<PAGE>
Dreyfus
Asset Allocation
Fund, Inc.
Semi-Annual
Report
October 31, 1997
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- ------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
Please note that this latest report to shareholders of Dreyfus Asset
Allocation Fund is now signed by Kevin M. McClintock, who became principal
portfolio manager of the Fund as of June 18, 1997. His predecessor in this
position, Timothy M. Ghriskey, who manages a number of Dreyfus equity funds,
will continue as a portfolio manager of the Fund and collaborate with Kevin on
the equity investments in the Fund. Additionally, Kevin is now responsible for
the Fund's allocation of assets as between equities and fixed income securities,
and management of the fixed income portion.
In addition to managing this Fund, Kevin McClintock manages several strategic
and fixed income funds and oversees the taxable bond area at the Dreyfus
Corporation. He joined our company in November 1995, after an association of
more than ten years with the Aetna Corporation, where he managed over $6 billion
in advisory assets.
Kevin started his career at Aetna in 1985 after graduating from Colorado
College and earning an M.B.A. from the Amos Tuck School of Business at Dartmouth
College. He received the designation of Chartered Financial Analyst (CFA) in
1989.
We have complete confidence in Kevin McClintock's skills and experience as a
mutual fund manager.
Sincerely,
/s/ Stephen E. Canter
Stephen E. Canter
Chief Investment Officer
November 18, 1997
New York, N.Y.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
We are pleased to report that Dreyfus Asset Allocation Fund provided a total
return of 19.69% for the six months ended October 31, 1997.* This reflects
income as well as changes in price per share. The Fund's total return
outperformed the 15.16% total return of the Standard and Poor's 500 Composite
Stock Price Index (the S&P 500), which is made up entirely of common stocks, and
7.07% for the Lehman Brothers Aggregate Bond Index.** A more accurate measure of
the performance of the Fund is against a special customized blended index which,
like the Fund, is composed of bonds and cash equivalents as well as stocks. This
benchmark index had a total return of 10.94% during the period.***
ECONOMIC REVIEW
The U.S. economy has registered a step-up in growth in 1997 and incoming
evidence suggests that momentum is still building. Stronger growth this year has
helped keep corporate profits buoyant despite a substantially tighter labor
market. This is because nationwide shortages of labor have so far not generated
much wage inflation. Moreover, price inflation has decelerated markedly during
the year suppressed by the strong dollar, import competition and continued
disinflation in health care.
Although the Federal Reserve Board (the "Fed") has held a tightening bias
since mid-1996, the central bank has raised interest rates only once this year.
Expectations for further hikes have been continually postponed. They were first
dampened by the surprising drop in this year's price inflation, and more
recently by unfolding crises in foreign economies. Both events have helped to
cap short-term rates and to pull long-term interest rates lower since the
spring.
Real GDP growth accelerated to about 4% this year from 3% in 1996. Virtually
all economic sectors have been strong so far. Consumer spending has been
supported by rising real incomes. Capital spending has been very robust and
incoming orders imply continued strength. Even housing demand, typically slowing
at this phase of the business cycle, has reached new highs. Most incoming
signals support sustained fast growth. The exception is that exporters' new
orders have marginally slowed in recent months, indicating that economic turmoil
overseas may be impacting this sector. By contrast, imports have been very
robust and, if their growth is sustained, could help mitigate the economic
weakness abroad.
Overall corporate profits have continued to trend higher, although some
companies have been hurt by events overseas and the stronger dollar.
Domestically generated profits have typically remained solid, helped by strong
growth and contained wages.
MARKET OVERVIEW
Even though the equity markets stumbled badly in late October, the fiscal
half year ended October 31, 1997 still saw solid gains. The total return for
this period was 7.12% for the Dow Jones Industrial Average, 15.16% for the S&P
500, and an impressive 27.29% for the Russell 2000 Small Stock Index. These were
the returns after the drop of the last week in October, and before counting the
rebounds that occurred in the first week of November.
In retrospect, it is apparent that stock valuations had been riding for a
fall. There was weakness in March when the Fed raised interest rates for the
first time in two years. By early summer, equity prices recovered and soared to
new highs. Then, however, some nervousness set in, related mainly to concern
about high stock valuations and fear of another Fed move to cool off the
bubbling economy. Weakness was apparent mainly in large capitalized companies,
while smaller companies, such as those listed in the Russell 2000 Index, gained
ground.
As autumn leaves began to turn, the stock market as a whole regained its
wind--but not for long. The relatively high valuations that had prevailed were
vulnerable to any major unpleasant surprise. That came in late October from an
unexpected source--the Far East. Severe market setbacks in Hong Kong and
Southeast Asia, together with drops in their foreign exchange rates, triggered
the fall in the U.S. market.
<PAGE>
Richard Hoey, Chief Economist for the Dreyfus Corporation, reviewing the
recent events, said that the U.S. stock market had a selling panic, followed by
a buying panic. The underlying logic of it all was valuation, he observed.
The market drop in Asia was caused by serious fundamental problems of excess
productive capacity, overvalued real estate and a banking system crisis.
European markets, of course, reacted to the Asian weakness, but less severely,
because their economies are more stable. In the U.S., the sharp price drop,
followed by a vigorous rebound, reflected an economy with much greater
underlying strength.
The influx of investors into stocks when prices dipped was a good augury for
the future. The American investing public appears to be convinced that equities
are a good place to put money for the long range, when their prices are
attractive, despite the recent volatility of the market averages.
In the bond market, alternating expectations for strong and moderate economic
growth caused Treasury rates to fluctuate within a fairly well-defined range. In
late October and November, the volatility that affected stocks spilled over into
the bond market. For several weeks, when there was a flight from stocks, bonds
benefited, and by the same token, when investors rushed back into stocks, bond
prices declined. Later, however, both markets stabilized. When bond rates were
declining, as they did in the earlier months of the fiscal period, spreads
narrowed considerably. Both corporate and mortgage-backed securities provided
moderate yield premiums to similar Treasury alternatives. As long as yields are
range-bound and economic growth remains moderate, these tight yield spread
relationships are likely to persist.
PORTFOLIO FOCUS
There are basically three decision levels for the Dreyfus Asset Allocation
Fund: the asset allocation, the equity holdings, and the fixed income holdings:
ASSET ALLOCATION
Until October, the Fund generally maintained an equity allocation close to
the top of the permitted range. We believed that the investment environment for
the stock market remained positive and wanted to maximize the Fund's
participation in this asset class. In October, we reduced the equity allocation
to a more neutral exposure based primarily on a view that stock market
valuations were extended along with a less favorable outlook for corporate
profits. We do not believe an equity bear market is imminent, but merely that
the return on equities going forward is more likely to be in line with
historical averages and closer to that of fixed-income investments. We have
increased the allocation to bonds and cash to a neutral weight from an
underweighted position. This asset allocation strategy was a positive addition
to performance results.
EQUITY HOLDINGS
Equity investment results benefited from being overweighted in industries
such as: oil services, cement, trucking, and retail drugstores. Specific
holdings that added to results are Cooper Cameron, Coflexip A.D.S., Bouygues
Offshore A.D.S., Lone Star Industries, Southdown, Yellow Corp., CNF
Transportation, CVS, and Rite Aid. Relative performance results were
penalized by holdings including Fruit of the Loom, Cl. A, La Quinta Inns, NIKE,
Cl. B, and Motorola.
FIXED INCOME HOLDINGS
The fixed-income portfolio was positioned with duration at times moderately
longer than the Lehman Brothers Aggregate Bond Index benchmark and at times
moderately shorter. On balance, the timing of these moves added to the Fund's
returns. The Fund also benefited from an allocation to high yield securities and
mortgage related securities. The allocation to corporate bonds had a near
neutral impact on performance.
<PAGE>
As always, our objective is to maximize total return of the Fund through
asset allocation and management of the equity, fixed income, and cash portions
of the fund. It is both an honor and a pleasure to be managing your investment
assets.
Sincerely,
/s/ Kevin M. McClintock
Kevin M. McClintock
Senior Portfolio Manager
November 18, 1997
November 18, 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 alone. We have
combined the performance of unmanaged indices that 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
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
benchmark percentages.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments October 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Bonds and Notes--17.7% Amount Value
- ------------------------------------------------------------------------------- ------------- -----------
<S> <C> <C> <C>
Commercial Mortgage--1.3% GMAC Commercial Mortgage Securities,
Mortgage Pass-Through Ctfs.,
Ser. 1996-C1, Cl. E, 7.86%, 2006........... $ 1,000,000 $ 1,014,280
-----------
Financial--3.3% Evans Withycombe, Notes,
7.50%, 2004................................ 650,000 682,243
Hyatt Equities, Notes,
6.80%, 2000................................ 500,000 507,977
Industrial Financial, Notes,
7.50%, 2007................................ 500,000 475,579
Presidential Life, Sr. Notes,
9.50%, 2000................................ 850,000 880,644
-----------
2,546,443
-----------
Industrial--4.7% Dual Drilling, Sr. Sub. Notes,
9.875%, 2004............................... 500,000 538,750
Emcor Group, Notes,
11%, 2001.................................. 530,197 559,358
Fairchild, Sub. Deb.,
12%, 2001.................................. 2,000,000 2,020,000
Philip Morris Cos., Notes
6.95%, 2006................................ 500,000 512,944
-----------
3,631,052
-----------
Residential Mortgage--1.6% Norwest Asset Securities,
Mortgage Pass-Through Ctfs.:
Ser. 1997-11, B-2, 7%, 2027............. 527,000 520,577
Ser. 1997-11, B-3, 7%, 2027............. 753,000 691,113
-----------
1,211,690
-----------
Utilities--1.6% Indiantown Cogeneration, L.P.,
9.77%, 2020................................ 1,000,000 1,216,773
-----------
U.S. Government Agency/
Mortgage Backed--5.2% Federal Home Loan Mortgage, REMIC,
Multiclass Mortgage Participation Ctfs.;
Ser. 1999, Cl. PW, 7%, 8/5/2026............ 3,755,714(a) 1,028,127
Federal National Mortgage Association,
9%, 2026................................... 736,356 784,220
Federal National Mortgage Association REMIC Trust,
Gtd. Pass-Through Ctfs.:
Ser. 1993-86, Cl. HA, 9.64%, 6/25/2008.. 1,000,000(a) 475,000
Ser. 1997-40, Cl. PF, 7%, 12/18/2026.... 1,000,000(a) 406,250
U.S.Treasury Bonds,
6.375%, 8/15/2027.......................... 1,200,000 1,235,250
-----------
3,928,847
-----------
TOTAL BONDS AND NOTES
(cost $13,328,050)......................... $13,549,085
-----------
-----------
</TABLE>
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks--74.0% Shares Value
- ------------------------------------------------------------------------------- --------------- -----------
<S> <C> <C> <C>
Consumer Durables--1.8% Electrolux, Cl. B............................. 17,200 $ 1,420,730
-----------
Consumer Non-durables--8.8% Dreyer's Grand Ice Cream...................... 42,800 1,770,850
Philip Morris Cos............................. 29,900 1,184,787
Ralston-Purina Group.......................... 15,000 1,346,250
Unilever, N.V................................. 26,400 1,409,100
Wrigley, (Wm) Jr.............................. 14,000 1,013,250
-----------
6,724,237
-----------
Consumer Services--3.3% Paxson Communications, Cl. A.................. 77,600(b) 873,000
Scandinavian Broadcasting System.............. 55,000(b) 1,402,500
Spanish Broadcasting.......................... 1,000 235,000
-----------
2,510,500
-----------
Electronic Technology--5.5% Applied Materials............................. 25,000(b) 834,375
Boeing........................................ 28,500 1,364,437
Intel......................................... 16,300 1,255,100
Micron Technology............................. 30,000(b) 804,375
-----------
4,258,287
-----------
Energy Minerals--3.5% Bouygues Offshore A.D.S....................... 50,000 1,212,500
Tosco......................................... 44,800 1,478,400
-----------
2,690,900
-----------
Finance--13.6% Bankers Trust NY.............................. 12,100 1,427,800
Boston Properties............................. 25,000 800,000
Equitable Cos................................. 20,000 823,750
Equity Office Properties Trust................ 25,000 764,062
Freddie Mac................................... 68,500 2,594,437
NationsBank................................... 13,600 814,300
Nomura Securities............................. 75,000 872,600
Patriot American Hospitality.................. 50,000 1,650,000
Travelers Group............................... 10,000 700,000
-----------
10,446,949
-----------
Health Services--1.3% Manor Care.................................... 30,000 1,029,375
-----------
Health Technology--4.8% Allergan...................................... 33,000 1,086,937
Biogen........................................ 34,600(b) 1,159,100
Genzyme....................................... 51,000 1,396,125
-----------
3,642,162
-----------
Industrial Services--3.8% AES........................................... 26,600(b) 1,054,025
Cooper Cameron................................ 25,600(b) 1,849,600
-----------
2,903,625
-----------
Non-energy Minerals--4.1% Lone Star Industries.......................... 27,700 1,521,769
Southdown..................................... 30,000 1,661,250
-----------
3,183,019
-----------
</TABLE>
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- --------------- -----------
<S> <C> <C> <C>
Process Industries--4.4% Abitibi-Consolidated.......................... 90,000 $ 1,282,500
Stone Container............................... 65,000 784,062
Union Camp.................................... 24,200 1,311,338
-----------
3,377,900
-----------
Producer Manufacturing--10.2% American Standard............................. 23,300(b) 832,975
Ingersoll-Rand................................ 48,500 1,888,469
MagneTek...................................... 116,000(b) 2,356,250
Tyco International............................ 40,000 1,510,000
Xerox ........................................ 15,200 1,205,550
-----------
7,793,244
-----------
Retail Trade--4.1% CVS........................................... 26,700 1,637,044
Rite Aid...................................... 25,000 1,484,375
-----------
3,121,419
-----------
Transportation--3.5% OMI........................................... 100,000(b) 1,193,750
Teekay Shipping............................... 47,000 1,504,000
-----------
2,697,750
-----------
Utilities--1.3% Sabesp........................................ 5,200 962,090
-----------
TOTAL COMMON STOCKS
(cost $ 52,922,901)........................ $56,762,187
-----------
-----------
Preferred Stocks--2.2%
- -------------------------------------------------------------------------------
Industrial; Spanish Broadcasting System
(cost $1,486,051).......................... 1,566 $ 1,659,960
-----------
-----------
Principal
Convertible Bonds and Notes--2.1% Amount
- ------------------------------------------------------------------------------- ---------------
Industrial; Rite Aid, Notes,
5.25%, 2002................................ $ 1,000,000 $ 1,077,500
Scandinavian Broadcasting System, Sub. Deb.,
7.25%, 2005................................ 500,000 523,750
-----------
TOTAL CONVERTIBLE BONDS AND NOTES
(cost $1,502,864).......................... $ 1,601,250
-----------
-----------
</TABLE>
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments (continued) October 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal
Short-Term Investments--2.6% Amount Value
- ------------------------------------------------------------------------------- ----------------- -------------
<S> <C> <C> <C>
U.S. Treasury Bills: 4.86%, 12/11/97............................... $ 390,000(c) $ 387,886
4.90%, 12/26/97............................... 180,000(c) 178,625
5.03%, 1/8/98................................. 563,000 557,612
5%, 1/22/98................................... 865,000 854,802
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,979,171).......................... $ 1,978,925
-----------
-----------
TOTAL INVESTMENTS (cost $71,219,037)........................................... 98.6% $75,551,407
------ -----------
------ -----------
CASH AND RECEIVABLES (NET)..................................................... 1.4% $ 1,107,703
------ -----------
------ -----------
NET ASSETS..................................................................... 100.0% $76,659,110
------ -----------
------ -----------
<FN>
Notes to Statement of Investments:
- --------------------------------------------------------------------------------
(a) Notional face amount shown.
(b) Non-income producing.
(c) Held by custodian in a segregated account as collateral for open futures
position.
</TABLE>
Statement of Financial Futures October 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Market Value Unrealized
Covered Appreciation
Contracts by Contracts Expiration at 10/31/97
--------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury 5 Year Notes (long)................ 73 7,913,656 December '97 $125,594
S&P 500 (short).................................. 32 14,784,000 December '97 37,000
--------
$162,594
--------
--------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Cost Value
------------ ------------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $71,219,037 $75,551,407
Cash............................................. 110,564
Receivable for investment securities sold........ 5,743,021
Dividends and interest receivable................ 281,841
Receivable for shares of Common Stock subscribed. 5,000
Prepaid expenses................................. 5,215
-----------
81,697,048
-----------
LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 53,012
Due to Distributor............................... 16,714
Payable for investment securities purchased...... 4,555,603
Net unrealized depreciation on forward currency
exchange contracts--Note 4(a).................. 14,072
Payable for shares of Common Stock redeemed...... 87,060
Payable for futures variation margin--Note 4(a).. 266,378
Accrued expenses................................. 45,099
-----------
5,037,938
-----------
NET ASSETS..................................................................... $76,659,110
-----------
-----------
REPRESENTED BY: Paid-in capital.................................. $55,649,010
Accumulated undistributed investment income--net. 797,980
Accumulated net realized gain (loss) on investments 15,731,527
Accumulated net unrealized appreciation
(depreciation) on investments and foreign
currency transactions (including $162,594 net
unrealized appreciation on
financial futures)............................. 4,480,593
-----------
NET ASSETS..................................................................... $76,659,110
-----------
-----------
SHARES OUTSTANDING
(300 million shares of $.001 par value Common Stock authorized)................ 4,364,138
NET ASSET VALUE, offering and redemption price per share....................... $17.57
------
------
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Operations Six Months Ended October 31, 1997 (Unaudited)
<TABLE>
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Interest................................... $ 622,120
Cash dividends............................. 373,349
-----------
Total Income............................. $ 995,469
EXPENSES: Management fee--Note 3(a).................. 268,314
Shareholder servicing costs--Note 3(b)..... 115,624
Registration fees.......................... 25,172
Professional fees.......................... 21,552
Directors' fees and expenses--Note 3(c).... 9,778
Custodian fees--Note 3(b).................. 8,046
Prospectus and shareholders' reports....... 6,783
Loan commitment fees--Note 2............... 308
Miscellaneous.............................. 14,121
-----------
Total Expenses........................... 469,698
-----------
INVESTMENT INCOME--NET................................................... 525,771
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments and
foreign currency transactions............ $11,547,743
Net realized gain (loss) on forward currency
exchange contracts....................... 42,540
Net realized gain (loss) on financial futures
Long transactions........................ 76,263
Short transactions....................... 481,562
-----------
Net Realized Gain (Loss)................. 12,148,108
Net unrealized appreciation (depreciation) on
investments and foreign currency
transactions (including $162,968 net unrealized
appreciation on financial futures)....... (768,778)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS................... 11,379,330
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $11,905,101
-----------
-----------
</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, 1997 Year Ended
(Unaudited) April 30, 1997
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Investment income--net................................................. $ 525,771 $ 1,278,329
Net realized gain (loss) on investments................................ 12,148,108 3,602,948
Net unrealized appreciation (depreciation) on investments.............. (768,778) 4,067,820
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations..... 11,905,101 8,949,097
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net................................................. -- (1,364,500)
Net realized gain on investments....................................... -- (2,536,364)
----------- -----------
Total Dividends..................................................... -- (3,900,864)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.......................................... 23,132,696 37,388,539
Dividends reinvested................................................... -- 3,751,463
Cost of shares redeemed................................................ (19,234,413) (48,272,464)
----------- -----------
Increase (Decrease) in Net Assets from Capital Stock Transactions... 3,898,283 (7,132,462)
----------- -----------
Total Increase (Decrease) in Net Assets.......................... 15,803,384 (2,084,229)
NET ASSETS:
Beginning of Period.................................................... 60,855,726 62,939,955
----------- -----------
End of Period.......................................................... $76,659,110 $60,855,726
----------- -----------
----------- -----------
Undistributed investment income--net...................................... $ 797,980 $ 272,209
----------- -----------
Shares Shares
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 1,388,548 2,577,794
Shares issued for dividends reinvested................................. -- 272,042
Shares redeemed........................................................ (1,168,831) (3,370,046)
----------- -----------
Net Increase (Decrease) in Shares Outstanding....................... 219,717 (520,210)
----------- -----------
----------- -----------
</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
October 31, 1997 Year Ended April 30,
------------------------------------
PER SHARE DATA: (Unaudited) 1997 1996 1995 1994(1)
----------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $14.68 $13.49 $13.81 $12.49 $12.50
------ ------ ------ ------ ------
Investment Operations:
Investment income--net................................ .12 .33 .32 .39 .24
Net realized and unrealized gain (loss) on investments 2.77 1.83 1.70 1.35 (.11)
------ ------ ------ ------ ------
Total from Investment Operations...................... 2.89 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........................ $17.57 $14.68 $13.49 $13.81 $12.49
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN.................................. 19.69%(2) 16.49% 15.67% 14.22% .99%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............... .66%(2) 1.31% 1.25% .67% .16%(2)
Ratio of net investment income to average net assets.. .74%(2) 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............................... 119.18%(2) 223.50% 370.06% 160.11% --
Average commission rate paid(3)....................... $.0657 $.0538 -- -- --
Net Assets, end of period (000's Omitted)............. $76,659 $60,856 $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 May 1, 1996, the Fund is required 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") is the distributor of the
Fund's shares, which are sold to the public without a sales charge.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: 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 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.
(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.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(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 $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. For the period ended October
31, 1997, the Fund did not borrow under the Facility.
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
October 31, 1997, the Fund was charged $89,438 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 October 31, 1997, the Fund was charged $19,066 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement to provide custodial
services for the Fund. During the period ended October 31, 1997, the Fund was
charged $8,046 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 October 31, 1997 amounted to
$84,481,098 and $82,170,687, respectively.
<PAGE>
Dreyfus Asset Allocation Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following summarizes open forward currency exchange contracts at October
31, 1997:
<TABLE>
<CAPTION>
Foreign
Currency Unrealized
Forward Currency Exchange Contracts Amounts Proceeds Value (Depreciation)
- ----------------------------------- --------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Sales:
- ------
Japanese Yen, expiring 12/30/97....... 119,520,000 $1,000,000 $1,001,340 ($ 1,340)
Swedish Krona, expiring 1/21/98....... 5,378,000 705,879 718,611 (12,732)
--------
Total.............................. ($14,072)
--------
--------
</TABLE>
The Fund enters into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings. When executing forward currency exchange contracts, the Fund
is obligated to buy or sell a foreign currency at a specified rate on a certain
date in the future. With respect to sales of forward currency exchange
contracts, the Fund would incur a loss if the value of the contract increases
between the date the forward contract is opened and the date the forward
contract is closed. The Fund realizes a gain if the value of the contract
decreases between those dates. With respect to purchases of forward currency
exchange contracts, the Fund would incur a loss if the value of the contract
decreases between the date the forward contract is opened and the date the
forward contract is closed. The Fund realizes a gain if the value of the
contract increases between those dates. The Fund is also exposed to credit risk
associated with counter party nonperformance on these forward currency exchange
contracts which is typically limited to the unrealized gain on each open
contract.
The Fund may invest in financial futures contracts in order to gain exposure
to or protect against changes in the market. The Fund is exposed to market risk
as a result of changes in the value of the underlying financial instruments (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 October 31, 1997, and their related unrealized appreciation are set forth in
the Statement of Financial Futures.
(B) At October 31, 1997, accumulated net unrealized appreciation on
investments, forward currency exchange contracts and financial futures was
$4,480,892, consisting of $6,536,875 gross unrealized appreciation and
$2,055,983 gross unrealized depreciation.
At October 31, 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).
<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. 550SA9710
