<PAGE>
Dreyfus
Asset Allocation
Fund, Inc.
Semi-Annual Report
October 31, 1996
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- ----------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
It is a pleasure to once again have the opportunity to correspond with
you regarding Dreyfus Asset Allocation Fund, Inc. This report covers the
semi-annual period ended October 31, 1996 during which time the Fund's total
return was 3.48%.* Due to the structure of the Fund, a mix of stocks, bonds
and cash, this return is not comparable to a market index composed entirely of
any one of these asset classes. One such index, the S&P 500 Composite Stock
Price Index, had a total return of 9.08% during the Fund's semi-annual
period.** A special blended index, the Customized Blended Index, which is
prepared by the Fund to provide better performance comparison, reflecting the
Fund's benchmark allocation of assets as defined in its Prospectus, had a total
return of 6.98% for the same period.***
The Fund was significantly restructured during this semi-annual period,
and results have already shown improvement, despite a difficult market for
value stocks, the style and philosophy of equity management used in the Fund.
We are confident that value investing will prove to be a superior style of
investment management, and that this fund will become more competitive with the
Customized Blended Index going forward.
Economic Review
The U.S. economy is enjoying a good year. First, the tightening labor
market has failed to push price inflation higher. Second, economic growth has
slowed since midyear from the torrid pace of the first half. Third, corporate
profits are holding up quite well, albeit growing more slowly than last year.
These developments have vindicated Federal Reserve Board inaction, keeping
market interest rates stable. Although the economy has simmered down, it is
nevertheless operating with very little slack.
The Federal Reserve twice thwarted market expectations for tightening
this year, taking the view instead that steady growth won't so easily foster
inflation in this cycle. Indeed, the unemployment rate has plunged towards 5%
this year and wage growth has outpaced price inflation for the first time since
1989. Yet there is little evidence of accelerating price inflation to date.
Even higher oil prices have failed to lift prices elsewhere. This is very
different from 1994 when the Fed preemptively hiked interest rates to stem an
anticipated future price inflation that subsequently did not materialize.
After rising 3.3% in the first half of this year, real GDP growth
slowed to a near-trend 2.2% in the third quarter. Early evidence for the
fourth quarter indicates sustained near-trend growth. In particular, consumer
spending has been lackluster since midyear, despite solid income growth and
high confidence levels. And new highs in home sales have not been matched by
new records in homebuilding. Spending on capital goods has rebounded, however,
while incoming strong export orders indicate better growth ahead for this
sector. Capital goods and exports typically dominate the business cycle's late
phase. Corporate profit growth, albeit slower than in 1995, continues to
surprise on the upside.
Interest rates this fall are not much different than in the spring.
Short-term rates have especially stabilized in recent months based on the view
that Fed tightening is unlikely this year. Long-term rates have recently
fallen. Should the economy show signs of reaccelerating, then long-term rates
would likely rise.
As the U.S. economy moves into the late-cycle phase it is, as usual,
out of sync with most business cycles overseas which are at a much earlier
stage. This portends faster world growth in 1997. How well the U.S. economy
can participate in an accelerating growth world economy without igniting
inflation remains to be seen.
Market Overview
The stock market in the last twelve months shrugged off a variety of
potentially negative factors to barrel its way to new heights.
In late 1995 and early 1996 economic activity appeared to slow down,
enough to prompt the Federal Reserve to lower interest rates in January of this
year. By springtime, when the Fed had apparently suspended its anti-
<PAGE>
inflationary measures, investors began to worry about signs of strength
exhibited by the economy. Though the Fed took no action to raise interest
rates, investor worries about that possibility restrained an ebullient market.
By July, fears of higher interest rates, plus concerns that some stock
prices--technology issues in particular--might have gone too far, too fast,
caused a temporary retreat in equity prices.
As fall approached, however, the underlying factors of a strong
economy, low inflation, and investor optimism took hold again and propelled
stock prices to new highs.
Chief beneficiaries were the large capitalization stocks. It took a
while for technology stocks and small caps to recover the ground lost in the
early summer. However, the trend across the board was clearly bullish.
As the fiscal year closed, there were some negative factors on the
horizon. Corporate profits may have passed their peak. Consumer demand seemed
to be slowing in some sectors. There were also hints that employment costs,
which have been quite stable for a long time, might face upward pressures.
The market, however, seemed to soar above these factors. The prospect
(since become a fact) of a split government in Washington, with Republicans
controlling Congress and Democrats in the White House, was seen as favorable
for stock prices. Moreover, the specter of renewed inflation remained just
that--nothing more than a specter. Furthermore, individual investors continued
to pour money into equity mutual funds--not at constantly increasing rates, to
be sure, but still at a pace that gave strong impetus for higher stock prices.
Fund Changes
The permitted asset allocation ranges for the Fund were broadened
effective August 1, 1996. Further, as of that date, common stocks other than
those in the Standard & Poor's 500 Index could be purchased, as well as bonds
other than U.S. Treasury issues. With these restrictions now removed, the Fund
has more flexibility to maximize total return.
Fundamental Analysis
We are practitioners of and passionate believers in fundamental
security analysis. This method of determining the value of a security involves
our analysts and sometimes our portfolio managers communicating directly with
the management of companies in which the Fund either has current investments or
is considering investing. Not only do we interview management by telephone on
a regular basis, but we also periodically visit corporate headquarters,
divisional headquarters, factories and distribution outlets. We meet with
senior management and talk with all levels of employees, as well as customers
and competitors. It is through the mosaic of information collected in these
meetings that investment decisions begin to be made.
It is a massive undertaking for us, especially given the thousands of
securities that are available to us for investment on a worldwide basis. It
can only be accomplished with an experienced and dedicated team of security
analysts. Dreyfus employs 35 individuals who specialize in this analytical
work, one of the largest efforts of any mutual fund firm. Our analysts are
strictly dedicated to finding the best investments for our client, the
shareholder. Their work is proprietary: it is only distributed internally to
our portfolio managers, and forms the basis for security selection in our
mutual funds.
Much like the complete and thorough mixture of information that we
build, our analysts form a diverse mix of individuals. Some are specialists in
certain types of securities, while others are industry specialists who
concentrate on securities within a particular sector of the economy. Most have
actual industry experience in their particular field of specialization prior to
joining Dreyfus. For example, our three-person health care team includes a
retired physician, a former medical researcher for the U.S. Army, and a former
health care lobbyist to Congress. Some of our analysts are relatively young
and some are veterans, providing a wonderful blend of energy and experience.
All of this diversity is
<PAGE>
beneficial to the investment process. Investments are best made by thinking
somewhat differently from everyone else who is making similar investments.
Ideally, one tries to make investment choices a bit sooner than other investors
make these same choices. The reason, of course, is that through an increase in
demand for ownership of a security, the price of that security increases.
Portfolio Focus
There are basically three areas of decision-making 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 started the semi-annual period with a benchmark allocation of
assets in equity securities. With the stock market correction in June, we
increased equity exposure to near the top of the permitted range, and then
dropped back to benchmark levels as the market rallied in late July. Equity
exposure remained modestly above the benchmark for the remainder of the
semi-annual period. Most of these asset allocation changes were made based on
our projections for the domestic economy, the resulting output from our
econometric model, and our interpretation of this data.
Bond holdings made up most of the remainder of the Fund's assets during
the semi-annual period. Cash equivalents were generally a small part of
holdings given the low yields available and our generally constructive outlook
on the equity and bond markets.
Equity Holdings
The equity portfolio of the Fund underperformed the broad market during
the semi-annual period at least partially due to the relative underperformance
of value stocks, the style of equity management practiced by the Fund. We
believe value stocks may provide superior investment performance in the future.
Equity performance benefited from holdings such as Kimberly-Clark,
Reebok, Jones Apparel, Intel, Chase Manhattan, Warner Lambert, and NorAm
Energy. This last stock received a takeover offer which significantly boosted
the stock price. Results were penalized by investments including American
Greetings, Sun, Alexander & Alexander Services, AT&T, Entergy and GTE. These
underperforming securities have been sold so that small problems would not
become big problems.
Fixed Income Holdings
The fixed income portfolio of the Fund was positioned at plus or minus
10% of the duration (weighted average time to maturity of all cash flows or a
more exact measure of time to maturity) of the Fund's benchmark. Until August
1, this benchmark was the Lehman Brothers Intermediate Treasury Bond Index. As
of August 1, the benchmark became the Lehman Brothers Aggregate Bond Index.
This positioning focuses the portfolio on security selection instead of relying
on interest rate anticipation. This change was made to correspond to changes
in the types of fixed income investments that the Fund invests in. Security
selection benefits from fundamental analytical work where our team of analysts
enables us to add value to the portfolio. Interest rate movements, on the
other hand, are often random and, therefore, it is difficult to add much value
to the portfolio in predicting these changes in the direction of rates.
Given that we were able to own fixed income securities other than U.S.
Treasuries for only the last three months of the semi-annual period, very
little is available in terms of a record for these holdings. We are confident,
however, that we can add value to the portfolio in the future with these
securities.
<PAGE>
OUTLOOK
We remain positive on the long term outlook for financial assets. We
believe we are in a period of secular decline in interest rates and inflation,
of controlled economic growth, and of increasingly active corporate
managements. This last point is that many corporate managements are now
working in the best interest of the owners of these companies, the holders of
the common stock. This group includes holders of mutual fund shares, our
clients.
Thank you for your trust and the privilege of managing your assets. The
Dreyfus organization continues to work diligently on your behalf.
Sincerely,
[Timothy M. Ghriskey signature logo]
Timothy M. Ghriskey
Portfolio Manager
November 12, 1996
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC.--Reflects the reinvestment of income
dividends and, where applicable, capital gain distributions. The Standard &
Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index
of U.S. stock market performance.
***The Customized Blended Index has been prepared by the Fund and is intended
to be a more accurate comparison to the Fund's general portfolio composition
than the benchmark index, which is 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 the Fund's Prospectus: 55% equity securities,
35% fixed-income securities, and 10% short-term money market instruments. The
Customized Blended 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.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- ----------------------------------------------------------------
Statement of Investments October 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Principal
Bonds and Notes--32.9% Amount Value
- ----------------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C> <C>
Financial--1.5% Presidential Life, Sr. Notes,
9 1/2%, 2000....................................... $ 850,000 $ 884,000
-----------
Industrial--3.5% Fairchild, Sub. Deb.,
12%, 2001.......................................... 2,000,000 2,030,000
-----------
Utilities--2.0% Indiantown Cogeneration, L.P.,
9.77%, 2020........................................ 1,000,000 1,150,645
-----------
Other--3.5% Asset Securitization Corporation,
Ser. 1996-D3, Cl. A4, 7.822%, 10/13/2026........... 1,000,000 1,030,469
GMAC, Mtg. Pass-Through Ctfs.,
Ser. 1996-E, 7.87%, 10/15/2026..................... 1,000,000 976,094
-----------
2,006,563
-----------
U.S. Government
and Agencies--22.4% Federal National Mortgage Association,
9%, 8/1/2026....................................... 949,814 999,974
Government National Mortgage Association,
5.50%, 10/20/2026.................................. 1,980,000 1,962,022
U.S. Treasury Bonds,
6.875%, 8/15/2025.................................. 400,000 409,000
U.S. Treasury Notes:
5.625%, 11/30/2000................................. 4,150,000 4,090,344
6.625%, 7/31/2001.................................. 2,500,000 2,553,906
6.25%, 2/15/2003................................... 1,600,000 1,606,250
6.875%, 5/15/2006.................................. 1,300,000 1,346,313
-----------
12,967,809
-----------
TOTAL BONDS AND NOTES
(cost $19,003,633)................................. $19,039,017
===========
Common Stocks--65.5% Shares
- ----------------------------------------------------------------------------------------- ------------
Consumer Durables--1.4% Newell............................................... 27,200 $ 771,800
-----------
Consumer Non-durables--6.7% First Brands......................................... 26,400 749,100
Kimberly-Clark....................................... 8,300 773,975
Philip Morris Cos.................................... 8,500 787,313
Reebok International................................. 24,800 886,600
Warnaco Group, Cl. A................................. 26,400 656,700
-----------
3,853,688
-----------
Consumer Services--1.1% La Quinta Inns....................................... 33,000 660,000
-----------
Electronic Technology--9.0% Cabletron Systems.................................... 13,600 848,300
International Business Machines...................... 5,300 683,700
</TABLE>
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ----------------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C> <C>
Electronic Technology (continued) Lockheed Martin...................................... 7,600 $ 681,150
McDonnell Douglas.................................... 15,200 828,400
Micron Technology.................................... 24,000 609,000
Perkin-Elmer......................................... 15,400 825,825
United Technologies.................................. 5,600 721,000
-----------
5,197,375
-----------
Energy Minerals--6.1% Amerada Hess......................................... 13,000 719,875
Amoco................................................ 9,400 712,050
Phillips Petroleum................................... 16,000 656,000
Tosco................................................ 12,900 724,013
Unocal............................................... 19,300 706,863
-----------
3,518,801
-----------
Finance--5.8% Bank United, Cl. A................................... 14,500(a) 386,062
Berkley (W.R.)....................................... 14,700 764,400
First Security....................................... 24,700 725,563
PMI Group............................................ 13,300 759,763
Signet Banking....................................... 25,600 739,200
-----------
3,374,988
-----------
Health Services--2.7% Allegiance........................................... 40,020(a) 750,375
Columbia/HCA Healthcare.............................. 22,900 818,675
-----------
1,569,050
-----------
Health Technology--5.7% Baxter International................................. 15,100 628,537
Bristol-Myers Squibb................................. 7,300 771,975
DePuy................................................ 23,000(a) 402,500
Glaxo Wellcome plc, A.D.R............................ 21,500 677,250
Sandoz AG............................................ 697 802,773
-----------
3,283,035
-----------
Industrial Services--1.5% Cooper Cameron....................................... 13,500(a) 862,312
-----------
Non-energy Minerals--1.3% Lone Star Industries................................. 20,600 757,050
-----------
Process Industries--3.6% Hoechst AG Aktien.................................... 19,000 712,812
Premark International................................ 35,000 730,625
Witco................................................ 21,000 651,000
-----------
2,094,437
-----------
Producer Manufacturing--7.8% General Signal....................................... 19,600 798,700
Masco................................................ 22,600 709,075
National-Oilwell..................................... 24,000(a) 558,000
Olin................................................. 18,600 790,500
</TABLE>
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ----------------------------------------------------------------------------------------- ---------- ----------
<S> <C> <C> <C>
Producer Manufacturing (continued) Raychem.............................................. 11,300 $ 882,812
Xerox................................................ 17,000 788,375
-----------
4,527,462
-----------
Retail Trade--2.5% Dominick's Supermarkets.............................. 36,000(a) 715,500
Pier 1 Imports....................................... 53,900 754,600
-----------
1,470,100
-----------
Technology Services--.6% Ingram Micro......................................... 18,000(a) 324,000
-----------
Transportation--2.9% Airborne Freight..................................... 38,900 773,137
Yellow............................................... 67,100 876,494
-----------
1,649,631
-----------
Utilities--6.8% GTE.................................................. 17,400 732,975
Hong Kong Telecom, A.D.R............................. 47,000 828,375
NorAm Energy......................................... 57,900 890,212
Tenaga Nasional...................................... 204,000 815,515
U S West Communications Group........................ 21,400 650,025
-----------
3,917,102
-----------
TOTAL COMMON STOCKS
(cost $35,166,348)................................. $37,830,831
===========
Principal
Convertible Corporate Notes--1.2% Amount
- ----------------------------------------------------------------------------------------- -------------
Retail; Michael's Stores, Sub. Notes,
6.75%, 1/15/2003
(cost $860,189).................................... $1,000,000 $ 700,000
===========
</TABLE>
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Principal
Short-Term Investments--7.2% Amount Value
- ----------------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C> <C>
U.S. Treasury Bills: 4.92%, 1/2/97........................................ $ 448,000 $ 444,188
4.94%, 1/9/97........................................ 394,000 390,245
4.98%, 1/16/97....................................... 2,532,000 2,505,262
4.99%, 1/23/97....................................... 485,000 479,408
5.01%, 1/30/97....................................... 324,000 319,937
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $4,139,277).................................. $ 4,139,040
===========
TOTAL INVESTMENTS (cost $59,169,447)............................................. 106.8% $61,708,888
====== ===========
LIABILITIES, LESS CASH AND RECEIVABLES............................................ (6.8%) $(3,914,752)
====== ===========
NET ASSETS....................................................................... 100.0% $57,794,136
====== ===========
<FN>
Note to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- -----------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Cost Value
----------- -----------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments................... $59,169,447 $61,708,888
Cash...................................................................... 7,242
Receivable for investment securities sold................................. 746,446
Dividends and interest receivable......................................... 360,654
Prepaid expenses.......................................................... 30,054
-----------
62,853,284
-----------
LIABILITIES: Due to The Dreyfus Corporation and affiliates............................. 40,509
Due to Distributor........................................................ 12,467
Payable for investment securities purchased............................... 4,955,981
Payable for Common Stock redeemed......................................... 6,500
Accrued expenses.......................................................... 43,691
-----------
5,059,148
-----------
NET ASSETS................................................................................ $57,794,136
-----------
-----------
REPRESENTED BY: Paid-in capital........................................................... $51,820,359
Accumulated undistributed investment income--net.......................... 1,126,872
Accumulated net realized gain (loss) on investments....................... 2,307,464
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4.................................................. 2,539,441
-----------
NET ASSETS................................................................................ $57,794,136
-----------
-----------
SHARES OUTSTANDING
(100 million shares of $.001 par value Common Stock authorized)........................... 4,140,830
NET ASSET VALUE, offering and redemption price per share.................................. $13.96
------
------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- -----------------------------------------------------------------------------
Statement of Operations Six Months Ended October 31, 1996 (Unaudited)
<TABLE>
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Interest.......................................... $ 811,669
Cash dividends.................................... 353,889
----------
Total Income.................................. $1,165,558
EXPENSES: Management fee--Note 3(a)......................... 226,279
Shareholder servicing costs--Note 3(b)............ 101,379
Professional fees................................. 26,975
Directors' fees and expenses--Note 3(c)........... 11,009
Prospectus and shareholders' reports.............. 10,042
Registration fees................................. 6,733
Custodian fees--Note 3(b)......................... 2,813
Miscellaneous..................................... 11,836
----------
Total Expenses................................ 397,066
----------
INVESTMENT INCOME--NET.................................................... 768,492
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments........... $ (209,371)
Net unrealized appreciation (depreciation)
on investments.................................. 1,357,890
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................... 1,148,519
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $1,917,011
----------
----------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
October 31, 1996 Year Ended
(Unaudited) April 30, 1996
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Investment income--net........................................................ $ 768,492 $ 1,351,034
Net realized gain (loss) on investments....................................... (209,371) 10,919,611
Net unrealized appreciation (depreciation) on investments..................... 1,357,890 (3,331,125)
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations............. 1,917,011 8,939,520
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net........................................................ -- (1,572,884)
Net realized gain on investments.............................................. -- (8,104,494)
----------- -----------
Total Dividends............................................................. -- (9,677,378)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold................................................. 2,417,002 21,004,054
Dividends reinvested.......................................................... -- 9,365,253
Cost of shares redeemed....................................................... (9,479,832) (23,330,934)
----------- -----------
Increase (Decrease) in Net Assets from Capital Stock Transactions........... (7,062,830) 7,038,373
----------- -----------
Total Increase (Decrease) in Net Assets (5,145,819) 6,300,515
NET ASSETS:
Beginning of Period........................................................... 62,939,955 56,639,440
----------- -----------
End of Period................................................................. $57,794,136 $62,939,955
----------- -----------
----------- -----------
Undistributed investment income--net............................................ $ 1,126,872 $ 358,380
----------- -----------
Shares Shares
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................................... 179,728 1,464,307
Shares issued for dividends reinvested........................................ -- 737,421
Shares redeemed............................................................... (703,529) (1,638,061)
----------- -----------
Net Increase (Decrease) in Shares Outstanding............................... (523,801) 563,667
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements.
<PAGE>
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.
<TABLE>
<CAPTION>
Six Months Ended Year Ended April 30,
October 31, 1996 -----------------------------------
PER SHARE DATA: (Unaudited) 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................................... .20 .32 .39 .24
Net realized and unrealized gain (loss)
on investments....................................... .27 1.70 1.35 (.11)
------ ------ ------ ------
Total from Investment Operations......................... .47 2.02 1.74 .13
------ ------ ------ ------
Distributions:
Dividends from investment income--net.................... -- (.38) (.37) (.13)
Dividends from net realized gain on investments.......... -- (1.96) (.05) (.01)
------ ------ ------ ------
Total Distributions...................................... -- (2.34) (.42) (.14)
------ ------ ------ ------
Net asset value, end of period........................... $13.96 $13.49 $13.81 $12.49
------ ------ ------ ------
------ ------ ------ ------
TOTAL INVESTMENT RETURN...................................... 3.48%(2) 15.67% 14.22% .99%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................. .66%(2) 1.25% .67% .16%(2)
Ratio of net investment income
to average net assets................................ 1.28%(2) 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.................................. 137.87%(2) 370.06% 160.11% --
Average commission rate paid(3).......................... $.0964 -- -- --
Net Assets, end of period (000's Omitted)................ $57,794 $62,940 $56,639 $51,063
<FN>
- -------------
(1) From July 1, 1993 (commencement of operations) to April 30, 1994.
(2) Not annualized.
(3) For fiscal years beginning November 1, 1995, the Fund is requried
to disclose its average commission rate paid per share for purchases
and sales of investment securities.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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") acts as 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
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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.
NOTE 2--Bank Line of Credit:
The Fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
Fund at rates which are related to the Federal Funds rate in effect at the time
of borrowings. For the period ended October 31, 1996, the Fund did not borrow
under the line of credit.
NOTE 3--Management Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement ("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. The Agreement provides
that if in any full fiscal year the aggregate expenses of the Fund, exclusive
of taxes, brokerage, interest on borrowings and extraordinary expenses, exceed
the expense limitation of any state having jurisdiction over the Fund, the Fund
may deduct from payments to be made to the Manager, or the Manager will bear
the amount of such excess to the extent required by state law. The most
stringent state expense limitation applicable to the Fund presently requires
reimbursement of expenses in any full fiscal year that such expenses (exclusive
of certain expenses as described above) exceed 2 1/2% of the first $30 million,
2% of the next $70 million and 1 1/2% of the excess over $100 million of the
average value of the Fund's net assets in accordance with California "blue sky"
regulations. There was no expense reimbursement for the period ended October
31, 1996.
(b) Pursuant to the Fund's 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 October 31, 1996, the Fund was charged $75,426
pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
agency agreement for providing personnel and facilities to perform transfer
agency services for the Fund. Such compensation amounted to $20,363 during the
period ended October 31, 1996.
Effective May 10, 1996, the Fund entered into a custody agreement with
Mellon to provide custodial services for the Fund. During the period ended
October 31, 1996, $3,446 was paid to 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:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended October 31, 1996
amounted to $79,245,389 and $78,552,981, respectively.
At October 31, 1996, accumulated net unrealized appreciation on investments
was $2,539,441, consisting of $3,252,024 gross unrealized appreciation and
$712,583 gross unrealized depreciation.
At October 31, 1996, 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).
Proxy Results (Unaudited)
A Special Meeting of shareholders of the Fund was held August 19, 1996 at
which the shareholders approved an Agreement and Plan of Reorganization for
each of the Fund's Dreyfus Growth Portfolio and Dreyfus Income Portfolio (each
a "Series") providing for the transfer of substantially all of the assets of
each Series, subject to its liabilities, to the Growth Portfolio and Income
Portfolio, respectively, of Dreyfus LifeTime Portfolios, Inc. (each a
"Portfolio") in exchange for each Portfolio's Retail shares and the assumption
by each Portfolio of stated liabilities. After consummation of the exchange,
the shares of each Series were canceled and each Series terminated. The
shareholders of each Series approved the Agreement and Plan of Reorganization
by a vote of 122,573.509 shares in favor, 1,751.804 shares against and 0
abstentions (including broker non-votes), with respect to the Dreyfus Growth
Portfolio and by a vote of 117,369.115 shares in favor, 1,972.728 shares
against and 1,236.206 shares abstaining (including broker non-votes), with
respect to the Dreyfus Income Portfolio.
<PAGE>
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. 550SA9610
