<PAGE>
Dreyfus
The Dreyfus Fund
Incorporated
Semi-Annual
Report
June 30, 1996
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
We are pleased to send you this semi-annual report for The Dreyfus
Fund Incorporated covering the six months ended June 30, 1996. During this
period, we took advantage of generally rising stock prices to make
significant changes in the portfolio. In the following sections of this
letter, we discuss the general economic and market environments that the Fund
operates in, and then analyze the Fund's performance and major strategy
changes in the portfolio.
THE ECONOMY
The U.S. economy is rebounding in 1996 following its midcycle
growth slowdown of last year. Yet overall corporate profit growth is slowing
this year. This is the sixth expansion year for this business cycle, and we
believe that it will prove a long cycle.
Economic growth has accelerated since year-end. The first quarter's
2.3% real Gross Domestic Product growth brought with it a demand rebound that
depleted inventories. Even stronger second quarter growth is apparent, led by
manufacturers' attempts to rebuild inventories. In addition, steady job
creation continues to support growth in consumer incomes and spending. As
yet, there are few indications of economic cooling. Some previously strong
capital goods sectors may now be slowing, but overall economic growth is
broadening to more industries. Despite better economic performance this year
than last, profit growth may have peaked last year.
Although surging oil prices boosted overall inflation temporarily
this spring, price inflation otherwise has remained tame this year.
Nevertheless, signs of a faster economic pace have reignited fears of higher
future inflation, especially coming from upward pressure on wages as the
labor market tightens. Thus, bond yields have risen substantially this year.
Short-term market rates are also higher in expectation of Federal Reserve
Board tightening in coming months. So far, long-term rates have risen much
more than short-term rates, forcing the yield curve to steepen. A steep yield
curve is usually supportive of sustained growth in the real economy.
As we look forward, the question arises whether the higher interest
rates already in place and those in prospect will effectively cool the
economy. At present, however, any advance signs of an eventual cooling off in
the economy are hard to discern. The preoccupation at present is with the
economy's impressive strength, and the problems such growth could create.
MARKET OVERVIEW
The broad trend of the stock market was strongly upward during the
six months under review. However, there were many crosscurrents at work. Not
all stock groups benefited equally. The blue chips in the Dow Jones
Industrial Average enjoyed solid advances for the six months, as did the
broader market as represented by the Nasdaq Composite Index and the Standard
& Poor's 500 Composite Stock Price Index. However, as spring turned into
summer, technology stocks began to lag, and small capitalization stocks were
unable to maintain the very fast growth pace of earlier months.
From time to time, unexpected signs of economic strength,
particularly employment and unemployment numbers, jolted the equity markets
with the fear of renewed inflation. Especially in the latter part of the
half-year, concerns over inflation and higher interest rates restrained
market performance in a number of industry categories.
Profits, always a major element in stock performance, continued
strong for a good part of the period. However, fear of rising labor costs and
intensified competition at home and abroad have cast some shadows over the
profit outlook. This has been balanced, however, by the very large sum of
money that continues to be invested in equity mutual funds, much of it from
people planning for their retirement.
As the half-year ended, broad market averages were still solidly
above where they stood when the year began. This, however, was before the
downdraft in stock prices that occurred in mid-July.
PORTFOLIO FOCUS
For the six months ended June 30, 1996, The Dreyfus Fund provided a
total return of 8.35%,* somewhat less than the return of 10.09% of the
Standard & Poor's 500.**
During the half-year, portfolio sectors that did best were
technology, consumer cyclicals, capital goods, basic industries and financial
companies. The worst-performing sector was consumer nondurables and services
where one stock, Viacom, Cl. B, was particularly disappointing.
<PAGE>
In basic industries, where our weighting was somewhat above the S&P
500 average, we sold Monsanto, DuPont (EI) deNemours and WMX Technologies,
all at a profit, and bought Compton & Knowles, Air Products & Chemicals and
Allegheny Ludlum.
In the capital goods category, we shifted emphasis to companies
that have been or could potentially become restructuring candidates. We took
profits in John Deere & Co., Xerox and Honeywell, and chose instead to
increase the position in Thiokol and initiate new positions in Masco,
Raytheon and Coltec Industries. We also added to positions in Boeing.
In a similar strategic shift in the consumer cyclical area, auto
producers were pared down in favor of such stocks as Price/Costco, Outboard
Marine and Intimate Brands. Emphasis in this category is now being placed on
home improvement issues such as Home Depot and Lowes.
As already noted, the consumer nondurable and services area
suffered from the general underperformance of the whole entertainment and
broadcast area. It should be noted that this part of the portfolio is made up
primarily of entertainment stocks which we believe have growth potential and
appear poised to do much better in the second half of the year both
domestically and internationally.
Your managers took selective profits in the energy category, mainly
from Texaco, Ensco International, Tidewater, Anadarko Petroleum and Noble
Drilling. Holdings in this sector have been reduced modestly. Funds were
redeployed to increase domestic exploration and production sectors,
particularly natural gas issues including names such as Louisiana Land and
Enron.
Weightings were increased modestly in financial stocks, with
emphasis on issues that are less sensitive to changes in interest rates. This
move stems from our belief that rates could be in a volatile period.
Accordingly, we sold Citicorp, First Union and BankAmerica, and bought Cigna,
AMBAC and ITT Hartford Group.
During the past six months, health care holdings were
substantially increased, including a decision to increase exposure to foreign
health care companies. This was based on the comparatively low equity
valuations available overseas plus the more certain earnings prospects for
the domestic health care sector in a changeable economic environment. In this
sector, we have increased holdings in Sandoz, AG, the Swiss company, added
positions in the German firms, Bayer and Hoechst, and continue to hold Astra A
of Sweden. The Fund also increased its investments in select American health
care companies.
Weightings in technology were increased during the period, which
reflects our belief that carefully selected stocks in this sector have
considerable earnings growth potential. Major holdings here include Intel,
Glenayre Technology, Cabletron Systems, Cisco Systems and Aspect
Telecommunications.
In utilities, the Fund has acquired issues amounting to about 4% of
total equity holdings. The focus is primarily on newer participants in
telephone communications. These include MFS Communications, GTE, WorldCom and
Teleport.
The portfolio of course cannot escape being affected by negative
movements in the broad securities markets. We believe, however, that The
Dreyfus Fund is now well-positioned to take advantage of favorable equity
currents and growth opportunities in specific stocks we have selected.
Sincerely,
Ernest G. Wiggins
Portfolio Manager
July 17, 1996
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.
<PAGE>
<TABLE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Statement of Investments June 30, 1996 (Unaudited)
Common Stocks--94.4% Shares Value
- -------------------------------------------------------------------------------------- --------- --------------
<S> <C> <C> <C>
Basic Industries--11.5% Air Products & Chemicals....................... 600,000 $ 34,650,000
Allegheny Ludlum............................... 1,500,000 28,312,500
Bayer AG....................................... 450,000 15,876,271
Crompton & Knowles............................. 2,451,100(b) 41,055,925
Crown Cork & Seal.............................. 1,725,000 77,625,000
Grace (W.R.)................................... 400,000 28,350,000
Hoechst A.G. .................................. 1,256,000 42,539,940
Olin .......................................... 322,100 28,747,425
Praxair........................................ 600,000 25,350,000
--------------
322,507,061
--------------
Capital Goods--11.8% AlliedSignal................................... 700,000 39,987,500
Boeing ........................................ 500,000 43,562,500
Coltec Industries ............................. 2,500,000(a) 35,625,000
GE Investment Private Placement Partners l,
L.P. (Units)................................. 14.303(c) 22,165,848
Giddings & Lewis............................... 635,000 10,318,750
Masco ......................................... 1,000,000 30,250,000
Raychem ....................................... 450,000 32,343,750
Raytheon ...................................... 500,000 25,812,500
Stewart & Stevenson Services 525,000 11,943,750
Sundstrand .................................... 492,100 18,023,163
Thiokol ....................................... 950,000(b) 37,525,000
U.S.A. Waste Service........................... 800,000(a) 23,700,000
--------------
331,257,761
--------------
Consumer Cyclical--10.3% Consolidated Stores............................ 1,000,000(a) 36,750,000
Ford Motor..................................... 1,000,000 32,375,000
Home Depot..................................... 700,000 37,800,000
International Game Technology.................. 1,500,000 25,312,500
Intimate Brands, Cl. A ........................ 850,000 19,443,750
Jones Apparel Group............................ 350,000(a) 17,193,750
Lowe's ........................................ 1,225,000 44,253,125
Outboard Marine................................ 1,100,000(b) 19,937,500
Price/Costco .................................. 1,250,000(a) 27,031,250
Sony........................................... 463,000 30,444,414
--------------
290,541,289
--------------
Consumer Non-Durables--11.0% BHC Communications, Cl. A...................... 158,000 15,444,500
CUC International.............................. 100,000(a) 3,550,000
Carnival, Cl. A................................ 500,000 14,437,500
Chris-Craft Industries......................... 540,750 23,793,000
Gaylord Entertainment, Cl. A................... 2,500,000 70,625,000
Grand Casinos ................................. 1,400,000 36,050,000
Liberty Media Group, Cl. A..................... 900,000 23,850,000
News Corp A.D.S. .............................. 1,400,000(a) 32,900,000
Tele-Communications, Cl. A, TCI Group.......... 1,500,000 27,187,500
Thomas Nelson ................................. 1,465,000(b) 19,594,375
</TABLE>
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Statement of Investments (continued) June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- -------------------------------------------------------------------------------------- --------- --------------
<S> <C> <C> <C>
Consumer Non-Durables
(continued) Time Warner.................................... 600,000 $ 23,550,000
Viacom, Cl. B ................................. 500,000(a) 19,437,500
--------------
310,419,375
--------------
Energy--8.0% Amerada Hess................................... 1,500,000 80,437,500
Enron Oil & Gas................................ 700,500 19,526,438
Louisiana Land & Exploration .................. 1,050,000 60,506,250
Occidental Petroleum........................... 2,275,000 56,306,250
Yorktown Energy Partners, L.P. (Units) ........ 7.095(c) 8,098,184
--------------
224,874,622
--------------
Financial--13.5% AMBAC.......................................... 680,000 35,445,000
Aetna Life & Casualty.......................... 400,000 28,600,000
Ahmanson (H.F.) & Co........................... 600,000 16,200,000
American International Group .................. 270,000 26,628,750
American Reinsurance .......................... 700,000 31,412,500
Bank of Boston................................. 425,000 21,037,500
CIGNA ......................................... 377,900 44,544,963
Everest Reinsurance Holdings .................. 1,075,000 27,815,625
Federal National Mortgage Association.......... 860,000 28,810,000
Hibernia, Cl. A................................ 1,500,000 16,312,500
ITT Hartford Group............................. 550,000 29,287,500
SK Equity Fund, L.P. (Units)................... 26.402(c) 50,865,783
State Street Boston............................ 325,000 16,575,000
Union Planters ................................ 191,600 5,819,850
--------------
379,354,971
--------------
Health Care--11.1% Astra A........................................ 1,000,000 44,183,065
Baxter International........................... 800,000 37,800,000
Columbia/HCA Healthcare........................ 800,000 42,700,000
Galen Partners II, L.P. (Units)................ 4.149(c) 3,905,817
PacifiCare Health Systems, Cl. B............... 175,000(a) 11,856,250
Perkin-Elmer................................... 1,225,000 59,106,250
Sandoz AG...................................... 56,000 63,955,307
Warner-Lambert................................. 900,000 49,500,000
--------------
313,006,689
--------------
Miscellaneous--2.2% ADT............................................ 2,000,000(a) 37,750,000
Culligan Water Technologies.................... 620,000(a) 23,560,000
--------------
61,310,000
--------------
Technology--9.5% 3COM........................................... 500,000(a) 22,875,000
Aspect Telecommunications...................... 513,100(a) 25,398,450
BMC Software................................... 200,000(a) 11,950,000
Cabletron Systems.............................. 400,000(a) 27,450,000
Cisco Systems.................................. 450,000(a) 25,481,250
</TABLE>
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Statement of Investments (continued) June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- -------------------------------------------------------------------------------------- --------- --------------
<S> <C> <C> <C>
Technology (continued) Glenayre Technologies.......................... 600,000(a) $ 30,000,000
Intel.......................................... 475,000 34,882,813
Microsoft...................................... 150,000(a) 18,018,750
Motorola....................................... 225,000 14,146,875
Sun Microsystems............................... 375,000(a) 22,078,125
Synopsys....................................... 300,000(a) 11,925,000
U.S. Robotics.................................. 250,000 21,375,000
--------------
265,581,263
--------------
Transportation--1.9% Burlington Northern Santa Fe................... 500,000 40,437,500
Union Pacific.................................. 200,000 13,975,000
--------------
54,412,500
--------------
Utilities--3.6% GTE............................................ 500,000 22,375,000
MFS Communications............................. 1,060,000(a) 39,882,500
Teleport Communications Group, Cl. A........... 849,100 16,239,037
WorldCom....................................... 400,000(a) 22,150,000
--------------
100,646,537
--------------
TOTAL COMMON STOCKS
(cost $2,417,800,786)........................ $2,653,912,068
--------------
--------------
TOTAL INVESTMENTS (cost $2,417,800,786)............................................... 94.4% $2,653,912,068
------ --------------
------ --------------
CASH AND RECEIVABLES (NET)............................................................ 5.6% $ 157,600,695
------ --------------
------ --------------
NET ASSETS............................................................................ 100.0% $2,811,512,763
------ --------------
------ --------------
</TABLE>
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Notes to Statement of Investments: (Unaudited)
- ------------------------------------------------------------------------------
(a) Non-income producing.
(b) Investment in non-controlled affiliates (cost $131,819,544)--see note 1(d).
(c) Securities restricted as to public resale. Investments in restricted
securities with an aggregate market value of $85,035,632 represent
approximately 3.02% of net assets:
<TABLE>
<CAPTION>
Acquisition Purchase Percentage of
Issuer Date Price* Net Assets Valuation +
- -------- ------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
GE Investment Private Placement
Partners I, L.P. (Units) 5/28/91-9/13/95 $1,284,634.51 .79% $1,549,734.18 per unit
Galen Partners II, L.P. (Units) 12/8/93-5/1/96 941,387.56 .14 941,387.56 per unit
SK Equity Fund, L.P. (Units) 12/16/92-6/10/96 1,065,056.76 1.81 1,926,588.25 per unit
Yorktown Energy Partners, L.P. (Units) 3/25/91-3/30/94 1,141,393.09 .28 1,141,393.09 per unit
</TABLE>
* Average cost.
+ The valuation of these securities has been determined in good faith under
the direction of the Board of Directors.
- ----------------------------
Subject to certain limitations, the Fund has commitments to invest in the
limited partnerships listed below:
Portion of Committed
Issuer Amounts Uninvested
___________ ____________________
Galen Partners II, L.P. (Units) $ 848,990
SK Equity Fund, L.P. (Units) 16,355,716
See independent accountants' review report and notes to financial statements.
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities June 30, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $2,417,800,786)--see statement............................... $2,653,912,068
Receivable for investment securities sold............................ 181,252,947
Receivable for subscriptions to Capital Stock........................ 117,059,116
Dividends and interest receivable.................................... 3,776,691
Prepaid expenses..................................................... 125,604
--------------
2,956,126,426
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................ $ 1,471,425
Bank loan payable--Note 2............................................ 6,500,000
Payable for investment securities purchased.......................... 131,988,396
Payable for Capital Stock redeemed................................... 3,809,245
Net unrealized depreciation on forward currency exchange contracts--
Note 4(a) ......................................................... 160,226
Accrued expenses..................................................... 684,371 144,613,663
----------- --------------
NET ASSETS............................................................... $2,811,512,763
--------------
--------------
REPRESENTED BY:
Paid-in capital...................................................... $2,382,245,677
Accumulated undistributed investment income--net...................... 755,283
Accumulated undistributed net realized gain on investments........... 192,552,761
Accumulated net unrealized appreciation on investments and
foreign currency transactions...................................... 235,959,042
--------------
NET ASSETS at value applicable to 251,504,620 shares outstanding
(500 million shares of $1 par value Capital Stock authorized)........ $2,811,512,763
--------------
--------------
NET ASSET VALUE, offering and redemption price per share
($2,811,512,763 / 251,504,620 shares)................................ $11.18
------
------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Statement of Operations six months ended June 30, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Cash dividends:
Unaffiliated issuers (net of $241,249 foreign taxes withheld at source) $ 18,455,811
Affiliated issuers............................................. 587,916 $ 19,043,727
Interest........................................................... 4,118,319
------------
Total Income................................................... 23,162,046
Expenses:
Management fee--Note 3(a)........................................... 8,764,000
Shareholder servicing costs--Note 3(a).............................. 1,082,847
Custodian fees--Note 3(a)........................................... 124,127
Professional fees.................................................. 70,725
Prospectus and shareholders' reports............................... 67,236
Directors' fees and expenses--Note 3(b)............................. 45,526
Registration fees.................................................. 40,051
Interest expense--Note 2............................................ 3,125
Miscellaneous...................................................... 31,738
------------
Total Expenses................................................. 10,229,375
------------
INVESTMENT INCOME--NET.......................................... 12,932,671
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (loss) on investments and foreign currency
transactions--Note 4(a):
Unaffiliated issuers............................................... $195,042,023
Affiliated issuers................................................. (1,916,681) $193,125,342
------------
Net realized gain on forward currency exchange
contracts--Note 4(a)................................................ 222,816
------------
Net Realized Gain.............................................. 193,348,158
Net unrealized appreciation on investments:
Unaffiliated issuers............................................... 33,999,070
Affiliated issuers................................................. 2,721,237 36,720,307
------------ ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................ 230,068,465
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... $243,001,136
------------
------------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30, 1996
1995 (Unaudited)
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................. $ 41,983,993 $ 12,932,671
Net realized gain on investments.................................. 754,917,450 193,348,158
Net unrealized appreciation (depreciation) on investments for the period (222,219,191) 36,720,307
-------------- --------------
Net Increase In Net Assets Resulting From Operations............ 574,682,252 243,001,136
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net............................................. (41,983,993) (12,177,388)
Net realized gain on investments.................................. (785,802,043) (14,377,942)
-------------- --------------
Total Dividends................................................. (827,786,036) (26,555,330)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold..................................... 8,936,161,261 5,206,178,460
Dividends reinvested.............................................. 715,713,497 15,272,089
Cost of shares redeemed........................................... (9,190,532,165) (5,279,922,883)
-------------- --------------
Increase (Decrease) In Net Assets From Capital Stock
Transactions................................................ 461,342,593 (58,472,334)
-------------- --------------
Total Increase In Net Assets................................ 208,238,809 157,973,472
NET ASSETS:
Beginning of period............................................... 2,445,300,482 2,653,539,291
-------------- --------------
End of period (including undistributed investment income--net of
$755,283 in 1996)............................................... $2,653,539,291 $2,811,512,763
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
Shares Shares
-------------- --------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................... 669,232,838 475,992,076
Shares issued for dividends reinvested............................ 67,564,166 1,313,245
Shares redeemed................................................... (686,986,385) (480,520,360)
-------------- --------------
Net Increase (Decrease) In Shares Outstanding................... 49,810,619 (3,215,039)
-------------- --------------
-------------- --------------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Financial Highlights
Contained below is per share operating performance data for a share of
Capital Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended
--------------------------------------------------------------- June 30, 1996
PER SHARE DATA: 1991 1992 1993 1994 1995 (Unaudited)
------ ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $10.80 $13.14 $13.27 $13.10 $11.93 $10.42
------ ------ ------ ------ ------ ------
Investment Operations:
Investment income--net........ .34 .27 .24 .21 .22 .05
Net realized and unrealized gain
(loss) on investments....... 2.63 .44 .58 (.76) 2.57 .82
------ ------ ------ ------ ------ ------
Total from Investment
Operations............. 2.97 .71 .82 (.55) 2.79 .87
------ ------ ------ ------ ------ ------
Distributions:
Dividends from investment
income--net................ (.35) (.24) (.30) (.22) (.22) (.05)
Dividends in excess of investment
income--net................ -- -- (.03) -- -- --
Dividends from net realized gain
on investments............. (.28) (.34) (.66) (.40) (4.08) (.06)
------ ------ ------ ------ ------ ------
Total Distributions....... (.63) (.58) (.99) (.62) (4.30) (.11)
------ ------ ------ ------ ------ ------
Net asset value, end of period.. $13.14 $13.27 $13.10 $11.93 $10.42 $11.18
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN......... 28.02% 5.53% 6.36% (4.26%) 23.77% 8.35%(1)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets............... .78% .74% .74% .74% .74% .37%(1)
------ ------ ------ ------ ------ ------
Ratio of net investment income
to average net assets.... 2.65% 2.08% 1.67% 1.63% 1.56% .46%(1)
Portfolio Turnover Rate.... 79.70% 55.42% 39.29% 27.70% 269.26% 112.39%(1)
Average commission rate paid(2) -- -- -- -- -- $.0675
Net Assets, end of period
(000's Omitted).......... $2,996,663 $3,148,858 $2,850,523 $2,445,300 $2,653,539 $2,811,513
<FN>
_____________________
(1) Not annualized.
(2) For years beginning January 1, 1996, the Fund is required to disclose its
average commission rate paid per share for purchases and sales of
investment securities.
</TABLE>
See independent acccountants' review report and notes to financial statements.
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
The Dreyfus Fund Incorporated (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company. The Fund's investment objective is to provide investors
with long-term capital growth consistent with the preservation of capital.
The Dreyfus Corporation ("Manager") serves as the Fund's investment adviser.
The Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). Premier
Mutual Fund Services, Inc. acts as the distributor of the Fund's shares,
which are sold to the public without a sales charge.
(a) Portfolio valuation: Investments in securities 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. 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, the difference between
the amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise from
changes in the value of assets and liabilities other than investments in
securities, resulting from changes in exchange rates. Such gains and losses
are included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(d) Affiliated issuers: Issuers in which the Fund held 5% or more
of the outstanding voting securities are defined as "affiliated" in the Act.
(e) Dividends to shareholders: Dividends are recorded on the
ex-dividend date. Dividends from investment income-net are declared and paid
on a quarterly basis. Dividends from net realized capital gain are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. To the extent that net
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
realized capital gain can be offset by capital loss carryovers, if
any, it is the policy of the Fund not to distribute such gain.
(f) Federal income taxes: It is the policy of the Fund to continue
to qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2--Bank Line of Credit:
The Fund participates in a $100 million unsecured line of credit
provided by The Bank of New York, primarily for temporary or emergency
purposes, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. Interest is payable at the
Federal Funds rates plus .50% on an annualized basis. Outstanding borrowings
on June 30, 1996 under the line of credit, amounted to $6,500,000 at an
annualized rate of 5.77%.
The average daily amount of short-term debt outstanding during the
six months ended June 30, 1996 was approximately $107,143, with a related
weighted annualized interest rate of 5.77%. The maximum amount borrowed at
any time during the six months ended June 30, 1996 was $6,500,000.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("Agreement") with the
Manager, the management fee is payable monthly, based on the following annual
percentages of the value of the Fund's average daily net assets: .65 of 1% of
the first $1.5 billion; .625 of 1% of the next $500 million; .60 of 1% of the
next $500 million; and .55 of 1% over $2.5 billion.
The Agreement provides for an expense reimbursement from the
Manager should the Fund's aggregate expenses, exclusive of taxes and
brokerage commissions, exceed 1% of the value of the Fund's average daily net
assets for any full year. No expense reimbursement was required pursuant to
the Agreement for the six months ended June 30, 1996.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned
subsidiary of the Manager, under a transfer agency agreement for providing
personnel and facilities to perform transfer agency services for the Fund.
Such compensation amounted to $647,892 for the six months ended June 30,
1996.
Effective May 10, 1996, the Fund entered into a Custody Agreement
with Mellon to provide custodial services for the Fund. For the period from
May 10, 1996 through June 30, 1996, $25,448 was paid to Mellon pursuant to
the Custody Agreement.
(b) Each director who is not an "affiliated person" as defined in
the Act receives from the Fund an annual fee of $6,500 and an attendance fee
of $500 per meeting. The Chairman of the Board receives an additional 25% of
such compensation.
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 4--Securities Transactions:
(a) The following summarizes the aggregate amount of purchases and
sales of investment securities, excluding short-term securities and forward
currency exchange contracts, during the six months ended June 30, 1996:
Purchases Sales
-------------- --------------
Unaffiliated issuers................ $2,937,873,579 $3,239,552,203
Affiliated issuers.................. 98,161,856 1,721,213
-------------- --------------
Total............................. $3,036,035,435 $3,241,273,416
-------------- --------------
-------------- --------------
In addition, the following summarizes open forward currency exchange
contracts at June 30, 1996:
<TABLE>
<CAPTION>
Foreign
Currency U.S. Dollar Unrealized
Forward Currency Sales Contracts Amounts Proceeds Value (Depreciation)
- -------------------------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
German Deutschemark,
expiring 9/10/96....................... 77,611,800 $51,000,000 $51,154,627 $(154,627)
Japanese Yen, expiring 9/10/96........... 825,892,000 7,600,000 7,605,599 (5,599)
---------
$(160,226)
---------
---------
</TABLE>
The Fund enters into forward currency exchange contracts in order
to hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings. When executing forward currency exchange
contracts, the Fund is obligated to buy or sell a foreign currency at a
specified rate on a certain date in the future. With respect to sales of
forward currency exchange contracts, the Fund would incur a loss if the value
of the contract increases between the date the forward contract is opened and
the date the forward contract is closed. The Fund realizes a gain if the
value of the contract decreases between those dates. With respect to
purchases of forward currency exchange contracts, the Fund would incur a loss
if the value of the contract decreases between the date the forward contract
is opened and the date the forward contract is closed. The Fund realizes a
gain if the value of the contract increases between those dates. The Fund is
also exposed to credit risk associated with counter party nonperformance on
these forward currency exchange contracts which is typically limited to the
unrealized gains on such contracts that are recognized in the statement of
assets and liabilities.
(b) At June 30, 1996, accumulated net unrealized appreciation on
investments and forward currency exchange contracts was $235,951,056,
consisting of $281,268,945 gross unrealized appreciation and $45,317,889
gross unrealized depreciation.
At June 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
<PAGE>
The Dreyfus Fund Incorporated
- ------------------------------------------------------------------------------
Review Report of Ernst & Young LLP, Independent Accountants
Shareholders and Board of Directors
The Dreyfus Fund Incorporated
We have reviewed the accompanying statement of assets and
liabilities of The Dreyfus Fund Incorporated, including the statement of
investments, as of June 30, 1996, and the related statements of operations
and changes in net assets and financial highlights for the six month period
ended June 30, 1996. These financial statements and financial highlights are
the responsibility of the Fund's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the interim financial statements and financial
highlights referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
December 31, 1995 and financial highlights for each of the five years in the
period ended December 31, 1995 and in our report dated February 12, 1996, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
Ernst & Young LLP
New York, New York
July 30, 1996
<PAGE>
The Dreyfus Fund Incorporated
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. 026SA966
