-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T+umfphXd/S12FEPg+vQba01ipG/9jO50vnGKzcO+ngvZjojocHzR/7v4/iWJhF5 ccnyYoNddCt94Rj7o6iMjA== 0000890341-99-000006.txt : 19991101 0000890341-99-000006.hdr.sgml : 19991101 ACCESSION NUMBER: 0000890341-99-000006 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYFUS BALANCED FUND INC CENTRAL INDEX KEY: 0000890341 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07068 FILM NUMBER: 99736929 BUSINESS ADDRESS: STREET 1: 144 GLENN CURTISS BLVD STREET 2: C/O DREYFUS CORP CITY: UNIONDALE STATE: NY ZIP: 11556 BUSINESS PHONE: 2129226130 N-30D 1 ANNUAL REPORT Dreyfus Balanced Fund, Inc. ANNUAL REPORT August 31, 1999 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the fund's portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value 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. Contents THE FUND - -------------------------------------------------- 2 Letter from the President 3 Discussion of Fund Performance 6 Fund Performance 7 Statement of Investments 14 Statement of Financial Futures 15 Statement of Assets and Liabilities 16 Statement of Operations 17 Statement of Changes in Net Assets 18 Financial Highlights 19 Notes to Financial Statements 24 Report of Independent Auditors 25 Important Tax Information FOR MORE INFORMATION - --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Balanced Fund, Inc. LETTER FROM THE PRESIDENT Dear Shareholder: We are pleased to present this annual report for Dreyfus Balanced Fund, Inc., covering the 12-month period from September 1, 1998 through August 31, 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, Douglas Ramos. The past 12 months have been highly volatile for stocks and bonds, which began the reporting period in the midst of a sharp correction caused primarily by the spread of the global financial crisis in overseas markets. The Federal Reserve Board responded to the crisis last fall by reducing short-term interest rates. Their strategy apparently was effective, and the U.S. economy remained strong through the remainder of the reporting period. Because inflation is more likely to rise in a strong economy, the bond market generally declined during the first eight months of 1999. To help forestall a rise of inflation, the Federal Reserve Board raised short-term interest rates twice during the summer of 1999, effectively reversing most of last fall's interest-rate cuts. These same economic conditions supported stock prices. Beginning in April, higher interest rates caused many previously out-of-favor market sectors to rally strongly. This helped narrow the valuation gap that had developed between growth and value stocks. We appreciate your confidence over the past year, and we look forward to your continued participation in Dreyfus Balanced Fund, Inc. Sincerely, Stephen E. Canter President and Chief Investment Officer The Dreyfus Corporation September 14, 1999 DISCUSSION OF FUND PERFORMANCE Douglas Ramos, Portfolio Manager How did Dreyfus Balanced Fund, Inc. perform relative to its benchmark? For the 12-month period ended August 31, 1999, Dreyfus Balanced Fund, Inc. produced a total return of 19.37%.(1) This compares with the return provided by the fund's Customized Blended Index (the "Index"), which produced a total return of 20.70% . The Standard & Poor' s 500 Composite Stock Price Index, which comprised 50% of the Index, had a total return of 39.81% for the 12 months ended August 31, 1999.(2) The Lehman Brothers Aggregate Bond Index, which comprised 40% of the Index, produced a total return of 0.80%.(3) The Merrill Lynch 3-Month U.S. Treasury Bill Index, which represented 10% of the Index, had a total return of 4.78%.(4) We attribute this performance to the rapid recovery of global capital markets in the wake of last summer's decline, and to the broadening of market strength that occurred during the second half of the reporting period. Additionally, in March, we began to focus on stocks that were selling at what we believed were low and moderate valuations, a strategy that produced positive results for the fund. What is the fund's investment approach? On the equity side, the portfolio invests primarily in mid- and large-sized companies that we believe have above-average growth potential and are attractively valued relative to the S&P 500 Index. While our investment universe generally consists of companies with market capitalizations of $1 billion or greater, over the past six months we have shifted our concentration slightly in favor of stocks with market capitalizations of $5 billion or greater. On the fixed-income side, the fund invests in a well-diversified mix of debt instruments including corporate bonds, mortgage-backed securities, asset-backed securities, U.S. Treasuries and U.S. government agency bonds, as well as commercial mortgage-backed securities. The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) Effective September 15, 1999, the fund modified its allocation parameters of equity and fixed-income investments. The equity securities allocation range, which was previously 45% to 65%, is now 40% to 75%. The fixed-income allocation range, which was previously 25% to 55%, is now 25% to 60%. It is anticipated that the normal allocation will be approximately 60% (up from 50%) in equity investments and 40% in fixed-income investments. The fixed-income allocation will include cash and cash equivalents in light of the deletion of the specific cash and cash-equivalent allocation. Under adverse market conditions, the fund would continue to be permitted to invest up to 100% of its assets in cash and cash equivalents, including money market instruments. As a result, going forward, the fund is changing its Customized Blended Index to one composed of 60% S&P 500 Index and 40% Lehman Brothers Aggregate Bond Index. We believe that this modification in asset allocation will provide the fund with greater portfolio flexibility and, thereby, put the fund in a potentially better position to take advantage of investment opportunities. What other factors influenced the fund's performance? In many ways, the first and second halves of the fund's one-year reporting period experienced widely disparate equity market conditions. Many of the factors that held back the fund's performance during the first six months of the reporting period reversed themselves during the second six months, boosting the fund' s overall returns. Most significantly, in April, market sentiment began to shift away from domestic large-cap growth stocks to include a broader group of companies, including smaller and value-oriented names. The most notable events within the fixed-income markets during the period were two interest rate hikes initiated by the Federal Reserve Board in June and August, 1999. In a rising interest-rate environment, the strongest fixed-income gains were produced by the corporate bond sector, followed by mortgage-backed securities, asset-backed securities, U.S. government agency bonds and U.S. Treasuries. The portfolio's strongest and most consistent gains stemmed from the technology sector, an area that we continued to emphasize throughout the period. In particular, we' ve enjoyed significant gains from our holdings in International Business Machines, Lexmark International Group, Cl.A., Sun Microsystems and Texas Instruments. The fund's second largest gains during the 12-month reporting period came from our healthcare stocks, with Biogen and Perkin-Elmer leading the pack. On the other hand, the fund had several individual holdings that performed poorly due to company-specific reasons. Included in those laggards were Lockheed Martin, a leading diversified technology company, Beverly Enterprises, one of the country' s largest nursing home companies, and XL Capital, Cl.A., a Bermuda-based property and casualty insurance company. Corporate bonds comprised 46% of our fixed-income portfolio as of August 31, which added significantly to the fund's overall returns. We received some of the strongest returns from bonds issued by economically sensitive companies, including energy, paper and forest product companies. In this area, Petroleum Geo-Services, Conoco and International Paper all contributed positively to performance. The fund also benefited from its continued reduction in commercial mortgage-backed securities, a move that was initiated last fall. On the other hand, several of our real estate investment trust (REIT) holdings disappointed due to their lack of liquidity. September 14, 1999 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. (2) SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- REFLECTS THE REINVESTMENT OF INCOME DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAINS DISTRIBUTIONS. 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 -- THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS AN UNMANAGED INDEX OF CORPORATE, U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY DEBT INSTRUMENTS, MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES WITH AN AVERAGE MATURITY OF 1-10 YEARS. (4) SOURCE: BLOOMBERG L.P. -- THE MERRILL LYNCH 3-MONTH U.S. TREASURY BILL INDEX IS CALCULATED USING BILLS THAT MATURE CLOSEST TO, BUT NOT BEYOND, 91 DAYS. The Fund
FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Balanced Fund, Inc. with the Standard & Poor's 500 Composite Stock Price Index, the Lehman Brothers Aggregate Bond Index and a Customized Blended Index - -------------------------------------------------------------------------------- Average Annual Total Returns AS OF 8/31/99 Inception 1 Year 5 Years (9/30/92) - ------------------------------------------------------------------------------------------------------------------------------------ FUND 19.37% 13.18% 11.90% ((+)) SOURCE: LIPPER ANALYTICAL SERVICES, INC. ((+)(+)) SOURCE: LEHMAN BROTHERS. ((+)(+)(+)) SOURCE: LIPPER ANALYTICAL SERVICES, INC., LEHMAN BROTHERS AND MERRILL LYNCH, PIERCE, FENNER AND SMITH INC.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS BALANCED FUND, INC. ON 9/30/92 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE ON THAT DATE IN THREE DIFFERENT INDEXES: (1) THE CUSTOMIZED BLENDED INDEX (2) THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX AND (3) THE LEHMAN BROTHERS AGGREGATE BOND INDEX, WHICH ARE DESCRIBED BELOW. THE CUSTOMIZED BLENDED INDEX IS CALCULATED ON A YEAR-TO-YEAR BASIS. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. DREYFUS BALANCED FUND, INC. SEEKS LONG-TERM CAPITAL GROWTH AND CURRENT INCOME THROUGH INVESTMENT IN EQUITY AND DEBT SECURITIES. THE FUND'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES. THE STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF U.S. STOCK MARKET PERFORMANCE. THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED INDEX OF CORPORATE, GOVERNMENT AND GOVERNMENT AGENCY DEBT INSTRUMENTS, MORTGAGE-BACKED SECURITIES, AND ASSET-BACKED SECURITIES. THE MERRILL LYNCH 3-MONTH U.S. TREASURY BILL INDEX IS CALCULATED USING BILLS THAT MATURE CLOSEST TO, BUT NOT BEYOND 91 DAYS. THE INDICES DO NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE CUSTOMIZED BLENDED INDEX IS COMPOSED OF STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX, 50%, LEHMAN BROTHERS AGGREGATE BOND INDEX, 40%, AND MERRILL LYNCH 3-MONTH U.S. TREASURY BILL INDEX, 10%. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. August 31, 1999 STATEMENT OF INVESTMENTS (STATEMENT OF INVESTMENTS CONTINUED) COMMON STOCKS--60.1% Shares Value ($) - -------------------------------------------------------------------------------- COMMERCIAL SERVICES--.6% McGraw-Hill Cos. 16,000 827,000 Outdoor Systems 8,000 (a) 258,500 1,085,500 CONSUMER DURABLES--1.9% Black & Decker 17,900 941,988 Ford Motor 15,400 802,725 General Motors 8,500 562,062 Leggett & Platt 28,000 619,500 Newell Rubbermaid 14,500 594,500 3,520,775 CONSUMER NON--DURABLES--2.8% Anheuser-Busch Cos. 16,100 1,239,700 Clorox 20,000 905,000 Kimberly-Clark 12,400 706,025 PepsiCo 40,800 1,392,300 Philip Morris Cos. 29,800 1,115,637 5,358,662 CONSUMER SERVICES--4.4% American Tower, Cl. A 23,100 525,525 CBS 20,000(a) 940,000 Carnival 31,500 1,407,656 Cendant 103,500(a) 1,856,531 Gannett 17,000 1,154,937 Hilton Hotel 19,000 232,750 McDonald's 27,900 1,154,363 Time Warner 16,600 984,588 8,256,350 ELECTRONIC TECHNOLOGY--9.2% Apple Computer 2,400(a) 156,600 Applied Materials 10,000 710,625 Cabletron Systems 20,300(a) 341,294 Compaq Computer 18,000 417,375 Computer Sciences 8,600(a) 595,013 Ericsson (LM) Telephone, Cl. B, A.D.R. 23,000 748,937 General Dynamics 8,000 504,000 Hewlett-Packard 9,800 1,032,675 Intel 31,600 2,597,125 The Fund STATEMENT OF INVESTMENTS (CONTINUED) STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - -------------------------------------------------------------------------------- ELECTRONIC TECHNOLOGY (CONTINUED) International Business Machines 21,000 2,615,812 Lexmark International Group, Cl. A 13,300(a) 1,047,375 Motorola 11,600 1,070,100 NCR 14,000 612,500 National Semiconductor 8,000(a) 225,500 Nortel Networks 20,000 821,250 Rockwell International 7,500 443,437 Sun Microsystems 6,000(a) 477,000 Teradyne 9,000(a) 612,563 Texas Instruments 15,000 1,230,938 United Technologies 17,400 1,150,575 17,410,694 ENERGY MINERALS--3.4% Burlington Resources 7,000 292,687 Conoco, Cl. A 23,000 615,250 Exxon 15,000 1,183,125 Mobil 5,900 604,012 Royal Dutch Petroleum, A.D.R. 34,700 2,147,063 Texaco 19,500 1,238,250 USX-Marathon Group 13,000 404,625 6,485,012 FINANCE--9.2% American Express 5,300 728,750 American General 8,100 575,100 American International Group 16,227 1,504,029 Associates First Capital, Cl. A 16,900 579,881 Bank One 11,800 473,475 Bank of America 27,500 1,663,750 CIGNA 13,800 1,239,412 Chase Manhattan 22,500 1,882,969 Citigroup 27,700 1,230,919 Federal Home Loan Mortgage 23,700 1,220,550 Federal National Mortgage Association 26,600 1,652,525 Fleet Financial Group 19,600 780,325 Household International 11,900 449,225 Morgan (J.P.) 5,100 658,856 COMMON STOCKS (CONTINUED) Shares Value ($) - -------------------------------------------------------------------------------- FINANCE (CONTINUED) Morgan Stanley Dean Witter & Co. 12,300 1,055,494 Wells Fargo 29,000 1,154,562 XL Capital, Cl. A 7,500 377,344 17,227,166 HEALTH SERVICES--1.6% Columbia/HCA Healthcare 75,800 1,866,575 Wellpoint Health Networks 14,500(a) 1,056,688 2,923,263 HEALTH TECHNOLOGY--3.6% American Home Products 7,600 315,400 Bristol-Myers Squibb 16,900 1,189,338 Johnson & Johnson 12,100 1,237,225 Lilly (Eli) 21,000 1,567,125 Merck & Co. 20,400 1,370,625 Pharmacia & Upjohn 15,700 820,325 Warner-Lambert 5,000 331,250 6,831,288 INDUSTRIAL SERVICES--.9% Baker Hughes 7,500(a) 255,000 Schlumberger 20,900 1,395,075 1,650,075 NON-ENERGY MINERALS--.2% Alcoa 5,000 322,813 PROCESS INDUSTRIES--1.1% Dow Chemical 10,000 1,136,250 International Paper 13,000 611,813 Mead 5,300 197,756 Rohm & Haas 5,600 209,300 2,155,119 PRODUCER MANUFACTURING--6.8% AlliedSignal 22,800 1,396,500 Emerson Electric 11,000 688,875 General Electric 36,000 4,043,250 Honeywell 13,200 1,498,200 Ingersoll-Rand 8,900 566,262 Masco 47,200 1,336,350 The Fund (STATEMENT OF INVESTMENTS (CONTINUED) STATEMENT OF INVESTMENTS CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - -------------------------------------------------------------------------------- PRODUCER MANUFACTURING (CONTINUED) Tyco International 24,200 2,451,763 Xerox 16,700 797,425 12,778,625 RETAIL TRADE--3.7% Albertson's 21,176 1,015,125 Dayton Hudson 28,800 1,670,400 Federated Department Stores 11,700(a) 538,200 Kroger 31,800(a) 735,375 Lowes 8,600 389,150 May Department Stores 27,600 1,078,125 Safeway 9,800(a) 456,312 TJX Cos. 39,400 1,137,675 7,020,362 TECHNOLOGY SERVICES--2.9% BMC Software 10,100(a) 543,506 Computer Associates International 18,000 1,017,000 Compuware 27,200(a) 821,100 Electronic Data Systems 20,000 1,122,500 Network Associates 21,000(a) 354,375 Oracle 24,000(a) 876,000 Synopsys 12,300(a) 688,031 5,422,512 TRANSPORTATION--.5% AMR 10,000(a) 586,250 Burlington Northern Santa Fe 12,000 348,000 934,250 UTILITIES--7.3% AT&T 37,400 1,683,000 Bell Atlantic 22,600 1,384,250 Coastal 46,700 2,022,694 El Paso Energy 6,600 241,312 Enron 16,000 670,000 GTE 30,800 2,113,650 MCI WorldCom 26,300 1,992,225 Niagara Mohawk Power 15,000(a) 226,875 SBC Communications 34,400 1,651,200 COMMON STOCKS (CONTINUED) Shares Value ($) - -------------------------------------------------------------------------------- UTILITIES (CONTINUED) Sprint 25,000 1,109,375 Texas Utilities 15,000 606,563 13,701,144 TOTAL COMMON STOCKS (cost $95,281,471) 113,083,610
- ------------------------------------------------------------------------------------------------------------------------------------ Principal BONDS AND NOTES--42.1% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ BANKING--2.6% HSBC Holding, Sub. Notes, 7.50%, 7/15/2009 3,000,000 2,973,411 Sanwa Bank, Notes, 8.35%, 7/15/2009 2,000,000 1,985,140 4,958,551 BROADCASTING--1.4% Scandinavian Brothers, Sub. Deb., 7%, 12/1/2004 2,000,000(b) 2,640,000 CHEMICALS--.8% Conoco, Sr. Notes, 6.95%, 4/15/2029 1,700,000 1,567,876 ENERGY--1.4% Dual Drilling, Sr. Sub. Notes, 9.875%,1/15/2004 2,650,000 2,705,388 FINANCE--1.1% Pemex, Bonds, 9.96%, 8/15/2009 2,000,000(b) 1,971,810 FOOD RETAILING--1.8% Fred Meyer, Notes, 7.375%, 3/1/2005 3,400,000 3,376,965 INDUSTRIAL--2.3% ICI Wilmington, Notes, 7.05%, 9/15/2007 1,500,000 1,450,184 International Paper, Deb., 6.875%, 4/15/2009 2,000,000 1,778,550 Saks, Deb., 8.25%, 11/15/2008 1,100,000 1,083,692 4,312,426 INSURANCE--1.1% Frank Russell, Notes, 5.625%,1/15/2009 2,250,000(b) 2,006,604 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - --------------------------------------------------------------------------------------------------------------------------------- OIL SERVICES--.8% Petroleum Geo-Services, Sr. Notes, 7.125%, 3/30/2028 1,700,000 1,494,371 REAL ESTATE--2.3% Crescent Real Estate Trust, Notes, 7.50%, 9/15/2007 5,000,000 4,343,260 TELECOMMUNICATIONS--2.3% Airtouch Communications, Notes, 3,000,000 2,892,870 6.35%, 6/1/2005 Electric Lightwave, Notes, 1,500,000 1,440,347 6.05%, 5/15/2004 4,333,217 TRANSPORTATION--1.5% American West Airlines, Pass-Through Ctfs., Ser.1997,1C, 7.53%,1/2/2004 2,860,462 2,834,474 OTHER--7.6% GMAC Commerical Mortgage Securities, Asset Backed Ctfs., Ser. 1996-Cl. E, 7.86%,9/15/2006 4,000,000 3,780,000 NSCOR, Residential Mortgage Securities: Ser. 1997-11, B1, 7%, 8/25/2027 3,931,128 3,702,455 Ser. 1997-11, B2, 7%, 8/25/2027 342,944 306,682 Ser. 1998-2, B2, 6.50%, 2/25/2028 739,740 616,874 New York City Tax Lien, Collateralized Bonds, Ser. 1997-1, Cl. D, 6.90%, 5/25/2005 759,655(b) 756,332 Residential Funding Mortgage Securities1, Pass-Through Ctfs.: Ser. 1998-S9, Cl. M2, 6.50%, 4/25/2013 1,957,470 1,855,271 Ser. 1998-S9, Cl. M3, 6.50%, 4/25/2013 978,782 920,927 Ser. 1996-s18, Cl. M3, 8%, 10/25/2026 2,346,782 2,298,615 14,237,156 U.S. GOVERNMENT & AGENCIES--15.1% Federal Home Loan Mortgage Corp., Real Estate Mortgage Investment Conduit, Ser. 1497, Cl. FF, 6.50%, 8/15/2021 1,650,000 1,599,296 Federal National Mortgage Association: Notes: 6.50%, 8/15/2004 1,750,000 1,745,163 6.375%, 6/15/2009 8,500,000 8,228,604 Real Estate Mortgage Investment Conduit, Ser. 1996-M3, Cl. A1, 7.385%, 3/25/2021 3,985,841 4,038,952 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - --------------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT & AGENCIES (CONTINUED) U.S. Treasury Bonds, 5.25%, 11/15/2028 1,150,000 995,003 U.S. Treasury Notes: 5%, 4/30/2001 750,000 741,720 5.75%, 6/30/2001 5,000,000 4,998,650 7.25%, 8/15/2004 1,000,000 1,051,970 6%, 8/15/2009 4,967,000 4,974,152 28,373,510 TOTAL BONDS AND NOTES (cost $80,791,057) 79,155,608 - ---------------------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS--2.3% - ---------------------------------------------------------------------------------------------------------------------------------- U.S. TREASURY BILLS: 4.71%, 11/18/1999 353,000(c) 349,382 4.79%, 11/26/1999 4,069,000(c) 4,022,243 TOTAL SHORT-TERM INVESTMENTS (cost $4,371,826) 4,371,625 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (cost $180,444,354) 104.5% 196,610,843 LIABILITIES, LESS CASH AND RECEIVABLES (4.5%) (8,395,596) NET ASSETS 100.0% 188,215,247
(A) NON-INCOME PRODUCING. (B) 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 AUGUST 31,1999, THESE SECURITIES AMOUNTED TO $7,374,746 OR APPROXIMATELY 3.9% OF NET ASSETS. (C) PARTIALLY HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN FINANCIAL FUTURES POSITIONS. SEE NOTES TO FINANCIAL STATEMENTS. The Fund
STATEMENT OF FINANCIAL FUTURES August 31, 1999 Unrealized Market Value Appreciation Covered (Depreciation) Contracts by Contracts ($) Expiration at 8/31/1999 ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL FUTURES LONG: 5 year U.S. Treasury Notes 33 3,561,937 December ' 99 (12,226) 20 year U.S. Treasury Bonds 85 9,687,343 December ' 99 7,968 FINANCIAL FUTURES SHORT: 10 year U.S. Treasury Notes 211 23,074,828 December ' 99 64,289 60,031
SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF ASSETS AND LIABILITIES August 31, 1999 Cost Value - ------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 180,444,354 196,610,843 Cash 168,839 Receivable for investment securities sold 6,912,704 Interest and dividends receivable 1,264,936 Receivable for shares of Common Stock subscribed 21,626 Receivable for futures variation margin--Note 4(a) 264 Prepaid expenses 16,409 204,995,621 - ------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 77,905 Payable for investment securities purchased 8,344,092 Payable for shares of Common Stock redeemed 8,289,317 Accrued expenses 69,060 16,780,374 - ------------------------------------------------------------------------------- NET ASSETS ($) 188,215,247 - ------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 154,340,340 Accumulated undistributed investment income--net 1,598,768 Accumulated net realized gain (loss) on investments 16,049,619 Accumulated net unrealized appreciation (depreciation) on investments (including $60,031 net unrealized appreciation on financial futures)--Note 4(b) 16,226,520 - ------------------------------------------------------------------------------- NET ASSETS ($) 188,215,247 - ------------------------------------------------------------------------------- SHARES OUTSTANDING (300 million shares of $.001 par value Common Stock authorized) 11,397,606 NET ASSET VALUE, offering and redemption price per share ($) 16.51 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF OPERATIONS Year Ended August 31, 1999 - ------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 7,530,425 Cash dividends (net of $17,456 foreign taxes withheld at source) 2,673,216 TOTAL INCOME 10,203,641 EXPENSES: Management fee--Note 3(a) 1,705,742 Shareholder servicing costs--Note 3(b) 815,216 Interest expense--Note 2 73,183 Custodian fees--Note 3(b) 38,018 Prospectus and shareholders' reports 37,746 Professional fees 37,039 Directors' fees and expenses--Note 3(c) 24,801 Registration fees 20,791 Loan commitment fees--Note 2 1,719 Miscellaneous 9,401 TOTAL EXPENSES 2,763,656 INVESTMENT INCOME--NET 7,439,985 - ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments: Long transactions (including foreign currency transactions) 13,484,904 Short sale transactions (1,044) Net realized gain (loss) on forward currency exchange contracts 64,537 Net realized gain (loss) on financial futures 2,045,421 NET REALIZED GAIN (LOSS) 15,593,818 Net unrealized appreciation (depreciation) on investments and foreign currency transactions (including $1,545,569 net unrealized appreciation on financial futures) 35,589,943 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 51,183,761 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 58,623,746 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended August 31, ---------------------------------- 1999 1998 - ------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 7,439,985 10,641,316 Net realized gain (loss) on investments 15,593,818 30,510,001 Net unrealized appreciation (depreciation) on investments 35,589,943 (53,386,750) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 58,623,746 (12,235,433) - ------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net (8,501,407) (9,883,286) Net realized gain on investments (20,122,668) (41,779,620) TOTAL DIVIDENDS (28,624,075) (51,662,906) - ------------------------------------------------------------------------------- CAPITAL STOCK TRANSACTIONS ($): Net proceeds from shares sold 131,420,540 192,954,235 Dividends reinvested 27,427,390 50,648,271 Cost of shares redeemed (360,153,223) (167,442,602) INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS (201,305,293) 76,159,904 TOTAL INCREASE (DECREASE) IN NET ASSETS (171,305,622) 12,261,565 - ------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 359,520,869 347,259,304 END OF PERIOD 188,215,247 359,520,869 Undistributed investment income--net 1,598,768 2,660,190 - ------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): Shares sold 8,145,401 10,899,523 Shares issued for dividends reinvested 1,733,807 3,094,784 Shares redeemed (22,149,613) (9,463,510) NET INCREASE (DECREASE) IN SHARES OUTSTANDING(12,270,405) 4,530,797 SEE NOTES TO FINANCIAL STATEMENTS. The Fund
FINANCIAL HIGHLIGHTS The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended August 31, -------------------------------------------- 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 15.19 18.15 15.13 15.61 13.72 Investment Operations: Investment income--net .87(a) .47 .45 .51 .54 Net realized and unrealized gain (loss) on investments 1.98 (.88) 3.65 .29 1.99 Total from Investment Operations 2.85 (.41) 4.10 .80 2.53 Distributions: Dividends from investment income--net (.45) (.46) (.44) (.53) (.51) Dividends from net realized gain on investments (1.08) (2.09) (.64) (.75) (.13) Total Distributions (1.53) (2.55) (1.08) (1.28) (.64) Net asset value, end of period 16.51 15.19 18.15 15.13 15.61 TOTAL RETURN (%) 19.37 (2.99) 28.06 5.19 19.03 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of operating expenses to average net assets .94 .91 .96 1.00 1.04 Ratio of interest expense to average net assets .03 -- -- -- -- Ratio of net investment income to average net assets 2.62 2.76 2.71 3.37 3.99 Portfolio Turnover Rate 162.40 177.85 235.56 186.23 72.42 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 188,215 359,521 347,259 269,869 165,909
(A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. SEE NOTES TO FINANCIAL STATEMENTS. NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Balanced Fund, Inc. (the "fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company. The fund's investment objective is to provide investors with long-term capital growth and current income, consistent with reasonable investment risk. The Dreyfus Corporation (the "Manager") serves as the fund' s investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. (" Mellon" ), which is a wholly-owned subsidiary of Mellon Bank Corporation. Premier Mutual Fund Services, Inc. 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: Most debt securities are valued each business day by an independent pricing service (the "Service") approved by the Board of Directors. Debt securities for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other debt securities are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Other securities (including financial futures) are valued at the average of the most recent bid and asked prices in the market in which such securities are primarily traded, or at the last sales price for securities traded primarily on an exchange or the national securities market. In the absence of reported sales of securities traded primarily on an exchange or national securities market, the average of the most recent bid and asked prices is used. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Directors. Investments The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 change in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the fund receives net earnings credits based on available cash balances left on deposit. (D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid quarterly. Dividends from net realized capital gain are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the " Code" ). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gain. (E) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $600 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund at rates based on prevailing market rates in effect at the time of borrowings. The average daily amount of borrowings outstanding during the period ended August 31, 1999 was approximately $1,400,100, with a related weighted average annualized interest of 5.23%. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .60 of 1% of the value of the fund's average daily net assets and is payable monthly. (B) Under the Shareholder Services Plan, the fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an amount not to exceed an annual rate of .25 of 1% of the value of the fund's average daily net assets for certain allocated expenses of providing personal services and/or maintaining shareholder accounts. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended August 31, 1999, the fund was charged $638,872 pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended August 31, 1999, the fund was charged $69,352 pursuant to the transfer agency agreement. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) The fund compensates Mellon under a custody agreement for providing custodial services for the fund. During the period ended August 31, 1999, the fund was charged $38,018 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. (D) During the period ended August 31, 1999, the fund incurred total brokerage commissions of $571,669, of which $14,630 was paid to Dreyfus Brokerage Services, a wholly-owned subsidiary of Mellon Bank Corporation. NOTE 4--Securities Transactions:
(A) The following summarizes the aggregate amount of purchases and sales of investment securities and securities sold short, excluding short-term securities, financial futures and forward currency exchange contracts during the period ended August 31, 1999: PURCHASES ($) SALES ($) -------------------------------------------------------- Long transactions. . . . . . . . . . . . . . . . . . . 440,761,077 630,152,932 Short sale transactions. . . . . . . . . . . . . . . . 129,282 128,238 TOTAL 440,890,359 630,281,170
The fund is engaged in short-selling which obligates the fund to replace the security borrowed by purchasing the security at current market value. The fund would incur a loss if the price of the security increases between the date of the short sale and date on which the fund replaces the borrowed security. The fund would realize a gain if the price of the security declines between those dates. Until the fund replaces the borrowed security, the fund will maintain daily, a segregated account with a broker and custodian, of permissable liquid assets sufficient to cover its short position. At August 31, 1999, there were no securities sold short outstanding. 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. At August 31, 1999, there were no open forward currency exchange contracts outstanding. The fund may invest in financial futures contracts in order to gain exposure to or protect against changes in the market. The fund is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments in financial futures require the fund to "mark to market" on a daily basis, which reflects the change in the market value of the contracts at the close of each day's trading. Typically, variation margin payments are received or made to reflect daily unrealized gains or losses. When the contracts are closed, the fund recognizes a realized gain or loss. These investments require initial margin deposits with a custodian, which consist of cash or cash equivalents, up to approximately 10% of the contract amount. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Contracts open at August 31, 1999 are set forth in the Statement of Financial Futures. (B) At August 31, 1999, accumulated net unrealized appreciation on investments and financial futures was $16,226,520, consisting of $21,085,639 gross unrealized appreciation and $4,859,119 gross unrealized depreciation. At August 31, 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). The Fund REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Directors Dreyfus Balanced Fund, Inc. We have audited the accompanying statement of assets and liabilities of Dreyfus Balanced Fund, Inc., including the statements of investments and financial futures, as of August 31, 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 by the custodian as of August 31, 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 Balanced Fund, Inc. at August 31, 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. New York, New York October 6, 1999 IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes the fund hereby designates $1.079 per share as a long-term capital gain distribution of the $1.199 per share paid on December 16, 1998. The fund also designates 28.91% of the ordinary dividends paid during the fiscal year ended August 31, 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. The Fund For More Information Dreyfus Balanced Fund, Inc. 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Distributor 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 info@dreyfus.com ON THE INTERNET Information can be viewed online or downloaded from: http://www.dreyfus.com (c) 1999 Dreyfus Service Corporation 222AR998 EX-99 2 TABLE FOR GRAPH IN PRESIDENT'S LETTER COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS BALANCED FUND, INC. WITH THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX, THE LEHMAN BROTHERS AGGREGATE BOND INDEX AND A CUSTOMIZED BLENDED INDEX EXHIBIT A: STANDARD & POOR'S 500 LEHMAN COMPOSITE BROTHERS STOCK AGGREGATE DREYFUS CUSTOMIZED PERIOD PRICE BOND BALANCED BLENDED INDEX * INDEX ** FUND INDEX *** 9/30/92 10,000 10,000 10,000 10,000 8/31/93 11,384 10,967 10,888 11,107 8/31/94 12,006 10,802 11,730 11,385 8/31/95 14,577 12,023 13,961 13,184 8/31/96 17,306 12,516 14,686 14,705 8/31/97 24,336 13,768 18,808 18,358 8/31/98 26,313 15,223 18,245 19,978 8/31/99 36,787 15,344 21,779 24,114 * Source: Lipper Analytical Services, Inc. ** Source: Lehman Brothers *** Source: Lipper Analytical Services, Inc., Lehman Brothers and Merrill Lynch, Pierce, Fenner and Smith Inc. EX-99 3 DREYFUS' COVER LETTER TO THE SEC October 29, 1999 Office of Records Securities an Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Dreyfus Balanced Fund, Inc. File No. 811-7068 Gentlemen: Transmitted for filing is one (1) copy of the Annual Report to Shareholders for the above-referenced Fund for the period ended August 31, 1999, filed in compliance with the provisions of Section 30 of the Investment Company Act of 1940. Very truly yours, Paraskevou Charalambous PC\ Enclosure -----END PRIVACY-ENHANCED MESSAGE-----