DREYFUS ASSET ALLOCATION FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
One of my most enjoyable duties as portfolio manager of the Dreyfus Asset
Allocation Fund, Inc. is writing this shareholder letter. This report covers
the annual period ended April 30, 1997 during which the Fund's total return
was 16.49%.* Due to the structure of the Fund, a balanced mix mainly of
stocks and bonds, this return is not comparable to a market index composed
entirely of either common stocks or bonds. The Standard & Poor's 500
Composite Stock Price Index had a total return of 25.12% during this period,
while the Lehman Brothers Aggregate Bond Index returned 7.08%.** A more
accurate measure of the performance of the Fund is against a customized
blended Index prepared by the Fund which is composed 55% of the Standard &
Poor's 500 Composite Stock Price Index, 35% of the Lehman Brothers Aggregate
Bond Index, and 10% of the Bank Rate Monitor Index. This benchmark index
returned 18.04% during the period,*** not far above the performance of the
Fund.
During the first three months of the Fund's past fiscal year, the
structure of the Fund was significantly different from what it now is. For
example, at that time the maximum permitted allocation to stocks was only
70%, the Fund could only own stocks included in the Standard & Poor's 500
Composite Stock Price Index, and the only bonds the Fund could own were U.S.
Treasury Bonds. By a vote of your Board of Directors on August 1, 1996, asset
allocation guidelines and the restrictions on stock and bond securities were
broadened. Since these changes were made, performance has improved
significantly.
ECONOMIC REVIEW
The Federal Reserve Board (the "Fed") decision in March to tighten credit
has been vindicated by the reported 5.6% rise in first quarter real Gross
Domestic Product and by the drop to 4.9% in April's unemployment rate. The
economic debate is now splintered into 1) those who believe that softer
incoming economic data for the second quarter can keep Fed policy on hold,
and 2) those who believe the economy is fundamentally too strong, warranting
higher rates irrespective of short-term economic fluctuations. Views on the
risk of inflation clearly distinguish these camps. To date, a strong dollar
has helped mute price inflation, preventing a follow-through from rising
wages. Market interest rates are likewise treading water until the policy
outlook becomes clearer. We believe that some tightening is likely in coming
months and this should temper overall growth to sustain a long business
cycle.
First quarter real GDP grew at an annualized rate of 5.6% for the quarter
and by 4.0% since the first quarter of 1996, both growth rates unseen since
1987/88. Virtually every major economic sector contributed positively to
growth. In the early evidence for the second quarter, rising new orders
portend continued strength in exports and capital spending. By contrast,
retail spending weakened in April and the housing sector slowed. However,
real disposable income grew 3.8% in the last year, a pace which, if
sustained, should support the upward cycle in consumer spending, while
mortgage rates have not yet risen substantially.
Alongside the recent evidence of slowing consumer demand is the report of
the drop in unemployment in April. With this, the labor market is becoming
extremely tight. This is raising fears of future inflation even though actual
inflation remains modest and despite signs of a slower second quarter
economy. Hence, bond yields remain near their recent highs, largely ignoring
the bullish news of a Washington agreement to balance the Federal budget.
Short-term rates likewise contain built-in expectations for another Fed rate
hike in coming weeks.
If inflation should stay subdued, then the larger risk from the
combination of slower economic growth and a tightening labor market is to
corporate profits. Through the first quarter, however, profits continued to
surprise on the upside, and we expect overall profits to post modest gains in
1997.
The economy is now embarked on the seventh year for this business cycle.
Economic growth is proving stronger than seen since the late 1980s while
inflation is still subdued. More Fed tightening would indicate a willingness
to err on the side of caution and would thus help sustain the expansion.
MARKET OVERVIEW
The six-month fiscal period ended April 30, 1997 was one of the most
volatile in recent stock market history. While the underlying U.S. economy
continued to grow with little inflation, investor concerns over the outlook
for interest rates and for corporate profits caused major shifts in market
sentiment, and hence in prices.
Early in the half-year period, the dominant market trend was strong,
despite nervousness about the solidity of economic growth and the possible
reactions of the Fed. The trend picked up steam during the winter, with the
Dow Jones Industrial Average breaking the 7000 mark in mid-February, and then
hitting a new high of 7085.16 in mid-March. However, when the Fed, in a
widely anticipated move, increased its overnight lending rate by one quarter
of a percentage point on March 25, seeking to cool off the economy and the
"irrational exuberance" in the equity markets (as Fed Chairman Alan Greenspan
termed it), the markets promptly obliged. Between mid-March and mid-April the
DJIA dropped 9.8%.
By then, however, a stream of strong quarterly profit reports began
issuing from major corporations, and the latest Government numbers on
inflation appeared reassuring. Moreover, underlying economic expansion
continued, but at a pace that appeared sustainable. The market's reaction was
to resume the upward trend of earlier in the year, breaking the 7000 level
once again on April 30.
Clearly one of the engines currently driving the market is the profit
outlook. According to two companies that monitor profit reports, I.B.E.S. and
First Call, overall first-quarter corporate profits ran about 3.7% above
forecasts. This reflects results from most of the companies in the Standard &
Poor's 500 Index. At the same time, increases in wages and compensation
during that same period were modest.
Big, heavily capitalized and well-established companies were the chief
beneficiaries. For the six months under review, the blue chip DJIA gained
17.42%, the Standard & Poor's 500 rose 14.71%, the Nasdaq was up only 3.23%
and the Russell 2000 Index of small-cap stocks only 1.61%. The mid- and
small-cap stocks enjoyed a revival along with the general market in late
April and the first few days of May. (Of course, past performance is no
guarantee of future results.)
The latest trend could, of course, be affected by a Fed decision to raise
interest rates once again. However, there is no denying the resilience
displayed by the equity markets, especially the larger issues, in the closing
days of the Fund's latest fiscal period.
TEAM EFFORT
Managing your investment assets is certainly a team effort. In our last
shareholder letter I described our research effort and the significant part
our team of analysts plays in selecting investments for your Fund. The effort
employed to manage your assets is even broader, and this letter will review
some of the other hard work involved on your behalf.
Your Dreyfus Asset Allocation Fund is managed in a disciplined manner. It
is a mutual fund that allocates investments among the three major asset
classes: stocks, bonds and cash. You should realize, therefore, that by
owning this Fund you will always have both stock market and bond market
exposure. Within the Fund, these exposures are provided in a mix that we
believe is appropriate given the current financial market environment. Based
on our judgment which includes extensive quantitative and qualitative input
from various sources, regular asset allocation changes are made between the
major asset classes.
In selecting both stocks and bonds for investment, your Fund seeks value.
With stocks, all investment managers look for companies that are growing; a
value manager looks for these growing companies, but is price sensitive, and
does not want to pay much for them. Further, your Fund often buys and sells
stocks based on the level of interest rates, in a disciplined process
designed to both protect your assets in a potentially negative stock market
environment, and to allow market participation in a potentially positive
stock market environment.
As your Fund manager, I follow specific, internally created buy and sell
criteria to maintain this disciplined process. An extensive team of research
analysts as well as proprietary computer models are employed in this process.
My experience as portfolio manager of your Fund determines whether to buy or
sell a security, and provides the structure of the portfolio of investments.
With bonds, the overall duration (weighted average time to maturity of
all cash flows or a more exact measure of time to maturity) of the fixed
income portfolio of your Fund is positioned against a benchmark index
designed to represent the overall bond marketplace. When we believe that
interest rates will decline, which results in bond prices going up, we
maintain a duration longer than the benchmark index. When we believe that
interest rates will rise, which results in bond prices going down, we maintain
a duration shorter than the benchmark index. Further, we look for value in
individual bonds by anticipating which bonds will improve in price more than
a U.S. Treasury bond of similar duration.
Trading is another area where we attempt to add value. Dreyfus has
dedicated security traders who focus on implementing the investment decisions
of the portfolio manager. This team of traders works hard to achieve the best
prices possible when the securities in your Fund are bought or sold. In
addition, the traders provide a flow of timely information to the analysts
and portfolio manager. The accounting team at Dreyfus also works hard to make
sure that, among other duties, security trades settle properly, that
available cash is properly calculated, and that the Fund's share price is
calculated accurately on a daily basis.
Managing your assets is a team effort at The Dreyfus Corporation.
PORTFOLIO FOCUS
There are basically three decision levels for the Dreyfus Asset
Allocation Fund: the asset allocation mix, the equity holdings and the fixed
income holdings. Each is addressed below.
ASSET ALLOCATION
The Fund generally maintained an equity allocation close to the top of
the permitted range during the entire period. We believed that the investment
environment for the stock market remained positive, and wanted to maximize
the Fund's participation in this asset class. This strategy in asset
allocation was generally additive to performance results.
Bonds composed most of the remainder of the Fund's assets during the
period, while cash equivalents were kept to a minimum. Cash equivalents
provided a low yield, and we were generally positive toward the bond markets
during this period. This strategy in asset allocation also was generally
positive for performance results.
EQUITY HOLDINGS
Equity investment results during this annual period benefited from
holdings such as Reebok International, Compaq Computer, Micron Technology,
Intel, IBM, Tosco, BankAmerica, NationsBank, Great Western Financial,
McKesson, Ciba Specialty Chemicals, Lone Star Industries, Xerox, Pier 1
Imports, Yellow Corp., Airborne Freight, CNF Transportation, El Paso Natural
Gas, NorAm Energy, and Telebras, the Brazilian telephone company. Relative
performance results were penalized by holdings including Fruit of the Loom,
Storage Technology, Amdahl, Olin, General Signal, and CSX.
FIXED INCOME HOLDINGS
The fixed income portfolio was positioned with a duration either
moderately more or less than the Lehman Brothers Aggregate Bond Index
benchmark during the period. The timing of these moves was generally
beneficial to the Fund's returns.
Also benefiting the Fund was continued de-emphasis of U. S. Treasury
bonds in favor of corporate bonds and mortgages. In particular, a new type of
bond issued primarily by banks and a new form of mortgage related to
commercial property both delivered unusually high returns.
It is both an honor and a pleasure to be managing your investment assets.
Sincerely,
[Timothy M. Ghriskey signature logo]
Timothy M. Ghriskey
Portfolio Manager
May 14, 1997
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
** SOURCE: LIPPER ANALYTICAL SERVICES _Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance. SOURCE: LEHMAN BROTHERS _ The Lehman
Brothers Aggregate Bond Index is a widely accepted index of corporate,
government and government agency debt instruments with an average maturity of
1-10 years.
*** The Customized Blended Index has been prepared by the Fund and is
intended to be a more accurate comparison to its general portfolio
composition than the Standard & Poor's 500 Composite Stock Price Index. We
have combined the performance of unmanaged indices which reflect benchmark
percentages with respect to each asset class in which the Fund invests as
described in its Prospectus: 55% equity securities, 35% fixed-income
securities, and 10% short-term money market instruments. The Customized Blende
d Index combines returns from the Lehman Brothers Aggregate Bond Index, the
Standard & Poor's 500 Composite Stock Price Index and the Bank Rate Monitor
Index of money market returns, and is weighted to the benchmark percentages.
In the past, the fixed-income component of the Customized Blended Index was
represented by the Lehman Brothers Intermediate Treasury Bond Index. In order
to reflect changes in the Fund's permissible investments, the fixed-income
component of the Customized Blended Index is now represented by the Lehman
Brothers Aggregate Bond Index.
SOURCE: LIPPER ANALYTICAL SERVICES, INC. _ The Dow Jones Industrial
Average (DJIA) is a price-weighted average of 30 actively traded blue chip
stocks.
DREYFUS ASSET ALLOCATION FUND, INC. APRIL 30, 1997
[Exhibit A]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS ASSET
ALLOCATION FUND, INC. WITH THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE
INDEX AND A CUSTOMIZED BLENDED INDEX
Dollars
$19,564
Standard & Poor's 500
Composite Stock
Price Index*
$16,184
Customized Blended
Index**
$15,542
Dreyfus Asset
Allocation Fund
* Source: Lipper Analytical Services, Inc.
** Source: Lipper Analytical Services, Inc., Lehman Brothers and Bank Rate
Monitor
[Exhibit A]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR ENDED FROM INCEPTION (7/1/93)
APRIL 30, 1997 TO APRIL 30, 1997
_________________ __________________________
<S> <C>
16.49% 12.20%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus Asset
Allocation Fund, Inc. on 7/1/93 (Inception Date) to a $10,000 investment made
in the Standard & Poor's 500 Composite Stock Price Index on that date as well
as to a Customized Blended Index reflecting the Portfolio's benchmark
percentage allocations. For comparative purposes, the value of each Index on
6/30/93 is used as the beginning value on 7/1/93. All dividends and capital
gain distributions are reinvested.
The Fund allocates your money among stocks, fixed-income securities and money
market instruments. The Fund's performance shown in the line graph takes into
account all applicable fees and expenses. The Standard & Poor's 500 Composite
Stock Price Index is a widely accepted, unmanaged index of overall stock
market performance which does not take into account charges, fees and other
expenses. The Customized Blended Index has been prepared by the Fund for
purposes of more accurate comparison to the Fund's general portfolio
composition. We have combined the performance of unmanaged indices reflecting
the benchmark percentages set forth in the Prospectus: 55% common stocks, 35%
fixed-income securities, and 10% money market instruments. The benchmark
percentages represent the asset mix that The Dreyfus Corporation would expect
to maintain where its assessment of economic conditions and investment
opportunities indicate that the financial markets are fairly valued in
relation to each other. The Customized Blended Index combines returns from
The Standard & Poor's 500 Composite Stock Price Index, the Lehman Brothers
Aggregate Bond Index and the Bank Rate Monitor Index of money market returns,
and is weighted to the aforementioned benchmark percentages. 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>
DREYFUS ASSET ALLOCATION FUND, INC.
STATEMENT OF INVESTMENTS APRIL 30, 1997
Principal
Bonds and Notes_21.4% Amount Value
_____________ _____________
<S> <C> <C>
FINANCIAL_2.5% Evans Withycombe, Notes,
7.50%, 2004.......................... $ 650,000 $ 649,262
Presidential Life, Sr. Notes,
9.50%, 2000.......................... 850,000 871,250
_____________
1,520,512
_____________
INDUSTRIAL_5.2% Emcor Group, Notes,
11%, 2001............................ 625,197 644,735
Fairchild, Sub. Deb.,
12%, 2001............................ 2,000,000 2,020,000
Philip Morris Cos., Notes,
6.95%, 2006.......................... 500,000 500,838
_____________
3,165,573
_____________
UTILITIES_1.9% Indiantown Cogeneration, L.P.,
9.77%, 2020.......................... 1,000,000 1,130,539
_____________
FOREIGN GOVERNMENT_.7% Poland, Bonds,
4%, 2014............................. 500,000 408,125
_____________
OTHER_4.1% Asset Securitization Corporation,
Ser. 1996-D3, Cl. A4, 7.821%, 10/13/2026 1,000,000 1,022,656
DLJ Mortgage Acceptance Corporation,
Asset Backed Ctfs.,
Ser. 1996-CF2, Cl. B1, 7.53%, 11/21/2021 500,000 494,375
GMAC Commercial Mortgage Securities,
Asset Backed Ctfs.,
Ser. 1996-C1, Cl. E, 7.86%, 10/15/2006 1,000,000 984,063
_____________
2,501,094
_____________
U.S. GOVERNMENT
AND AGENCIES_7.0% Federal National Mortgage Association,
9%, 8/1/2026......................... 836,228 876,726
U.S. Treasury Notes:
6.625%, 7/31/2001.................... 1,750,000 1,755,195
6.25%, 1/31/2002..................... 375,000 370,254
7.875%, 11/15/2004................... 620,000 662,237
6.50%, 10/15/2006.................... 625,000 614,893
_____________
4,279,305
_____________
TOTAL BONDS AND NOTES
(cost $13,029,256)................... $13,005,148
=============
COMMON STOCKS_76.8% SHARES
_____________
CONSUMER DURABLES_1.4% General Motors......................... 15,000 $ 868,125
_____________
CONSUMER NON-DURABLES_8.2% First Brands........................... 30,300 768,863
Fruit of the Loom, Cl. A............... 22,000 (a) 792,000
Kimberly-Clark......................... 17,000 871,250
NIKE, Cl. B............................ 17,000 956,250
DREYFUS ASSET ALLOCATION FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1997
COMMON STOCKS (CONTINUED) SHARES VALUE
___________ _________
CONSUMER
NON-DURABLES (CONTINUED) Philip Morris Cos...................... 20,400 $ 803,250
Warnaco Group, Cl. A................... 29,000 826,500
_________
5,018,113
_________
CONSUMER SERVICES_1.6% La Quinta Inns........................ 43,500 951,563
_________
ELECTRONIC TECHNOLOGY_10.7% Amdahl................................. 70,000 (a) 599,375
Cabletron Systems...................... 21,800 (a) 752,100
Compaq Computer........................ 12,000 (a) 1,024,500
Intel.................................. 6,600 1,010,625
International Business Machines........ 5,300 851,975
Lockheed Martin........................ 9,700 868,150
Novell................................. 105,000 (a) 794,063
Storage Technology..................... 17,000 (a) 597,125
_________
6,497,913
_________
ENERGY MINERALS_4.4% Mobil.................................. 7,000 910,000
Phillips Petroleum..................... 19,800 779,625
Tosco.................................. 33,300 986,512
_________
2,676,137
_________
FINANCE_11.3% Allstate............................... 14,500 949,750
BankAmerica............................ 8,800 1,028,500
Chase Manhattan........................ 9,300 861,413
Equitable Cos.......................... 31,700 927,225
Great Western Financial................ 29,000 1,218,000
NationsBank............................ 14,800 893,550
Travelers Group........................ 17,500 969,062
__________
6,847,500
__________
HEALTH SERVICES_3.0% Allegiance............................. 36,320 803,580
McKesson............................... 14,400 1,042,200
__________
1,845,780
__________
HEALTH TECHNOLOGY_1.6% Forest Labs............................ 27,500 (a) 938,438
__________
INDUSTRIAL SERVICES_1.5% Cooper Cameron......................... 12,300 (a) 876,375
__________
NON-ENERGY MINERALS_3.0% Aluminum Co. of America................ 12,800 894,400
Lone Star Industries................... 23,700 936,150
__________
1,830,550
__________
PROCESS INDUSTRIES_7.5% Ciba Specialty Chemicals............... 10,600 915,471
Olin................................... 22,100 908,862
Owens-Illinois......................... 35,500 (a) 958,500
Premark International.................. 35,000 857,500
Temple-Inland.......................... 16,700 926,850
__________
4,567,183
__________
DREYFUS ASSET ALLOCATION FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1997
COMMON STOCKS (CONTINUED) SHARES VALUE
________ _________
PRODUCER MANUFACTURING_7.2% General Signal......................... 19,600 $ 769,300
Ingersoll-Rand......................... 19,000 933,375
Masco.................................. 24,100 909,775
Raychem................................ 13,300 857,850
Xerox.................................. 15,200 934,800
_________
4,405,100
_________
RETAIL TRADE_1.6% Pier 1 Imports......................... 49,700 981,575
_________
TRANSPORTATION_6.7% Airborne Freight....................... 32,900 1,155,613
CNF Transportation..................... 29,400 874,650
CSX.................................... 17,600 820,600
Hertz, Cl. A........................... 5,300 (a) 153,700
Yellow................................. 54,600 (a) 1,051,050
_________
4,055,613
_________
UTILITIES_7.1% Coastal................................ 18,000 855,000
El Paso Natural Gas.................... 16,600 964,875
Hong Kong Telecom, A.D.R............... 47,000 804,875
NorAm Energy........................... 57,900 846,787
Tenaga Nasional Berhad................. 190,000 878,332
_________
4,349,869
_________
TOTAL COMMON STOCKS
(cost $41,616,342)................... $46,709,834
===========
CONVERTIBLE PREFERRED STOCKS_1.7%
ENERGY; Petroleo Brasiliero
(cost $872,479)...................... 5,000 $ 1,050,973
============
PRINCIPAL
SHORT-TERM INVESTMENTS_5.3% AMOUNT VALUE
___________ ___________
U.S. TREASURY BILLS: 5.25%, 5/29/97 $ 25,000 (b) $ 24,906
5.14%, 7/24/97......................... 2,128,000 2,102,890
5.13%, 8/7/97.......................... 1,115,000 1,099,412
__________
TOTAL SHORT-TERM INVESTMENTS
(cost $3,226,709).................... $ 3,227,208
===========
TOTAL INVESTMENTS (cost $58,744,786)........................................ 105.2% $63,993,163
====== ===========
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (5.2%) $ (3,137,437)
====== ============
NET ASSETS.................................................................. 100.0% $60,855,726
====== ===========
NOTES TO STATEMENT OF INVESTMENTS:
(a) Non-income producing.
(b) Held by custodian in a segregated account as collateral for open
futures position.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS ASSET ALLOCATION FUND, INC.
STATEMENT OF FINANCIAL FUTURES APRIL 30, 1997
MARKET VALUE UNREALIZED
COVERED (DEPRECIATION)
FINANCIAL FUTURES PURCHASED: CONTRACTS BY CONTRACTS EXPIRATION AT 4/30/97
______________ _________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
U.S. Treasury 10 Year Note................... 6 $641,813 June '97 ($375)
========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS ASSET ALLOCATION FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1997
COST VALUE
_____________ _____________
<S> <C> <C> <C>
ASSETS: Investments in securities_See Statement of Investments $58,744,786 $63,993,163
Cash....................................... 255,341
Receivable for investment securities sold.. 1,483,257
Dividends and interest receivable.......... 236,005
Net unrealized appreciation on forward
currency exchange contracts_Note 4(a).... 1,412
Receivable for shares of Common Stock subscribed 166
Prepaid expenses........................... 22,573
___________
65,991,917
___________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 40,091
Due to Distributor......................... 12,348
Payable for investment securities purchased 3,575,977
Payable for shares of Common Stock redeemed 1,453,548
Payable for futures variation margin_Note 4(a) 2,250
Accrued expenses........................... 51,977
___________
5,136,191
___________
NET ASSETS.................................................................. $60,855,726
============
REPRESENTED BY: Paid-in capital............................ $51,750,727
Accumulated undistributed investment income_net 272,209
Accumulated net realized gain (loss) on investments 3,583,419
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions
[including ($375) net unrealized depreciation
on financial futures].................. 5,249,371
___________
NET ASSETS.................................................................. $60,855,726
============
SHARES OUTSTANDING
(100 MILLION OF $.001 PAR VALUE SHARES COMMON STOCK AUTHORIZED)............. 4,144,421
NET ASSET VALUE, offering and redemption price per share.................... $14.68
=======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS ASSET ALLOCATION FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1997
INVESTMENT INCOME
INCOME: Interest................................... $1,386,351
Cash dividends (net of $6,969 foreign taxes
withheld at source).................... 683,903
____________
TOTAL INCOME......................... $2,070,254
EXPENSES: Management fee_Note 3(a).................. 451,732
Shareholder servicing costs_Note 3(b)...... 206,842
Professional fees.......................... 45,885
Directors' fees and expenses_Note 3(c)..... 21,498
Registration fees.......................... 17,339
Prospectus and shareholders' reports....... 16,649
Custodian fees_Note 3(b)................... 6,160
Interest_Note 2............................ 1,890
Loan commitment fees_Note 2................ 495
Miscellaneous.............................. 23,435
____________
TOTAL EXPENSES....................... 791,925
____________
INVESTMENT INCOME_NET...................................................... 1,278,329
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS_Note 4:
Net realized gain (loss) on investments and
foreign currency transactions.......... $3,569,322
Net realized gain (loss) on forward currency
exchange contracts..................... 42,007
Net realized gain (loss) on financial futures
Short transactions..................... (8,381)
____________
NET REALIZED GAIN (LOSS)............. 3,602,948
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions [including ($375)
net unrealized (depreciation) on financial futures] 4,067,820
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 7,670,768
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $8,949,097
============
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS ASSET ALLOCATION FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
APRIL 30, 1997 APRIL 30, 1996
_________________ ______________
OPERATIONS:
Investment income_net................................................. $ 1,278,329 $ 1,351,034
Net realized gain (loss) on investments................................ 3,602,948 10,919,611
Net unrealized appreciation (depreciation) on investments.............. 4,067,820 (3,331,125)
_________________ ______________
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... 8,949,097 8,939,520
_________________ ______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net................................................. (1,364,500) (1,572,884)
Net realized gain on investments....................................... (2,536,364) (8,104,494)
_________________ ______________
TOTAL DIVIDENDS...................................................... (3,900,864) (9,677,378)
_________________ ______________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.......................................... 37,388,539 21,004,054
Dividends reinvested................................................... 3,751,463 9,365,253
Cost of shares redeemed................................................ (48,272,464) (23,330,934)
_________________ ______________
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS.... (7,132,462) 7,038,373
_________________ ______________
TOTAL INCREASE (DECREASE) IN NET ASSETS.......................... (2,084,229) 6,300,515
NET ASSETS:
Beginning of Period.................................................... 62,939,955 56,639,440
_________________ ______________
End of Period.......................................................... $ 60,855,726 $ 62,939,955
================ ================
UNDISTRIBUTED INVESTMENT INCOME_NET........................................ $ 272,209 $ 358,380
_________________ ______________
SHARES SHARES
_________________ ______________
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 2,577,794 1,464,307
Shares issued for dividends reinvested................................. 272,042 737,421
Shares redeemed........................................................ (3,370,046) (1,638,061)
_________________ ______________
NET INCREASE (DECREASE) IN SHARES OUTSTANDING........................ (520,210) 563,667
================ ================
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS ASSET ALLOCATION 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.
YEAR ENDED APRIL 30,
_________________________________________________________________
PER SHARE DATA: 1997 1996 1995 1994(1)
________ ________ ________ ________
<S> <C> <C> <C> <C>
Net asset value, beginning of period............ $13.49 $13.81 $12.49 $12.50
________ ________ ________ ________
INVESTMENT OPERATIONS:
Investment income_net.......................... .33 .32 .39 .24
Net realized and unrealized gain (loss)
on investments.................................... 1.83 1.70 1.35 (.11)
________ ________ ________ ________
TOTAL FROM INVESTMENT OPERATIONS............... 2.16 2.02 1.74 .13
________ ________ ________ ________
DISTRIBUTIONS:
Dividends from investment income_net.............. (.34) (.38) (.37) (.13)
Dividends from net realized gain on investments...... (.63) (1.96) (.05) (.01)
________ ________ ________ ________
TOTAL DISTRIBUTIONS.............................. (.97) (2.34) (.42) (.14)
________ ________ ________ ________
Net asset value, end of period.......... $14.68 $13.49 $13.81 $12.49
========= ========= ========= ==========
TOTAL INVESTMENT RETURN...................... 16.49% 15.67% 14.22% .99%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.... 1.31% 1.25% .67% .16%(2)
Ratio of net investment income
to average net assets............................ 2.12% 2.16% 3.00% 2.48%(2)
Decrease reflected in above expense ratios
due to undertakings by the Manager........ __ .27% 1.27% 1.58%(2)
Portfolio Turnover Rate..................... 223.50% 370.06% 160.11% __
Average commission rate paid(3)............ $.0538 __ __ __
Net Assets, end of period (000's Omitted)... $60,856 $62,940 $56,639 $51,063
---------------------------
(1) From July 1, 1993 (commencement of operations) to April 30, 1994.
(2) Not annualized.
(3) For fiscal years beginning May 1, 1996, the Fund is required to
disclose its average commission rate paid per share for
purchases and sales of investment securities.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS ASSET ALLOCATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1_SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Asset Allocation Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company. The Fund's investment objective is to maximize
total return, consisting of capital appreciation and current income. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). Premier
Mutual Fund Services, Inc. (the "Distributor") is the distributor of the
Fund's shares, which are sold to the public without a sales charge.
On August 21, 1996, the Dreyfus Total Return Portfolio began operating
under the name "Dreyfus Asset Allocation Fund, Inc." Also on August 21,
1996, the Fund's Dreyfus Income Portfolio and Dreyfus Growth Portfolio were
merged into Dreyfus Lifetime Portfolios, Inc. Income Portfolio and Growth
Portfolio, respectively.
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: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sales
price on the national securities market. Securities not listed on an exchange
or the national securities market, or securities for which there were no
transactions, are valued at the average of the most recent bid and asked
prices, except for open short positions, where the asked price is used for
valuation purposes. 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, the difference between
the amounts of dividends, interest and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise from
changes in the value of assets and liabilities other than investments in
securities, resulting from changes in exchange rates. Such gains and losses
are included with net realized and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and dividends from net realized
capital gain are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, if any, it is the
policy of the Fund not to distribute such gain.
(E) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
DREYFUS ASSET ALLOCATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2_BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility ("Facility") primarily 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. At April 30,
1997, there were no outstanding borrowings under the Facility.
The average daily amount of borrowings outstanding during the period
ended April 30, 1997 was approximately $33,000, with a related weighted
average annualized interest rate of 5.75%. The maximum amount borrowed at any
time during the period ended April 30, 1997 was $1.5 million.
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 .75 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 pays the Distributor at
an annual rate of .25 of 1% of the value of the Fund's average daily net
assets for the provision of certain services. 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.
The Distributor may make payments to Service Agents (a securities dealer,
financial institution, or other industry professional) in respect of these
services. The Distributor determines the amounts to be paid to Service
Agents. During the period ended April 30, 1997, the Fund was charged $150,577
pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $39,429 during the period ended April 30, 1997.
Effective May 10, 1996, the Fund entered into a custody agreement with
Mellon to provide custodial services for the Fund. During the period ended
April 30, 1997, $6,160 was charged by Mellon pursuant to the custody
agreement.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4_SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, forward currency exchange contracts and
financial futures, during the period ended April 30, 1997 amounted to
$130,510,152 and $132,945,494, respectively.
The following summarizes open forward currency exchange contracts at
April 30, 1997:
<TABLE>
<CAPTION>
FOREIGN
CURRENCY UNREALIZED
FORWARD CURRENCY CONTRACTS AMOUNTS PROCEEDS VALUE APPRECIATION
______________ ___________ _________ ______ _______________
<S> <C> <C> <C> <C>
SALES:
___
Swiss Francs, expiring 6/16/97........... 1,040,301 $712,340 $710,928 $1,412
========
</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
DREYFUS ASSET ALLOCATION FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 (See Statement of Financial Futures). 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 contract at the close of each day's
trading. Accordingly, 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 April 30, 1997, and their
related unrealized depreciation are set forth in the Statement of Financial
Futures.
(B) At April 30, 1997, accumulated net unrealized appreciation on
investments, forward currency exchange contracts and financial futures was
$5,249,414, consisting of $6,274,099 gross unrealized appreciation and
$1,024,685 gross unrealized depreciation.
At April 30, 1997, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS ASSET ALLOCATION FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS ASSET ALLOCATION FUND, INC.
We have audited the accompanying statement of assets and liabilities,
including the statements of investments and financial futures, of Dreyfus
Asset Allocation Fund, Inc., as of April 30, 1997, 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 as of April 30, 1997 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 Asset Allocation Fund, Inc. at April 30, 1997, and the
results of its operations, 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.
[Ernst & Young LLP signature logo]
New York, New York
May 29, 1997
DREYFUS ASSET ALLOCATION FUND, INC.
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates $.094 per share as a
long-term capital gain distribution of the $.972 per share paid on December
12, 1996.
The Fund also designates 9.10% of the ordinary dividends paid during the
fiscal year ended April 30, 1997 as qualifying for the corporate dividends
received deduction. Shareholders will receive notification in January 1998 of
the percentage applicable to the preparation of their 1997 income tax
returns.
[Dreyfus lion "d" logo]
Registration Mark
DREYFUS ASSET ALLOCATION 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. 550AR974
[Dreyfus lion "d" logo]
Registration Mark
Asset Allocation
Fund, Inc.
Annual Report
April 30, 1997
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
DREYFUS ASSET ALLOCATION FUND, INC. WITH THE STANDARD
& POOR'S 500 COMPOSITE STOCK PRICE INDEX AND A CUSTOMIZED
BLENDED INDEX
EXHIBIT A:
STANDARD
DREYFUS & POOR'S 500
ASSET COMPOSITE CUSTOMIZED
PERIOD ALLOCATION STOCK BLENDED
FUND PRICE INDEX * INDEX **
7/1/93 10,000 10,000 10,000
4/30/94 10,099 10,227 10,107
4/30/95 11,535 12,010 11,368
4/30/96 13,342 15,636 13,711
4/30/97 15,542 19,564 16,184
* Source: Lipper Analytical Services, Inc.
**Source: Lipper Analytical Services, Inc., Lehman Brothers and Bank
Rate Monitor
