THE DREYFUS FUND INCORPORATED
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this annual report for The Dreyfus
Fund Incorporated for the year ended December 31, 1996. Our investment
strategy during the year was to participate in the strong equity markets and
at the same time remain cognizant of the constant trade-off between values
and risks as market valuations approached historic levels. This produced a
total return of 15.85% for the fiscal year,* which compares with 22.95% for
the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500") for the
same period.** The Fund is positioned to benefit from an economy
demonstrating modest growth and as such, compared to the market, is slightly
overweighted in such cyclical sectors as basic industry, capital goods,
energy and technology and somewhat underweighted in consumer cyclicals and
consumer nondurables and services.
The following sections of this report discuss economic trends of the past
year and the stock market environment, and provide details concerning
portfolio performance.
THE ECONOMY
The much-heralded "Goldilocks" phase of the U.S. economy _ not too hot
and not too cold _ may be ending. First, the slowdown to 2% GDP growth seems
to have been confined to the summer and recent data depict faster growth for
the fourth quarter of 1996. Second, inflation has begun a cyclical climb,
although there is yet little linkage to the tight labor market. The economy
is operating with very little slack near the close of its sixth year of
expansion. Hence, the resumption of faster growth quickly restored a rising
trend to bond yields and pulled short-term rates above their December lows.
As yet there is little expectation of tighter Federal Reserve policy,
although sustained above-trend growth would probably justify higher rates
during 1997. Modest tightening in 1997 would in our opinion help allay
inflation fears and sustain another year of economic growth.
Although the economy grew near its 2.4% long-term trend rate in 1996, it
was nonetheless quite volatile during the year. After a strong first half,
and then the summer slowdown, the return to faster growth late in the year is
not broad-based. Strong sectors are in manufacturing, exports, services and
construction. By contrast, some retailers found Christmas sales disappointing
and capital goods orders are mixed. However, inventories are quite lean and
this tilts the odds towards yet another year of growth in 1997. While
corporate profit growth slowed in 1996, profits still tended to surprise on
the upside and should maintain steady growth in 1997 too.
Accelerating wage growth in 1996 did not fuel higher prices. And surging
energy prices have failed to lift inflation elsewhere. Indeed, core inflation
(excluding food and energy) decelerated last year. Yet surging energy prices
have forced consumer price inflation above 3% and indications are that this
will accelerate further. The general price structure has so far ignored the
higher oil price, responding to it as temporary. However, oil prices have
been rising now for a year and, at some point, their ability to raise the
overall price level may become worrisome, especially if the Fed finds them
significant.
Both long-term and short-term interest rates were quite volatile in 1996.
The strength of the economy prompted rising rates through summer's end, but
bond yields then fell 90 basis points after the economy slowed. That period
of low rates may have ended now that faster growth is again apparent.
We believe the economy has reverted to a period of growth above the
long-term average. Key issues are whether faster growth will fuel higher
inflation this time and at what point rising oil prices would disturb price
stability. The economy will shortly begin a seventh expansion year and
continued volatility in growth and in sentiment is likely.
MARKET OVERVIEW
The stock market in 1996 was a mixture of agony and ecstasy, with the
accent for most of the year on the more desirable of those two alternatives.
By the end of the year, the S&P 500 had registered a gain of 22.95%, while
the blue
chip Dow Jones Industrial Average ("DJIA") gained 28.91%.*** The road leading
to those impressive year-end gains was not a smooth one, however.
The market year began haltingly, in the wake of shaky business conditions
at the end of the previous year. As 1996 unfolded, however, the market picked
up steam. The economy took on characteristics that continued for much of the
year _ low inflation, moderate growth and relatively low interest rates. This
was a combination that investors liked, perhaps too much. By midyear,
satisfaction with the economy turned into fear that economic growth might be
overdone.
The prevailing nervousness about potential inflation served to boost
interest rates temporarily, without the need for Federal Reserve
intervention. This was a temporary setback for large capitalization stocks,
but more damaging to Nasdaq issues and particularly to the smaller
capitalization stocks measured by the Russell 2000 Index.
As summer turned into fall, interest rates eased and inflation remained
at bay. The benign economic environment allowed many stocks to resume their
upward course, causing a string of record-breaking performances by the DJIA
and other broad market indexes. In mid-fall the prospect that government
would continue divided in Washington, with a Democratic President and a
Republican-controlled Congress, appeared to be another plus factor for the
market. Stocks continued to surge, hardly pausing for breath when Chairman
Alan Greenspan raised a caution signal in early December by referring to
"irrational exuberance" in the equity markets.
Stock market veterans issued a stream of warnings that what goes up so
strongly and consistently must, at some point, come down. Nonetheless, a
fairly steady flow of new money coming into stocks from people putting money
aside for retirement seemed to be fueling the boom. While at the very end of
the year, caution caused a softening of stock prices, which backed away from
the year's record of 6560.91 on the DJIA, that record was surpassed in early
1997, when the average surpassed 6700.
Among the best performing groups for 1996 were oil drillers,
semi-conductors, computers, financial enterprises and consumer non-durables.
Corporate earnings were very strong for much of the year, but showed signs of
flagging as the year wore on. This raised questions in the minds of many
market observers whether the scorching pace of the past year could be
maintained.
PORTFOLIO FOCUS
The Fund underperformed the broad market averages as it was
underrepresented in the limited number of stock issues that powered the
performance of the DJIA and S&P 500. The disciplined approach we employ to
manage the Fund kept the broad industry sector weightings approximately in
line with the averages (with the exception of utilities). However, the same
disciplined approach precluded buying high-priced issues that became even
more expensive as the flow of new funds committed to the equity markets surpas
sed historic levels. The Dreyfus Fund is currently strategically positioned
to benefit if the market continues to advance during 1997 and broadens out to
include more than just a narrow selection of issues. The Dreyfus Fund is also
defensively positioned if investors turn out to be less enthusiastic than
they were in 1996. As always, stock selection is driven by fundamental
research as issues are bought and sold with a keen eye on valuation and risk.
Continuing the trend from midyear, technology was the best performing
group. Weightings were increased as the year progressed, finishing the year
with a modest overweighting. New names include Ascend Communications,
Adaptec, Storage Technology, and Computer Sciences. Looking out to 1997,
technology is one of the areas that your management believes has a bright
future in terms of both domestic and international prospects.
Also helping 1996's performance were holdings in financials and, again,
the sector weighting increased during the second half. Significant new
positions were established in Chubb Advanta Cl.B, Fleet Financial Group,
USF&G and Ace. The financial sector continues to benefit from a solid economy
and ongoing industry consolidation and restructuring. In our opinion, the
positive trends driving the outperformance of this sector are likely to
continue for the forseeable future.
Basic industries continued their positive contribution established during
the first half, reflecting a continuing healthy economy. The weighting in
this area declined during the last half as profits were taken, the result of
investments achieving their target prices and of higher stock valuations. New
positions were established in Witco, Monsanto and Hercules, hopefully taking
advantage of their respective restructuring.
Among the stocks that benefited the portfolio most during 1996 were
Intel, Perkin-Elmer, Cisco Systems, Consolidated Stores, Hoechst A.G.,
Warner-Lambert, Raychem, Crown Cork & Seal, AlliedSignal, and American
Reinsurance. The list highlights the themes of corporate restructuring and
broad industry participation in the makeup of the portfolio, which reflect a
research-driven stock selection process.
We are glad that you are a shareholder in The Dreyfus Fund Incorporated.
We look forward to continuing to serve your investment needs and extend our
best wishes for 1997.
Sincerely,
[Ernest G. Wiggins signature logo]
Ernest G. Wiggins
Portfolio Manager
January 15, 1997
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: LIPPER ANALYTICAL SERVICES, INC. _ The Dow Jones Industrial
Average (DJIA) is a price-weighted average of 30 actively traded blue chip
stocks.
THE DREYFUS FUND INCORPORATED DECEMBER 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE DREYFUS FUND
INCORPORATED AND
THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX
[Exhibit A:
Dollars
$1,816,507
The Dreyfus Fund
$1,740,895
Standard & Poor's 500
Composite Stock
Price Index*
12/31/51
(years shown above are as of December 31)
*Source: Lipper Analytical Services, Inc.]
<TABLE>
<CAPTION>
Average Annual Total Returns
One Year Ended Five Years Ended Ten Years Ended From Inception (5/24/51)
December 31, 1996 December 31, 1996 December 31, 1996 to December 31, 1996
------------------ ------------------ ---------------- --------------------
<S> <C> <C> <C>
15.85% 9.03% 10.78% 12.33%
</TABLE>
Past performance is not predictive of future performance.
Although the Fund commenced operations on 5/24/51, the Standard & Poor's 500
Composite Stock Price Index was available beginning 12/31/51. Accordingly,
the above graph compares a $10,000 investment made in The Dreyfus Fund
Incorporated on 12/31/51 to a $10,000 investment made in the Standard &
Poor's 500 Composite Stock Price Index on that date. All dividends and
capital gain distributions are reinvested.
The Fund's performance shown in the line graph takes into account all
applicable fees and expenses. The Standard & Poor's 500 Composite Stock Price
Index is a widely accepted, unmanaged index of overall stock market
performance, which does not take into account charges, fees and other
expenses. 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.
<TABLE>
<CAPTION>
THE DREYFUS FUND INCORPORATED
STATEMENT OF INVESTMENTS DECEMBER 31, 1996
Common Stocks_99.7% Shares Value
_______ _______
<S> <C> <C>
Basic Industries_12.2%. Allegheny Teledyne 1,500,000 $ 34,500,000
Bayer AG............................ 590,000 24,044,127
Crompton & Knowles.................. 2,825,000 54,381,250
Crown Cork & Seal................... 880,000 47,850,000
Hercules............................ 600,000 25,950,000
Hoechst AG.......................... 1,376,000 64,915,769
Monsanto............................ 750,000 29,156,250
Olin................................ 500,000 18,812,500
Witco............................... 1,000,000 30,500,000
_______
330,109,896
_______
Capital Goods_7.9% Coltec Industries................... 2,490,000 (a) 46,998,750
GE Investment Private Placement Partners I,
L.P. (Units)...................... 9.731 (d) 18,236,106
Litton Industries................... 325,000 (a) 15,478,125
Millipore........................... 800,000 33,100,000
Raychem............................. 225,000 18,028,125
Sundstrand.......................... 1,000,000 42,500,000
Thiokol............................. 890,000 39,827,500
_______
214,168,606
_______
Consumer Cyclical_8.2% Consolidated Stores................. 937,500 (a) 30,117,188
Home Depot.......................... 800,000 40,100,000
International Game Technology....... 700,000 12,775,000
Outboard Marine..................... 1,250,000 (b) 20,625,000
Pep Boys............................ 1,000,000 30,750,000
Price/Costco........................ 1,000,000 (a) 25,125,000
Sony................................ 500,000 32,786,177
Wal-Mart Stores..................... 1,300,000 29,737,500
_______
222,015,865
_______
Consumer
Non-Durables_11.6% Gannett............................. 500,000 37,437,500
Grand Casinos....................... 1,450,000 19,575,000
Infinity Broadcasting, Cl. A........ 1,000,000 (a) 33,625,000
Liberty Media Group, Cl. A.......... 1,050,000 29,990,625
McGraw-Hill Companies............... 625,000 28,828,125
Nabisco Holdings, Cl. A............. 1,000,000 38,875,000
Time Warner......................... 1,000,000 37,500,000
Unilever, N.V., ADR................. 300,000 52,575,000
Viacom, Cl. B....................... 1,000,000 (a) 34,875,000
_______
313,281,250
_______
Energy_9.4% Amerada Hess........................ 1,040,000 60,190,000
Louisiana Land & Exploration........ 1,231,000 66,012,375
Murphy Oil.......................... 1,000,000 55,625,000
Pennzoil............................ 1,115,000 62,997,500
Yorktown Energy Partners, L.P. (Units) 7.095 (d) 9,903,177
_______
254,728,052
_______
THE DREYFUS FUND INCORPORATED
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
Common Stocks (continued) Shares Value
_______ _______
Financial_16.4% ACE................................. 500,000 $ 30,062,500
ADVANTA, Cl. B...................... 740,000 30,247,500
AMBAC............................... 368,500 24,459,187
Bank of Boston...................... 215,000 13,813,750
CIGNA............................... 205,000 28,008,125
Chase Manhattan..................... 155,000 13,833,750
Chubb............................... 925,000 49,718,750
Everest Reinsurance Holdings........ 1,440,000 41,400,000
Fleet Financial Group............... 550,000 27,431,250
Glendale Federal Bank............... 576,600 (a) 13,405,950
Great Western Financial............. 686,000 19,894,000
Hibernia, Cl. A..................... 1,380,000 18,285,000
ITT Hartford Group.................. 435,000 29,362,500
Mid Ocean........................... 280,000 14,700,000
SK Equity Fund, L.P.(Units)......... 29.605 (d) 65,728,879
USF&G............................... 1,000,000 20,875,000
_______
441,226,141
_______
Health Care_11.5% Astra A............................. 600,000 29,561,404
Biogen.............................. 850,000 (a) 32,937,500
Boston Scientific................... 300,000 (a) 18,000,000
Bristol-Myers Squibb................ 300,000 32,625,000
Bristol-Myers Squibb................ 5,722 (c) 622,267
Columbia/HCA Healthcare............. 600,000 24,450,000
Galen Partners II, L.P. (Units)..... 4.006 (d) 3,775,323
Guidant............................. 400,000 22,800,000
Merck & Co.......................... 475,000 37,643,750
Novartis AG......................... 30,000 34,282,520
Perkin-Elmer........................ 750,000 44,156,250
Warner-Lambert...................... 400,000 30,000,000
_______
310,854,014
_______
Miscellaneous_3.9% ADT................................. 1,750,000 (a) 40,031,250
Culligan Water Technologies......... 1,000,000 (a) 40,500,000
USA Waste Service................... 750,000 (a) 23,906,250
_______
104,437,500
_______
Technology_14.3% 3COM................................ 385,000 (a) 28,249,375
ADC Telecommunications.............. 700,000 (a) 21,787,500
AMP................................. 500,000 19,187,500
Adaptec............................. 875,000 (a) 35,000,000
Adobe Systems....................... 780,000 29,152,500
Ascend Communications............... 600,000 (a) 37,275,000
Aspect Telecommunications........... 580,000 (a) 36,830,000
Cabletron Systems................... 720,000 (a) 23,940,000
Cascade Communications.............. 415,000 (a) 22,876,875
Computer Sciences................... 400,000 (a) 32,850,000
General Signal...................... 416,900 17,822,475
Intel............................... 175,000 22,914,063
THE DREYFUS FUND INCORPORATED
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1996
Common Stocks (continued) Shares Value
_______ _______
Technology (continued) Storage Technology.................. 650,000 (a) $ 30,956,250
Xilinx.............................. 700,000 (a) 25,768,750
_______
384,610,288
_______
Transportation_1.6% Union Pacific....................... 725,000 43,590,625
_______
Utilities_2.7% AES................................. 500,000 (a) 23,250,000
MFS Communications.................. 500,000 (a) 27,250,000
Northeast Utilities................. 1,600,000 21,200,000
_______
71,700,000
_______
TOTAL COMMON STOCKS
(cost $2,367,585,659)............. $2,690,722,237
=======
Principal
Short-Term Investments_.1% Amount
_______
U.S Government & Agency Federal Home Loan Banks,
6.50%, 1/2/1997
(cost $2,399,567)................. $ 2,400,000 $ 2,399,567
=======
TOTAL INVESTMENTS (cost $2,369,985,226).................................. 99.8% $2,693,121,804
====== =======
CASH AND RECEIVABLES (NET)............................................... .2% $ 5,645,225
====== =======
NET ASSETS............................................................... 100.0% $2,698,767,029
====== =======
Notes to Statement of Investments:
(a) Non-income producing.
(b)Investment in non-controlled affiliates (cost $24,878,175)_see note
1(d).
(c) Security 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 December 31, 1996, this security amounted to
$622,267 or approximately .02% of net assets.
(d) Securities restricted as to public resale.
</TABLE>
<TABLE>
<CAPTION>
Investments in restricted securities with an aggregate market value of
$97,643,485 represent approximately 3.62% of net assets:
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 $1,491,931.74 .68% $1,874,021.79 per unit
Galen Partners II, L.P. (Units)....... 12/8/93 - 11/12/96 942,417.12 .14 942,417.12 per unit
SK Equity Fund, L.P. (Units).......... 12/16/92 - 10/30/96 1,056,286.11 2.43 2,220,195.20 per unit
Yorktown Energy Partners, L.P. (Units) 3/25/91 - 3/30/94 1,141,393.06 .37 1,395,796.62 per unit
*Average cost per unit.
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
securities and limited partnerships listed below:
Portion of Committed
Issuer Amounts Uninvested
______ __________________
Galen Partners II, L.P. (Units)....... $459,927
See notes to financial statements.
THE DREYFUS FUND INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996
Cost Value
_______ _______
ASSETS: Investments in securities_See Statement of Investments $2,369,985,226 $2,693,121,804
Receivable for investment securities sold.. 20,826,779
Dividends receivable....................... 5,149,701
Receivable for subscriptions to Capital Stock 3,319,093
Prepaid expenses........................... 60,943
_______
2,722,478,320
_______
LIABILITIES: Due to The Dreyfus Corporation and affiliates 1,533,670
Payable for investment securities purchased 15,456,059
Cash overdraft due to Custodian............ 5,736,671
Payable for Capital Stock redeemed......... 313,840
Net unrealized depreciation on forward
currency exchange contracts_Note 4(a)..... 135,431
Accrued expenses........................... 535,620
_______
23,711,291
=======
NET ASSETS.................................................................. $2,698,767,029
_______
_______
REPRESENTED BY: Paid-in capital............................ $2,337,581,287
Accumulated net realized gain (loss) on investments 38,195,323
Accumulated net unrealized appreciation (depreciation)
on investments and forward currency transactions 322,990,419
_______
NET ASSETS.................................................................. $2,698,767,029
=======
SHARES OUTSTANDING
(500 MILLION SHARES OF $1 PAR VALUE CAPITAL STOCK AUTHORIZED)............... 249,381,757
NET ASSET VALUE, offering and redemption price per share.................... $10.82
===
See notes to financial statements.
THE DREYFUS FUND INCORPORATED
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996
INVESTMENT INCOME
INCOME: Cash dividends:
Unaffiliated issuers (net of $354,824 foreign taxes
withheld at source)....................... $ 30,726,517
Affiliated issuers....................... 1,197,364 $ 31,923,881
______
Interest................................... 7,384,278
______
Total Income......................... 39,308,159
EXPENSES: Management fee_Note 3(a)................... 17,295,175
Shareholder servicing costs_Note 3(a)...... 1,982,788
Custodian fees_Note 3(a)................... 259,034
Prospectus and shareholders' reports....... 178,813
Professional fees.......................... 162,957
Directors' fees and expenses_Note 3(b)..... 99,137
Registration fees.......................... 56,117
Interest_Note 2............................ 2,833
Miscellaneous.............................. 36,021
______
Total Expenses....................... 20,072,875
______
INVESTMENT INCOME_NET....................................................... 19,235,284
______
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments and foreign
currency transactions_Note 4(a):
Unaffiliated issuers................... $312,343,389
Affiliated issuers..................... (19,627,777) 292,715,612
______
Net realized gain on forward currency exchange
contracts_Note 4(a).................... 2,256,641
______
Net Realized Gain.................... 294,972,253
Net unrealized appreciation (depreciation) on investments:
Unaffiliated issuers................... 111,576,878
Affiliated issuers..................... 12,174,806 123,751,684
______ ______
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 418,723,937
______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $437,959,221
======
See notes to financial statements.
THE DREYFUS FUND INCORPORATED
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
OPERATIONS:
Investment income_net............................................. $ 19,235,284 $ 41,983,993
Net realized gain (loss) on investments........................... 294,972,253 754,917,450
Net unrealized appreciation (depreciation) on investments......... 123,751,684 (222,219,191)
________ _______
Net Increase (Decrease) in Net Assets Resulting from Operations. 437,959,221 574,682,252
________ _______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net............................................. (20,361,089) (41,983,993)
Net realized gain on investments.................................. (269,233,670) (785,802,043)
________ _______
Total Dividends................................................. (289,594,759) (827,786,036)
________ _______
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold..................................... 8,914,742,586 8,936,161,261
Dividends reinvested.............................................. 236,366,888 715,713,497
Cost of shares redeemed........................................... (9,254,246,198) (9,190,532,165)
________ _______
Increase (Decrease) in Net Assets from Capital Stock Transactions (103,136,724) 461,342,593
________ _______
Total Increase (Decrease) in Net Assets....................... 45,227,738 208,238,809
NET ASSETS:
Beginning of Period............................................... 2,653,539,291 2,445,300,482
________ _______
End of Period..................................................... $ 2,698,767,029 $ 2,653,539,291
======== =======
Shares Shares
________ _______
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................... 810,824,782 669,232,838
Shares issued for dividends reinvested............................ 21,687,752 67,564,166
Shares redeemed................................................... (837,850,436) (686,986,385)
________ _______
Net Increase (Decrease) in Shares Outstanding................... (5,337,902) 49,810,619
======== =======
See notes to financial statements.
</TABLE>
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,
______________________________________________________
PER SHARE DATA: 1996 1995 1994 1993 1992
___ ___ ___ ___ ___
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $10.42 $11.93 $13.10 $13.27 $13.14
___ ___ ___ ___ ___
Investment Operations:
Investment income_net........................ .08 .22 .21 .24 .27
Net realized and unrealized gain (loss)
on investments............................. 1.57 2.57 (.76) .58 .44
___ ___ ___ ___ ___
Total from Investment Operations............. 1.65 2.79 (.55) .82 .71
___ ___ ___ ___ ___
Distributions:
Dividends from investment income_net......... (.09) (.22) (.22) (.30) (.24)
Dividends in excess of investment income_net. -- -- -- (.03) --
Dividends from net realized gain on investments (1.16) (4.08) (.40) (.66) (.34)
___ ___ ___ ___ ___
Total Distributions.......................... (1.25) (4.30) (.62) (.99) (.58)
___ ___ ___ ___ ___
Net asset value, end of period............... $10.82 $10.42 $11.93 $13.10 $13.27
=== === === === ===
TOTAL INVESTMENT RETURN.......................... 15.85% 23.77% (4.26%) 6.36% 5.53%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .73% .74% .74% .74% .74%
Ratio of net investment income
to average net assets...................... .70% 1.56% 1.63% 1.67% 2.08%
Portfolio Turnover Rate...................... 220.92% 269.26% 27.70% 39.29% 55.42%
Average commission rate paid(1).............. $.0601 -- -- -- --
Net Assets, end of period (000's Omitted).... $2,698,767 $2,653,539 $2,445,300 $2,850,523 $3,148,858
(1) 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 notes to financial statements.
THE DREYFUS FUND INCORPORATED
NOTES TO FINANCIAL STATEMENTS
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.
The Fund's 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 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. The
following summarizes affiliated issuers during the period ended December 31,
1996:
<TABLE>
<CAPTION>
Shares Market
______________________________________________________
Beginning End of Dividend Value
Name of issuer of Period Purchases Sales Period Income 12/31/96
___________ ---------- ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas Nelson 1,605,200 -- 1,605,200 -- $ 173,364 --
Crompton & Knowles* -- 3,000,000 175,000 2,825,000 -- $54,381,250
Outboard Marine -- 1,250,000 -- 1,250,000 437,500 20,625,000
Thiokol* 500,000 450,000 60,000 890,000 586,500 39,827,500
-------
$1,197,364
=======
*No longer an affiliated Issuer at December 31, 1996.
THE DREYFUS FUND INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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 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.
As a result of varying treatment for financial reporting and Federal
income tax purposes, the Fund reclassed $1,125,805 from accumulated net
realized gains to undistributed net investment income.
NOTE 2_BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
Fund at rates which are related to the Federal Funds rate in effect at the
time of borrowings. At December 31, 1996, the Fund had no outstanding
borrowings under the line of credit.
The average daily amount of borrowings outstanding during the period
ended December 31, 1996 was $53,279, with a related weighted annualized
interest rate of 5.32%. The maximum amount borrowed at any time during the
period ended December 31, 1996 was $6.5 million.
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 period ended December 31, 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 $1,299,081 during the period ended December 31,
1996.
Effective May 10, 1996, the Fund entered into a custody agreement with
Mellon to provide custodial services for the Fund. During the period ended
December 31, 1996, $180,929 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.
THE DREYFUS FUND INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4_SECURITIES TRANSACTIONS:
(A) The following summarizes aggregate amount of purchases and sales of
investment securities, excluding short-term securities and forward currency
exchange contracts, during the period ended December 31, 1996:
Purchases Sales
------------ ----------
Unaffiliated issuers............... $5,807,561,485 $6,229,255,915
Affiliated issuers................. 91,532,969 23,458,078
_______________ _______________
TOTAL.......................... $5,899,094,454 $6,252,713,993
=============== ===============
In addition, the following summarizes open forward currency exchange
contracts at December 31, 1996:
Foreign Unrealized
Currency U.S. Dollar Appreciation
Forward Currency Sales Contracts: Amounts Proceeds Value (Depreciation)
- -------------------------------- ------------ ------------ ------------- -------------
German Deutsche Marks, expiring 3/5/97... 130,000,000 $83,542,189 $84,696,072 $(1,153,883)
Swedish Krona, expiring 3/5/97........... 195,000,000 28,740,715 28,579,804 160,911
Swiss Francs, expiring 3/5/97............ 93,000,000 70,593,594 69,736,053 857,541
_______
$ (135,431)
=======
</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 gain on each contract recognized above.
(B) At December 31, 1996, accumulated net unrealized appreciation on
investments and forward currency exchange contracts was $323,001,147,
consisting of $387,331,068 gross unrealized appreciation and $64,329,921
gross unrealized depreciation.
At December 31, 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).
THE DREYFUS FUND INCORPORATED
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
THE DREYFUS FUND INCORPORATED
We have audited the accompanying statement of assets and liabilities of
The Dreyfus Fund Incorporated, including the statement of investments, as of
December 31, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included verification by
examination of securities held by custodian as of December 31, 1996 and confir
mation 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 The Dreyfus Fund Incorporated at December 31, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
January 31, 1997
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates $.285 per share as a
long-term capital gain distribution of the $1.115 per share paid on December
27, 1996 and also designates $.021 per share as a long-term capital gain
distribution of the $.085 per share paid on June 28, 1996.
The Fund also designates 13.66% of the ordinary dividends paid during the
fiscal year ended December 31, 1996 as qualifying for the corporate dividends
received deduction.
[Dreyfus lion "d" logo]
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. 026AR9612
[Dreyfus logo]
The Dreyfus Fund
Incorporated
Annual Report
December 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE DREYFUS FUND INCORPORATED AND THE STANDARD
& POOR'S 500 COMPOSITE STOCK PRICE INDEX
EXHIBIT A:
STANDARD & POOR'S 500 THE
PERIOD COMPOSITE STOCK DREYFUS
PRICE INDEX * FUND
12/31/51 10,000 10,000
12/31/52 11,840 10,437
12/31/53 11,722 10,426
12/31/54 17,887 17,094
12/31/55 23,540 21,634
12/31/56 25,093 24,887
12/31/57 22,383 23,767
12/31/58 32,097 36,617
12/31/59 35,949 45,971
12/31/60 36,129 49,066
12/31/61 45,847 61,991
12/31/62 41,859 53,563
12/31/63 51,402 67,003
12/31/64 59,884 78,289
12/31/65 67,369 101,770
12/31/66 60,565 103,506
12/31/67 75,101 131,101
12/31/68 83,437 146,511
12/31/69 76,345 128,868
12/31/70 79,398 120,805
12/31/71 90,752 137,760
12/31/72 107,995 150,415
12/31/73 92,120 121,928
12/31/74 67,708 97,676
12/31/75 92,896 128,698
12/31/76 115,005 163,844
12/31/77 106,724 163,899
12/31/78 113,768 183,947
12/31/79 134,702 230,812
12/31/80 178,345 301,037
12/31/81 169,606 317,341
12/31/82 205,902 362,708
12/31/83 252,229 434,406
12/31/84 268,120 448,408
12/31/85 354,455 560,840
12/31/86 420,029 652,372
12/31/87 441,870 708,585
12/31/88 516,104 770,531
12/31/89 678,677 952,679
12/31/90 656,960 920,943
12/31/91 857,332 1,178,929
12/31/92 923,347 1,244,141
12/31/93 1,016,235 1,323,213
12/31/94 1,029,548 1,266,846
12/31/95 1,415,938 1,568,003
12/31/96 1,740,895 1,816,507
*Source: Lipper Analytical Services, Inc.
