THE DREYFUS FUND INCORPORATED
LETTER TO SHAREHOLDERS
Dear Shareholder:
Management of The Dreyfus Fund Incorporated was taken over in late May,
1997 by Timothy M. Ghriskey, who also manages a number of other equity funds
for The Dreyfus Corporation. I am delighted to introduce Tim Ghriskey to
shareholders in The Dreyfus Fund.
Tim joined the investment staff of The Dreyfus Corporation in the summer
of 1995 as a Senior Equity Portfolio Manager. Before joining Dreyfus, he
spent ten years with Loomis, Sayles & Company as both an equity and a
balanced portfolio manager. At his prior firm, Tim was an Associate Managing
Partner and a member of the Investment Policy Committee and the Planning
Committee. He began his investment career as an equity analyst following a
number of industries, including beverage, tobacco, leisure, entertainment,
home products, cosmetics, metals and mining.
Tim is a graduate of Trinity College and received his M.B.A. from the
Darden School at the University of Virginia. He is a Chartered Financial
Analyst and a Chartered Investment Counselor.
We have great confidence in Tim's ability to manage the Fund's portfolio.
Sincerely,
[Stephen E. Canter signature logo]
Stephen E. Canter
Chief Investment Officer
The Dreyfus Corporation
THE DREYFUS FUND INCORPORATED
LETTER TO SHAREHOLDERS
Dear Shareholder:
This letter is my first to you, as I assumed portfolio management of The
Dreyfus Fund Incorporated at a meeting of your board of directors on May 29,
1997.
We are pleased to provide you with this semi-annual report for The
Dreyfus Fund Incorporated for the six-month reporting period ended June 30,
1997. Over this period, your Fund produced a total return of 9.26%,* which
compares with a total return of 20.60% for the Standard & Poor's 500
Composite Stock Price Index over the same period.** The Standard & Poor's 500
is weighted toward the largest publicly traded companies, and these
investments have experienced significant appreciation during this period. My
approach is not to attempt to replicate this index, as I believe there is
better value elsewhere.
Restructuring the Fund since I assumed management was accomplished in
relatively short order, and was largely completed by the end of June. When I
assumed portfolio management of the Fund, my team and I brought with us a new
style of equity investing: disciplined value. This investment style seeks
undervalued investments through a disciplined approach.
Value Investing
While there are other investment disciplines practiced at Dreyfus, we are
passionate believers in value investing. Paying attention to the value of
securities has proven in numerous industry and academic studies to have
resulted historically in superior and more consistent long-term investment
returns. Why? Value investors are frugal. We want to buy growing companies,
but we do not want to pay much for them.
As value investors, we believe that in the investment world inexpensive
is better than expensive. By definition, securities with low valuations
should have more potential for an increase in this valuation than securities
with high valuations. In fact, securities priced at a valuation discount to
the average market valuation have historically tended to move toward higher
valuations over time and, therefore, have what we believe is a built-in
advantage for long-term price appreciation. Of course, this assumes sound
business fundamentals. Investors tend to have low expectations for securities
with low valuations, and these low expectations tend to be more easily met
than for securities with high expectations. Further, investors and analysts
often extrapolate or project past growth into the future which tends to
result in excessive pessimism about low valuation stocks. More often than
not, we believe the opposite growth pattern occurs, relative to these
expectations, with low valuation stocks growing more rapidly than expected.
Finally, when a stock with a low valuation is unfortunately greeted with bad
news and its price corrects, we believe that it is already relatively
inexpensive and simply should not have far to fall in value.
Investing in value stocks is somewhat counter to human nature, a decided
advantage. A successful value investor does not follow the herd of other
investors, does not blindly accept widely distributed recommendations from
brokerage firms, and does not just buy glamorous investment stories which
almost everyone else already knows and owns. A successful value investor is
more proactive than reactive, and takes advantage of other investors'
overreaction to events. Among the numerous reasons that value stocks may
appreciate in value are lower expectations, more thorough analysis of actual,
reported data instead of forecasts, typically higher dividends, often more
stock repurchases by the companies, and the potential for takeovers and asset
restructuring. Because of its focus on securities with low valuations, value
investing should, we believe, result in steady investment gains and not
wildly volatile swings in investment performance. In this sense, we believe
it is designed to be a lower risk, more conservative style of equity
investing.
Investment Process
Our approach to the selection of securities starts and ends with our
analysts, who are an integral part of our investment team. We only want to
own securities which our fine team of analysts know and follow closely
through regular management interviews and company visits.
Using our analysts' work as a starting point, we then screen the universe
of stocks by computer according to two principal methods. First, we screen
for high projected earnings yield (the inverse of the price-earnings ratio)
on earnings for the next 12 months. We look for securities with an earnings
yield which is competitive with risk-free investments, U.S. Treasuries.
Otherwise, we would rather own the risk-free security. Second, we apply our
proprietary screen of 21 fundamental factors which have historically affected
stock returns. These factors include the growth outlook over various time
horizons, several relative value measures, company size, earnings revision
and surprise, cash flow, financial, operating and foreign leverage, momentum
measures, and a qualitative evaluation of the potential for positive change
to occur at each company.
Combining this data with our analysts' in-depth knowledge of the
individual companies, we then construct a portfolio of approximately 65 to 75
securities which we believe is adequately diversified without overly diluting
the potential impact of good investment ideas.
Selling is also a major part of our discipline and, we believe, an often
neglected part of the investment management process. We use specific criteria
to determine when selling a security is in our shareholders' best interest.
Economic Review
Since ending its 1995 slowdown, the economy has sustained an above-trend
growth trajectory, slowing only briefly in the third quarter of 1996 and
again in recent months. Meanwhile, the level of economic activity is now at
the point where economic resources are near full deployment. Yet price
inflation remains quiescent, boosting the purchasing power of incomes and
contributing to the best sense of economic well-being in decades. In this
environment, monetary policy has been benign, allowing market interest rates
to sway within an eighteen-month trading range and corporate profits to rise
steadily. However, even while the jury is out on the inflation risks ahead,
the Federal Reserve Board (the "Fed") has indicated that it wouldn't hesitate
to tighten credit policy if circumstances require.
Real Gross Domestic Product growth grew an above-trend 3.1% from year-end
1995 to year-end 1996, then accelerating to more than 4.0% in the first half
of this year. However, this year's pattern shows growth concentrated into the
first quarter, when GDP surged 5.9%, while a slowdown to near 2.5% is
apparent in the second quarter. The slower recent growth is attributable to a
lackluster retail sector, even though exports and capital spending are
gaining. A key issue is whether the absence of pent-up demand could lead to a
sluggish consumer profile and, hence, slow GDP growth in the near future.
Indeed, factors that could underpin a resumption of stronger spending are
rising: real consumer purchasing power, soaring household wealth and all-time
highs in consumer confidence. Additionally, inventories remain lean, muting
the prospect of yet slower economic growth.
Alongside evidence of a slower retail sector in the second quarter are
reports showing that unemployment fell below 5% and industrial capacity
utilization tightened towards its 1994 highs. With these developments, the
economy now is operating at a high level with little slack. Yet wage
inflation abated in the second quarter while price inflation continued to
decelerate. The absence of any troublesome sign of inflation has kept market
interest rates in a long-standing trading range. Even corporate profits
continue to surprise on the upside.
Views on the need to tighten monetary policy are divergent. There are
those who believe that inflation pressure points are just different than in
the past and others who believe the inflation cycle has been eliminated by
global factors and technology. However, the Fed appears willing to err on the
cautious side, if necessary, in the next several months.
Market Overview
When the closing bell rang on June 30, the Standard & Poor's 500 showed a
six-month gain of 20.60%, the Dow Jones Industrial Average was up 20.12%, the
Nasdaq Composite Index had gained 11.70% and even small capitalization stocks
represented by the Russell 2000 Index were up by 10.20%.***
All these major indexes set new records repeatedly during the half-year.
However, it wasn't clear sailing, and not all sectors profited equally. As
recently as April, just after the Fed voted its latest increase in interest
rates, broad stock averages were only modestly ahead for the year. Technology
and small cap stocks were lagging the larger, better-known issues.
A turnaround began in mid-April that carried all markets to new highs.
The main propellant was the expanding yet noninflationary economy. At the
same time, corporate profits, generally speaking, showed continued strength.
Clearly, all the hard work of corporate reorganization and down-sizing in
recent years was paying off. Before each scheduled meeting of the Fed, there
was apprehension that interest rates might be boosted again. Yet the
underlying tone of the market was one of confidence and strength. No doubt
the steady influx of retirement money and other assets into equity mutual
funds was an important factor in the market's buoyancy.
As the market averages advanced, an increasing number of warnings were
being issued to the investing public to remember that what goes up might come
down - that many stocks appeared richly priced in relation to earnings
prospects. In day-to-day stock trading, however, there was little evidence by
the end of June that the cautionary advice was affecting stock prices.
Recent Developments
During this semi-annual period, the Fund benefited from exposure to the
health care sector -Novartis AG, for example - and from securities undergoing
asset restructuring, such as Ciba Specialty Chemicals AG. Results were
penalized by weak returns in the energy sector, Amerada Hess among other
holdings, and the utilities sector, with investments including Northeast
Utilities. At the end of the period, one of the Fund's holdings, Pennzoil,
received a takeover proposal which resulted in significant appreciation of
the security.
As the fiscal year ended, our primary investment themes under the new
management included:
*Depressed high growth securities
*Asset restructuring potential
*Neglected or misunderstood companies
*New, unappreciated growth opportunities
*Particularly undervalued situations
It is an honor to have been named as portfolio manager of this Fund. All
of the Dreyfus family will endeavor to serve you to the best of our
abilities.
Sincerely,
[Timothy M. Ghriskey signature logo]
Timothy M. Ghriskey
Portfolio Manager
July 16, 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 is a price-weighted average of 30 actively traded blue chip stocks.
The Nasdaq Composite Index is an unmanaged index which monitors stocks traded
over-the-counter. The Russell 2000 Index is a widely accepted unmanaged index
of small cap stock performance.
<TABLE>
<CAPTION>
THE DREYFUS FUND INCORPORATED
STATEMENT OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
Common Stocks-97.4% Shares Value
-------- --------
<S> <C> <C> <C> <C>
Commercial Services-1.4% McGraw-Hill Cos......................................... 640,000 $ 37,640,000
--------
Consumer Durables-1.2% Whirlpool........................ 600,000 32,737,500
--------
Consumer Non-Durables-7.1% Kimberly-Clark................ 840,000 41,790,000
NIKE, Cl. B............................ 690,000 40,278,750
Philip Morris Cos...................... 1,600,000 71,000,000
RJR Nabisco Holdings................... 1,300,000 42,900,000
--------
195,968,750
--------
Electronic Technology-14.3% 3COM.................................... 700,000 (a) 31,500,000
Adaptec................................. 1,035,000 (a) 35,966,250
Applied Materials...................... 595,000 (a) 42,133,437
Cabletron Systems...................... 1,250,000 (a) 35,390,625
Intel....................................... 290,000 41,125,625
Lockheed Martin........................ 440,000 45,567,500
McDonnell Douglas...................... 615,000 42,127,500
Micron Electronics..................... 590,000 (a) 10,509,375
Micron Technology...................... 730,000 (a) 29,154,375
Novell...................................... 1,735,000 (a) 12,036,563
Read-Rite.............................. 500,000 (a) 10,437,500
Rockwell International................. 265,000 15,635,000
Sundstrand............................. 820,100 45,771,831
--------
397,355,581
--------
Energy Minerals-8.2% British Petroleum, A.D.S........................ 600,000 44,925,000
Pennzoil............................... 780,000 59,865,000
Phillips Petroleum..................... 935,000 40,906,250
Tosco....................................... 1,310,000 39,218,125
USX-Marathon Group..................... 1,450,000 41,868,750
--------
226,783,125
--------
Finance-20.6% AMBAC.......................... 265,000 20,239,375
Allstate............................... 590,000 43,070,000
BankAmerica............................ 690,000 44,548,125
Bankers Trust New York................. 500,000 43,500,000
Chase Manhattan........................ 445,000 43,192,812
Chubb....................................... 695,000 46,478,125
Equitable Cos.......................... 1,300,000 43,225,000
Everest Reinsurance Holdings........... 1,000,000 39,625,000
First Chicago NBD...................... 361,000 21,840,500
First Union............................ 490,000 45,325,000
GE Investment Private Placement Partners I, L.P
L.P. (Units)......................... 9.403 (b) 18,640,197
Hartford Financial Services Group...... 530,000 43,857,500
NationsBank............................ 675,000 43,537,500
Nationwide Financial Services, Cl. A... 161,400 (a) 4,287,188
Progressive, Ohio...................... 91,200 7,934,400
THE DREYFUS FUND INCORPORATED
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1997 (UNAUDITED)
Common Stocks (continued) Shares Value
-------- --------
Finance (continued) Travelers Group.......... 675,000 $ 42,567,188
USF&G.................................. 875,000 21,000,000
--------
572,867,910
--------
Health Services-3.0% Aetna................... 415,000 42,485,625
PacifiCare Health Systems, Cl. B....... 645,000 (a) 41,199,375
--------
83,685,000
--------
Health Technology-3.1% Biogen................ 165,000 (a) 5,589,375
Galen Partners II, L.P. (Units)........ 4.319 (b) 4,115,288
Novartis AG............................ 30,000 47,926,078
U.S. Surgical.......................... 800,000 29,800,000
--------
87,430,741
--------
Industrial Services-1.1% AES................. 259,600 (a) 18,366,700
Yorktown Energy Partners, L.P. (Units). 7.095 (b) 12,434,246
--------
30,800,946
--------
Non-Energy Minerals-3.2% Aluminum Co. of America................. 650,000 48,993,750
Georgia-Pacific........................ 480,000 40,980,000
--------
89,973,750
--------
Process Industries-6.4% Ciba Specialty Chemicals AG................. 437,000 40,379,875
Crompton & Knowles..................... 900,000 20,025,000
duPont (E.I.) de Nemours............... 780,000 49,042,500
Temple-Inland.......................... 715,000 38,610,000
Willamette Industries.................. 426,100 29,827,000
--------
177,884,375
--------
Producer Manufacturing-10.0 Caterpillar..... 430,000 46,171,250
Deere & Co............................. 900,000 49,387,500
General Signal......................... 1,000,000 43,625,000
Ingersoll-Rand......................... 780,000 48,165,000
Masco....................................... 1,040,000 43,420,000
Xerox....................................... 614,000 48,429,250
--------
279,198,000
--------
Retail Trade-6.9% Dayton Hudson.............. 860,000 45,741,250
Pep Boys-Manny, Moe & Jack............. 1,000,000 34,062,500
SK Equity Fund, L.P. (Units)........... 13.929 (b) 29,911,503
Saks Holdings.......................... 1,600,000 (a) 40,000,000
Sears, Roebuck......................... 800,000 43,000,000
--------
192,715,253
--------
Transportation-3.1% CNF Transportation....... 1,240,000 39,990,000
CSX......................................... 850,000 47,175,000
--------
87,165,000
--------
THE DREYFUS FUND INCORPORATED
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1997 (UNAUDITED)
Common Stocks (continued) Shares Value
-------- --------
Utilities-7.8% China Light & Power........... 7,000,000 $ 39,669,528
Coastal................................ 825,000 43,879,688
El Paso Natural Gas.................... 91,800 5,049,000
Empresa Nacional Electricidad, A.D.S... 1,740,000 39,258,750
GTE......................................... 965,000 42,339,375
Telecommunications Brasil-Telebras, A.D.S 310,000 47,042,500
--------
217,238,841
--------
TOTAL COMMON STOCKS
(cost $2,501,222,881)................ $2,709,444,772
========
Principal
Short-Term Investments-1.9% Amount
--------
U.S. Government & Agency; Federal Home Loan Banks,
6%, 7/1/1997
(cost $52,600,000)................... $ 52,600,000 $ 52,600,000
========
TOTAL INVESTMENTS (cost $2,553,822,881)..................................... 99.3% $2,762,044,772
====== ========
CASH AND RECEIVABLES (NET).................................................. .7% $ 19,612,880
====== ========
NET ASSETS.................................................................. 100.0% $2,781,657,652
====== ========
Notes to Statement of Investments:
(a) Non-income producing.
(b) Securities restricted as to public resale. Investments in restricted
securities with an aggregate market value of $65,101,234, represent
approximately 2.34% of net assets.
Acquisition Purchase Percentage of
Issuer Date Price* Net Assets Valuation +
- --- -------------------- ------------ -------- --------------------
GE Investment Private Placement
Partners I, L.P. (Units)........... 5/28/91-9/13/95 $1,499,793 .67% $1,982,367 per unit
Galen Partners II, L.P. (Units)........ 12/8/93-1/3/97 $ 952,834 .15% $ 952,834 per unit
SK Equity Fund, L.P. (Units)........... 12/6/92-10/30/96 $1,046,590 1.08% $2,147,426 per unit
Yorktown Energy Partners, L.P. (Units). 3/25/91-3/30/94 $1,188,210 .44% $1,752,536 per unit
*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)........ $147,742
SEE NOTES TO FINANCIAL STATEMENTS.
THE DREYFUS FUND INCORPORATED
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 (UNAUDITED)
Cost Value
--------- ---------
ASSETS: Investments in securities-See Statement of Investments $2,553,822,881 $2,762,044,772
Receivable for investment securities sold.. 52,714,164
Dividends receivable....................... 5,324,680
Receivable for shares of Capital Stock subscribed 1,934,848
Net unrealized appreciation on forward
....... currency exchange contracts-Note 4(a) 1,082,598
Prepaid expenses........................... 145,299
---------
2,823,246,361
---------
LIABILITIES: Due to The Dreyfus Corporation and affiliates 1,638,853
Cash overdraft due to Custodian............ 7,465,023
Payable for investment securities purchased 25,496,244
Payable for shares of Capital Stock redeemed 6,627,329
Accrued expenses........................... 361,260
---------
41,588,709
---------
NET ASSETS.................................................................. $2,781,657,652
=========
REPRESENTED BY: Paid-in capital............................ $2,224,597,444
Accumulated undistributed investment income-net 2,490,950
Accumulated net realized gain (loss) on investments 345,285,670
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions 209,283,588
---------
NET ASSETS.................................................................. $2,781,657,652
=========
SHARES OUTSTANDING
(500 million shares of $1 par value Capital Stock authorized)............... 239,930,743
NET ASSET VALUE, offering and redemption price per share.................... $11.59
=========
SEE NOTES TO FINANCIAL STATEMENTS.
THE DREYFUS FUND INCORPORATED
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
INVESTMENT INCOME
INCOME: Cash dividends (net of $398,759 foreign taxes
withheld at source).................... $ 17,902,304
Interest................................... 2,937,636
--------
Total Income......................... $ 20,839,940
EXPENSES: Management fee-Note 3(a)................... 8,701,303
Shareholder servicing costs-Note 3(a)...... 904,986
Custodian fees-Note 3(a)................... 133,040
Professional fees.......................... 44,593
Directors' fees and expenses-Note 3(b)..... 41,007
Registration fees.......................... 30,466
Loan commitment fees-Note 2................ 24,042
Prospectus and shareholders' reports....... 14,321
Miscellaneous.............................. 4,518
--------
Total Expenses....................... 9,898,276
--------
INVESTMENT INCOME-NET....................................................... 10,941,664
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments and foreign
currency transactions:
Unaffiliated issuers................. $ 343,052,254
Affiliated issuers................... (4,949,534) 338,102,720
--------
Net realized gain (loss) on forward currency
exchange contracts..................... 15,136,625
--------
Net Realized Gain.................... 353,239,345
Net unrealized appreciation (depreciation) on investments (113,706,831)
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 239,532,514
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 250,474,178
========
SEE NOTES TO FINANCIAL STATEMENTS.
THE DREYFUS FUND INCORPORATED
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1997 Year Ended
(Unaudited) December 31, 1996
--------- --------------------
OPERATIONS:
Investment income-net................................................. $ 10,941,664 $ 19,235,284
Net realized gain (loss) on investments............................... 353,239,345 294,972,253
Net unrealized appreciation (depreciation) on investments............. (113,706,831) 123,751,684
--------- ---------
Net Increase (Decrease) in Net Assets Resulting from Operations... 250,474,178 437,959,221
--------- ---------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................. (8,450,714) (20,361,089)
Net realized gain on investments...................................... (46,148,998) (269,233,670)
--------- ---------
Total Dividends................................................... (54,599,712) (289,594,759)
--------- ---------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold......................................... 1,667,532,829 8,914,742,586
Dividends reinvested.................................................. 46,043,833 236,366,888
Cost of shares redeemed............................................... (1,826,560,505) (9,254,246,198)
--------- ---------
Increase (Decrease) in Net Assets from Capital Stock Transactions. (112,983,843) (103,136,724)
--------- ---------
Total Increase (Decrease) in Net Assets......................... 82,890,623 45,227,738
NET ASSETS:
Beginning of Period................................................... 2,698,767,029 2,653,539,291
--------- ---------
End of Period......................................................... $ 2,781,657,652 $ 2,698,767,029
========= =========
Undistributed investment income-net..................................... $ 2,490,950 -----
--------- ---------
Shares Shares
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................... 149,325,005 810,824,782
Shares issued for dividends reinvested................................ 3,997,375 21,687,752
Shares redeemed....................................................... (162,773,394) (837,850,436)
--------- ---------
Net Increase (Decrease) in Shares Outstanding..................... (9,451,014) (5,337,902)
========= =========
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>
Six Months Ended
June 30, 1997 Year Ended December 31,
----------------------------------------------------
PER SHARE DATA: (Unaudited) 1996 1995 1994 1993 1992
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $10.82 $10.42 $11.93 $13.10 $13.27 $13.14
---- ---- ---- ---- ---- ----
Investment Operations:
Investment income-net................. .05 .08 .22 .21 .24 .27
Net realized and unrealized gain (loss)
on investments...................... .96 1.57 2.57 (.76) .58 .44
---- ---- ---- ---- ---- ----
Total from Investment Operations...... 1.01 1.65 2.79 (.55) .82 .71
---- ---- ---- ---- ---- ----
Distributions:
Dividends from investment income-net.. (.04) (.09) (.22) (.22) (.30) (.24)
Dividends in excess of investment income-net -- -- -- -- (.03) --
Dividends from net realized gain on investments (.20) (1.16) (4.08) (.40) (.66) (.34)
---- ---- ---- ---- ---- ----
Total Distributions................... (.24) (1.25) (4.30) (.62) (.99) (.58)
---- ---- ---- ---- ---- ----
Net asset value, end of period........ $11.59 $10.82 $10.42 $11.93 $13.10 $13.27
==== ==== ==== ==== ==== ====
TOTAL INVESTMENT RETURN................... 9.26%(1) 15.85% 23.77% (4.26%) 6.36% 5.53%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .36%(1) .73% .74% .74% .74% .74%
Ratio of net investment income
to average net assets............... .39%(1) .70% 1.56% 1.63% 1.67% 2.08%
Portfolio Turnover Rate............... 151.17%(1) 220.92% 269.26% 27.70% 39.29% 55.42%
Average commission rate paid (2)...... $.0612 $.0601 -- -- -- --
Net Assets, end of period (000's Omitted) $2,781,658 $2,698,767 $2,653,539 $2,445,300 $2,850,523 $3,148,858
(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.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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. 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 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 June 30,
1997:
<TABLE>
<CAPTION>
Shares
----------------------------------------------------
Market
Beginning End of Dividend Value
Name of Issuer of Period Purchases Sales Period Income 6/30/97
- -------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outboard Marine.................. 1,250,000 - 1,250,000 - - -
</TABLE>
(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.
THE DREYFUS FUND INCORPORATED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(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 with other Dreyfus-managed funds in a $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion
of the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings. For the period ended June
30, 1997, the Fund did not borrow under the Facility.
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 June 30, 1997.
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 $623,232 during the period ended June 30, 1997.
The Fund compensates Mellon under a custody agreement for providing
custodial services for the Fund. For the period ended June 30, 1997, $133,040
was charged by 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.
NOTE 4-SECURITIES TRANSACTIONS:
(a) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities and forward currency exchange contracts,
during the period ended June 30, 1997 amounted to$4,029,062,359 and
$4,235,061,928, respectively.
In addition, the following summarizes open forward currency exchange
contracts at June 30, 1997:
<TABLE>
<CAPTION>
Foreign
Currency Unrealized
Forward Currency Exchange Contracts Amount Proceeds Value Appreciation
- ----------------------------------- -------------- -------- -------------- --------------
Sales:
- ------
<S> <C> <C> <C> <C>
Swiss Francs, expiring 9/19/97........... 119,733,440 $83,800,000 $82,717,402 $1,082,598
======
</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
THE DREYFUS FUND INCORPORATED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
contract decreases between those dates. With respect to purchase 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.
(b) At June 30, 1997, accumulated net unrealized appreciation on
investments and forward currency exchange contracts was $209,304,489,
consisting of $268,692,950 gross unrealized appreciation and $59,388,461
gross unrealized depreciation.
At June 30, 1997, 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).
Registration Mark
[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. 026SA976
Registration Mark
[Dreyfus logo]
The Dreyfus Fund
Incorporated
Semi-Annual
Report
June 30, 1997
