Dreyfus
Asset Allocation
Fund, Inc.
ANNUAL REPORT
April 30, 1999
<PAGE>
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the fund's other service providers do not properly
process and calculate date-related information from and after January 1,
2000. The Dreyfus Corporation is working to avoid Year 2000-related problems
in its systems and to obtain assurances from other service providers that
they are taking similar steps. In addition, issuers of securities in which
the fund invests may be adversely affected by Year 2000-related problems.
This could have an impact on the value of the fund's investments and its
share price.
<PAGE>
Contents
THE FUND
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2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
8 Statement of Investments
16 Statement of Assets and Liabilities
17 Statement of Operations
18 Statement of Changes in Net Assets
19 Financial Highlights
20 Notes to Financial Statements
25 Report of Independent Auditors
26 Important Tax Information
FOR MORE INFORMATION
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Back Cover
<PAGE>
Dreyfus Asset The Fund
Allocation Fund, Inc.
LETTER FROM THE PRESIDENT
- -------------------------
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Asset Allocation
Fund, Inc., covering the one year period from May 1, 1998 through April 30,
1999. Inside, you'll find valuable information about how the Fund was managed
during the reporting period, including a discussion with the Fund's portfolio
manager, Steven Falci.
On the equity side, the past year has been rewarding for many investors.
Strong economic growth, low inflation and high levels of consumer spending
supported continued strength in the stocks of many large companies. As a
result, several major market indices set new records, including the Dow Jones
Industrial Average's first-ever close above the 10,000 level. The broader S&P
500 Index and the technology-laden NASDAQ Index also recorded new highs.
Through much of the reporting period the stock market's advance remained
relatively narrow, confined to a handful of highly valued growth and
technology stocks. However, in April, some previously out-of-favor market
sectors rallied strongly, including large-cap value stocks as well as small-
and mid-cap stocks.
Fixed-income securities provided mixed results in this economic climate.
While U.S. Treasury securities rallied strongly last summer when stocks and
other types of bonds fell, they subsequently lost most of their gains. Other
types of bonds performed well, however, as investors shifted assets back into
bond market sectors they had previously avoided. Accordingly, many corporate
bonds, mortgage-backed securities, asset-backed securities and U.S. dollar-
denominated foreign bonds provided attractive returns over the reporting
period.
We appreciate your confidence over the past fiscal year.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
May 13, 1999
2
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DISCUSSION OF FUND PERFORMANCE
- ------------------------------
Steven Falci, Portfolio Manager
How did Dreyfus Asset Allocation Fund, Inc.
perform relative to its benchmark?
For the 12-month period ended April 30, 1999, Dreyfus Asset Allocation Fund,
Inc. produced a total return of -3.95%. (1) This compares with a total return of
21.83% for the Standard & Poor's 500 Composite Stock Price Index ("S&P
500"), (2) which is made up entirely of common stocks, and a total return of
6.27% for the Lehman Brothers Aggregate Bond Index. (3) However, we believe that
a more accurate measure of the performance of the Fund is against a special
customized blend index, (4) which, like the Fund, is composed of stocks, bonds
and cash equivalents. The blended benchmark index provided a total return of
14.44% during the same period.
During February 1999, we instituted changes to the portfolio's management
team and investment strategy. For example, we increased the number of stock
and bond holdings because we believe a well-diversified portfolio could help
reduce risks associated with declines in any particular market, industry or
security. In the common stock portion of the portfolio, we increased the
number of holdings from approximately 20 names as of January 1, 1999 to
approximately 110 names as of April 30, 1999. On the bond side, we increased
the number of holdings from approximately 20 to approximately 100 names as of
the same dates.
In addition, we trimmed the percentage of the Fund's assets that were
invested in the stock component, choosing instead to place a greater emphasis
on the bond market. We made this change primarily because of our belief that
the stock market was overvalued.
What is the Fund's investment approach?
Our "neutral" allocation is 55% stocks, 35% bonds and 10% short-term money
market instruments. However, the Fund is permitted to invest up to 80%, and
as little as 40%, of its assets in stocks, up to 60%,
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (continued)
and as little as 20%, of its assets in bonds, and up to 40%, and as little as 0%
of its assets in short-term money market instruments.
When selecting stocks for the portfolio, we use a valuation model that
identifies and ranks stocks within their industries typically based on the
stocks' value, growth rates and financial profiles. We then attempt to
diversify across companies and industries, and by maintaining risk
characteristics -- such as growth rate, size, quality and dividend yield --
that are similar to those of the S&P 500.
When choosing bonds for the portfolio, we review economic, market and other
data to determine valuations by bond market sector, maturity and credit
quality. The Fund's bond component is well diversified and, as of April 30,
1999, consisted of approximately 25% U.S. Treasuries, approximately 50%
agency bonds, most of which are mortgage-backed securities and approximately
25% corporate bonds. As a matter of policy, we strive to keep the Fund's
average duration neutral to its benchmark, which was 4.6 years on April 30.
What other factors influenced the Fund's performance?
While the Fund underperformed its benchmark, the portfolio produced solid
gains from some of the best performing companies in the S&P 500, most notably
America Online and Microsoft. These two stocks are credited with producing a
full third of the Index's advance in the first quarter of 1999. In addition,
our holdings within the consumer cyclicals market sector, including Ford
Motor and Wal-Mart Stores, provided attractive returns for the Fund. The
Fund's utility stocks also performed well, especially those related to the
telecommunications industry, including MCI WorldCom. On the other hand,
several stocks within the basic industries and consumer staples areas
disappointed.
Our best fixed-income returns came from corporate bonds and mortgage-backed
securities, while our U.S. Treasury holdings produced
4
<PAGE>
modest returns. That's because when the Federal Reserve Board trimmed short-term
interest rates by a total of three-quarters of a percentage point last fall, it
caused bond prices, which move inversely to interest rates, to rise.
What is the Fund's current strategy?
As of April 30, 1999, we allocated approximately 40% of the Fund's assets to
stocks while approximately 60% were invested in bonds. This represents a
notable shift from the portfolio's stance at the beginning of 1999, at which
time approximately 60% of the portfolio's assets were invested in stocks and
approximately 40% were invested in bonds.
May 13, 1999
1 Total return includes reinvestment of dividends and any capital gains
paid.
2 SOURCE: LIPPER ANALYTICAL SERVICES, INC.--Reflects the reinvestment of
income dividends and, where applicable, capital gains paid. The Standard
& Poor's 500 Composite Stock Price Index is a widely accepted unmanaged
index of U.S. stock market performance.
3 SOURCE: LEHMAN BROTHERS--Reflects the reinvestment of dividends and
capital gains. The Lehman Brothers Aggregate Bond Index is a widely
accepted unmanaged index of corporate, government and government agency
debt instruments, mortgage-backed securities and asset-backed securities.
4 The customized blended index has been prepared by the Fund and is intended
to be a more accurate comparison to the 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.
The Fund 5
<PAGE>
FUND PERFORMANCE
[INSERT GRAPH]
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$33,622
Standard & Poor's
500 Composite
Stock Price Index*
$23,017
Customized Blended Index**
$20,054
Dreyfus Asset Allocation Fund, Inc.
Comparison of change in value of $10,000 investment in the Fund and the
Standard & Poor's 500 Composite Stock Price Index and a customized blended
index
Past performance is not predictive of future performance.
* Source: Lipper Analytical Services, Inc.
** Source: Lipper Analytical Services, Inc., Lehman Brothers and Bank Rate
Monitor
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 on that
date in the Standard & Poor's 500 Composite Stock Price Index (S&P 500), 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. The Customized Blended Index
is calculated on a year-to-year basis. 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 S&P 500 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 S&P 500, 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.
6
<PAGE>
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Average Annual Total Returns as of 4/30/99
[CAPTION]
Inception
1 Year 5 Years (7/31/93)
- ---------------------------------------------------------------------
Fund (3.95)% 14.71% 12.68%
Past performance is not predictive of future performance.
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS
April 30, 1999
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Principal
Bonds and Notes--55.1% Amount($) Value ($)
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Finance--8.0%
Associates Corp. of North America, Sr. Notes:
7.50%, 2002 550,000 575,665
6.25%, 2008 600,000 595,338
Atlantic Richfield, Notes,
5.55%, 2003 500,000 497,205
BankAmerica, Sr. Notes,
5.875%, 2009 500,000 481,151
Ford Motor Credit, Sr. Notes,
5.75%, 2004 500,000 494,987
Frank Russell, Notes,
5.625%, 2009 750,000 a 720,575
Household Finance, Sr. Unsub. Notes,
5.875%, 2009 300,000 286,065
Hyatt Equities, Notes,
Series MTN, 6.80%, 2000 500,000 a 503,695
International Lease Finance, Notes,
5.625%, 2002 500,000 499,740
NationsBank Credit Card Master Trust, Notes,
Ser. 1995-1, Cl. A, 6.45%, 2003 500,000 509,695
5,164,116
Industrial--3.9%
Archer Daniels Midland, Deb.,
6.75%, 2027 600,000 595,846
Clear Channel Communications, Deb.,
6.875%, 2018 435,000 413,647
Monsanto, Deb.,
6.60%, 2028 500,000 a 471,975
Philip Morris Cos., Notes,
6.95%, 2006 500,000 514,557
Viacom, Sr. Notes,
7.75%, 2005 500,000 530,494
2,526,519
Utilities--3.7%
AT&T, Notes,
5.625%, 2004 500,000 495,812
National Rural Utilities Cooperative Finance,
Collateral Trust,
5.50%, 2005 300,000 293,403
Niagara Mohawk Power, Sr. Discount Notes,
Series H, 8.50%, 2010 500,000 387,006
8
<PAGE>
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Principal
Bonds and Notes (continued) Amount($) Value ($)
- -------------------------------------------------------------------------------
Utilities (continued)
Peco Energy Transition Trust, Notes,
Ser. 1999--A, Cl. A2, 5.63%, 2005 500,000 497,585
Public Service Electric and Gas, First Mortgage,
8.875%, 2003 500,000 547,611
U.S. West Capital Funding, Gtd.,
6.875%, 2028 200,000 198,421
2,419,838
U.S. Government & Agencies--39.5%
Federal Home Loan Bank, Sr. Notes:
Ser. 100, 5.125%, 9/15/2003 300,000 294,525
Ser. 100, 5.80%, 9/2/2008 500,000 494,287
788,812
Federal Home Loan Mortgage Corp.,
Real Estate Mortgage Investment Conduit:
7%, 8/1/2008 23,421 24,058
7%, 11/1/2012 509,899 522,326
6%, 2/1/2013 128,377 127,615
6.50%, 7/1/2013 597,534 603,880
7%, 12/1/2023 220,000 b 223,230
7.50%, 8/1/2027 95,805 98,859
6.50%, 9/1/2028 99,206 98,834
6%, 1/1/2029 598,328 580,935
7%, 2/1/2029 196,402 199,470
6.50%, 3/1/2029 948,686 944,237
7%, 3/1/2029 699,473 710,399
6.50%, 4/1/2029 425,000 423,007
4,556,850
Federal National Mortgage Association:
6.50%, 12/1/1999 218,819 219,366
5.625%, 3/15/2001 300,000 301,848
5.375%, 3/15/2002 500,000 500,030
5.25%, 1/15/2003 600,000 594,000
5.25%, 1/15/2009 750,000 715,373
7.50%, 10/1/2011 188,440 195,036
8%, 5/1/2013 99,630 103,086
6.50%, 6/1/2013 98,701 99,595
6%, 8/1/2013 893,153 885,616
5.50%, 2/1/2014 246,755 239,738
8%, 9/1/2026 578,437 604,103
7.50%, 9/1/2027 53,848 55,447
7.50%, 10/1/2028 693,077 713,003
The Fund 9
<PAGE>
STATEMENT OF INVESTMENTS (continued)
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Principal
Bonds and Notes (continued) Amount($) Value ($)
- -------------------------------------------------------------------------------
Federal National Mortgage Association (continued)
6.50%, 11/1/2028 998,920 993,297
7%, 11/1/2028 999,075 1,013,742
6.50%, 12/1/2028 99,881 99,319
6%, 2/1/2029 250,000 242,500
6%, 3/1/2029 499,062 484,090
6.50%, 4/1/2029 499,492 496,680
8,555,869
Government National Mortgage Association I:
9%, 10/15/2016 99,495 107,237
9%, 2/15/2023 104,680 112,335
9%, 2/15/2025 301,311 322,403
8%, 8/15/2026 469,960 491,987
7%, 6/15/2028 749,245 762,590
6%, 11/15/2028 99,832 96,837
6%, 1/15/2029 199,763 193,771
7.50%, 1/15/2029 599,504 618,610
8.50%, 1/15/2029 350,000 370,234
7%, 2/15/2029 149,104 151,574
6.50%, 3/15/2029 599,457 596,460
3,824,038
U.S. Treasury Bonds:
11.875%, 11/15/2003 300,000 377,862
12.375%, 5/15/2004 135,000 176,289
11.625%, 11/15/2004 170,000 220,125
11.25%, 2/15/2015 200,000 310,564
9.875%, 11/15/2015 150,000 212,610
7.25%, 5/15/2016 100,000 114,379
7.50%, 11/15/2016 100,000 117,210
8.75%, 5/15/2017 250,000 327,765
8.875%, 2/15/2019 150,000 201,032
8.125%, 8/15/2019 150,000 188,533
8.75%, 8/15/2020 100,000 133,832
8.125%, 5/15/2021 150,000 189,978
7.625%, 11/15/2022 300,000 364,062
7.125%, 2/15/2023 160,000 184,192
6.25%, 8/15/2023 200,000 208,422
7.50%, 11/15/2024 100,000 120,819
6.875%, 8/15/2025 100,000 112,784
6.50%, 11/15/2026 100,000 108,115
6.625%, 2/15/2027 100,000 109,980
5.50%, 8/15/2028 100,000 95,247
3,873,800
10
<PAGE>
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Principal
Bonds and Notes (continued) Amount($) Value ($)
- -------------------------------------------------------------------------------
U.S. Treasury Notes:
5.375%, 7/31/2000 200,000 200,974
4.50%, 1/31/2001 200,000 198,136
5.25%, 1/31/2001 550,000 551,677
7.50%, 11/15/2001 500,000 527,680
6.625%, 4/30/2002 300,000 311,871
5.75%, 11/30/2002 200,000 203,278
5.625%, 12/31/2002 200,000 202,584
5.25%, 8/15/2003 200,000 199,982
7.50%, 2/15/2005 100,000 110,620
6.50%, 8/15/2005 200,000 212,012
7%, 7/15/2006 680,000 743,281
6.25%, 2/15/2007 150,000 157,808
6.125%, 8/15/2007 260,000 271,729
5.50%, 2/15/2008 180,000 181,229
4,072,861
Total Bonds and Notes
(cost $35,911,880) 35,782,703
Common Stocks--43.4% Shares Value ($)
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Basic Industries--1.4%
Centex 1,600 58,500
Dow Chemical 2,300 301,731
Georgia Pacific Group 3,000 277,500
USG 1,200 70,050
Union Carbide 3,800 197,125
904,906
Capital Spending--11.3%
America Online 3,200 d 456,800
Applied Materials 1,300 d 69,712
BMC Software 5,000 d 215,312
Boeing 3,700 150,312
Cisco Systems 3,900 d 444,844
Compuware 3,800 d 92,625
Dell Computer 10,100 d 415,994
EMC 2,300 d 250,556
General Dynamics 2,900 203,725
General Electric 5,300 559,150
The Fund 11
<PAGE>
STATEMENT OF INVESTMENTS (continued)
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Principal
Common Stocks (continued) Amount($) Value ($)
- -------------------------------------------------------------------------------
Capital Spending (continued)
Hewlett-Packard 3,900 307,612
Ingersoll-Rand 4,100 283,669
Intel 15,200 930,050
International Business Machines 1,700 355,619
Lexmark International Group 2,500 d 308,750
Lucent Technologies 8,500 511,063
Microsoft 14,300 d 1,162,769
Oracle 10,200 d 276,038
Sundstrand 500 35,875
Tellabs 1,800 d 197,213
USWeb 4,000 d 89,750
7,317,438
Consumer Cyclical--6.6%
AT&T--Liberty Media Group, Cl. A 8,840 d 564,655
Federal-Mogul 1,600 70,200
Federated Department Stores 2,500 d 116,719
Ford Motor 7,600 485,925
Fox Entertainment Group 3,600 d 92,250
Gannett 3,600 254,925
Gap 4,600 306,187
General Motors 2,200 195,663
Infinity Broadcasting, Cl. A 6,900 d 191,044
Mattel 4,500 116,437
NIKE, Cl. B 1,900 118,156
Safeway 5,100 d 275,081
Staples 4,100 d 123,000
TJX Cos. 8,800 293,150
Time Warner 2,100 147,000
Tommy Hilfiger 1,600 d 111,800
Tribune 1,000 83,437
Wal-Mart Stores 16,200 745,200
4,290,829
Consumer Staples--3.3%
Anheuser-Busch Cos. 1,400 102,375
Coca-Cola 5,100 346,800
Eastman Kodak 2,800 208,950
IBP 4,300 87,075
Kimberly-Clark 5,500 337,219
12
<PAGE>
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Principal
Common Stocks (continued) Amount($) Value ($)
- -------------------------------------------------------------------------------
Consumer Staples (continued)
Philip Morris Cos. 7,000 245,437
Proctor & Gamble 2,500 c 234,531
Ralston--Purina 5,600 170,800
Sara Lee 7,500 166,875
Unilever, N.V. 4,000 259,750
2,159,812
Energy Related--2.8%
Chevron 1,500 149,625
Coastal 4,400 168,300
Diamond Offshore Drilling 2,000 66,125
El Paso Energy 2,800 102,900
Exxon 8,800 730,950
Royal Dutch Petroleum 5,300 311,044
Sunoco 2,800 100,100
Transocean Offshore 3,100 92,031
UtiliCorp United 3,300 80,644
1,801,719
Health Care--4.9%
Abbott Laboratories 11,200 542,500
Amgen 6,500 d 399,343
Biomet 2,900 118,900
Bristol-Myers Squibb 7,500 476,719
Immunex 1,400 d 133,700
Johnson & Johnson 5,600 546,000
Lilly (Eli) 2,800 206,150
Schering-Plough 8,700 420,319
Warner-Lambert 3,200 217,400
Wellpoint Health Networks 1,900 d 133,475
3,194,506
Interest Sensitive--7.9%
Allstate 7,900 287,363
Ambac Financial Group 2,500 150,937
American Express 1,300 169,894
BankBoston 2,900 142,100
Bank One 5,300 312,700
Bank of America 3,600 259,200
Chase Manhattan 6,700 554,425
Citigroup 6,700 504,175
The Fund 13
<PAGE>
STATEMENT OF INVESTMENTS (continued)
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Principal
Common Stocks (continued) Amount($) Value ($)
- -------------------------------------------------------------------------------
Interest Sensitive (continued)
Comerica 3,400 221,212
Edwards (A.G.) 1,700 59,500
Everest Reinsurance Holdings 6,000 181,875
Fannie Mae 4,500 319,219
Fleet Financial Group 6,300 271,294
Golden West Financial 1,100 110,138
Jefferson-Pilot 1,300 87,587
MBNA 4,000 112,750
MGIC Investment 1,800 87,412
Merrill Lynch 2,200 184,663
Morgan Stanley Dean Witter 2,600 257,888
NAC Re 5,000 272,500
SLM Holding 5,100 217,706
SunTrust Banks 2,600 185,900
Transamerica 1,100 78,375
UnionBanCal 2,000 68,250
5,097,063
Metals & Mining--.4%
Alcoa 2,900 180,525
USX-U.S. Steel Group 2,300 69,575
250,100
Transportation--.4%
Burlington Northern Santa Fe 4,300 157,487
Delta Air Lines 2,100 133,219
290,706
Utilities--4.4%
AT&T 4,200 212,100
AirTouch Communications 4,400 d 410,850
Ameren 2,600 100,588
Ameritech 9,100 622,781
BellSouth 9,600 429,600
Consolidated Edison 3,200 145,400
FPL Group 3,600 202,950
MCI WorldCom 7,900 d 649,281
Pinnacle West Capital 2,600 100,913
2,874,463
Total Common Stocks
(cost $25,650,606) 28,181,542
14
<PAGE>
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Principal
Short-Term Investments--14% Amount($) Value ($)
- -------------------------------------------------------------------------------
U.S. Treasury Bills:
4.23%, 6/10/99 586,000 583,167
4.34%, 6/24/99 351,000 348,689
Total Short-Term Investments
(cost $931,933) 931,856
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Total Investments (cost $62,494,419) 99.9% 64,896,101
Cash and Receivables (Net) .1% 19,762
Net Assets 100.0% 64,915,863
a Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30, 1999,
these securities amounted to $1,696,245 or approximately 2.6% of net assets.
b Purchased on a forward commitment basis.
c Held by the custodian in a segregated account as collateral for securities
purchased on a forward commitment basis.
d Non-income producing.
See notes to financial statements.
The Fund 15
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
Cost Value
- -------------------------------------------------------------------------------
Assets ($):
Investments in securities--See Statement of Investments 62,494,419 64,896,101
Cash 97,256
Receivable for investment securities sold 1,009,836
Dividends and interest receivable 473,649
Prepaid expenses 9,727
66,486,569
- -------------------------------------------------------------------------------
Liabilities ($):
Due to The Dreyfus Corporation and affiliates 46,458
Due to Distributor 13,717
Payable for investment securities purchased 1,273,968
Payable for shares of Common Stock redeemed 185,737
Accrued expenses 50,826
1,570,706
- -------------------------------------------------------------------------------
Net Assets ($) 64,915,863
- -------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 62,061,162
Accumulated undistributed investment income--net 1,538,112
Accumulated net realized gain (loss) on investments (1,085,093)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4(b) 2,401,682
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Net Assets ($) 64,915,863
- -------------------------------------------------------------------------------
Shares Outstanding
(300 million shares of $.001 par value Common Stock authorized) 4,784,550
Net Asset Value, offering and redemption price per share ($) 13.57
See notes to financial statements.
16
<PAGE>
STATEMENT OF OPERATIONS
Year Ended April 30, 1999
- -------------------------------------------------------------------------------
Investment Income ($)
- -------------------------------------------------------------------------------
Income:
Interest 1,848,594
Cash dividends (net of $332 foreign taxes withheld at source) 745,488
Total Income 2,594,082
Expenses:
Management fee--Note 3(a) 587,804
Shareholder servicing costs--Note 3(b) 263,761
Professional fees 56,580
Registration fees 26,994
Directors' fees and expenses--Note 3(c) 20,638
Prospectus and shareholders' reports 18,323
Custodian fees--Note 3(b) 10,809
Loan commitment fees--Note 2 216
Miscellaneous 2,590
Total Expenses 987,715
Investment Income--Net 1,606,367
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 4:
Net realized gain (loss) on investments and foreign
currency transactions (938,847)
Net realized gain (loss) on forward currency exchange contracts 201,788
Net realized gain (loss) on financial futures:
Long transactions (255,600)
Short transactions (231,692)
Net Realized Gain (Loss) (1,224,351)
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions (including $344,519 net
unrealized appreciation on financial futures) (4,941,302)
Net Realized and Unrealized Gain (Loss) on Investments (6,165,653)
Net (Decrease) in Net Assets Resulting From Operations (4,559,286)
See notes to financial statements.
The Fund 17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
Year Ended April 30,
----------------------------
1999 1998
- -------------------------------------------------------------------------------
Operations ($):
Investment income--net 1,606,367 1,223,195
Net realized gain (loss) on investments (1,224,351) 18,637,989
Net unrealized appreciation (depreciation)
on investments (4,941,302) 2,093,613
Net Increase (Decrease) in Net Assets
Resulting from Operatons (4,559,286) 21,954,797
- -------------------------------------------------------------------------------
Dividends to Shareholders From ($):
Investment income--net (500,483) (1,063,176)
Net realized gain on investments (6,174,375) (15,907,775)
Total Dividends (6,674,858) (16,970,951)
- -------------------------------------------------------------------------------
Capital Stock Transactions ($):
Net proceeds from shares sold 13,096,365 48,997,788
Dividends reinvested 6,463,686 16,384,058
Cost of shares redeemed (38,306,372) (36,325,090)
Increase (Decrease) in Net Assets from
Capital Stock Transactions (18,746,321) 29,056,756
Total Increase (Decrease) in Net Assets (29,980,465) 34,040,602
- -------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 94,896,328 60,855,726
End of Period 64,915,863 94,896,328
Undistributed investment income--net 1,538,112 432,228
- -------------------------------------------------------------------------------
Capital Share Transactions (Shares):
Shares sold 924,859 3,100,069
Shares issued for dividends reinvested 491,909 1,167,787
Shares redeemed (2,757,079) (2,287,416)
Net Increase (Decrease) in Shares Outstanding (1,340,311) 1,980,440
See notes to financial statements.
18
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods
indicated. Total return shows how much your investment in the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been derived from the Fund's
financial statements.
- -----------------------------------------------------------------------------
Year Ended April 30,
-------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------
Per Share Data ($):
Net asset value, beginning of period 15.49 14.68 13.49 13.81 12.49
Investment Operations:
Investment income--net .35 .24 .33 .32 .39
Net realized and unrealized
gain (loss) on investments (1.00) 4.40 1.83 1.70 1.35
Total from Investment Operations (.65) 4.64 2.16 2.02 1.74
Distributions:
Dividends from investment income--net (.10) (.24) (.34) (.38) (.37)
Dividends from net realized gain
on investments (1.17) (3.59) (.63) (1.96) (.05)
Total Distributions (1.27) (3.83) (.97) (2.34) (.42)
Net asset value, end of period 13.57 15.49 14.68 13.49 13.81
- -------------------------------------------------------------------------------
Total Return (%) (3.95) 34.33 16.49 15.67 14.22
- -------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of expenses to average net assets 1.26 1.27 1.31 1.25 .67
Ratio of net investment income
to average net assets 2.05 1.57 2.12 2.16 3.00
Decrease reflected in above expense ratios
due to undertakings by the Manager -- -- -- .27 1.27
Portfolio Turnover Rate 294.19 262.74 223.50 370.06 160.11
Net Assets, end of period ($ X 1,000) 64,916 94,896 60,856 62,940 56,639
See notes to financial statements.
The Fund 19
<PAGE>
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, as amended (the "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 (the "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.
On May 6, 1999, the Board of Directors of the Fund and Dreyfus LifeTime
Portfolios, Inc., approved an Agreement and Plan of Reorganization whereby,
subject to approval by the shareholders of the Fund, Dreyfus LifeTime
Portfolios, Inc. -- Growth and Income Portfolio ("LifeTime Growth and Income
Portfolio") will acquire all the assets, subject to the liabilities, of the
Fund, in exchange for a number of LifeTime Growth and Income Portfolio,
Investor Class shares equal to the pro rata net assets of the Fund.
(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 trans-
20
<PAGE>
lated to U.S. dollars at the prevailing rates of exchange. Forward currency
exchange contracts are valued at the forward rate.
(b) Foreign currency transactions. The Fund does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities
of short-term securities, sales of foreign currencies, currency gains or
losses realized on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities,
resulting from changes in exchange rates. Such gains and losses are included
with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custody agreement, the Fund receives net
earnings credits based on available cash balances left on deposit.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net 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 of 1986, as amended (the "Code"). To
the extent that net realized capital gain can be offset by capital loss
carryovers it is the policy of the Fund not to distribute such gain.
The Fund 21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (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 Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $961,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1999. If not
applied, the carryover expires in fiscal 2007.
NOTE 2--Bank Line of Credit:
Effective January 15, 1999, the Fund may borrow up to $20 million for
leveraging purposes under a short-term unsecured line of credit and
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.
Prior to January 15, 1999, the Fund participated 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 had agreed to pay commitment
fees on its pro rata portion of the Facility. Interest was charged to the Fund
at rates based on prevailing market rates in effect at the time of borrowings.
During the period ended April 30, 1999, the Fund had no outstanding borrowings
under either arrangement.
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
22
<PAGE>
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, 1999, the Fund was charged $195,935 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 $43,184 during the period ended April 30, 1999.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended April 30, 1999, $10,809 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, 1999 amounted to
$214,914,980 and $237,819,045, respectively.
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
The Fund 23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
currency exchange contracts, the Fund would incur a loss if the value of the
contract increases between the date the forward contract is opened and the date
the forward contract is closed. The Fund realizes a gain if the value of the
contract decreases between those dates. With respect to purchases of forward
currency exchange contracts, the Fund would incur a loss if the value of the
contract decreases between the date the forward contract is opened and the date
the forward contract is closed. The Fund realizes a gain if the value of the
contract increases between those dates. The Fund is also exposed to credit
risk associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gain on each
open contract. At April 30, 1999, there were no open forward currency exchange
contracts.
The Fund may invest in financial futures contracts in order to gain exposure
to or protect against changes in the market. The Fund is exposed to market
risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the Fund to "mark to
market" on a daily basis, which reflects the change in the market value of the
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. At April 30,
1999, there were no financial futures contracts outstanding.
(b) At April 30, 1999, accumulated net unrealized appreciation on investments
was $2,401,682, consisting of $3,106,953 gross unrealized appreciation and
$705,271 gross unrealized depreciation.
At April 30, 1999, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
24
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Dreyfus Asset Allocation Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Asset Allocation Fund, Inc.
as of April 30, 1999, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years
in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
verification by examination of securities held as of April 30, 1999 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Asset Allocation Fund, Inc. at April 30, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the indicated years, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
New York, New York
June 2, 1999
The Fund 25
<PAGE>
IMPORTANT TAX INFORMATION (Unaudited)
For Federal tax purposes the Fund hereby designates $.345 per share as a long-
term capital gain distribution of the $1.267 per share paid on December 15,
1998.
The Fund also designates 5.073% of the ordinary dividends paid during the
fiscal year ended April 30, 1999 as qualifying for the corporate dividends
received deduction. Shareholders will receive notification in January 2000 of
the percentage applicable to the preparation of their 1999 income tax returns.
26
<PAGE>
For More Information
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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call 1-800-645-6561
By mail Write to:
The Dreyfus
Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
By E-mail Send your request
to [email protected]
On the internet Information
can be viewed online or
downloaded from:
http://www.dreyfus.com
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
(c) 1999 Dreyfus Service Corporation 550AR994
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:
DREYFUS STANDARD
ASSET & POOR'S 500
ALLOCATION COMPOSITE CUSTOMIZED
PERIOD FUND, STOCK BLENDED
INC. 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 11,362
4/30/96 13,342 15,636 13,623
4/30/97 15,542 19,564 15,879
4/30/98 20,878 27,598 20,113
4/30/99 20,054 33,622 23,017
* Source: Lipper Analytical Services, Inc.
**Source: Lipper Analytical Services, Inc., Lehman Brothers
and Bank Rate Monitor
