-----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, IaRFPqzCpzppRNuoDqZOmFDh37BXGiBukM9ZH+lc1aJei1VBA1SOxLh8asbpQ+2w vHfBW1OjRklmNIX+rjZddg== 0000904818-99-000001.txt : 19990114 0000904818-99-000001.hdr.sgml : 19990114 ACCESSION NUMBER: 0000904818-99-000001 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYFUS ASSET ALLOCATION FUND INC CENTRAL INDEX KEY: 0000904818 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133717433 STATE OF INCORPORATION: MD FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07710 FILM NUMBER: 99505441 BUSINESS ADDRESS: STREET 1: 144 GLENN CURTISS BLVD STREET 2: C/O DREYFUS CORP CITY: UNIONDALE STATE: NY ZIP: 11556-0144 BUSINESS PHONE: 2129226130 MAIL ADDRESS: STREET 1: C/O DREYFUS CORP STREET 2: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 N-30D 1 SEMI-ANNUAL REPORT DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- LETTER TO SHAREHOLDERS Dear Shareholder: We are pleased to provide you with this report for Dreyfus Asset Allocation Fund, Inc. for the six-month period ended October 31, 1998. This period was marked by unusual volatility in the stock and bond markets. Your Fund produced a total return of -9.94%,* which compares with a total return of -0.40% for the Standard & Poor' s 500 Composite Stock Price Index,** which is made up entirely of common stocks, and a total return of 5.55% for the Lehman Brothers Aggregate Bond Index.*** We believe that a more accurate measure of the performance of the Fund is against a special customized blended index, which, like the Fund, is composed of bonds and cash equivalents as well as stocks. This benchmark index had a total return of 1.85% during the same period.(+) Economic Review So far in 1998, the main regions of the world have had very different economic fundamentals. The U.S. entered the year with a strong economy near full employment, with unemployment only slightly above 4%. The tight labor market led the Federal Reserve Board to contemplate a rise in interest rates early in the year. The U.S. economy cooled enough over the months that the Fed decided to stand pat. Evidence of economic cooling continued to accumulate and worries about the world economy intensified. Financial stresses pushed the Fed to ease credit in both late September and mid-October. After many years of subpar economic growth, continental Europe moved into a sustained economic expansion. The overall European economy benefited as interest rates in peripheral countries such as Spain and Italy fell, approaching the lower levels established by Germany, on the eve of currency unification. Unlike the U.S., Europe has substantial excess capacity of productive plant and labor. In Asia, weak economies were pervasive as a result of the Asian financial crisis. The Latin American economies weakened as the financial stresses spread throughout that region. A main influence on the U.S. economy this year was the foreign financial crisis and cooling of the world economy. The positive effects hit first. Actual inflation and expected inflation dropped, causing a decline in long-term Treasury bond yields and mortgage rates. This caused a boom in housing. The fall in inflation helped the consumer sector as more of the growth in consumer income was left over after inflation to buy goods and services. Consumers benefited from a combination of good growth in income after inflation, a strong labor market and past increases in the price of assets they owned. The negative effect of Asian weakness was felt in the industrial sector more than in the consumer sector. Corporate profits weakened, especially in sectors affected by the Asian crisis such as world-traded commodities (oil, metals and paper) and exports. One result of this industrial weakness was to cool off a U.S. economy that had been growing rapidly. The major change in the economic outlook over recent months has been a downward shift in expectations for world economic growth. A credit crunch developed in emerging countries and former communist countries, sharply reducing the economic outlook for Asia and Latin America as well as for commodity-exporting countries throughout the world. The effect on Europe and the U.S. has been to lower expectations of profit growth and drive down bond yields Evidence of a weaker world economy accumulated as the financial stresses continued. A worsened financial crisis occurred between the Russian default in mid-August and the fallout from the Long-Term Capital Management (hedge fund) crisis through early October. However, proactive steps were taken to stabilize the Japanese banks, design a support package for Brazil and ease monetary policy. The prospects for world economic weakness and monetary ease in the major countries will be powerfully influenced by whether foreign financial stresses calm down or intensify in the coming months. There appears to be a shift in the priorities of key policymakers from fighting potential inflation to restimulating future world economic growth. Market Overview The six months ended October 31, 1998, encompassed some very different market phases. There was stock market strength during the early part of the period. Then small-cap indices started to erode in the spring and were joined by large-cap indices by midsummer. A sharp decline until the end of August was followed by a brief rebound and then a renewed decline amid financial fears until early October. The last few weeks of the fiscal year saw a strong rally in response to the easing of monetary policy. Returns on mid-cap and small-cap stock indices tended to be weaker than on large-caps, with a negative total return on small-cap indices. Three key trends influenced stock market behavior during the reporting period. First, the Federal Reserve kept the Federal Funds rate flat at 5.5% early in the half year, but then eased policy twice. Second, weakness in emerging country economies contributed to declining commodity prices and a drop in long-term Treasury bond yields to multidecade lows. Third, expectations for corporate profits dropped, first in the sectors sensitive to Asian developments such as oil, basic materials and exports and then for a broader list of stocks. The trigger for the sharp decline in stocks in August appeared to be the Russian default in the summer of 1998. This resulted in deepening concerns about weaker economic growth and corporate profits. There was also a global margin call on risky assets held by hedge funds and financial institutions. This raised the cost of debt financing for many corporations and many emerging countries. Expectations for economic activity in emerging countries in Asia and Latin America shifted down sharply while expectations for U.S. corporate profits weakened somewhat. Despite the fall in Treasury bond yields, financial stocks led the summer selloff due to concerns about financial contagion among emerging countries and potential loan losses by financial institutions. However, in the last few weeks of the fiscal year, these fears began to ebb and the stock market rebounded. The erosion of expectations about average corporate profit growth over the last year contributed to an outperformance by a small group of super-cap growth stocks. Investors had more confidence in the prospect for strong persistent earnings growth for this small group of stocks than for the broad market. Value stocks, which often have greater cyclical sensitivity to earnings fluctuations, lagged behind these super-growth stocks. In addition, many of the financial stocks that fall into the value category fell sharply following the Russian default and global margin call concerns. Portfolio Focus There are basically three decision levels for the Dreyfus Asset Allocation Fund: the asset allocation, the equity holdings and the fixed-income holdings. Asset Allocation The Fund generally reduced the equity allocation over the past six months from close to the top of the permitted range to a more neutral weighting. While we believe that the longer-term investment environment for the stock market remains positive, there are several aforementioned uncertainties on the horizon that we think may have a dampening effect on corporate earnings in 1999. We believe that these uncertainties, while unlikely to produce an equity bear market, may bring the return on equities more in line with historical averages. We increased the allocation to bonds and cash to an overweight position from an underweight position when we reduced our equity exposure. This asset allocation strategy was a positive addition to performance results up until mid-October when the Federal Reserve triggered an equity rally by lowering the Fed Funds interest rate between normally scheduled Federal Reserve Board meetings. Equity Holdings Equity investment results benefited from being overweight in industries such as retail drug stores and pharmaceuticals. Specific holdings that added to results are CVS, Rite Aid, Biogen and American Stores. Relative performance results were penalized by holdings including Perkin-Elmer, Sealed Air and OMI. Fixed Income Holdings The fixed-income portfolio was positioned with duration moderately longer than the Lehman Brothers Aggregate Bond Index benchmark during most of the period. On balance, this added to the Fund's relative returns. The Fund's performance was negatively impacted by an allocation to corporate and mortgage bonds. These securities' spreads to Treasuries widened substantially, causing their prices to decline, in the months of August, September and October. Large liquidations by hedge funds and concerns about global economic conditions were the primary causes of this widening spread. We appreciate your investment in the Dreyfus Asset Allocation Fund. Sincerely, [Kevin M. McClintock signature] Kevin M. McClintock Senior Portfolio Manager Dreyfus Asset Allocation Fund, Inc. November 27, 1998 New York, N.Y. * Total return includes reinvestment of dividends and any capital gains paid. **SOURCE: LIPPER ANALYTICAL SERVICES, INC.--Reflects the reinvestment of income dividends and, where applicable, capital gain distributions. The Standard & Poor' s 500 Composite Stock Price Index is a widely accepted, unmanaged index of U.S. stock market performance. ***SOURCE: LEHMAN BROTHERS--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. It reflects reinvestment of dividends and capital gain distributions. (+)The customized blended index has been prepared by the Fund and is intended to be a more accurate comparison to the general portfolio composition than the Standard & Poor' s 500 Composite Stock Price Index alone. We have combined the performance of unmanaged indices that reflect benchmark percentages with respect to each asset class in which the Fund invests, as described in its Prospectus: 55% equity securities, 35% fixed-income securities and 10% short-term money market instruments. The customized blended index combines returns from the Standard & Poor's 500 Composite Stock Price Index, the Lehman Brothers Aggregate Bond Index and the Bank Rate Monitor Index of money market returns, and is weighted to the benchmark percentages.
DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS OCTOBER 31, 1998 (UNAUDITED) Principal Bonds and Notes--17.0% Amount Value - ------------------------------------------------------- ____________ ___________ Commercial Mortgage--1.2% GMAC Commercial Mortgage Securities, Commercial Mortgage Pass-Through Ctfs., Ser. 1996-C1, Cl. E, 7.86%, 2006 . . . . . . . . . $ 1,000,000 $ 917,188 ____________ Financial--1.8% Hyatt Equities, Notes, 6.80%, 2000 . . . . . . . . . . . . . . . . . . . 500,000 (b) 509,430 Presidential Life, Sr. Notes, 9.50%, 2000 . . . . . . . . . . . . . . . . . . . 850,000 862,443 ____________ 1,371,873 ____________ Industrial--1.3% Dual Drilling, Sr. Sub. Notes, 9.875%, 2004 . . . . . . . . . . . . . . . . . . . 500,000 520,000 Philip Morris Cos., Notes, 6.95%, 2006 . . . . . . . . . . . . . . . . . . . 500,000 526,962 ____________ 1,046,962 ____________ Residential Mortgage--5.1% Norwest Asset Securities, Mortgage Pass-Through Ctfs.: Ser. 1997-11, B-2, 7%, 2027 . . . . . . . . . . 520,891 496,555 Ser. 1997-11, B-3, 7%, 2027 . . . . . . . . . . 744,271 (b) 701,476 Ser. 1998-13, B-4, 6.25%, 2028 . . . . . . . . 747,779 672,121 Ser. 1998-13, B-5, 6.25%, 2028 . . . . . . . . 248,927 (b) 180,501 Ser. 1998-D6, A-4, 7.595%, 2028 . . . . . . . . 2,000,000 1,901,875 ____________ 3,952,528 ____________ U.S. Governments & Agencies--7.6% Federal Home Loan Mortgage, REMIC, Multiclass Mortgage Participation Ctfs.: Ser. 1999, Cl. PW, 7%, 8/15/2026 . . . . . . . 3,755,714 (a) 563,357 Ser. 2068, Cl. IA, 6.50%, 10/15/2023 . . . . . 9,063,907 (a) 1,458,723 Federal National Mortgage Association, 9%, 8/1/2026 . . . . . . . . . . . . . . . . . . . 424,398 448,665 Federal National Mortgage Association REMIC Trust, Gtd. Pass-Through Ctfs.: Ser. 1993-86, Cl. HA, 9.64%, 6/25/2008 . . . . 1,000,000 (a) 371,344 Ser. 1997-40, Cl. PF, 7%, 12/18/2026 . . . . . 1,000,000 (a) 197,656 U.S. Treasury Bonds, 8.75%, 5/15/2017 . . . . . . . . . . . . . . . . . 2,000,000 2,796,200 ____________ 5,835,945 ____________ TOTAL BONDS AND NOTES (cost $14,359,044) . . . . . . . . . . . . . . . . $13,124,496 ____________ Common Stocks--47.8% Shares - ------------------------------------------------------------------------------------------ ____________ ____________ Consumer Non-durables--7.5% Philip Morris Cos. . . . . . . . . . . . . . . . . . . 64,900 $ 3,318,013 Ralston-Purina Group . . . . . . . . . . . . . . . . . 75,000 2,503,125 ____________ 5,821,138 ____________ DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1998 (UNAUDITED) Common Stocks (continued) Shares Value - ------------------------------------------------------- ____________ ____________ Consumer Services--1.4% Clear Channel Communications . . . . . . . . . . . . . 20,000 (c) $ 911,250 Spanish Broadcasting System (Warrants) . . . . . . . . 1,000 (b,c) 205,000 ____________ 1,116,250 ____________ Electronic Technology--9.0% Applied Materials. . . . . . . . . . . . . . . . . . . 70,000 (c) 2,428,125 Intel . . . . . . . . . . . . . . . . . . . . . . . . 16,300 1,453,756 Perkin-Elmer . . . . . . . . . . . . . . . . . . . . . 36,000 3,035,250 ____________ 6,917,131 ____________ Finance--4.6% Everest Reinsurance Holdings . . . . . . . . . . . . . 55,000 1,894,063 NAC Re . . . . . . . . . . . . . . . . . . . . . . . . 35,000 1,695,312 ____________ 3,589,375 ____________ Health Technology--5.7% Biogen . . . . . . . . . . . . . . . . . . . . . . . . 33,000 (c) 2,293,500 Medtronic . . . . . . . . . . . . . . . . . . . . . . 33,000 2,145,000 ____________ 4,438,500 ____________ Industrial Services--3.8% Waste Management . . . . . . . . . . . . . . . . . . . 65,000 2,933,125 ____________ Non-Energy Minerals--.3% Aluminum Co. of America. . . . . . . . . . . . . . . . 3,000 237,750 ____________ Process Industries--3.3% Sealed Air . . . . . . . . . . . . . . . . . . . . . . 71,000 (c) 2,516,063 ____________ Retail Trade--7.5% American Stores. . . . . . . . . . . . . . . . . . . . 70,000 2,279,375 CVS . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 1,142,187 Rite Aid . . . . . . . . . . . . . . . . . . . . . . . 60,000 2,381,250 ____________ 5,802,812 ____________ Transportation--.6% Marine Transport . . . . . . . . . . . . . . . . . . . 14,490 (c) 29,433 OMI . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 (c) 450,000 ____________ 479,433 ____________ Utilities--4.1% Niagara Mohawk Power . . . . . . . . . . . . . . . . . 65,000 (c) 950,625 Pinnacle West Capital . . . . . . . . . . . . . . . . 50,000 2,190,625 ____________ 3,141,250 ____________ TOTAL COMMON STOCKS (cost $33,307,996) . . . . . . . . . . . . . . . . $36,992,827 ____________ Convertible Preferred Stocks--3.6% - ------------------------------------------------------- Energy Minerals; Union Pacific Cap. Trust, 6.25% (cost $3,000,000) . . . . . . . . . . . . . . . . 60,000 (b) $ 2,760,000 ____________ Preferred Stocks--2.3% - ------------------------------------------------------- Consumer Services; Spanish Broadcasting System (cost $1,728,815) . . . . . . . . . . . . . . . . 1,797 (b) $ 1,770,045 ____________ DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1998 (UNAUDITED) Principal Short-Term Investments--29.4% Amount Value - ------------------------------------------------------- ____________ ____________ U.S. Treasury Bills: 3.80%, 12/31/98. . . . . . . . . . . . . . . . . . . . $ 725,000 (d) $ 720,128 3.88%, 1/14/99 . . . . . . . . . . . . . . . . . . . . 654,000 648,467 4.30%, 1/21/99 . . . . . . . . . . . . . . . . . . . . 21,541,000 21,324,082 ____________ TOTAL SHORT-TERM INVESTMENTS (cost $22,723,294) . . . . . . . . . . . . . . . . $22,692,677 ____________ TOTAL INVESTMENTS (cost $75,119,149) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.1% $77,340,045 _______ ____________ LIABILITIES, LESS CASH AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . (.1%) $ (63,326) _______ ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $77,276,719 _______ ____________
Notes to Statement of Investments: - ----------------------------------------------------------------------------- (a) Notional face amount shown. Interest only obligation. (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 October 31, 1998, these securities amounted to $6,126,452 or approximately 7.9% of net assets. (c) Non-income producing. (d)Partially held by custodian in a segregated account as collateral for open financial futures positions. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- STATEMENT OF FINANCIAL FUTURES OCTOBER 31, 1998 (UNAUDITED) Unrealized Market Value Appreciation Covered (Depreciation) Contracts by Contracts Expiration at 10/31/98 ____________ _______________ ______________ ______________ 5 Year U.S. Treasury Notes (long). . . . . . . . . . . . 401 $45,970,893 December '98 $31,658 30 Year U.S. Treasury Bonds (short). . . . . . . . . . . 15 1,933,594 December '98 (938) ________ $30,720 ________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1998 (UNAUDITED) Cost Value ____________ ____________ ASSETS: Investments in securities--See Statement of Investments . . $75,119,149 $77,340,045 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 128,498 Dividends and interest receivable . . . . . . . . . . . . 325,679 Receivable for shares of Common Stock subscribed . . . . 308 Prepaid expenses . . . . . . . . . . . . . . . . . . . . 9,770 ____________ 77,804,300 ____________ LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 65,411 Due to Distributor . . . . . . . . . . . . . . . . . . . 16,092 Payable for futures variation margin--Note 4(a) . . . . . 262,094 Payable for shares of Common Stock redeemed . . . . . . . 153,115 Accrued expenses . . . . . . . . . . . . . . . . . . . . 30,869 ____________ 527,581 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $77,276,719 ____________ REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $72,645,472 Accumulated undistributed investment income--net . . . . 1,252,275 Accumulated net realized gain (loss) on investments . . . 1,127,356 Accumulated net unrealized appreciation (depreciation) on investments (including $30,720 net unrealized appreciation on financial futures)--Note 4(b) . . . . . 2,251,616 ____________ NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $77,276,719 ____________ SHARES OUTSTANDING (300 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED). . . . . . . . . . . . . . 5,541,026 NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $13.95 _______ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- STATEMENT OF OPERATIONS SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED) INVESTMENT INCOME INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 790,811 Cash dividends . . . . . . . . . . . . . . . . . . . . . 553,580 ____________ Total Income . . . . . . . . . . . . . . . . . . . $ 1,344,391 EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . . . . . 318,193 Shareholder servicing costs--Note 3(b) . . . . . . . . . 144,139 Professional fees . . . . . . . . . . . . . . . . . . . . 27,120 Registration fees . . . . . . . . . . . . . . . . . . . . 15,201 Directors' fees and expenses--Note 3(c) . . . . . . . . . 8,949 Prospectus and shareholders' reports . . . . . . . . . . 7,205 Custodian fees--Note 3(b) . . . . . . . . . . . . . . . . 2,550 Loan commitment fees --Note 2 . . . . . . . . . . . . . . 287 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 700 ____________ Total Expenses . . . . . . . . . . . . . . . . . . . . 524,344 ____________ INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820,047 ____________ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4: Net realized gain (loss) on investments and foreign currency transactions . . . . . . . . . . . . . . . . $ (5,584,538) Net realized gain (loss) on forward currency exchange contracts . . . . . . . . . . . . . . . . . . 201,788 Net realized gain (loss) on financial futures: Long Transacations . . . . . . . . . . . . . . . . . . 526,458 Short Transactions . . . . . . . . . . . . . . . . . . (329,985) ____________ Net Realized Gain (Loss) . . . . . . . . . . . . . (5,186,277) Net unrealized appreciation (depreciation) on investments and foreign currency transactions (including $375,239 net unrealized appreciation on financial futures) . . (5,091,368) ____________ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . $(10,277,645) ____________ NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $ (9,457,598) ____________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS Six Months Ended October 31, 1998 Year Ended (Unaudited) April 30, 1998 __________ ____________ OPERATIONS: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 820,047 $ 1,223,195 Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . (5,186,277) 18,637,989 Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . (5,091,368) 2,093,613 ____________ ____________ Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . (9,457,598) 21,954,797 ____________ ____________ DIVIDENDS TO SHAREHOLDERS FROM: Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---- (1,063,176) Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . ---- (15,907,775) ____________ ____________ Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (16,970,951) ____________ ____________ CAPITAL STOCK TRANSACTIONS: Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,823,780 48,997,788 Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 16,384,058 Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,985,791) (36,325,090) ____________ ____________ Increase (Decrease) in Net Assets from Capital Stock Transactions . . . . . . . . (8,162,011) 29,056,756 ____________ ____________ Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . (17,619,609) 34,040,602 NET ASSETS: Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,896,328 60,855,726 ____________ ____________ End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,276,719 $ 94,896,328 ____________ ____________ UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,252,275 $ 432,228 ____________ ____________ Shares Shares ____________ ____________ CAPITAL SHARE TRANSACTIONS: Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685,854 3,100,069 Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . --- 1,167,787 Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,269,689) (2,287,416) ____________ ____________ Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . . (583,835) 1,980,440 ____________ ____________ SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for a share of Common Stock outstanding, total investment return, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from the Fund's financial statements. Six Months Ended October 31, 1998 Year Ended April 30, _____________________________________________ PER SHARE DATA: (Unaudited) 1998 1997 1996 1995 1994 (1) __________ ______ ______ ______ ______ ______ Net asset value, beginning of period . . . . . . $15.49 $14.68 $13.49 $13.81 $12.49 $12.50 ______ ______ ______ ______ ______ ______ Investment Operations: Investment income--net . . . . . . . . . . . . . .16 .24 .33 .32 .39 .24 Net realized and unrealized gain (loss) on investments . . . . . . . . . . . . . . . (1.70) 4.40 1.83 1.70 1.35 (.11) ______ ______ ______ ______ ______ ______ Total from Investment Operations . . . . . . . . (1.54) 4.64 2.16 2.02 1.74 .13 ______ ______ ______ ______ ______ ______ Distributions: Dividends from investment income--net . . . . . . -- (.24) (.34) (.38) (.37) (.13) Dividends from net realized gain on investments . . -- (3.59) (.63) (1.96) (.05) (.01) ______ ______ ______ ______ ______ ______ Total Distributions . . . . . . . . . . . . . . . -- (3.83) (.97) (2.34) (.42) (.14) ______ ______ ______ ______ ______ ______ Net asset value, end of period . . . . . . . . . $13.95 $15.49 $14.68 $13.49 $13.81 $12.49 ______ ______ ______ ______ ______ ______ TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . (9.94%)(2) 34.33% 16.49% 15.67% 14.22% .99%(2) RATIOS/SUPPLEMENTAL DATA: Ratio of expenses to average net assets . . . . . .62%(2) 1.27% 1.31% 1.25% .67% .16%(2) Ratio of net investment income to average net assets . . . . . . . . . . . . .97%(2) 1.57% 2.12% 2.16% 3.00% 2.48%(2) Decrease reflected in above expense ratios due to undertakings by the Manager . . . . . -- -- -- .27% 1.27% 1.58%(2) Portfolio Turnover Rate . . . . . . . . . . . . . 118.19%(2) 262.74% 223.50% 370.06% 160.11% -- Net Assets, end of period (000's Omitted) . . . . $ 77,277 $ 94,896 $ 60,856 $ 62,940 $ 56,639 $ 51,063 - ----------------------------- (1) From July 1, 1993 (commencement of operations) to April 30, 1994. (2) Not annualized. SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES: Dreyfus Asset Allocation Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act") as a non-diversified open-end management investment company. The Fund's investment objective is to maximize total return, consisting of capital appreciation and current income. The Dreyfus Corporation (the "Manager") serves as the Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor of the Fund's shares, which are sold to the public without a sales charge. The Fund' s financial statements are prepared in accordance with generally accepted accounting principles which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including options and financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Securities for which there are no such valuations are valued at fair value as determined in good faith under the direction of the Board of Directors. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate. (b) Foreign currency transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss form investments. Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gain or loss on investments. (c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, amortization of discount on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the Fund receives net earnings credits based on available cash balances left on deposit. (d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain are normally declared and paid annually, but the Fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, 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. DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 2--BANK LINE OF CREDIT: The Fund participates with other Dreyfus-managed funds in a $600 million redemption credit facility ("Facility") primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the Fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the Fund at rates based on prevailing market rates in effect at the time of borrowings. During the period ended October 31, 1998, the Fund did not borrow under the Facility. NOTE 3--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES: (a) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .75 of 1% of the value of the Fund's average daily net assets and is payable monthly. (b) Under the Shareholder Services Plan, the Fund pays the Distributor at an annual rate of .25 of 1% of the value of the Fund's average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the Fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (a securities dealer, financial institution, or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended October 31, 1998, the Fund was charged $106,064 pursuant to the Shareholder Services Plan. The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the Fund. During the period ended October 31, 1998, the Fund was charged $24,042 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 October 31, 1998, the Fund was charged $2,550 pursuant to the custody agreement. (c) Each director who is not an "affiliated person" as defined in the Act receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per meeting. The Chairman of the Board receives an additional 25% of such compensation. NOTE 4--SECURITIES TRANSACTIONS: (a) The aggregate amount of purchases and sales of investment securities, excluding short-term securities, forward currency exchange contracts and financial futures, during the period ended October 31, 1998, amounted to $92,701,326 and $120,528,468, respectively. The Fund enters into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings. When executing forward currency exchange contracts, the Fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward 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 October 31, 1998, there were no open forward currency exchange contracts. The Fund may invest in financial futures contracts in order to gain exposure to or protect against changes in the market. The Fund is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments DREYFUS ASSET ALLOCATION FUND, INC. - ----------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) in financial futures require the Fund to "mark to market" on a daily basis, which reflects the change in the market value of the contract at the close of each day's trading. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses. When the contracts are closed, the Fund recognizes a realized gain or loss. These investments require initial margin deposits with a custodian, which consist of cash or cash equivalents, up to approximately 10% of the contract amount. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Contracts open at October 31, 1998, are set forth in the Statement of Financial Futures. (b) At October 31, 1998, accumulated net unrealized appreciation on investments and financial futures was $2,251,616, consisting of $6,452,658 gross unrealized appreciation and $4,201,042 gross unrealized depreciation. At October 31, 1998, 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). [reg.tm logo] (reg.tm) DREYFUS ASSET ALLOCATION FUND, INC. 200 Park Avenue New York, NY 10166 MANAGER The Dreyfus Corporation 200 Park Avenue New York, NY 10166 CUSTODIAN Mellon Bank, N.A. One Mellon Bank Center Pittsburgh, PA 15258 TRANSFER AGENT & DIVIDEND DISBURSING AGENT Dreyfus Transfer, Inc. P.O. Box 9671 Providence, RI 02940 Printed in U.S.A. 550SA9810 Asset Allocation Fund, Inc. Semi-Annual Report October 31, 1998 -----END PRIVACY-ENHANCED MESSAGE-----