Dreyfus Balanced Fund, Inc.
ANNUAL REPORT August 31, 2000
(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
Contents
THE FUND
--------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
8 Statement of Investments
16 Statement of Financial Futures
17 Statement of Assets and Liabilities
18 Statement of Operations
19 Statement of Changes in Net Assets
20 Financial Highlights
21 Notes to Financial Statements
27 Report of Independent Auditors
28 Important Tax Information
FOR MORE INFORMATION
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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, 1999 through August 31, 2000.
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 D. Ramos, CFA.
Although large-cap U.S. stocks generally provided attractive returns over the
past year, the reporting period was marked by high levels of volatility and
dramatic shifts in investor sentiment. Between September 1999 and March 2000,
the large-cap market was led by fast-growing technology stocks that, many
investors believed, would benefit most from the "new economy." Subsequently,
however, technology and other growth-oriented stocks corrected sharply over
concerns about rising interest rates and extremely high valuations. As a result,
during the second half of the reporting period various investment styles and
market sectors moved in and out of favor among investors. Accordingly, investors
with broadly diversified stock portfolios generally tended to do better during
the second half of the reporting period than "momentum" investors who sought to
follow market trends.
In the fixed-income markets, higher interest rates generally led to an erosion
of most bond prices, especially among higher yielding securities such as
corporate bonds. U.S. Treasury securities represented a notable exception.
Prices of these direct obligations of the federal government rose primarily
because of reduced supply amid robust demand from domestic and foreign
investors.
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 15, 2000
DISCUSSION OF FUND PERFORMANCE
Douglas D. Ramos, CFA, Portfolio Manager
How did Dreyfus Balanced Fund, Inc. perform relative to its benchmark?
For the 12-month period ended August 31, 2000, Dreyfus Balanced Fund produced a
total return of 12.62% .(1) This compares with the performance of the fund's
Customized Blended Index, which produced a total return of 12.81%. The Standard
& Poor's 500 Composite Stock Price Index ("S&P 500 Index"), which comprised 60%
of our blended index, provided a total return of 16.31% for the 12-month period
ended August 31, 2000.(2) The Lehman Brothers Aggregate Bond Index, which
comprised 40% of our blended index, produced a total return of 7.56%.(3)
We attribute the fund' s performance primarily to a highly volatile market
environment in which our successful equity investment decisions were partly
offset by disappointments. Our fixed-income investments performed approximately
in line with our fixed-income benchmark, contributing to the fund's positive
return.
What is the fund's investment approach?
On the equity side, the portfolio employs a value-oriented, bottom-up approach
and invests primarily in mid- and large-sized companies that we believe have
above-average growth potential and are attractively valued relative to the
market in general. While our investment universe generally consists of companies
with market capitalizations of $1 billion or greater, we have tended to
concentrate somewhat more on 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- and asset-backed securities,
U.S. Treasuries and U.S. Government agency bonds, as well as commercial
mortgage-backed securities. The fixed-income portion of the fund also includes
cash and cash equivalents.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
The fund' s asset allocation parameters provide the portfolio management team
with the flexibility to respond to changing investment environments and to take
advantage of a wide range of investment opportunities. The fund's equities
allocation may range from 40% to 75%, and its fixed-income allocation may range
from 25% to 60%. Typically, the fund's benchmark allocation will approximate 60%
in equity investments and 40% in fixed-income investments. Of course, the fund's
portfolio allocation could vary depending upon market and other conditions.
Under adverse market conditions, the fund may invest up to 100% of its assets in
cash and cash equivalents, including money market instruments.
What other factors influenced the fund's performance?
From the beginning of the period until early March 2000, the stock market
generally benefited from the U.S. economy's rapid growth. The stock market's
advance was led by the technology industry group, which enjoyed impressive gains
in late 1999 and early 2000. As valuations of several of the fund's technology
stocks climbed beyond levels we considered reasonable, as gauged by our
investment discipline, we reduced our holdings in this area. Starting in
mid-March, rising interest rates and extreme stock valuations began to take a
toll on the volatile technology sector, which quickly gave back a substantial
portion of its earlier gains. By that time, we had sold many of the fund's most
highly valued technology holdings, and our remaining technology stocks performed
relatively well in a difficult environment. For the period as a whole,
technology stocks predominantly accounted for the fund's total return from
equities, despite the declines in late March and April 2000.
As stock market leadership shifted to other industry groups, some of the fund's
holdings benefited while others lagged. Our energy holdings responded well to
rising oil prices and deregulation. On the other hand, our consumer cyclical
holdings suffered as interest rates continued to rise and retail sales began to
slow. Our investments in communications services companies also lost ground in
the face of rising costs and
competition. These disappointing market sectors prevented us from significantly
outperforming the stock portion of our blended benchmark during the reporting
period.
Within the fund' s bond portfolio, rising interest rates hurt our fixed-income
investments during the first half of the reporting period. However, when the
economy began to show signs of slowing later in the reporting period, bond
prices began to rise. As a result, our fixed-income investments provided a
positive rate of return overall that was approximately in line with the
fixed-income component of the blended index.
What is the fund's current strategy?
As of August 31, 2000, the fund held fewer technology stocks than our blended
index. Nevertheless, technology remained the fund's single largest investment
area. We have also built a relatively large position in financial stocks, where
we have found what we believe are several attractively priced, high quality
companies that may benefit from an environment of stable or lower interest
rates.
On the fixed-income side, we allocated a slightly smaller percentage of assets
to mortgage-backed securities than our blended index, and a slightly higher
percentage to U.S. Treasury bonds to reflect our view of the market. However,
our allocations among most sectors of the bond market are approximately
equivalent to those of our benchmark.
September 15, 2000
(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 INC. -- REFLECTS REINVESTMENT OF 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.
(3) SOURCE: LIPPER INC. -- THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS A WIDELY
ACCEPTED, UNMANAGED TOTAL RETURN 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.
The Fund
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, the Current Customized Blended Index and the
Previous Customized Blended Index
((+)) SOURCE: LIPPER INC.
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 STANDARD & POOR'S 500 COMPOSITE STOCK PRICE
INDEX, (2) THE LEHMAN BROTHERS AGGREGATE BOND INDEX, (3) THE CUSTOMIZED BLENDED
INDEX (PREVIOUS), AND (4) THE CUSTOMIZED BLENDED INDEX (CURRENT), WHICH ARE
DESCRIBED BELOW. THE CUSTOMIZED BLENDED INDEX IS CALCULATED ON A YEAR-TO-YEAR
BASIS. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED.
EFFECTIVE SEPTEMBER 15,1999, THE BOARD OF DIRECTORS APPROVED A CHANGE TO THE
CUSTOMIZED BLENDED INDEX SUCH THAT IT IS NOW COMPOSED OF 60% STANDARD & POOR'S
500 COMPOSITE STOCK PRICE INDEX AND 40% LEHMAN BROTHERS AGGREGATE BOND INDEX. IT
IS BELIEVED THAT THIS ALLOCATION BETTER REFLECTS THE FUND'S CURRENT ALLOCATION
PERCENTAGE RANGES NOTED BELOW. THE EQUITY SECURITIES ALLOCATION, WHICH WAS
PREVIOUSLY 45% TO 65%, IS NOW 40% TO 75%. THE FIXED-INCOME ALLOCATION, WHICH WAS
PREVIOUSLY 25% TO 55% IS NOW 25% TO 60%. 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.
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 INDICES DO NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER
EXPENSES. THE CUSTOMIZED BLENDED INDEX 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% WAS USED AS THE FUND'S
SECONDARY HYBRID INDEX LAST YEAR, AND IS BEING REPLACED BY THE NEW HYBRID INDEX
COMPOSITION OF 60% STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX AND 40%
LEHMAN BROTHERS AGGREGATE BOND INDEX. 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
<TABLE>
<CAPTION>
Average Annual Total Returns AS OF 8/31/00
Inception From
Date 1 Year 5 Years Inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FUND 9/30/92 12.62% 11.93% 12.00%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The Fund
STATEMENT OF INVESTMENTS
August 31, 2000
STATEMENT OF INVESTMENTS
COMMON STOCKS--55.2% Shares Value ($)
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CAPITAL GOODS--.1%
Lexmark International Group, Cl. A 3,000 (a) 203,438
COMMERCIAL SERVICES--.7%
Lamar Advertising 4,100 (a) 190,394
McGraw-Hill Cos. 18,000 1,114,875
1,305,269
CONSUMER NON-DURABLES--2.6%
Anheuser-Busch Cos. 7,100 559,568
Coca-Cola 10,000 526,250
Intimate Brands 20,000 322,500
Kimberly-Clark 12,400 725,400
PepsiCo 26,800 1,142,350
Philip Morris Cos. 19,000 562,875
Procter & Gamble 11,100 686,119
UST 27,000 583,875
5,108,937
CONSUMER SERVICES--3.7%
Adelphia Communications, Cl. A 12,200 (a) 408,700
Cendant 105,500 (a) 1,391,281
Clear Channel Communications 18,520 (a) 1,340,385
Disney (Walt) 18,300 712,556
Infinity Broadcasting, Cl. A 10,000 (a) 378,750
Time Warner 13,800 1,179,900
USA Networks 27,000 (a) 649,688
Viacom, Cl. B 18,445 (a) 1,241,579
7,302,839
ELECTRONIC TECHNOLOGY--11.8%
American Tower, Cl. A 17,100 620,944
Amkor Technology 19,000 (a) 648,375
Apple Computer 15,800 (a) 962,813
Applied Materials 8,000 (a) 690,500
Cabletron Systems 24,300 (a) 909,731
Compaq Computer 39,100 1,331,843
Ericsson (LM) Telephone, Cl. B, ADR 12,000 246,000
Gateway 9,000 (a) 612,900
General Dynamics 7,000 440,563
Hewlett-Packard 7,800 941,850
COMMON STOCKS (CONTINUED) Shares Value ($)
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ELECTRONIC TECHNOLOGY (CONTINUED)
Intel 63,200 4,732,100
International Business Machines 19,000 2,508,000
KLA-Tencor 10,000 (a) 656,250
LSI Logic 13,000 (a) 467,188
Lucent Technologies 19,000 (a) 794,438
Micron Technology 11,000 899,250
Motorola 24,800 894,350
National Semiconductor 16,400 (a) 729,800
Nortel Networks 19,000 1,549,688
Novellus Systems 7,000 (a) 430,938
Sun Microsystems 5,000 (a) 634,688
Teradyne 10,000 (a) 648,125
Texas Instruments 8,000 535,500
United Technologies 8,400 524,475
23,410,309
ENERGY MINERALS--3.2%
Anadarko Petroleum 22,000 1,446,940
Conoco, Cl. A 15,000 377,813
Exxon Mobil 29,288 2,390,633
Royal Dutch Petroleum, ADR 27,700 1,694,893
Texaco 10,500 540,750
6,451,029
FINANCE--10.4%
American Express 15,900 940,088
American General 8,100 589,781
American International Group 24,340 2,169,297
Associates First Capital, Cl. A 23,900 672,188
Bank of America 25,300 1,355,131
Bank of New York 16,000 839,000
Chase Manhattan 10,750 600,656
Citigroup 63,600 3,712,650
Federal Home Loan Mortgage 28,000 1,179,500
Federal National Mortgage Association 26,600 1,429,750
FleetBoston Financial 23,600 1,007,425
Goldman Sachs Group 3,000 384,187
Hartford Financial Services Group 6,000 399,750
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
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FINANCE (CONTINUED)
Household International 11,900 571,200
John Hancock Financial Services 22,600 (a) 570,650
MBNA 10,000 353,125
Morgan (J.P.) 5,100 852,656
Morgan Stanley Dean Witter & Co. 16,600 1,785,537
Wells Fargo 29,000 1,252,438
20,665,009
HEALTH SERVICES--1.9%
HCA-Healthcare 74,800 2,580,600
Wellpoint Health Networks 12,800 (a) 1,104,800
3,685,400
HEALTH TECHNOLOGY--4.2%
ALZA 6,000 (a) 453,750
American Home Products 12,500 677,343
Baxter International 8,000 666,000
Bristol-Myers Squibb 20,900 1,107,700
Johnson & Johnson 7,100 652,756
Merck & Co. 28,400 1,984,450
Pfizer 34,000 1,470,500
Pharmacia 10,683 625,623
Schering-Plough 18,000 722,250
8,360,372
INDUSTRIAL SERVICES--.9%
Schlumberger 21,900 1,868,344
NON-ENERGY MINERALS--.3%
Alcoa 18,000 598,500
PROCESS INDUSTRIES--1.0%
Dow Chemical 20,000 523,750
duPont (E.I.) deNemours 7,000 314,125
International Paper 16,000 510,000
Rohm & Haas 19,000 549,812
1,897,687
PRODUCER MANUFACTURING--4.3%
Emerson Electric 8,000 529,500
General Electric 82,000 4,812,375
COMMON STOCKS (CONTINUED) Shares Value ($)
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PRODUCER MANUFACTURING (CONTINUED)
Honeywell International 21,800 840,663
Ingersoll-Rand 6,300 287,043
Masco 23,200 452,400
Tyco International 29,700 (a) 1,692,900
8,614,881
RETAIL TRADE--1.3%
Costco Wholesale 5,200 (a) 179,075
Gap 12,000 269,250
Lowes 12,600 564,638
May Department Stores 12,600 289,012
TJX Cos. 33,400 628,338
Target 27,600 641,700
2,572,013
TECHNOLOGY SERVICES--3.4%
Charter Communications, Cl. A 54,000 (a) 826,875
Computer Associates International 24,100 (a) 765,175
Computer Sciences 18,600 (a) 1,470,562
Electronic Data Systems 21,500 1,070,968
First Data 12,000 572,250
Network Associates 22,400 (a) 579,600
Oracle 16,600 (a) 1,509,563
6,794,993
UTILITIES--5.4%
ALLTEL 4,000 202,250
AT&T 15,400 485,100
AT&T--Liberty Media Group, Cl. A 24,000 (a) 513,000
BellSouth 15,000 559,687
Coastal 27,200 1,873,400
Duke Energy 15,000 1,122,187
Dynegy, Cl. A 14,000 630,000
El Paso Energy 4,600 267,950
Enron 7,000 594,125
Niagara Mohawk Power 29,900 (a) 384,963
SBC Communications 32,400 1,352,700
TXU 10,000 349,375
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED) Shares Value ($)
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UTILITIES (CONTINUED)
Telefonos de Mexico, Cl. L, ADS 6,000 326,625
Verizon Communications 28,096 1,225,688
WorldCom 25,450 (a) 928,925
10,815,975
TOTAL COMMON STOCKS
(cost $84,901,646) 109,654,995
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Principal
BONDS AND NOTES--52.4% Amount ($) Value ($)
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AIRLINES--1.1%
US Airways, Pass-Through Ctfs.,
8.02%, 2/5/2019 2,100,000 2,136,383
AUTO TRUCKS & PARTS--.2%
American Axle & Manufacturing, Notes,
9.75%, 3/1/2009 484,000 480,370
BANKING--2.1%
Bank One Capital III, Trust Originated Preferred Securities
8.75%, 9/1/2030 1,420,000 1,426,735
Capital One Bank, Sr. Notes,
8.25%, 6/15/2005 1,137,000 1,142,883
HSBC Capital Funding, Notes,
10.176%, 12/29/2049 1,482,000 (b) 1,640,374
4,209,992
CABLE-SATELLITE--.6%
British Sky Broadcasting, Notes,
8.20%, 7/15/2009 1,343,000 (b) 1,254,365
CABLE TELEVISION--.7%
Viacom, Sr. Notes,
7.70%, 7/30/2010 1,418,000 1,443,755
ELECTRIC POWER--.7%
Consolidated Edison, Deb.,
Ser. B, 7.50%, 9/1/2010 1,417,000 1,408,990
FINANCIAL--.7%
CIT Group, Sr. Notes,
7.625%, 8/16/2005 1,339,000 1,342,738
FINANCIAL SERVICES--.5%
Spear Leeds & Kellogg, Notes,
8.25%, 8/15/2005 1,013,000 (b) 1,018,515
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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INDUSTRIAL--3.0%
Abitibi-Consolidated, Deb.,
8.85%, 8/1/2030 1,738,000 1,773,796
Pemex Finance, Notes,
7.80%, 2/15/2013 3,000,000 (b) 3,110,625
Yosemite Securities Trust I, Deb.,
8.25%, 11/15/2004 1,000,000 (b) 1,010,223
5,894,644
INSURANCE--1.2%
American General, Notes,
7.50%, 8/11/2010 1,340,000 1,338,141
MONY Group, Sr. Notes,
8.35%, 3/15/2010 1,100,000 1,121,533
2,459,674
RETAIL--APPAREL--.5%
Saks, Notes:
7.50%, 12/1/2010 544,000 378,760
7.375%, 2/15/2019 1,042,000 633,463
1,012,223
RETAIL TRADE/BUILDING PRODUCTS--.4%
Lowe's Companies, Notes,
8.25%, 6/1/2010 702,000 733,238
TELECOMMUNICATIONS--2.6%
Cable & Wireless Optus Finance Property, Notes,
8%, 6/22/2010 2,165,000 2,178,269
Vodafone Group, Notes,
6.35%, 6/1/2005 3,000,000 2,874,918
5,053,187
TRANSPORTATION--1.4%
America West Airlines, Pass-Through Trust Ctfs.,
Ser. 1997,1C, 7.53%, 1/2/2004 2,790,697 2,726,190
UTILITIES--.6%
Duke Energy Field Services, Bonds,
8.125%, 8/16/2030 1,219,000 1,222,444
OTHER--3.1%
CS First Boston Mortgage Securities,
Ser. 1999-C1, A2, 7.29%, 9/15/2009 1,400,000 1,399,791
GMAC Commercial Mortgage Securities,
Ser. 2000-C2, A1, 7.273%, 4/16/2009 1,171,000 1,171,000
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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OTHER (CONTINUED)
NSCOR, Residential Mortgage Securities:
Ser. 1997-11, B2, 7%, 8/25/2027 338,924 330,837
Ser. 1998-2, B3, 6.50%, 2/25/2028 730,762 634,437
New York City Tax Lien,
Collateralized Bonds,
Ser. 1997-1D, 6.90%, 5/25/2005 384,533 (b) 379,846
Residential Funding Mortgage Securities 1,
Pass-Through Ctfs., Ser. 1996-s22,
Cl. M3, 8%, 10/25/2026 2,321,265 2,255,794
6,171,705
U.S. GOVERNMENT & AGENCIES--33.0%
Federal National Mortgage Association, Notes:
7.25%, 1/15/2010 15,276,000 15,726,092
8%, 9/15/2029 5,000,000 5,048,400
7.50%, 9/15/2030 4,500,000 4,476,060
Federal Home Loan Mortgage Corp.,
Real Estate Mortgage Investment Conduit,
Ser. 1497, Cl. FF, 6.50%, 8/15/2021 1,650,000 1,591,755
Government National Mortgage Association II:
Adjustable Rate Mortgage:
7.50%, 9/20/2030 4,500,000 4,501,395
8%, 9/20/2030 5,000,000 5,046,850
U.S. Treasury Bonds:
5.25%, 2/15/2029 548,000 505,185
6.125%, 8/15/2029 813,000 851,869
U.S. Treasury Notes:
5%, 4/30/2001 750,000 743,438
5.75%, 6/30/2001 1,000,000 995,310
5.50%, 8/31/2001 2,000,000 1,984,360
5.875%, 11/30/2001 2,500,000 2,488,275
7.25%, 8/15/2004 1,000,000 1,041,560
5.875%, 11/15/2004 8,845,000 (c) 8,795,202
6.75%, 5/15/2005 3,123,000 3,220,593
6.50%, 2/15/2010 6,865,000 7,167,471
U.S. Treasury Inflation Protection Securities,
3.635%, 7/15/2002 1,252,000 1,341,678
65,525,493
TOTAL BONDS AND NOTES
(cost $103,223,905) 104,093,906
Principal
SHORT-TERM INVESTMENTS--.3% Amount ($) Value ($)
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U.S. TREASURY BILLS:
6.22%, 9/21/2000 58,000 57,783
5.96%, 9/28/2000 500,000 (c) 497,805
TOTAL SHORT-TERM INVESTMENTS
(cost $555,565) 555,588
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TOTAL INVESTMENTS (cost $188,681,116) 107.9% 214,304,489
LIABILITIES, LESS CASH AND RECEIVABLES (7.9%) (15,726,468)
NET ASSETS 100.0% 198,578,021
(A) NON-INCOME PRODUCING.
(B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE SOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION,
NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT AUGUST 31, 2000, THESE SECURITIES
AMOUNTED TO $8,413,948 OR APPROXIMATELY 4.2% OF NET ASSETS.
(C) PARTIALLY HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR
OPEN FINANCIAL FUTURES POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF FINANCIAL FUTURES
August 31, 2000
Unrealized
Market Value Appreciation
Covered (Depreciation)
Contracts by Contracts ($) Expiration at 8/31/2000 ($)
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL FUTURES LONG:
U.S. Treasury 5 year Notes 376 37,623,500 December 2000 102,148
U.S. Treasury 2 year Notes 69 13,764,422 December 2000 28,031
FINANCIAL FUTURES SHORT:
U.S. Treasury 10 year Notes 171 17,113,359 December 2000 (89,507)
U.S. Treasury 20 year Bonds 69 6,930,188 December 2000 (59,625)
(18,953)
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 188,681,116 214,304,489
Cash 753,863
Receivable for investment securities sold 2,784,947
Interest and dividends receivable 1,201,456
Receivable for shares of Common Stock subscribed 63,761
Prepaid expenses 16,143
219,124,659
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 119,365
Payable for investment securities purchased 20,285,091
Payable for futures variation margin--Note 4(a) 35,142
Payable for shares of Common Stock redeemed 26,637
Accrued expenses 80,403
20,546,638
--------------------------------------------------------------------------------
NET ASSETS ($) 198,578,021
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 164,893,398
Accumulated undistributed investment income--net 1,503,650
Accumulated net realized gain (loss) on investments 6,576,553
Accumulated net unrealized appreciation (depreciation)
on investments [including ($18,953) net unrealized
(depreciation) on financial futures]--Note 4(b) 25,604,420
--------------------------------------------------------------------------------
NET ASSETS ($) 198,578,021
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(300 million shares of $.001 par value Common Stock authorized) 12,094,606
NET ASSET VALUE, offering and redemption price per share ($) 16.42
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Year Ended August 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Interest 5,418,748
Cash dividends (net of $10,151 foreign taxes withheld at source) 1,244,821
TOTAL INCOME 6,663,569
EXPENSES:
Management fee--Note 3(a) 1,142,087
Shareholder servicing costs--Note 3(b) 538,168
Professional fees 42,099
Prospectus and shareholders' reports 30,116
Custodian fees--Note 3(b) 27,265
Directors' fees and expenses--Note 3(c) 19,512
Registration fees 19,320
Loan commitment fees--Note 2 4,646
Interest expense--Note 2 4,001
Miscellaneous 8,767
TOTAL EXPENSES 1,835,981
INVESTMENT INCOME--NET 4,827,588
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments:
Long transactions 8,595,396
Short sale transactions (80,034)
Net realized gain (loss) on financial futures (81,111)
NET REALIZED GAIN (LOSS) 8,434,251
Net unrealized appreciation (depreciation) on investments
[including ($78,984) net unrealized (depreciation)
on financial futures] 9,377,900
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 17,812,151
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 22,639,739
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended August 31,
---------------------------------
2000 1999
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 4,827,588 7,439,985
Net realized gain (loss) on investments 8,434,251 15,593,818
Net unrealized appreciation (depreciation)
on investments 9,377,900 35,589,943
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 22,639,739 58,623,746
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (4,922,706) (8,501,407)
Net realized gain on investments (17,907,317) (20,122,668)
TOTAL DIVIDENDS (22,830,023) (28,624,075)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 54,508,634 131,420,540
Dividends reinvested 22,248,309 27,427,390
Cost of shares redeemed (66,203,885) (360,153,223)
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL STOCK TRANSACTIONS 10,553,058 (201,305,293)
TOTAL INCREASE (DECREASE) IN NET ASSETS 10,362,774 (171,305,622)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 188,215,247 359,520,869
END OF PERIOD 198,578,021 188,215,247
Undistributed investment income--net 1,503,650 1,598,768
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 3,393,326 8,145,401
Shares issued for dividends reinvested 1,423,419 1,733,807
Shares redeemed (4,119,745) (22,149,613)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 697,000 (12,270,405)
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
Year Ended August 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 16.51 15.19 18.15 15.13 15.61
Investment Operations:
Investment income--net .41(a) .42(a) .47 .45 .51
Net realized and unrealized
gain (loss) on investments 1.54 2.43 (.88) 3.65 .29
Total from Investment Operations 1.95 2.85 (.41) 4.10 .80
Distributions:
Dividends from investment income--net (.43) (.45) (.46) (.44) (.53)
Dividends from net realized
gain on investments (1.61) (1.08) (2.09) (.64) (.75)
Total Distributions (2.04) (1.53) (2.55) (1.08) (1.28)
Net asset value, end of period 16.42 16.51 15.19 18.15 15.13
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 12.62 19.37 (2.99) 28.06 5.19
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .96 .94 .91 .96 1.00
Ratio of interest expense and loan
commitment fees to average net assets .00(b) .03 -- -- --
Ratio of net investment income
to average net assets 2.54 2.62 2.76 2.71 3.37
Portfolio Turnover Rate 160.38 162.40 177.85 235.56 186.23
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 198,578 188,215 359,521 347,259 269,869
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(B) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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 Financial
Corporation. Effective March 22, 2000, Dreyfus Service Corporation ("DSC"), a
wholly-owned subsidiary of the Manager, became the distributor of the fund's
shares, which are sold to the public without a sales charge. Prior to March 22,
2000, Premier Mutual Fund Services, Inc. was the distributor.
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 The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 changes 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 $500 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, 2000 was approximately $66,600 with a related weighted average
annualized interest rate of 6.00%.
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.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(b) Under the Shareholder Services Plan, the fund reimburses DSC 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, 2000, the fund was charged $351,596 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, 2000, the fund was charged $30,375 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 August 31, 2000, the fund was
charged $27,265 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Effective January 1, 2000,
each Board member who is not an "affiliated person" as defined in the Act
receives an annual fee of $40,000 and an attendance fee of $6,000 for each
meeting attended and $500 for telephone meetings. These fees are allocated among
the funds in the Fund Group. The chairman of the Board receives an additional
25% of such compensation. Prior to January 1, 2000, each Board member who was
not an "affiliated person" as defined in the Act received from the fund an
annual fee of $4,500 and an attendance fee of $500 per meeting. The Chairman of
the Board received an additional 25% of such compensation. Subject to the fund's
Emeritus Program Guidelines, Emeritus Board Members, if any, receive 50% of the
fund's annual retainer fee and per meeting fee paid at the time the Board member
achieves emeritus status.
(d) During the period ended August 31, 2000, the fund incurred total brokerage
commissions of $174,964, of which $7,633 was paid to Dreyfus Brokerage Services,
a wholly-owned subsidiary of Mellon Financial Corporation.
NOTE 4--Securities Transactions:
(a) The following summarizes the aggregate amount of purchases and sales of
investment securities and securities sold short, excluding short-term securities
and financial futures, during the period ended August 31, 2000:
Purchases ($) Sales ($)
--------------------------------------------------------------------------------
Long transactions 307,358,227 304,000,587
Short sale transactions 455,636 375,602
TOTAL 307,813,863 304,376,189
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 the 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 or custodian of permissable
liquid assets sufficient to cover its short position. At August 31, 2000, there
were no securities sold short 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 The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 2000 are set forth in the
Statement of Financial Futures.
(b) At August 31, 2000, accumulated net unrealized appreciation on investments
and financial futures was $25,604,420, consisting of $30,345,566 gross
unrealized appreciation and $4,741,146 gross unrealized depreciation.
At August 31, 2000, 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).
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, 2000, 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 auditing standards generally accepted
in the United States. 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,
2000 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, 2000, 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 accounting principles generally accepted in the United
States.
New York, New York
October 11, 2000
The Fund
IMPORTANT TAX INFORMATION (Unaudited)
For Federal tax purposes the fund hereby designates $1.5190 per share as a
long-term capital gain distribution of the $1.7260 per share paid on December 6,
1999.
The fund also designates 18.03% of the ordinary dividends paid during the fiscal
year ended August 31, 2000 as qualifying for the corporate dividends received
deduction. Shareholders will receive notification in January 2001 of the
percentage applicable to the preparation of their 2000 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
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
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) 2000 Dreyfus Service Corporation 222AR008
