THE DREYFUS FUND INCORPORATED
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Fellow Shareholder:
It is a pleasure to have this opportunity to communicate with my fellow
shareholders of The Dreyfus Fund Incorporated.
This letter accompanies the semi-annual report of The Dreyfus Fund for the six
months ended June 30, 1998. During this period, your Fund produced a total
return of 11.78%* which compares with a total return of 17.72% for the Standard
and Poor's 500 Composite Stock Price Index (the "S&P 500")** and 10.04% for the
Wilshire Large Company Value Index.*** The Dreyfus Fund is managed in a
disciplined value investment style and, therefore, we believe its performance
results since a value style was adopted in May 1997 are more comparable to a
value stock benchmark like the Wilshire index noted above.
Value stocks underperformed growth stocks during the period. The margin was
among the widest in memory. Any value manager who remained true to their
discipline could not hope to have matched the returns of the S&P 500 Index which
has become largely dominated by growth stocks due to increases in major
component security valuations. The S&P 500 Index and many of its major security
components carry valuations well above those of any historic period by almost
any financial measure according to our calculations. These major security
components, the so-called "mega caps" or the very largest domestically traded
companies, continued to drive the performance of the S&P 500 Index. This
concentrated overvaluation, in our opinion, is reminiscent of the early 1970s
" nifty fifty" stocks or oil stocks in the early 1980s. Both of those markets
ended with quick and severe corrections of the overvalued securities. No one can
predict such an occurrence today, but many market participants may conclude that
the risk level of the S&P 500 Index and many of its major security components is
high by historic standards. Regardless, at least for the time being, positive
price momentum in this index and in many of these mega cap stocks continues.
The Fund's solid performance during the semi-annual period versus the Wilshire
Large Company Value Index was due in part to being overweight in consumer
cyclicals and health care, and at a near index weight in financials, all
strongly performing large cap value sectors. Overweighting technology and
transportation in the Fund, and keeping a near-index weight in energy, all
weak-performance sectors, restrained relative performance.
Economic Review
During the first half of 1998, three major regions of the world had very
different economic fundamentals. The United States entered the year with a
strong but not overheated economy and at near full employment. After many years
of subpar economic growth, continental Europe moved into a period of improving
economic expansion. In Asia, weak economies were pervasive in the aftermath of
the Asian financial crisis that began late last year.
A main influence on the U.S. economy during the first half of 1998 was Asian
economic weakness. It had both positive and negative effects. On the positive
side, actual inflation and expected inflation in the U.S. dropped, causing a
decline in long-term Treasury bond yields and mortgage rates. These lower rates
contributed to the boom in real estate prices and benefited stock prices as
well. The fall in inflation helped the consumer sector as more income was left
over after inflation to buy goods and services.
The negative effect of the Asian weakness was directed toward the industrial
sector. By midyear, the evidence of industrial weakness was clear-cut given
slowing inventory accumulation and weakening exports. One result of this
industrial weakness was to cool off the overall U.S. economy, at least keeping
the Federal Reserve Board neutral toward the level of interest rates, and
perhaps increasing the possibility of an eventual ease or lowering of rates. We
believe that this favorable shift in expectations about Federal Reserve policy
was clearly a major reason for the rise in U.S. bond and stock prices during the
period.
Stock Market Overview
The half-year ended June 30, 1998, was another period of solid advance for the
broad stock market indices, although the strength of this advance was decidedly
narrow.
Three major trends could be observed within the stock market in the first half
of 1998. First, the strongest performance came by far from the largest stocks,
the so-called mega caps. The S& P 500 Index, dominated by the stocks of the
largest companies, generated a total return of 17.72% for the half-year, while
the Standard and Poor's Midcap 400 Index of mid-sized companies returned 8.63%,
and the Russell 2000 Index of small company issues returned only 4.93%.(+) Even
within most of the market indices, the strongest gains tended to come from the
largest stocks within that index. One contributor to this pattern was strong
buying of U.S. stocks by foreign investors who often simply focus on the largest
companies.
A second and related major trend in the stock market during the first half was
the significantly stronger stock performance by most large growth companies
relative to most value stocks. With the expectations for corporate earnings
growth being reduced as the period progressed due to concerns about the impact
of Asia, large growth companies, which are better able to control short-term
earnings results, were in demand.
Finally, the relative performance of different industries revealed the
significant impact of Asian economic weakness. Most of the leading sectors of
securities in the S& P 500 Index during the period were either impervious to
Asia' s impact or were beneficiaries of the lower inflation and the lower
interest rates precipitated by the Asian impact. Stock categories that were
strongest during the half-year included the consumer cyclical sector (primarily
retailers and two of the big three automotive companies), the health care sector
(both managed care providers and pharmaceuticals), and the dominate electronic
technology companies, primarily Microsoft.
The sectors within the S&P 500 Index that lagged during the semi-annual period
tended to be those negatively impacted by Asia from either weak industrial
demand or weak commodity prices. These categories included world-traded
commodities such as oil, metals, papers and chemicals. Transportation companies
and electric utilities also lagged in the strong stock market environment.
The stock market's rise during the first half of 1998 reflected a continuation
of the pattern of favorable trends in financial asset prices as low rates of
inflation and overall stable growth persist in the U.S. economy.
Value Investing and Our Investment Process
To once again summarize our investment philosophy, while there are other
investment disciplines practiced at Dreyfus, we are passionate believers in
value investing. Value stocks have achieved superior long-term investment
returns.(+)(+) As value investors, we want to buy growing companies, but we want
to pay as little for them as we can. In one sense, value investing is a lower
risk, more conservative style of equity investing because value stock prices may
decline less in falling markets.
Our approach to the selection of securities starts and ends with our analysts,
who are an integral part of our investment team. Our Dreyfus analysts contribute
their proprietary forecasts on corporate earnings and cash flows to our computer
models, their analysis and opinions to our decision-making process, and their
constant flow of information to our on-going assessment of owned securities. We
screen the universe of stocks by computer according to two principal methods.
The first computer screen determines value by calculating each security's
earnings yield (our forecast for earnings divided by the current security price)
which, to justify purchase, must be greater than the yield available on
reasonably long term U.S. Treasury securities. Being paid more than this rate
for the risk inherent in equity investing is central to our value discipline.
The second computer screen looks at 19 other factors that have historically
influenced stock returns including various growth, valuation and leverage
measures. We input into this computer model the current economic and stock
market trends, and the computer calculates each security's exposure to this
environment. The model is an idea generator, and further detailed fundamental
analysis is conducted on each potential holding to determine its suitability for
the Fund. Combining all of this data with our analysts' in-depth knowledge of
the individual companies, we then construct a portfolio of approximately 60 or
so securities. We use similar disciplined criteria and several other factors to
determine when selling a security is in our shareholders' best interest.
Examples of Our Investment Process
The detailed fundamental analysis, computer modeling and portfolio strategy
that goes into the decision-making process for each security in the Fund is not
possible in this short report. Instead, provided below, are several brief
summaries of some of the better and poorer performing securities within the Fund
during the first half of 1998.
Biogen, a biotechnology company, was one of the better performing securities
during the semi-annual period. Our earnings estimates for the company have been
well above the Wall Street consensus, qualifying this growth stock as a value
security. We believe that the company's new product pipeline, both near term and
long term, is particularly promising. The security remained a holding at the end
of the period.
Sears was another strong performer. The retailer has been buffeted by customer
credit problems, but appears to have wrapped their arms around the issue and is
well on the way to resolution. Sales especially in appliances have generally
been above expectations. The security was held in the Fund at the end of the
period.
Xerox has been expanding its core copier business into the computer printer
business with great initial success. The ability to provide quality service can
be a significant competitive advantage. The security remained in the Fund at the
end of the semi-annual period.
RJR Holdings and Philip Morris, both largely tobacco companies, were poor
performers during the period. Congress could not agree on tobacco legislation
that we believe would have significantly benefited both the public good and
these securities. The tobacco companies are now working with the states to
resolve these same issues. As the second quarter ended, we remained attracted to
what we believe are the unusually inexpensive valuations and high dividend
yields of these two securities.
Praxair is an industrial gases company that was bought and sold during the
semi-annual period, unfortunately at a slight loss. In addition to operations
elsewhere around the world, primarily in the U.S., Praxair is also the majority
owner of the largest industrial gas company in Brazil. The security's price was
already deeply depressed by this emerging market exposure when we purchased it.
We believed that the worst was over in terms of Asia's largely psychological
impact on emerging stock markets like Brazil, and we believed that Praxair's
Brazilian operations were improving. Over the relatively brief time that we
owned the stock, however, the market kept telling us that we were wrong, that
Asian worries would continue to impact the Brazilian market, and that there
might be developing economic weakness in Brazil itself. Since we believe in
learning from the market, we sold the stock and put the money to work where we
believed better visibility for investment gains existed.
Union Pacific, a major railroad, was a new purchase during the period and has
not initially performed terribly well. The company has had operating problems
resulting in bottlenecks at several major rail yards that helped depress the
stock price and attracted our interest. We saw these problems as an opportunity
to realize value as the problems were fixed, and bought the stock. Management
appears to have their hands around the operating problems, and appears to be
well on the way to correcting them. We believe that the security will respond
accordingly.
In almost any Fund there are both well performing and poorly performing
securities. Our job is to maximize the good and minimize the poor, while keeping
risk at tolerable levels. We will not be successful every quarter or every year,
but we work to reward our investors over the long term.
Diligent management of your investments is our highest priority. Thank you for
entrusting us with your assets.
Sincerely,
[Timothy M. Ghriskey signature logo]
Timothy M. Ghriskey
Portfolio Manager
July 23, 1998
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC.--Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The Standard
& Poor's 500 Composite Stock Price Index is a widely accepted unmanaged index of
U.S. stock market performance.
***SOURCE: WILSHIRE ASSOCIATES, INC.--The Wilshire Large Company Value Index
is constructed by using a blend of price-to-book and forecast price-to-earnings
ratios. The largest 750 stocks in the Wilshire 5000 are ranked based on a style
score that is 75% price-to-earnings ratio. The universe is divided so that
companies that represent half of the total capitalization fall into growth and
the remainder are placed into value.
(+)From December 1976 through June 1998 (23.5 years), the S&P/Barra Value
Index has returned 4,593.73% (or 17.80% annualized), while the S&P/Barra Growth
Index has returned 3,359.86% (or 16.28% annualized). Together, these indices
compose the performance of the S&P 500 Index. Past performance is no guarantee
of future results and there can be no guarantee that any particular investment
style will outperform another over any given period.
(+)(+)SOURCE: --LIPPER ANALYTICAL SERVICES, INC.--Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The Standard
& Poor' s MidCap 400 Index is a broad-based index of 400 companies and is a
widely accepted, unmanaged index of mid-cap stock market performance. The
Russell 2000 Index is an unmanaged index of small cap stock performance.
<TABLE>
<CAPTION>
THE DREYFUS FUND INCORPORATED
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
Common Stocks--97.0% Shares Value
- -------------------------------------------------------------------------------
------------- ---------------
<S> <C> <C>
CONSUMER DURABLES--1.6% General Motors 650,000 $ 43,428,125
________________
CONSUMER NON-DURABLES--7.6% ConAgra 1,300,000 41,193,750
Kimberly-Clark 900,000 41,287,500
NIKE, Cl. B 895,000 43,575,312
Philip Morris Cos 1,162,300 45,765,562
RJR Nabisco Holdings 1,300,000 30,875,000
________________
202,697,124
________________
CONSUMER SERVICES--5.0% Cendant 2,000,000 41,750,000
Circus Circus Enterprises 1,850,000 (a) 31,334,375
McDonald's 850,000 58,650,000
________________
131,734,375
________________
ELECTRONIC TECHNOLOGY--8.7% Compaq Computer 1,376,450 39,056,769
Intel 525,000 38,915,625
International Business Machines 430,000 49,369,375
Lockheed Martin 300,000 31,762,500
Storage Technology 1,700,000 (a) 73,737,500
________________
232,841,769
________________
ENERGY MINERALS--8.5% British Petroleum, A.D.S. 600,000 52,950,000
Mobil 535,000 40,994,375
Phillips Petroleum 935,000 45,055,313
Tosco 1,310,000 38,481,250
USX-Marathon Group 1,450,000 49,753,125
________________
227,234,063
________________
FINANCE--18.6% BankAmerica 463,000 40,020,563
BankBoston 300,000 16,687,500
Bankers Trust New York 532,500 61,803,281
Chase Manhattan 890,000 67,195,000
Citicorp 260,000 38,805,000
First Chicago NBD 361,000 31,993,625
Fleet Financial Group 487,000 40,664,500
GE Investment Private Placement Partners I,
L.P.(Units) 6.128 (c) 12,093,832
Green Tree Financial 1,608,500 68,863,906
Istituto Banc San Pablo 4,000,000 58,272,076
NationsBank 512,000 39,168,000
Standard & Poor's Depository Receipts 175,000 19,829,688
________________
495,396,971
________________
HEALTH SERVICES--2.3% Aetna 796,500 60,633,563
________________
THE DREYFUS FUND INCORPORATED
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Common Stocks (continued) Shares Value
- -------------------------------------------------------------------------------
------------- ---------------
HEALTH TECHNOLOGY--4.2% Amgen 690,000 (a) $ 45,108,750
Biogen 1,315,000 (a) 64,435,000
Galen Partners II, L.P. (Units) 3.693 (c) 3,260,996
________________
112,804,746
________________
INDUSTRIAL SERVICES--1.8% Waste Management 1,250,000 43,750,000
Yorktown Energy Partners, L.P.(Units) 5.292 (c) 5,057,582
________________
48,807,582
________________
INSURANCE--9.7% AMBAC 530,000 31,005,000
CIGNA 600,000 41,400,000
Chubb 645,000 51,841,875
Equitable Cos 700,000 52,456,250
St Paul Cos 1,000,000 42,062,500
Travelers Group 634,300 38,454,437
________________
257,220,062
________________
PROCESS INDUSTRIES--.5% Crown Cork & Seal 255,700 12,145,750
________________
PRODUCER MANUFACTURING--8.2% General Electric 850,000 77,350,000
Georgia-Pacific 620,000 36,541,250
Masco 1,040,000 62,920,000
Xerox 397,900 40,436,588
________________
217,247,838
________________
RETAIL TRADE--7.3% American Stores 2,100,000 50,793,750
Federated Department Stores 880,000 47,355,000
SK Equity Fund, L.P. (Units) 18.259 (c) 35,192,953
Sears, Roebuck 998,000 60,940,375
________________
194,282,078
________________
TRANSPORTATION--3.0% CNF Transportation 1,135,800 48,271,500
Union Pacific 727,000 32,078,875
________________
80,350,375
________________
UTILITIES--10.0% AT&T 885,000 50,555,625
Ameritech 1,060,000 47,567,500
Bell Altantic 820,000 37,412,500
Coastal 825,000 57,595,313
Empresa Nacional Electricidad, A.D.S. 2,070,000 29,497,500
Texas Utilities 1,025,000 42,665,625
________________
265,294,063
________________
TOTAL COMMON STOCKS
(cost $2,200,125,841) $2,582,118,484
________________
THE DREYFUS FUND INCORPORATED
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Convertible Preferred Stocks--.2% Shares Value
- -------------------------------------------------------------------------------
------------- ---------------
BANKING; Sanwa International Finance, Cum.,
1.25% (Units)
(cost $6,983,282) 287(b) $ 6,316,993
________________
Principal
Short-Term Investments--3.1% Amount
- -------------------------------------------------------------------------------
------------- ---------------
U.S. GOVERNMENT & AGENCY; Federal Home Loan Banks,
5.85%, 7/1/1998
(cost $81,500,000) $81,500,000 $ 81,500,000
________________
TOTAL INVESTMENTS (cost $2,288,609,123) 100.3% $2,669,935,477
_______ ________________
LIABILITIES, LESS CASH AND RECEIVABLES (.3%) $ (8,293,968)
_______ ________________
NET ASSETS 100.0% $2,661,641,509
_______ ________________
</TABLE>
Notes to Statement of Investments:
- ------------------------------------------------------------------------------
(a) Non-income producing.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. This Security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At June 30, 1998, this security
amounted to $6,316,993 or approximately .2% of net assets.
(c) Securities restricted as to public resale. Investments in restricted
securities with an aggregate market value of $55,605,363, represent
approximately 2.1% 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 $1,756,405 .45% $1,973,537 per unit
Galen Partners II, L.P. (Units) 1/28/93-1/3/97 $ 883,021 .13% $883,021 per unit
SK Equity Fund, L.P. (Units) 12/6/92-10/30/96 $ 763,747 1.33% $1,927,430 per unit
Yorktown Energy Partners, L.P. (Units) 3/5/91-9/15/95 $ 961,416 .19% $955,703 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 partnership listed below:
</TABLE>
Portion of Committed
Issuer Amounts Uninvested
_______ ___________________
Galen Partners II, L.P. (Units)...... $147,742
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
THE DREYFUS FUND INCORPORATED
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED)
Cost Value
_______________ _______________
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $2,288,609,123 $2,669,935,477
Receivable for investment securities sold 29,645,064
Dividend receivable 7,022,958
Receivable for shares of Capital Stock subscribed 202,962
Prepaid expenses 149,060
_______________
2,706,955,521
_______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 1,537,552
Cash overdraft due to Custodian 2,590,598
Payable for investment securities purchased 40,121,568
Payable for shares of Capital Stock redeemed 433,509
Net unrealized (depreciation) on forward
currency exchange contracts--Note 4(a) 165,870
Accrued expenses 464,915
_______________
45,314,012
_______________
NET ASSETS $2,661,641,509
_______________
REPRESENTED BY: Paid-in capital $2,174,668,512
Accumulated undistributed investment income--net 5,063,358
Accumulated net realized gain (loss) on investments and
foreign currency transactions 100,757,685
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions 381,151,954
_______________
NET ASSETS $2,661,641,509
_______________
SHARES OUTSTANDING
(500 MILLION SHARES OF $1 PAR VALUE CAPITAL STOCK AUTHORIZED) 240,787,089
NET ASSET VALUE, offering and redemption price per share $11.05
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
THE DREYFUS FUND INCORPORATED
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Cash dividends (net of $312,269 foreign taxes
withheld at source) $ 20,144,066
Interest 2,200,287
______________
Total Income $ 22,344,353
EXPENSES: Management fee--Note 3(a) $ 8,481,761
Shareholder servicing costs--Note 3(a) 917,489
Prospectus and shareholders' reports 148,814
Custodian fees--Note 3(a) 96,075
Professional fees 93,738
Directors' fees and expenses--Note 3(b) 40,008
Registration fees 22,842
Loan commitment fees--Note 2 13,624
______________
Total Expenses 9,814,351
______________
INVESTMENT INCOME--NET 12,530,002
______________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments and
foreign currency transactions $131,451,630
Net realized gain (loss) of forward currency
exchange contracts 990,030
______________
Net Realized Gain (Loss) 132,441,660
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions 159,604,919
______________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 292,046,579
______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $304,576,581
______________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
THE DREYFUS FUND INCORPORATED
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
________________ ________________
<S> <C> <C>
OPERATIONS:
Investment income--net $ 12,530,002 $ 23,701,972
Net realized gain (loss) on investments 132,441,660 368,614,512
Net unrealized appreciation (depreciation) on investments 159,604,919 (101,443,384)
__________________ __________________
Net Increase (Decrease) in Net Assets Resulting from Operations 304,576,581 290,873,100
__________________ __________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net (12,306,777) (18,861,839)
Net realized gain on investments ------ (406,809,835)
Dividends in excess of net realized gain on investments ------ (31,683,975)
__________________ __________________
Total Dividends (12,306,777) (457,355,649)
__________________ __________________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold 460,322,117 2,865,010,268
Dividends reinvested 10,283,755 383,965,424
Cost of shares redeemed (729,305,984) (3,153,188,355)
__________________ __________________
Increase (Decrease) in Net Assets from Capital Stock Transactions (258,700,112) 95,787,337
__________________ __________________
Total Increase (Decrease) in Net Assets 33,569,692 (70,695,212)
NET ASSETS:
Beginning of Period 2,628,071,817 2,698,767,029
__________________ __________________
End of Period $2,661,641,509 $2,628,071,817
__________________ __________________
UNDISTRIBUTED INVESTMENT INCOME--NET $ 5,063,358 $ 4,840,133
__________________ __________________
Shares Shares
__________________ __________________
CAPITAL SHARE TRANSACTIONS:
Shares sold 43,686,095 247,569,413
Shares issued for dividends reinvested 932,399 38,995,031
Shares redeemed (68,494,904) (271,282,702)
__________________ __________________
Net Increase (Decrease) in Shares Outstanding (23,876,410) 15,281,742
__________________ __________________
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 Year Ended December 31,
June 30, 1998 _________________________________________________________________
PER SHARE DATA: (Unaudited) 1997 1996 1995 1994 1993
________________ __________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.93 $10.82 $10.42 $11.93 $13.10 $13.27
_______ _______ _______ _______ _______ _______
Investment Operations:
Investment income--net .05 .10 .08 .22 .21 .24
Net realized and unrealized gain (loss)
on investments 1.12 1.01 1.57 2.57 (.76) .58
_______ _______ _______ _______ _______ _______
Total from Investment Operations 1.17 1.11 1.65 2.79 (.55) .82
_______ _______ _______ _______ _______ _______
Distributions:
Dividends from investment income--net (.05) (.08) (.09) (.22) (.22) (.30)
Dividends in excess of investment
income--net ---- ---- ---- ---- ---- (.03)
Dividends from net realized gain
on investments ---- (1.78) (1.16) (4.08) (.40) (.66)
Dividends in excess of net realized gain
on investments ---- (.14) ---- ---- ---- ----
_______ _______ _______ _______ _______ _______
Total Distributions (.05) (2.00) (1.25) (4.30) (.62) (.99)
_______ _______ _______ _______ _______ _______
Net asset value, end of period $11.05 $ 9.93 $10.82 $10.42 $11.93 $13.10
_______ _______ _______ _______ _______ _______
TOTAL INVESTMENT RETURN 11.78%* 10.75% 15.85% 23.77% (4.26%) 6.36%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .37%* .71% .73% .74% .74%% .74%
Ratio of net investment income
to average net assets .46%* .85% .70% 1.56% 1.63% 1.67%
Portfolio Turnover Rate 33.50%* 201.10% 220.92% 269.26% 27.70% 39.29%
Net Assets, end of period (000's Omitted) $2,661,642 $2,628,072 $2,698,767 $2,653,539 $2,445,300 $2,850,523
- -----------------------
* Not annualized.
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 and the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(C) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custodian agreement, the Fund receives net
earnings credits based on available cash balances left on deposit.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid 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)
(E) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the 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. During the period ended June
30, 1998, 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, 1998.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the period
ended June 30, 1998, the Fund was charged $565,525 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended June 30, 1998, the Fund was
charged $96,075 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, 1998 amounted to $888,799,553 and $1,196,533,665,
respectively.
THE DREYFUS FUND INCORPORATED
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
In addition, the following summarizes open forward currency exchange
contracts at June 30, 1998:
Foreign
Currency Unrealized
Forward Currency Exchange Contracts Amounts Proceeds Value (Depreciation)
__________________________________ ________ ________ _____ ____________
<S> <C> <C> <C> <C>
Sales:
____
Japanese Yen, expiring 7/16/98 826,506,000 $5,790,263 $5,956,133 $(165,870)
_________
</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 open
contract.
(B) At June 30, 1998, accumulated net unrealized appreciation on investments
and forward currency exchange contracts was $381,160,484, consisting of
$471,693,585 gross unrealized appreciation and $90,533,101 gross unrealized
depreciation.
At June 30, 1998, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
(reg.tm)
(reg.tm)
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. 026SA986
The Dreyfus Fund
Incorporated
Semi-Annual
Report
June 30, 1998
