-----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, OGRq+D25geCCVAvFXrUOHBsDJ1RB1g1W5J23+W/7RdAdwoPVm7UtS5os44ECcsnY mIbTaHl8bX0FUfXVUbDDWA== /in/edgar/work/0000890341-00-000006/0000890341-00-000006.txt : 20001026 0000890341-00-000006.hdr.sgml : 20001026 ACCESSION NUMBER: 0000890341-00-000006 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYFUS BALANCED FUND INC CENTRAL INDEX KEY: 0000890341 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07068 FILM NUMBER: 745269 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 0001.txt ANNUAL REPORT Dreyfus Balanced Fund, Inc. ANNUAL REPORT August 31, 2000 (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 Contents THE FUND - -------------------------------------------------- 2 Letter from the President 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 16 Statement of Financial Futures 17 Statement of Assets and Liabilities 18 Statement of Operations 19 Statement of Changes in Net Assets 20 Financial Highlights 21 Notes to Financial Statements 27 Report of Independent Auditors 28 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, 1999 through August 31, 2000. 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 D. Ramos, CFA. Although large-cap U.S. stocks generally provided attractive returns over the past year, the reporting period was marked by high levels of volatility and dramatic shifts in investor sentiment. Between September 1999 and March 2000, the large-cap market was led by fast-growing technology stocks that, many investors believed, would benefit most from the "new economy." Subsequently, however, technology and other growth-oriented stocks corrected sharply over concerns about rising interest rates and extremely high valuations. As a result, during the second half of the reporting period various investment styles and market sectors moved in and out of favor among investors. Accordingly, investors with broadly diversified stock portfolios generally tended to do better during the second half of the reporting period than "momentum" investors who sought to follow market trends. In the fixed-income markets, higher interest rates generally led to an erosion of most bond prices, especially among higher yielding securities such as corporate bonds. U.S. Treasury securities represented a notable exception. Prices of these direct obligations of the federal government rose primarily because of reduced supply amid robust demand from domestic and foreign investors. 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 15, 2000 DISCUSSION OF FUND PERFORMANCE Douglas D. Ramos, CFA, Portfolio Manager How did Dreyfus Balanced Fund, Inc. perform relative to its benchmark? For the 12-month period ended August 31, 2000, Dreyfus Balanced Fund produced a total return of 12.62% .(1) This compares with the performance of the fund's Customized Blended Index, which produced a total return of 12.81%. The Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"), which comprised 60% of our blended index, provided a total return of 16.31% for the 12-month period ended August 31, 2000.(2) The Lehman Brothers Aggregate Bond Index, which comprised 40% of our blended index, produced a total return of 7.56%.(3) We attribute the fund' s performance primarily to a highly volatile market environment in which our successful equity investment decisions were partly offset by disappointments. Our fixed-income investments performed approximately in line with our fixed-income benchmark, contributing to the fund's positive return. What is the fund's investment approach? On the equity side, the portfolio employs a value-oriented, bottom-up approach and invests primarily in mid- and large-sized companies that we believe have above-average growth potential and are attractively valued relative to the market in general. While our investment universe generally consists of companies with market capitalizations of $1 billion or greater, we have tended to concentrate somewhat more on 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- and asset-backed securities, U.S. Treasuries and U.S. Government agency bonds, as well as commercial mortgage-backed securities. The fixed-income portion of the fund also includes cash and cash equivalents. The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) The fund' s asset allocation parameters provide the portfolio management team with the flexibility to respond to changing investment environments and to take advantage of a wide range of investment opportunities. The fund's equities allocation may range from 40% to 75%, and its fixed-income allocation may range from 25% to 60%. Typically, the fund's benchmark allocation will approximate 60% in equity investments and 40% in fixed-income investments. Of course, the fund's portfolio allocation could vary depending upon market and other conditions. Under adverse market conditions, the fund may invest up to 100% of its assets in cash and cash equivalents, including money market instruments. What other factors influenced the fund's performance? From the beginning of the period until early March 2000, the stock market generally benefited from the U.S. economy's rapid growth. The stock market's advance was led by the technology industry group, which enjoyed impressive gains in late 1999 and early 2000. As valuations of several of the fund's technology stocks climbed beyond levels we considered reasonable, as gauged by our investment discipline, we reduced our holdings in this area. Starting in mid-March, rising interest rates and extreme stock valuations began to take a toll on the volatile technology sector, which quickly gave back a substantial portion of its earlier gains. By that time, we had sold many of the fund's most highly valued technology holdings, and our remaining technology stocks performed relatively well in a difficult environment. For the period as a whole, technology stocks predominantly accounted for the fund's total return from equities, despite the declines in late March and April 2000. As stock market leadership shifted to other industry groups, some of the fund's holdings benefited while others lagged. Our energy holdings responded well to rising oil prices and deregulation. On the other hand, our consumer cyclical holdings suffered as interest rates continued to rise and retail sales began to slow. Our investments in communications services companies also lost ground in the face of rising costs and competition. These disappointing market sectors prevented us from significantly outperforming the stock portion of our blended benchmark during the reporting period. Within the fund' s bond portfolio, rising interest rates hurt our fixed-income investments during the first half of the reporting period. However, when the economy began to show signs of slowing later in the reporting period, bond prices began to rise. As a result, our fixed-income investments provided a positive rate of return overall that was approximately in line with the fixed-income component of the blended index. What is the fund's current strategy? As of August 31, 2000, the fund held fewer technology stocks than our blended index. Nevertheless, technology remained the fund's single largest investment area. We have also built a relatively large position in financial stocks, where we have found what we believe are several attractively priced, high quality companies that may benefit from an environment of stable or lower interest rates. On the fixed-income side, we allocated a slightly smaller percentage of assets to mortgage-backed securities than our blended index, and a slightly higher percentage to U.S. Treasury bonds to reflect our view of the market. However, our allocations among most sectors of the bond market are approximately equivalent to those of our benchmark. September 15, 2000 (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 INC. -- REFLECTS REINVESTMENT OF 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. (3) SOURCE: LIPPER INC. -- THE LEHMAN BROTHERS AGGREGATE BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN 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. 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, the Current Customized Blended Index and the Previous Customized Blended Index ((+)) SOURCE: LIPPER 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 STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX, (2) THE LEHMAN BROTHERS AGGREGATE BOND INDEX, (3) THE CUSTOMIZED BLENDED INDEX (PREVIOUS), AND (4) THE CUSTOMIZED BLENDED INDEX (CURRENT), WHICH ARE DESCRIBED BELOW. THE CUSTOMIZED BLENDED INDEX IS CALCULATED ON A YEAR-TO-YEAR BASIS. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. EFFECTIVE SEPTEMBER 15,1999, THE BOARD OF DIRECTORS APPROVED A CHANGE TO THE CUSTOMIZED BLENDED INDEX SUCH THAT IT IS NOW COMPOSED OF 60% STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX AND 40% LEHMAN BROTHERS AGGREGATE BOND INDEX. IT IS BELIEVED THAT THIS ALLOCATION BETTER REFLECTS THE FUND'S CURRENT ALLOCATION PERCENTAGE RANGES NOTED BELOW. THE EQUITY SECURITIES ALLOCATION, WHICH WAS PREVIOUSLY 45% TO 65%, IS NOW 40% TO 75%. THE FIXED-INCOME ALLOCATION, WHICH WAS PREVIOUSLY 25% TO 55% IS NOW 25% TO 60%. 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. 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 INDICES DO NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE CUSTOMIZED BLENDED INDEX 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% WAS USED AS THE FUND'S SECONDARY HYBRID INDEX LAST YEAR, AND IS BEING REPLACED BY THE NEW HYBRID INDEX COMPOSITION OF 60% STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX AND 40% LEHMAN BROTHERS AGGREGATE BOND INDEX. 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
Average Annual Total Returns AS OF 8/31/00 Inception From Date 1 Year 5 Years Inception - ------------------------------------------------------------------------------------------------------------------------------------ FUND 9/30/92 12.62% 11.93% 12.00% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The Fund STATEMENT OF INVESTMENTS August 31, 2000 STATEMENT OF INVESTMENTS COMMON STOCKS--55.2% Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL GOODS--.1% Lexmark International Group, Cl. A 3,000 (a) 203,438 COMMERCIAL SERVICES--.7% Lamar Advertising 4,100 (a) 190,394 McGraw-Hill Cos. 18,000 1,114,875 1,305,269 CONSUMER NON-DURABLES--2.6% Anheuser-Busch Cos. 7,100 559,568 Coca-Cola 10,000 526,250 Intimate Brands 20,000 322,500 Kimberly-Clark 12,400 725,400 PepsiCo 26,800 1,142,350 Philip Morris Cos. 19,000 562,875 Procter & Gamble 11,100 686,119 UST 27,000 583,875 5,108,937 CONSUMER SERVICES--3.7% Adelphia Communications, Cl. A 12,200 (a) 408,700 Cendant 105,500 (a) 1,391,281 Clear Channel Communications 18,520 (a) 1,340,385 Disney (Walt) 18,300 712,556 Infinity Broadcasting, Cl. A 10,000 (a) 378,750 Time Warner 13,800 1,179,900 USA Networks 27,000 (a) 649,688 Viacom, Cl. B 18,445 (a) 1,241,579 7,302,839 ELECTRONIC TECHNOLOGY--11.8% American Tower, Cl. A 17,100 620,944 Amkor Technology 19,000 (a) 648,375 Apple Computer 15,800 (a) 962,813 Applied Materials 8,000 (a) 690,500 Cabletron Systems 24,300 (a) 909,731 Compaq Computer 39,100 1,331,843 Ericsson (LM) Telephone, Cl. B, ADR 12,000 246,000 Gateway 9,000 (a) 612,900 General Dynamics 7,000 440,563 Hewlett-Packard 7,800 941,850 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ ELECTRONIC TECHNOLOGY (CONTINUED) Intel 63,200 4,732,100 International Business Machines 19,000 2,508,000 KLA-Tencor 10,000 (a) 656,250 LSI Logic 13,000 (a) 467,188 Lucent Technologies 19,000 (a) 794,438 Micron Technology 11,000 899,250 Motorola 24,800 894,350 National Semiconductor 16,400 (a) 729,800 Nortel Networks 19,000 1,549,688 Novellus Systems 7,000 (a) 430,938 Sun Microsystems 5,000 (a) 634,688 Teradyne 10,000 (a) 648,125 Texas Instruments 8,000 535,500 United Technologies 8,400 524,475 23,410,309 ENERGY MINERALS--3.2% Anadarko Petroleum 22,000 1,446,940 Conoco, Cl. A 15,000 377,813 Exxon Mobil 29,288 2,390,633 Royal Dutch Petroleum, ADR 27,700 1,694,893 Texaco 10,500 540,750 6,451,029 FINANCE--10.4% American Express 15,900 940,088 American General 8,100 589,781 American International Group 24,340 2,169,297 Associates First Capital, Cl. A 23,900 672,188 Bank of America 25,300 1,355,131 Bank of New York 16,000 839,000 Chase Manhattan 10,750 600,656 Citigroup 63,600 3,712,650 Federal Home Loan Mortgage 28,000 1,179,500 Federal National Mortgage Association 26,600 1,429,750 FleetBoston Financial 23,600 1,007,425 Goldman Sachs Group 3,000 384,187 Hartford Financial Services Group 6,000 399,750 The Fund STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCE (CONTINUED) Household International 11,900 571,200 John Hancock Financial Services 22,600 (a) 570,650 MBNA 10,000 353,125 Morgan (J.P.) 5,100 852,656 Morgan Stanley Dean Witter & Co. 16,600 1,785,537 Wells Fargo 29,000 1,252,438 20,665,009 HEALTH SERVICES--1.9% HCA-Healthcare 74,800 2,580,600 Wellpoint Health Networks 12,800 (a) 1,104,800 3,685,400 HEALTH TECHNOLOGY--4.2% ALZA 6,000 (a) 453,750 American Home Products 12,500 677,343 Baxter International 8,000 666,000 Bristol-Myers Squibb 20,900 1,107,700 Johnson & Johnson 7,100 652,756 Merck & Co. 28,400 1,984,450 Pfizer 34,000 1,470,500 Pharmacia 10,683 625,623 Schering-Plough 18,000 722,250 8,360,372 INDUSTRIAL SERVICES--.9% Schlumberger 21,900 1,868,344 NON-ENERGY MINERALS--.3% Alcoa 18,000 598,500 PROCESS INDUSTRIES--1.0% Dow Chemical 20,000 523,750 duPont (E.I.) deNemours 7,000 314,125 International Paper 16,000 510,000 Rohm & Haas 19,000 549,812 1,897,687 PRODUCER MANUFACTURING--4.3% Emerson Electric 8,000 529,500 General Electric 82,000 4,812,375 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCER MANUFACTURING (CONTINUED) Honeywell International 21,800 840,663 Ingersoll-Rand 6,300 287,043 Masco 23,200 452,400 Tyco International 29,700 (a) 1,692,900 8,614,881 RETAIL TRADE--1.3% Costco Wholesale 5,200 (a) 179,075 Gap 12,000 269,250 Lowes 12,600 564,638 May Department Stores 12,600 289,012 TJX Cos. 33,400 628,338 Target 27,600 641,700 2,572,013 TECHNOLOGY SERVICES--3.4% Charter Communications, Cl. A 54,000 (a) 826,875 Computer Associates International 24,100 (a) 765,175 Computer Sciences 18,600 (a) 1,470,562 Electronic Data Systems 21,500 1,070,968 First Data 12,000 572,250 Network Associates 22,400 (a) 579,600 Oracle 16,600 (a) 1,509,563 6,794,993 UTILITIES--5.4% ALLTEL 4,000 202,250 AT&T 15,400 485,100 AT&T--Liberty Media Group, Cl. A 24,000 (a) 513,000 BellSouth 15,000 559,687 Coastal 27,200 1,873,400 Duke Energy 15,000 1,122,187 Dynegy, Cl. A 14,000 630,000 El Paso Energy 4,600 267,950 Enron 7,000 594,125 Niagara Mohawk Power 29,900 (a) 384,963 SBC Communications 32,400 1,352,700 TXU 10,000 349,375 The Fund STATEMENT OF INVESTMENTS (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (CONTINUED) Telefonos de Mexico, Cl. L, ADS 6,000 326,625 Verizon Communications 28,096 1,225,688 WorldCom 25,450 (a) 928,925 10,815,975 TOTAL COMMON STOCKS (cost $84,901,646) 109,654,995 - ------------------------------------------------------------------------------------------------------------------------------------ Principal BONDS AND NOTES--52.4% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ AIRLINES--1.1% US Airways, Pass-Through Ctfs., 8.02%, 2/5/2019 2,100,000 2,136,383 AUTO TRUCKS & PARTS--.2% American Axle & Manufacturing, Notes, 9.75%, 3/1/2009 484,000 480,370 BANKING--2.1% Bank One Capital III, Trust Originated Preferred Securities 8.75%, 9/1/2030 1,420,000 1,426,735 Capital One Bank, Sr. Notes, 8.25%, 6/15/2005 1,137,000 1,142,883 HSBC Capital Funding, Notes, 10.176%, 12/29/2049 1,482,000 (b) 1,640,374 4,209,992 CABLE-SATELLITE--.6% British Sky Broadcasting, Notes, 8.20%, 7/15/2009 1,343,000 (b) 1,254,365 CABLE TELEVISION--.7% Viacom, Sr. Notes, 7.70%, 7/30/2010 1,418,000 1,443,755 ELECTRIC POWER--.7% Consolidated Edison, Deb., Ser. B, 7.50%, 9/1/2010 1,417,000 1,408,990 FINANCIAL--.7% CIT Group, Sr. Notes, 7.625%, 8/16/2005 1,339,000 1,342,738 FINANCIAL SERVICES--.5% Spear Leeds & Kellogg, Notes, 8.25%, 8/15/2005 1,013,000 (b) 1,018,515 Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIAL--3.0% Abitibi-Consolidated, Deb., 8.85%, 8/1/2030 1,738,000 1,773,796 Pemex Finance, Notes, 7.80%, 2/15/2013 3,000,000 (b) 3,110,625 Yosemite Securities Trust I, Deb., 8.25%, 11/15/2004 1,000,000 (b) 1,010,223 5,894,644 INSURANCE--1.2% American General, Notes, 7.50%, 8/11/2010 1,340,000 1,338,141 MONY Group, Sr. Notes, 8.35%, 3/15/2010 1,100,000 1,121,533 2,459,674 RETAIL--APPAREL--.5% Saks, Notes: 7.50%, 12/1/2010 544,000 378,760 7.375%, 2/15/2019 1,042,000 633,463 1,012,223 RETAIL TRADE/BUILDING PRODUCTS--.4% Lowe's Companies, Notes, 8.25%, 6/1/2010 702,000 733,238 TELECOMMUNICATIONS--2.6% Cable & Wireless Optus Finance Property, Notes, 8%, 6/22/2010 2,165,000 2,178,269 Vodafone Group, Notes, 6.35%, 6/1/2005 3,000,000 2,874,918 5,053,187 TRANSPORTATION--1.4% America West Airlines, Pass-Through Trust Ctfs., Ser. 1997,1C, 7.53%, 1/2/2004 2,790,697 2,726,190 UTILITIES--.6% Duke Energy Field Services, Bonds, 8.125%, 8/16/2030 1,219,000 1,222,444 OTHER--3.1% CS First Boston Mortgage Securities, Ser. 1999-C1, A2, 7.29%, 9/15/2009 1,400,000 1,399,791 GMAC Commercial Mortgage Securities, Ser. 2000-C2, A1, 7.273%, 4/16/2009 1,171,000 1,171,000 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal BONDS AND NOTES (CONTINUED) Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ OTHER (CONTINUED) NSCOR, Residential Mortgage Securities: Ser. 1997-11, B2, 7%, 8/25/2027 338,924 330,837 Ser. 1998-2, B3, 6.50%, 2/25/2028 730,762 634,437 New York City Tax Lien, Collateralized Bonds, Ser. 1997-1D, 6.90%, 5/25/2005 384,533 (b) 379,846 Residential Funding Mortgage Securities 1, Pass-Through Ctfs., Ser. 1996-s22, Cl. M3, 8%, 10/25/2026 2,321,265 2,255,794 6,171,705 U.S. GOVERNMENT & AGENCIES--33.0% Federal National Mortgage Association, Notes: 7.25%, 1/15/2010 15,276,000 15,726,092 8%, 9/15/2029 5,000,000 5,048,400 7.50%, 9/15/2030 4,500,000 4,476,060 Federal Home Loan Mortgage Corp., Real Estate Mortgage Investment Conduit, Ser. 1497, Cl. FF, 6.50%, 8/15/2021 1,650,000 1,591,755 Government National Mortgage Association II: Adjustable Rate Mortgage: 7.50%, 9/20/2030 4,500,000 4,501,395 8%, 9/20/2030 5,000,000 5,046,850 U.S. Treasury Bonds: 5.25%, 2/15/2029 548,000 505,185 6.125%, 8/15/2029 813,000 851,869 U.S. Treasury Notes: 5%, 4/30/2001 750,000 743,438 5.75%, 6/30/2001 1,000,000 995,310 5.50%, 8/31/2001 2,000,000 1,984,360 5.875%, 11/30/2001 2,500,000 2,488,275 7.25%, 8/15/2004 1,000,000 1,041,560 5.875%, 11/15/2004 8,845,000 (c) 8,795,202 6.75%, 5/15/2005 3,123,000 3,220,593 6.50%, 2/15/2010 6,865,000 7,167,471 U.S. Treasury Inflation Protection Securities, 3.635%, 7/15/2002 1,252,000 1,341,678 65,525,493 TOTAL BONDS AND NOTES (cost $103,223,905) 104,093,906 Principal SHORT-TERM INVESTMENTS--.3% Amount ($) Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ U.S. TREASURY BILLS: 6.22%, 9/21/2000 58,000 57,783 5.96%, 9/28/2000 500,000 (c) 497,805 TOTAL SHORT-TERM INVESTMENTS (cost $555,565) 555,588 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $188,681,116) 107.9% 214,304,489 LIABILITIES, LESS CASH AND RECEIVABLES (7.9%) (15,726,468) NET ASSETS 100.0% 198,578,021 (A) NON-INCOME PRODUCING. (B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE SOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT AUGUST 31, 2000, THESE SECURITIES AMOUNTED TO $8,413,948 OR APPROXIMATELY 4.2% OF NET ASSETS. (C) PARTIALLY HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN FINANCIAL FUTURES POSITIONS. SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF FINANCIAL FUTURES August 31, 2000 Unrealized Market Value Appreciation Covered (Depreciation) Contracts by Contracts ($) Expiration at 8/31/2000 ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL FUTURES LONG: U.S. Treasury 5 year Notes 376 37,623,500 December 2000 102,148 U.S. Treasury 2 year Notes 69 13,764,422 December 2000 28,031 FINANCIAL FUTURES SHORT: U.S. Treasury 10 year Notes 171 17,113,359 December 2000 (89,507) U.S. Treasury 20 year Bonds 69 6,930,188 December 2000 (59,625) (18,953) SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES August 31, 2000 Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 188,681,116 214,304,489 Cash 753,863 Receivable for investment securities sold 2,784,947 Interest and dividends receivable 1,201,456 Receivable for shares of Common Stock subscribed 63,761 Prepaid expenses 16,143 219,124,659 - -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 119,365 Payable for investment securities purchased 20,285,091 Payable for futures variation margin--Note 4(a) 35,142 Payable for shares of Common Stock redeemed 26,637 Accrued expenses 80,403 20,546,638 - -------------------------------------------------------------------------------- NET ASSETS ($) 198,578,021 - -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 164,893,398 Accumulated undistributed investment income--net 1,503,650 Accumulated net realized gain (loss) on investments 6,576,553 Accumulated net unrealized appreciation (depreciation) on investments [including ($18,953) net unrealized (depreciation) on financial futures]--Note 4(b) 25,604,420 - -------------------------------------------------------------------------------- NET ASSETS ($) 198,578,021 - -------------------------------------------------------------------------------- SHARES OUTSTANDING (300 million shares of $.001 par value Common Stock authorized) 12,094,606 NET ASSET VALUE, offering and redemption price per share ($) 16.42 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF OPERATIONS Year Ended August 31, 2000 - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Interest 5,418,748 Cash dividends (net of $10,151 foreign taxes withheld at source) 1,244,821 TOTAL INCOME 6,663,569 EXPENSES: Management fee--Note 3(a) 1,142,087 Shareholder servicing costs--Note 3(b) 538,168 Professional fees 42,099 Prospectus and shareholders' reports 30,116 Custodian fees--Note 3(b) 27,265 Directors' fees and expenses--Note 3(c) 19,512 Registration fees 19,320 Loan commitment fees--Note 2 4,646 Interest expense--Note 2 4,001 Miscellaneous 8,767 TOTAL EXPENSES 1,835,981 INVESTMENT INCOME--NET 4,827,588 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments: Long transactions 8,595,396 Short sale transactions (80,034) Net realized gain (loss) on financial futures (81,111) NET REALIZED GAIN (LOSS) 8,434,251 Net unrealized appreciation (depreciation) on investments [including ($78,984) net unrealized (depreciation) on financial futures] 9,377,900 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 17,812,151 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 22,639,739 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended August 31, --------------------------------- 2000 1999 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 4,827,588 7,439,985 Net realized gain (loss) on investments 8,434,251 15,593,818 Net unrealized appreciation (depreciation) on investments 9,377,900 35,589,943 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 22,639,739 58,623,746 - -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net (4,922,706) (8,501,407) Net realized gain on investments (17,907,317) (20,122,668) TOTAL DIVIDENDS (22,830,023) (28,624,075) - -------------------------------------------------------------------------------- CAPITAL STOCK TRANSACTIONS ($): Net proceeds from shares sold 54,508,634 131,420,540 Dividends reinvested 22,248,309 27,427,390 Cost of shares redeemed (66,203,885) (360,153,223) INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS 10,553,058 (201,305,293) TOTAL INCREASE (DECREASE) IN NET ASSETS 10,362,774 (171,305,622) - -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 188,215,247 359,520,869 END OF PERIOD 198,578,021 188,215,247 Undistributed investment income--net 1,503,650 1,598,768 - -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): Shares sold 3,393,326 8,145,401 Shares issued for dividends reinvested 1,423,419 1,733,807 Shares redeemed (4,119,745) (22,149,613) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 697,000 (12,270,405) SEE NOTES TO FINANCIAL STATEMENTS. The Fund
FINANCIAL HIGHLIGHTS The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended August 31, ------------------------------------------------------------------- 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 16.51 15.19 18.15 15.13 15.61 Investment Operations: Investment income--net .41(a) .42(a) .47 .45 .51 Net realized and unrealized gain (loss) on investments 1.54 2.43 (.88) 3.65 .29 Total from Investment Operations 1.95 2.85 (.41) 4.10 .80 Distributions: Dividends from investment income--net (.43) (.45) (.46) (.44) (.53) Dividends from net realized gain on investments (1.61) (1.08) (2.09) (.64) (.75) Total Distributions (2.04) (1.53) (2.55) (1.08) (1.28) Net asset value, end of period 16.42 16.51 15.19 18.15 15.13 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) 12.62 19.37 (2.99) 28.06 5.19 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of operating expenses to average net assets .96 .94 .91 .96 1.00 Ratio of interest expense and loan commitment fees to average net assets .00(b) .03 -- -- -- Ratio of net investment income to average net assets 2.54 2.62 2.76 2.71 3.37 Portfolio Turnover Rate 160.38 162.40 177.85 235.56 186.23 - ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 198,578 188,215 359,521 347,259 269,869 (A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (B) AMOUNT REPRESENTS LESS THAN .01%. 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 Financial Corporation. Effective March 22, 2000, Dreyfus Service Corporation ("DSC"), a wholly-owned subsidiary of the Manager, became the distributor of the fund's shares, which are sold to the public without a sales charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor. 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 The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 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. 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 $500 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, 2000 was approximately $66,600 with a related weighted average annualized interest rate of 6.00%. 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. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) (b) Under the Shareholder Services Plan, the fund reimburses DSC 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, 2000, the fund was charged $351,596 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, 2000, the fund was charged $30,375 pursuant to the transfer agency agreement. The fund compensates Mellon under a custody agreement for providing custodial services for the fund. During the period ended August 31, 2000, the fund was charged $27,265 pursuant to the custody agreement. (c) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Effective January 1, 2000, each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $40,000 and an attendance fee of $6,000 for each meeting attended and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The chairman of the Board receives an additional 25% of such compensation. Prior to January 1, 2000, each Board member who was not an "affiliated person" as defined in the Act received from the fund an annual fee of $4,500 and an attendance fee of $500 per meeting. The Chairman of the Board received an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board Members, if any, receive 50% of the fund's annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. (d) During the period ended August 31, 2000, the fund incurred total brokerage commissions of $174,964, of which $7,633 was paid to Dreyfus Brokerage Services, a wholly-owned subsidiary of Mellon Financial Corporation. NOTE 4--Securities Transactions: (a) The following summarizes the aggregate amount of purchases and sales of investment securities and securities sold short, excluding short-term securities and financial futures, during the period ended August 31, 2000: Purchases ($) Sales ($) - -------------------------------------------------------------------------------- Long transactions 307,358,227 304,000,587 Short sale transactions 455,636 375,602 TOTAL 307,813,863 304,376,189 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 the 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 or custodian of permissable liquid assets sufficient to cover its short position. At August 31, 2000, there were no securities sold short 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 The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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, 2000 are set forth in the Statement of Financial Futures. (b) At August 31, 2000, accumulated net unrealized appreciation on investments and financial futures was $25,604,420, consisting of $30,345,566 gross unrealized appreciation and $4,741,146 gross unrealized depreciation. At August 31, 2000, 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). 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, 2000, 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 auditing standards generally accepted in the United States. 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, 2000 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, 2000, 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 accounting principles generally accepted in the United States. New York, New York October 11, 2000 The Fund IMPORTANT TAX INFORMATION (Unaudited) For Federal tax purposes the fund hereby designates $1.5190 per share as a long-term capital gain distribution of the $1.7260 per share paid on December 6, 1999. The fund also designates 18.03% of the ordinary dividends paid during the fiscal year ended August 31, 2000 as qualifying for the corporate dividends received deduction. Shareholders will receive notification in January 2001 of the percentage applicable to the preparation of their 2000 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 Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 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) 2000 Dreyfus Service Corporation 222AR008 EX-99.A 2 0002.txt PIE CHART IN THE PRES' LTR OF THE ANNUAL REPORT 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 LEHMAN 500 COMPOSITE BROTHERS DREYFUS CURRENT PREVIOUS STOCK AGGREGATE BALANCED CUSTOMIZED CUSTOMIZED PERIOD PRICE BOND FUND, BLENDED BLENDED INDEX * INDEX * INC. INDEX * INDEX * 9/30/92 10,000 10,000 10,000 10,000 10,000 8/31/93 11,384 10,967 10,888 11,217 11,108 8/31/94 12,006 10,802 11,730 11,517 11,383 8/31/95 14,577 12,023 13,961 13,518 13,183 8/31/96 17,306 12,516 14,686 15,258 14,705 8/31/97 24,336 13,768 18,808 19,587 18,360 8/31/98 26,313 15,223 18,245 21,370 19,979 8/31/99 36,787 15,344 21,779 26,542 24,115 8/31/00 42,785 16,504 24,528 29,943 26,949 * Source: Lipper Inc. -----END PRIVACY-ENHANCED MESSAGE-----