer leading the
pack.
On the other hand, the fund had several individual holdings that performed
poorly due to company-specific reasons. Included in those laggards were Lockheed
Martin, a leading diversified technology company, Beverly Enterprises, one of
the country' s largest nursing home companies, and XL Capital, Cl.A., a
Bermuda-based property and casualty insurance company.
Corporate bonds comprised 46% of our fixed-income portfolio as of August 31,
which added significantly to the fund's overall returns. We received some of the
strongest returns from bonds issued by economically sensitive companies,
including energy, paper and forest product companies. In this area, Petroleum
Geo-Services, Conoco and International Paper all contributed positively to
performance. The fund also benefited from its continued reduction in commercial
mortgage-backed securities, a move that was initiated last fall. On the other
hand, several of our real estate investment trust (REIT) holdings disappointed
due to their lack of liquidity.
September 14, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN FLUCTUATE SUCH THAT UPON REDEMPTION FUND SHARES MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
(2) SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- REFLECTS THE REINVESTMENT OF
INCOME DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAINS DISTRIBUTIONS. THE
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A WIDELY ACCEPTED,
UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE.
(3) SOURCE: LEHMAN BROTHERS -- THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS AN
UNMANAGED INDEX OF CORPORATE, U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY DEBT
INSTRUMENTS, MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES WITH AN
AVERAGE MATURITY OF 1-10 YEARS.
(4) SOURCE: BLOOMBERG L.P. -- THE MERRILL LYNCH 3-MONTH U.S. TREASURY BILL
INDEX IS CALCULATED USING BILLS THAT MATURE CLOSEST TO, BUT NOT BEYOND, 91 DAYS.
The Fund
<TABLE>
<CAPTION>
FUND PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Balanced Fund,
Inc. with the Standard & Poor's 500 Composite Stock Price Index, the Lehman
Brothers Aggregate Bond Index and a Customized Blended Index
- --------------------------------------------------------------------------------
Average Annual Total Returns AS OF 8/31/99
Inception
1 Year 5 Years (9/30/92)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FUND 19.37% 13.18% 11.90%
((+)) SOURCE: LIPPER ANALYTICAL SERVICES, INC.
((+)(+)) SOURCE: LEHMAN BROTHERS.
((+)(+)(+)) SOURCE: LIPPER ANALYTICAL SERVICES, INC., LEHMAN BROTHERS AND MERRILL LYNCH, PIERCE, FENNER AND SMITH INC.
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS BALANCED FUND,
INC. ON 9/30/92 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE ON THAT DATE IN
THREE DIFFERENT INDEXES: (1) THE CUSTOMIZED BLENDED INDEX (2) THE STANDARD &
POOR'S 500 COMPOSITE STOCK PRICE INDEX AND (3) THE LEHMAN BROTHERS AGGREGATE
BOND INDEX, WHICH ARE DESCRIBED BELOW. THE CUSTOMIZED BLENDED INDEX IS
CALCULATED ON A YEAR-TO-YEAR BASIS. ALL DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ARE REINVESTED.
DREYFUS BALANCED FUND, INC. SEEKS LONG-TERM CAPITAL GROWTH AND CURRENT INCOME
THROUGH INVESTMENT IN EQUITY AND DEBT SECURITIES. THE FUND'S PERFORMANCE SHOWN
IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES. THE
STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A WIDELY ACCEPTED,
UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. THE LEHMAN BROTHERS AGGREGATE
BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF CORPORATE, GOVERNMENT AND
GOVERNMENT AGENCY DEBT INSTRUMENTS, MORTGAGE-BACKED SECURITIES, AND ASSET-BACKED
SECURITIES. THE MERRILL LYNCH 3-MONTH U.S. TREASURY BILL INDEX IS CALCULATED
USING BILLS THAT MATURE CLOSEST TO, BUT NOT BEYOND 91 DAYS. THE INDICES DO NOT
TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE CUSTOMIZED BLENDED INDEX
IS COMPOSED OF STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX, 50%, LEHMAN
BROTHERS AGGREGATE BOND INDEX, 40%, AND MERRILL LYNCH 3-MONTH U.S. TREASURY BILL
INDEX, 10%. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE
REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION
OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
August 31, 1999
STATEMENT OF INVESTMENTS (STATEMENT OF INVESTMENTS
CONTINUED)
COMMON STOCKS--60.1% Shares Value ($)
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES--.6%
McGraw-Hill Cos. 16,000 827,000
Outdoor Systems 8,000 (a) 258,500
1,085,500
CONSUMER DURABLES--1.9%
Black & Decker 17,900 941,988
Ford Motor 15,400 802,725
General Motors 8,500 562,062
Leggett & Platt 28,000 619,500
Newell Rubbermaid 14,500 594,500
3,520,775
CONSUMER NON--DURABLES--2.8%
Anheuser-Busch Cos. 16,100 1,239,700
Clorox 20,000 905,000
Kimberly-Clark 12,400 706,025
PepsiCo 40,800 1,392,300
Philip Morris Cos. 29,800 1,115,637
5,358,662
CONSUMER SERVICES--4.4%
American Tower, Cl. A 23,100 525,525
CBS 20,000(a) 940,000
Carnival 31,500 1,407,656
Cendant 103,500(a) 1,856,531
Gannett 17,000 1,154,937
Hilton Hotel 19,000 232,750
McDonald's 27,900 1,154,363
Time Warner 16,600 984,588
8,256,350
ELECTRONIC TECHNOLOGY--9.2%
Apple Computer 2,400(a) 156,600
Applied Materials 10,000 710,625
Cabletron Systems 20,300(a) 341,294
Compaq Computer 18,000 417,375
Computer Sciences 8,600(a) 595,013
Ericsson (LM) Telephone, Cl. B, A.D.R. 23,000 748,937
General Dynamics 8,000 504,000
Hewlett-Packard 9,800 1,032,675
Intel 31,600 2,597,125
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- --------------------------------------------------------------------------------
ELECTRONIC TECHNOLOGY (CONTINUED)
International Business Machines 21,000 2,615,812
Lexmark International Group, Cl. A 13,300(a) 1,047,375
Motorola 11,600 1,070,100
NCR 14,000 612,500
National Semiconductor 8,000(a) 225,500
Nortel Networks 20,000 821,250
Rockwell International 7,500 443,437
Sun Microsystems 6,000(a) 477,000
Teradyne 9,000(a) 612,563
Texas Instruments 15,000 1,230,938
United Technologies 17,400 1,150,575
17,410,694
ENERGY MINERALS--3.4%
Burlington Resources 7,000 292,687
Conoco, Cl. A 23,000 615,250
Exxon 15,000 1,183,125
Mobil 5,900 604,012
Royal Dutch Petroleum, A.D.R. 34,700 2,147,063
Texaco 19,500 1,238,250
USX-Marathon Group 13,000 404,625
6,485,012
FINANCE--9.2%
American Express 5,300 728,750
American General 8,100 575,100
American International Group 16,227 1,504,029
Associates First Capital, Cl. A 16,900 579,881
Bank One 11,800 473,475
Bank of America 27,500 1,663,750
CIGNA 13,800 1,239,412
Chase Manhattan 22,500 1,882,969
Citigroup 27,700 1,230,919
Federal Home Loan Mortgage 23,700 1,220,550
Federal National Mortgage Association 26,600 1,652,525
Fleet Financial Group 19,600 780,325
Household International 11,900 449,225
Morgan (J.P.) 5,100 658,856
COMMON STOCKS (CONTINUED) Shares Value ($)
- --------------------------------------------------------------------------------
FINANCE (CONTINUED)
Morgan Stanley Dean Witter & Co. 12,300 1,055,494
Wells Fargo 29,000 1,154,562
XL Capital, Cl. A 7,500 377,344
17,227,166
HEALTH SERVICES--1.6%
Columbia/HCA Healthcare 75,800 1,866,575
Wellpoint Health Networks 14,500(a) 1,056,688
2,923,263
HEALTH TECHNOLOGY--3.6%
American Home Products 7,600 315,400
Bristol-Myers Squibb 16,900 1,189,338
Johnson & Johnson 12,100 1,237,225
Lilly (Eli) 21,000 1,567,125
Merck & Co. 20,400 1,370,625
Pharmacia & Upjohn 15,700 820,325
Warner-Lambert 5,000 331,250
6,831,288
INDUSTRIAL SERVICES--.9%
Baker Hughes 7,500(a) 255,000
Schlumberger 20,900 1,395,075
1,650,075
NON-ENERGY MINERALS--.2%
Alcoa 5,000 322,813
PROCESS INDUSTRIES--1.1%
Dow Chemical 10,000 1,136,250
International Paper 13,000 611,813
Mead 5,300 197,756
Rohm & Haas 5,600 209,300
2,155,119
PRODUCER MANUFACTURING--6.8%
AlliedSignal 22,800 1,396,500
Emerson Electric 11,000 688,875
General Electric 36,000 4,043,250
Honeywell 13,200 1,498,200
Ingersoll-Rand 8,900 566,262
Masco 47,200 1,336,350
The Fund
(STATEMENT OF INVESTMENTS (CONTINUED)
STATEMENT OF INVESTMENTS CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
- --------------------------------------------------------------------------------
PRODUCER MANUFACTURING (CONTINUED)
Tyco International 24,200 2,451,763
Xerox 16,700 797,425
12,778,625
RETAIL TRADE--3.7%
Albertson's 21,176 1,015,125
Dayton Hudson 28,800 1,670,400
Federated Department Stores 11,700(a) 538,200
Kroger 31,800(a) 735,375
Lowes 8,600 389,150
May Department Stores 27,600 1,078,125
Safeway 9,800(a) 456,312
TJX Cos. 39,400 1,137,675
7,020,362
TECHNOLOGY SERVICES--2.9%
BMC Software 10,100(a) 543,506
Computer Associates International 18,000 1,017,000
Compuware 27,200(a) 821,100
Electronic Data Systems 20,000 1,122,500
Network Associates 21,000(a) 354,375
Oracle 24,000(a) 876,000
Synopsys 12,300(a) 688,031
5,422,512
TRANSPORTATION--.5%
AMR 10,000(a) 586,250
Burlington Northern Santa Fe 12,000 348,000
934,250
UTILITIES--7.3%
AT&T 37,400 1,683,000
Bell Atlantic 22,600 1,384,250
Coastal 46,700 2,022,694
El Paso Energy 6,600 241,312
Enron 16,000 670,000
GTE 30,800 2,113,650
MCI WorldCom 26,300 1,992,225
Niagara Mohawk Power 15,000(a) 226,875
SBC Communications 34,400 1,651,200
COMMON STOCKS (CONTINUED) Shares Value ($)
- --------------------------------------------------------------------------------
UTILITIES (CONTINUED)
Sprint 25,000 1,109,375
Texas Utilities 15,000 606,563
13,701,144
TOTAL COMMON STOCKS
(cost $95,281,471) 113,083,610
<TABLE>
<CAPTION>
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Principal
BONDS AND NOTES--42.1% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
BANKING--2.6%
HSBC Holding, Sub. Notes,
<S> <C> <C> <C>
7.50%, 7/15/2009 3,000,000 2,973,411
Sanwa Bank, Notes,
8.35%, 7/15/2009 2,000,000 1,985,140
4,958,551
BROADCASTING--1.4%
Scandinavian Brothers, Sub. Deb.,
7%, 12/1/2004 2,000,000(b) 2,640,000
CHEMICALS--.8%
Conoco, Sr. Notes,
6.95%, 4/15/2029 1,700,000 1,567,876
ENERGY--1.4%
Dual Drilling, Sr. Sub. Notes,
9.875%,1/15/2004 2,650,000 2,705,388
FINANCE--1.1%
Pemex, Bonds,
9.96%, 8/15/2009 2,000,000(b) 1,971,810
FOOD RETAILING--1.8%
Fred Meyer, Notes,
7.375%, 3/1/2005 3,400,000 3,376,965
INDUSTRIAL--2.3%
ICI Wilmington, Notes,
7.05%, 9/15/2007 1,500,000 1,450,184
International Paper, Deb.,
6.875%, 4/15/2009 2,000,000 1,778,550
Saks, Deb.,
8.25%, 11/15/2008 1,100,000 1,083,692
4,312,426
INSURANCE--1.1%
Frank Russell, Notes,
5.625%,1/15/2009 2,250,000(b) 2,006,604
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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OIL SERVICES--.8%
Petroleum Geo-Services, Sr. Notes,
7.125%, 3/30/2028 1,700,000 1,494,371
REAL ESTATE--2.3%
Crescent Real Estate Trust, Notes,
7.50%, 9/15/2007 5,000,000 4,343,260
TELECOMMUNICATIONS--2.3%
Airtouch Communications, Notes, 3,000,000 2,892,870
6.35%, 6/1/2005
Electric Lightwave, Notes, 1,500,000 1,440,347
6.05%, 5/15/2004 4,333,217
TRANSPORTATION--1.5%
American West Airlines, Pass-Through Ctfs.,
Ser.1997,1C, 7.53%,1/2/2004 2,860,462 2,834,474
OTHER--7.6%
GMAC Commerical Mortgage Securities,
Asset Backed Ctfs.,
Ser. 1996-Cl. E, 7.86%,9/15/2006 4,000,000 3,780,000
NSCOR, Residential Mortgage Securities:
Ser. 1997-11, B1, 7%, 8/25/2027 3,931,128 3,702,455
Ser. 1997-11, B2, 7%, 8/25/2027 342,944 306,682
Ser. 1998-2, B2, 6.50%, 2/25/2028 739,740 616,874
New York City Tax Lien,
Collateralized Bonds,
Ser. 1997-1, Cl. D, 6.90%, 5/25/2005 759,655(b) 756,332
Residential Funding Mortgage Securities1,
Pass-Through Ctfs.:
Ser. 1998-S9, Cl. M2, 6.50%, 4/25/2013 1,957,470 1,855,271
Ser. 1998-S9, Cl. M3, 6.50%, 4/25/2013 978,782 920,927
Ser. 1996-s18, Cl. M3, 8%, 10/25/2026 2,346,782 2,298,615
14,237,156
U.S. GOVERNMENT & AGENCIES--15.1%
Federal Home Loan Mortgage Corp.,
Real Estate Mortgage Investment Conduit,
Ser. 1497, Cl. FF, 6.50%, 8/15/2021 1,650,000 1,599,296
Federal National Mortgage Association:
Notes:
6.50%, 8/15/2004 1,750,000 1,745,163
6.375%, 6/15/2009 8,500,000 8,228,604
Real Estate Mortgage Investment Conduit,
Ser. 1996-M3, Cl. A1, 7.385%, 3/25/2021 3,985,841 4,038,952
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCIES (CONTINUED)
U.S. Treasury Bonds,
5.25%, 11/15/2028 1,150,000 995,003
U.S. Treasury Notes:
5%, 4/30/2001 750,000 741,720
5.75%, 6/30/2001 5,000,000 4,998,650
7.25%, 8/15/2004 1,000,000 1,051,970
6%, 8/15/2009 4,967,000 4,974,152
28,373,510
TOTAL BONDS AND NOTES
(cost $80,791,057) 79,155,608
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SHORT-TERM INVESTMENTS--2.3%
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS:
4.71%, 11/18/1999 353,000(c) 349,382
4.79%, 11/26/1999 4,069,000(c) 4,022,243
TOTAL SHORT-TERM INVESTMENTS
(cost $4,371,826) 4,371,625
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TOTAL INVESTMENTS (cost $180,444,354) 104.5% 196,610,843
LIABILITIES, LESS CASH AND RECEIVABLES (4.5%) (8,395,596)
NET ASSETS 100.0% 188,215,247
</TABLE>
(A) NON-INCOME PRODUCING.
(B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT AUGUST 31,1999,
THESE SECURITIES AMOUNTED TO $7,374,746 OR APPROXIMATELY 3.9% OF NET ASSETS.
(C) PARTIALLY HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR
OPEN FINANCIAL FUTURES POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL FUTURES
August 31, 1999
Unrealized
Market Value Appreciation
Covered (Depreciation)
Contracts by Contracts ($) Expiration at 8/31/1999 ($)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL FUTURES LONG:
<S> <C> <C> <C> <C>
5 year U.S. Treasury Notes 33 3,561,937 December ' 99 (12,226)
20 year U.S. Treasury Bonds 85 9,687,343 December ' 99 7,968
FINANCIAL FUTURES SHORT:
10 year U.S. Treasury Notes 211 23,074,828 December ' 99 64,289
60,031
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999
Cost Value
- -------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 180,444,354 196,610,843
Cash 168,839
Receivable for investment securities sold 6,912,704
Interest and dividends receivable 1,264,936
Receivable for shares of Common Stock subscribed 21,626
Receivable for futures variation margin--Note 4(a) 264
Prepaid expenses 16,409
204,995,621
- -------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 77,905
Payable for investment securities purchased 8,344,092
Payable for shares of Common Stock redeemed 8,289,317
Accrued expenses 69,060
16,780,374
- -------------------------------------------------------------------------------
NET ASSETS ($) 188,215,247
- -------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 154,340,340
Accumulated undistributed investment income--net 1,598,768
Accumulated net realized gain (loss) on investments 16,049,619
Accumulated net unrealized appreciation (depreciation)
on investments (including $60,031 net unrealized
appreciation on financial futures)--Note 4(b) 16,226,520
- -------------------------------------------------------------------------------
NET ASSETS ($) 188,215,247
- -------------------------------------------------------------------------------
SHARES OUTSTANDING
(300 million shares of $.001 par value Common Stock authorized) 11,397,606
NET ASSET VALUE, offering and redemption price per share ($) 16.51
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Year Ended August 31, 1999
- -------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Interest 7,530,425
Cash dividends (net of $17,456 foreign taxes withheld at source) 2,673,216
TOTAL INCOME 10,203,641
EXPENSES:
Management fee--Note 3(a) 1,705,742
Shareholder servicing costs--Note 3(b) 815,216
Interest expense--Note 2 73,183
Custodian fees--Note 3(b) 38,018
Prospectus and shareholders' reports 37,746
Professional fees 37,039
Directors' fees and expenses--Note 3(c) 24,801
Registration fees 20,791
Loan commitment fees--Note 2 1,719
Miscellaneous 9,401
TOTAL EXPENSES 2,763,656
INVESTMENT INCOME--NET 7,439,985
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments:
Long transactions (including foreign currency transactions) 13,484,904
Short sale transactions (1,044)
Net realized gain (loss) on forward currency exchange contracts 64,537
Net realized gain (loss) on financial futures 2,045,421
NET REALIZED GAIN (LOSS) 15,593,818
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions
(including $1,545,569 net unrealized appreciation
on financial futures) 35,589,943
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 51,183,761
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 58,623,746
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended August 31,
----------------------------------
1999 1998
- -------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 7,439,985 10,641,316
Net realized gain (loss) on investments 15,593,818 30,510,001
Net unrealized appreciation (depreciation)
on investments 35,589,943 (53,386,750)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 58,623,746 (12,235,433)
- -------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (8,501,407) (9,883,286)
Net realized gain on investments (20,122,668) (41,779,620)
TOTAL DIVIDENDS (28,624,075) (51,662,906)
- -------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 131,420,540 192,954,235
Dividends reinvested 27,427,390 50,648,271
Cost of shares redeemed (360,153,223) (167,442,602)
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL STOCK TRANSACTIONS (201,305,293) 76,159,904
TOTAL INCREASE (DECREASE) IN NET ASSETS (171,305,622) 12,261,565
- -------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 359,520,869 347,259,304
END OF PERIOD 188,215,247 359,520,869
Undistributed investment income--net 1,598,768 2,660,190
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 8,145,401 10,899,523
Shares issued for dividends reinvested 1,733,807 3,094,784
Shares redeemed (22,149,613) (9,463,510)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING(12,270,405) 4,530,797
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
Year Ended August 31,
--------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 15.19 18.15 15.13 15.61 13.72
Investment Operations:
Investment income--net .87(a) .47 .45 .51 .54
Net realized and unrealized
gain (loss) on investments 1.98 (.88) 3.65 .29 1.99
Total from Investment Operations 2.85 (.41) 4.10 .80 2.53
Distributions:
Dividends from investment income--net (.45) (.46) (.44) (.53) (.51)
Dividends from net realized gain
on investments (1.08) (2.09) (.64) (.75) (.13)
Total Distributions (1.53) (2.55) (1.08) (1.28) (.64)
Net asset value, end of period 16.51 15.19 18.15 15.13 15.61
TOTAL RETURN (%) 19.37 (2.99) 28.06 5.19 19.03
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to
average net assets .94 .91 .96 1.00 1.04
Ratio of interest expense to
average net assets .03 -- -- -- --
Ratio of net investment income
to average net assets 2.62 2.76 2.71 3.37 3.99
Portfolio Turnover Rate 162.40 177.85 235.56 186.23 72.42
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 188,215 359,521 347,259 269,869 165,909
</TABLE>
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
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" ), which is a wholly-owned subsidiary of Mellon Bank
Corporation. 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 are valued each business day by an
independent pricing service (the "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 The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
(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 (the "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
August 31, 1999 was approximately $1,400,100, with a related weighted average
annualized interest of 5.23%.
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
August 31, 1999, the fund was charged $638,872 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 August 31, 1999, the fund was charged $69,352 pursuant to the transfer
agency agreement.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The fund compensates Mellon under a custody agreement for providing custodial
services for the fund. During the period ended August 31, 1999, the fund was
charged $38,018 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.
(D) During the period ended August 31, 1999, the fund incurred total brokerage
commissions of $571,669, of which $14,630 was paid to Dreyfus Brokerage
Services, a wholly-owned subsidiary of Mellon Bank Corporation.
NOTE 4--Securities Transactions:
<TABLE>
<CAPTION>
(A) The following summarizes the aggregate amount of purchases and sales of
investment securities and securities sold short, excluding short-term
securities, financial futures and forward currency exchange contracts during the
period ended August 31, 1999:
PURCHASES ($) SALES ($)
--------------------------------------------------------
<S> <C> <C>
Long transactions. . . . . . . . . . . . . . . . . . . 440,761,077 630,152,932
Short sale transactions. . . . . . . . . . . . . . . . 129,282 128,238
TOTAL 440,890,359 630,281,170
</TABLE>
The fund is engaged in short-selling which obligates the fund to replace the
security borrowed by purchasing the security at current market value. The fund
would incur a loss if the price of the security increases between the date of
the short sale and date on which the fund replaces the borrowed security. The
fund would realize a gain if the price of the security declines between those
dates. Until the fund replaces the borrowed security, the fund will maintain
daily, a segregated account with a broker and custodian, of permissable liquid
assets sufficient to cover its short position. At August 31, 1999, there were no
securities sold short outstanding.
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. At August 31, 1999, there were no open forward currency exchange
contracts outstanding.
The fund may invest in financial futures contracts in order to gain exposure to
or protect against changes in the market. The fund is exposed to market risk as
a result of changes in the value of the underlying financial instruments.
Investments in financial futures require the fund to "mark to market" on a daily
basis, which reflects the change in the market value of the contracts at the
close of each day's trading. Typically, variation margin payments are received
or made to reflect daily unrealized gains or losses. When the contracts are
closed, the fund recognizes a realized gain or loss. These investments require
initial margin deposits with a custodian, which consist of cash or cash
equivalents, up to approximately 10% of the contract amount. The amount of these
deposits is determined by the exchange or Board of Trade on which the contract
is traded and is subject to change. Contracts open at August 31, 1999 are set
forth in the Statement of Financial Futures.
(B) At August 31, 1999, accumulated net unrealized appreciation on investments
and financial futures was $16,226,520, consisting of $21,085,639 gross
unrealized appreciation and $4,859,119 gross unrealized depreciation.
At August 31, 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).
The Fund
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Dreyfus Balanced Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Dreyfus
Balanced Fund, Inc., including the statements of investments and financial
futures, as of August 31, 1999, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund' s management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of August 31, 1999 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Balanced Fund, Inc. at August 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the indicated
years, in conformity with generally accepted accounting principles.
New York, New York
October 6, 1999
IMPORTANT TAX INFORMATION (Unaudited)
For Federal tax purposes the fund hereby designates $1.079 per share as a
long-term capital gain distribution of the $1.199 per share paid on December 16,
1998.
The fund also designates 28.91% of the ordinary dividends paid during the fiscal
year ended August 31, 1999 as qualifying for the corporate dividends received
deduction. Shareholders will receive notification in January 2000 of the
percentage applicable to the preparation of their 1999 income tax returns.
The Fund
For More Information
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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 1999 Dreyfus Service Corporation 222AR998
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS BALANCED FUND, INC. WITH THE STANDARD &
POOR'S 500 COMPOSITE STOCK PRICE INDEX, THE
LEHMAN BROTHERS AGGREGATE BOND INDEX AND A CUSTOMIZED
BLENDED INDEX
EXHIBIT A:
STANDARD
& POOR'S 500 LEHMAN
COMPOSITE BROTHERS
STOCK AGGREGATE DREYFUS CUSTOMIZED
PERIOD PRICE BOND BALANCED BLENDED
INDEX * INDEX ** FUND INDEX ***
9/30/92 10,000 10,000 10,000 10,000
8/31/93 11,384 10,967 10,888 11,107
8/31/94 12,006 10,802 11,730 11,385
8/31/95 14,577 12,023 13,961 13,184
8/31/96 17,306 12,516 14,686 14,705
8/31/97 24,336 13,768 18,808 18,358
8/31/98 26,313 15,223 18,245 19,978
8/31/99 36,787 15,344 21,779 24,114
* Source: Lipper Analytical Services, Inc.
** Source: Lehman Brothers
*** Source: Lipper Analytical Services, Inc., Lehman Brothers and Merrill
Lynch, Pierce, Fenner and Smith Inc.
October 29, 1999
Office of Records
Securities an Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Dreyfus Balanced Fund, Inc.
File No. 811-7068
Gentlemen:
Transmitted for filing is one (1) copy of the Annual Report to Shareholders
for the above-referenced Fund for the period ended August 31, 1999, filed in
compliance with the provisions of Section 30 of the Investment Company Act of
1940.
Very truly yours,
Paraskevou Charalambous
PC\
Enclosure
