N-30D 1 pn30d-026.txt SEMI-ANNUAL REPORT The Dreyfus Fund Incorporated SEMIANNUAL REPORT June 30, 2001 (reg.tm) The views expressed herein are current to the date of this report. These views and the composition of the fund's portfolio are subject to change at any time based on market and other conditions. * Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Statement of Investments 13 Statement of Financial Futures 14 Statement of Assets and Liabilities 15 Statement of Operations 16 Statement of Changes in Net Assets 17 Financial Highlights 18 Notes to Financial Statements FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund The Dreyfus Fund Incorporated LETTER FROM THE CHAIRMAN Dear Shareholder: We present this semiannual report for The Dreyfus Fund Incorporated, covering the six-month period from January 1, 2001 through June 30, 2001. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, Timothy M. Ghriskey, CFA. Effective July 17, 2001, Douglas D. Ramos, CFA, and Hilary R. Woods will assume primary portfolio management responsibilities for the fund. While the first half of 2001 was difficult for the U.S. economy, we have recently seen signs that economic improvement may be in sight. The Federal Reserve Board's aggressive easing of monetary policy produced a 2.75 percentage-point drop in short-term interest rates during the reporting period, a move designed to help revive the economy by reducing borrowing costs for corporations and consumers. Approval of the $1.3 trillion federal tax cut should further stimulate economic growth, as should reduced inventories of products on manufacturers' shelves. Based on these and other factors, we believe that the current borderline recession may give way to renewed economic growth later this year. In our view, the implications of this economic scenario may be positive for the stock market. Better economic times generally tend to lead to increased sales and profits for many companies, especially those that are sensitive to changes in the economic cycle. A stronger economy may also help spark a recovery in the shares of companies whose stock prices are inexpensive relative to historical norms, as well as stocks of fundamentally sound companies whose valuations dropped during the recent economic downturn. Of course, our economic perspective may change as new information becomes available. We encourage you to contact your financial advisor for information about ways to refine your investment strategies in the current environment. For additional market perspectives, point your web browser to www.dreyfus.com and go to the Market Commentary section. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 16, 2001 DISCUSSION OF FUND PERFORMANCE Timothy M. Ghriskey, CFA, Senior Portfolio Manager How did The Dreyfus Fund Incorporated perform relative to its benchmark? For the six-month period ended June 30, 2001, the fund's total return was -6.19% . (1) For the same period, the total return of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"), the portfolio's benchmark, was -6.69%.(2) Although the fund produced negative returns during the reporting period, its performance was better than that of the S&P 500 Index. We attribute the market's weakness primarily to the impact of the economic slowdown on a variety of industries and investment sectors, particularly in health care, utilities and technology. However, the fund did a reasonably good job of protecting investors' capital in the face of declines in these areas. Relatively strong performance by our individual stock selection strategy in the technology, communications services and consumer staples sectors enabled us to outperform our benchmark. What is the fund's investment approach? The Dreyfus Fund invests primarily in stocks of well-established U.S. companies that we believe demonstrate the potential to outperform the S&P 500 Index. Our investment approach targets both growth- and value-oriented stocks. Our disciplined investment process sifts through over 1,500 equity securities to identify the relatively small number of stocks that best meet our criteria. We start with computerized, quantitative analysis of all potential targets, scoring each stock on a wide range of growth, valuation, leverage, earnings surprise, momentum and risk factors. Our team of experienced analysts then further narrows the field by examining the specifics of each top-ranked candidate. We observe their operations, interview corporate management and conduct detailed surveys of the competitive environment, seeking catalysts likely to The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) spark a change in a company' s market value. Armed with these analytical insights, we decide which stocks to purchase and whether any current holdings should be sold. What other factors influenced the fund's performance? Competing economic forces produced volatile market conditions during the period. On the one hand, slowing U.S. economic performance forced a wide range of companies to post lower than expected earnings and to warn of future disappointments. On the other hand, declining interest rates and relatively strong levels of consumer spending raised hopes for economic recovery in the not too distant future. Market strength shifted from sector to sector depending on whether investors were focused on current earnings results or were looking ahead to the longer term prospects for an economic rebound. For example, although health care stocks generally perform well during economic slowdowns, many slumped during the last few months of the period. This was due to the fact that in anticipation of an economic recovery, investors began to move a significant percentage of assets in early April out of relatively defensive areas such as health care and into more consumer-oriented, economically sensitive market sectors. Consequently, while consumer cyclicals rose, many of the pharmaceutical company stocks in which the fund invests, such as Pfizer and Merck & Co., suffered declines during the period. Utilities stocks also generated losses when rising supplies of petroleum and natural gas caused energy prices to drop in May and June. Some utilities that had previously benefited from deregulation were further undermined by fears that California's energy crisis might lead to re-regulation. The fund's investments in utility companies, such as Duke Energy and Enron, lost ground as a result. While many highly valued technology stocks retreated during the period, a handful of more reasonably valued, well-established names performed well. The fund experienced mixed performance in the technology area, with declines in some holdings, such as Cisco Systems and EMC, nearly balanced by gains in others, such as International Business Machines, Micron Technology and Dell Computer. Although the fund's technology holdings finished the period in negative territory, they performed better than the technology component of the S&P 500 Index. The fund also outperformed its benchmark in the communications services and consumer staples sectors, both of which were positives for the fund, even as they declined in the Index. Advances in individual holdings, such as AT&T, Philip Morris Cos. and AOL Time Warner, drove the fund's relative outperformance in these two sectors. What is the fund's current strategy? As of the end of the period, consumer spending remains strong, supported by lower energy prices and falling interest rates. In light of these conditions, we are currently placing slightly greater emphasis than the S&P 500 Index on the consumer cyclical sector. Otherwise, we have positioned the fund's sector allocations neutrally with respect to our benchmark. We continue to adhere to our investment discipline of evaluating individual companies and stocks in seeking to outperform the S&P 500 Index. July 17, 2001 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. (2) SOURCE: LIPPER INC. - REFLECTS REINVESTMENT OF 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. The Fund STATEMENT OF INVESTMENTS June 30, 2001 (Unaudited) COMMON STOCKS--97.3% Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL SERVICES--1.0% Lamar Advertising 192,700 8,478,800 McGraw-Hill Cos. 170,000 11,245,500 19,724,300 CONSUMER DURABLES--1.0% General Motors 260,542 16,765,878 Newell Rubbermaid 165,000 4,141,500 20,907,378 CONSUMER NON-DURABLES--5.9% Anheuser-Busch Cos. 164,000 6,756,800 Coca-Cola 450,000 20,250,000 Colgate-Palmolive 104,000 6,134,960 General Mills 51,000 2,232,780 Gillette 184,000 5,334,160 Jones Apparel Group 121,000 (a) 5,227,200 Kimberly-Clark 111,000 6,204,900 Kraft Foods, Cl. A 380,000 (a) 11,780,000 PepsiCo 135,500 5,989,100 Philip Morris Cos. 387,000 19,640,250 Procter & Gamble 406,000 25,902,800 UST 130,600 3,769,116 119,222,066 CONSUMER SERVICES--3.0% Clear Channel Communications 103,000 (a) 6,458,100 Comcast, Cl. A 270,000 (a) 11,718,000 Disney (Walt) 488,000 14,098,320 McDonald's 236,800 6,407,808 USA Networks 182,000 (a) 5,130,580 Viacom, Cl. B 313,310 16,213,793 60,026,601 ELECTRONIC TECHNOLOGY--13.5% Agilent Technologies 77,000 (a) 2,502,500 Altera 261,600 (a) 7,586,400 Applied Materials 147,000 (a) 7,217,700 Boeing 283,600 15,768,160 Cisco Systems 1,288,300 (a) 23,447,060 Compaq Computer 297,000 4,600,530 Dell Computer 456,000 (a) 11,924,400 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ ELECTRONIC TECHNOLOGY (CONTINUED) EMC 381,700 (a) 11,088,385 Emulex 118,700 (a) 4,795,480 General Dynamics 35,000 2,723,350 Hewlett-Packard 349,400 9,992,840 Intel 1,230,000 35,977,500 International Business Machines 480,000 54,240,000 JDS Uniphase 222,400 (a) 2,835,600 Lockheed Martin 78,000 2,889,900 Lucent Technologies 370,000 2,294,000 Micron Technology 287,100 (a) 11,799,810 Motorola 383,000 6,342,480 Nortel Networks 295,000 2,681,550 QLogic 88,000 (a) 5,671,600 Qualcomm 133,000 (a) 7,777,840 Rockwell International 33,000 1,257,960 Scientific-Atlanta 66,500 2,699,900 Sun Microsystems 588,800 (a) 9,255,936 Tellabs 212,000 (a) 4,087,360 Texas Instruments 469,300 14,782,950 United Technologies 84,600 6,197,796 272,438,987 ENERGY MINERALS--5.9% Anadarko Petroleum 112,500 6,078,375 BP Amoco, ADS 91,720 4,572,242 Chevron 112,000 10,136,000 Conoco, Cl. B 322,000 9,305,800 Exxon Mobil 710,721 62,081,479 Ocean Energy 248,000 4,327,600 Royal Dutch Petroleum, ADR 372,000 21,676,440 118,177,936 FINANCE--17.8% Allstate 287,000 12,625,130 American Express 456,000 17,692,800 American General 116,600 5,416,070 American International Group 401,375 34,518,250 Bank One 270,800 9,694,640 Bank of America 372,000 22,331,160 The Fund STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCE (CONTINUED) Bank of New York 420,600 20,188,800 Citigroup 1,238,555 65,445,246 Federal Home Loan Mortgage 141,000 9,870,000 Federal National Mortgage Association 173,000 14,730,950 FleetBoston Financial 250,000 9,862,500 GE Investment Private Placement Partners I, L.P. (Units) 5.798 (b) 8,865,791 Goldman Sachs Group 47,000 4,032,600 Household International 83,000 5,536,100 J.P. Morgan Chase 348,500 15,543,100 MBNA 231,800 7,637,810 Marsh & McLennan Cos. 52,000 5,252,000 Morgan Stanley Dean Witter 339,000 21,773,970 PNC Financial Services Group 50,000 3,289,500 Schwab (Charles) 263,500 4,031,550 USA Education 171,600 12,526,800 Washington Mutual 462,000 17,348,100 Wells Fargo 659,000 30,597,370 358,810,237 HEALTH SERVICES--1.3% AdvancePCS 78,000 (a) 4,995,900 HCA-Healthcare 236,000 10,664,840 Healthsouth 324,000 (a) 5,174,280 Wellpoint Health Networks 52,000 (a) 4,900,480 25,735,500 HEALTH TECHNOLOGY--10.6% Abbott Laboratories 302,000 14,499,020 American Home Products 229,000 13,382,760 Amgen 183,200 (a) 11,116,576 Baxter International 198,000 9,702,000 Bristol-Myers Squibb 341,000 17,834,300 Galen Partners II, L.P. (Units) 2.145 (b) 1,765,989 Genentech 84,000 (a) 4,628,400 Johnson & Johnson 437,000 21,850,000 Medtronic 236,000 10,858,360 Merck & Co. 540,000 34,511,400 Pfizer 1,332,500 53,366,625 Pharmacia 226,100 10,389,295 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ HEALTH TECHNOLOGY (CONTINUED) Teva Pharmaceutical Industries, ADR 170,000 10,591,000 214,495,725 INDUSTRIAL SERVICES--.7% BJ Services 30,000 (a) 851,400 ENSCO International 95,000 2,223,000 Schlumberger 100,000 5,265,000 Waste Management 174,000 5,362,680 Yorktown Energy Partners, L.P. (Units) .26 (b) 420,541 14,122,621 NON-ENERGY MINERALS--.9% Alcoa 382,000 15,050,800 Weyerhaeuser 70,000 3,847,900 18,898,700 PROCESS INDUSTRIES--1.6% Corning 151,200 2,526,552 Dow Chemical 329,027 10,940,148 duPont (E.I.) deNemours 182,000 8,779,680 International Paper 303,400 10,831,380 33,077,760 PRODUCER MANUFACTURING--6.5% Danaher 26,000 1,456,000 Deere 42,000 1,589,700 Dover 37,000 1,393,050 Emerson Electric 78,000 4,719,000 General Electric 1,698,800 82,816,500 Honeywell International 287,000 10,042,130 Illinois Tool Works 55,000 3,481,500 Minnesota Mining & Manufacturing 67,000 7,644,700 Tyco International 312,200 17,014,900 130,157,480 RETAIL TRADE--9.5% Best Buy 113,000 (a) 7,177,760 CVS 70,000 2,702,000 Costco Wholesale 332,000 (a) 13,638,560 Gap 218,000 6,322,000 Home Depot 461,500 21,482,825 Kohl's 58,000 (a) 3,638,340 The Fund STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ RETAIL TRADE (CONTINUED) Lowe's Cos. 133,000 9,649,150 May Department Stores 157,400 5,392,524 RadioShack 112,000 3,416,000 SK Equity Fund, L.P. (Units) 10.845 (b) 44,570,295 Sears, Roebuck & Co. 315,000 13,327,650 Target 171,000 5,916,600 Wal-Mart Stores 984,000 48,019,200 Walgreen 190,000 6,488,500 191,741,404 TECHNOLOGY SERVICES--8.2% AOL Time Warner 934,900 (a) 49,549,700 Adobe Systems 121,000 5,687,000 Computer Associates International 85,500 3,078,000 Electronic Data Systems 82,000 5,125,000 First Data 66,000 4,240,500 Microsoft 938,000 (a) 68,474,000 Oracle 1,040,800 (a) 19,775,200 PeopleSoft 100,000 (a) 4,923,000 Veritas Software 72,000 (a) 4,790,160 165,642,560 TRANSPORTATION--.7% Burlington Northern Santa Fe 125,000 3,771,250 Southwest Airlines 251,500 4,650,235 Union Pacific 92,000 5,051,720 13,473,205 UTILITIES--9.2% AES 91,900 (a) 3,956,295 AT&T 581,000 12,782,008 AT&T - Liberty Media Group, Cl. A 638,000 (a) 11,158,620 American Electric Power 103,000 4,755,510 BellSouth 346,400 13,949,528 Dominion Resources 43,000 2,585,590 Duke Energy 134,800 5,258,548 El Paso 89,873 4,721,928 Enron 137,000 6,713,000 Exelon 200,000 12,824,000 NEXTEL Communications, Cl. A 134,000 (a) 2,345,000 COMMON STOCKS (CONTINUED) Shares Value ($) ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES (CONTINUED) Qwest Communications International 289,400 9,223,178 SBC Communications 624,288 25,008,977 Southern 257,000 5,975,250 Sprint (FON Group) 160,000 3,417,600 Sprint (PCS Group) 163,000 (a) 3,936,450 TXU 201,900 9,729,561 UtiliCorp United 166,000 5,071,300 Verizon Communications 498,100 26,648,350 WorldCom 822,325 (a) 11,677,015 WorldCom - MCI Group 223,373 3,596,305 185,334,013 TOTAL COMMON STOCKS (cost $1,570,300,874) 1,961,986,473 ------------------------------------------------------------------------------------------------------------------------------------ Principal SHORT-TERM INVESTMENTS--2.8% Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCY-2.7% Federal Home Loan Banks, 3.94%, 7/2/2001 53,900,000 53,894,101 U.S. TREASURY BILLS-.1% 3.71%, 7/26/2001 2,150,000 (c) 2,145,270 TOTAL SHORT-TERM INVESTMENTS (cost $56,038,554) 56,039,371 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $1,626,339,428) 100.1% 2,018,025,844 LIABILITIES, LESS CASH AND RECEIVABLES (.1%) (1,673,898) NET ASSETS 100.0% 2,016,351,946 (A) NON-INCOME PRODUCING. (B) SECURITIES RESTRICTED AS TO PUBLIC RESALE. INVESTMENT IN RESTRICTED SECURITIES WITH AN AGGREGATE MARKET VALUE OF $55,622,616 REPRESENTING APPROXIMATELY 2.8% OF NET ASSETS SEE BELOW. (C) PARTIALLY HELD BY THE CUSTODIAN AND BROKER IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN FINANCIAL FUTURES POSITIONS. The Fund STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Net Acquistion Purchase Assets Issuer Date Price ($)* (%) Valuation ($)** ------------------------------------------------------------------------------------------------------------------------------------ GE Investment Private Placement Partners I, L.P. (Units) 5/28/91--9/13/95 1,529,112 .44 1,529,112 per unit Galen Partners II, L.P. (Units) 1/28/93--1/3/97 823,305 .09 823,305 per unit SK Equity Fund, L.P. (Units) 12/6/92--10/30/96 847,730 2.21 4,109,755 per unit Yorktown Energy Partners, L.P. (Units) 3/5/91--9/15/95 1,617,179 .02 1,617,465 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: Portion of Committed Issuer Amounts Uninvested ----------------------------------------------------------------------------------------------------------------------------------- Galen Partners II, L.P. (Units) $147,742 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF FINANCIAL FUTURES June 30, 2001 (Unaudited) Unrealized Market Value Appreciation/ Covered by (Depreciation) Contracts Contracts ($) Expiration at 6/30/2001 ($) ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL FUTURES LONG Standard & Poor's 500 5 1,539,625 September 2001 (2,875) SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF ASSETS AND LIABILITIES June 30, 2001 (Unaudited) Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 1,626,339,428 2,018,025,84 Receivable for investment securities sold 21,072,016 Dividends receivable 1,581,895 Receivable for shares of Capital Stock subscribed 45,985 Prepaid expenses 77,466 2,040,803,206 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 1,277,790 Cash overdraft due to Custodian 805,075 Payable for investment securities purchased 20,586,907 Payable for shares of Capital Stock redeemed 1,343,403 Payable for futures variation margin--Note 4(a) 2,875 Accrued expenses 435,210 24,451,260 -------------------------------------------------------------------------------- NET ASSETS ($) 2,016,351,946 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 1,623,800,62 Accumulated undistributed investment income--net 1,930,891 Accumulated net realized gain (loss) on investments (1,063,112) Accumulated net unrealized appreciation (depreciation) on investments [including ($2,875) net unrealized (depreciation) on financial futures]--Note 4(b) 391,683,541 -------------------------------------------------------------------------------- NET ASSETS ($) 2,016,351,946 -------------------------------------------------------------------------------- SHARES OUTSTANDING (500 million shares of $1 par value Capital Stock authorized) 192,803,184 NET ASSET VALUE, offering and redemption price per share ($) 10.46 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2001 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $62,760 foreign taxes withheld at source) 11,700,806 Interest 1,938,082 TOTAL INCOME 13,638,888 EXPENSES: Management fee--Note 3(a) 6,766,176 Shareholder servicing costs--Note 3(a) 589,736 Custodian fees--Note 3(a) 75,617 Professional fees 64,407 Prospectus and shareholders' reports 47,758 Directors' fees and expenses--Note 3(b) 45,113 Registration fees 14,145 Loan commitment fees--Note 2 11,656 Miscellaneous 32,240 TOTAL EXPENSES 7,646,848 INVESTMENT INCOME--NET 5,992,040 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 14,301,810 Net realized gain (loss) on financial futures (1,138,345) NET REALIZED GAIN (LOSS) 13,163,465 Net unrealized appreciation (depreciation) on investments [including ($2,875) net unrealized (depreciation) on financial futures] (157,146,608) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (143,983,143) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (137,991,103) SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2001 Year Ended (Unaudited) December 31, 2000 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 5,992,040 11,037,295 Net realized gain (loss) on investments 13,163,465 (1,743,286) Net unrealized appreciation (depreciation) on investments (157,146,608) (388,571,813) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (137,991,103) (379,277,804) -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS ($): From Investment income--net (4,859,464) (10,238,980) From net realized gain on investments (4,040,342) (22,183,682) In excess of net realized gain on investments -- (10,186,235) TOTAL DIVIDENDS (8,899,806) (42,608,897) -------------------------------------------------------------------------------- CAPITAL STOCK TRANSACTIONS ($): Net proceeds from shares sold 336,634,342 775,864,634 Dividends reinvested 7,552,662 36,455,081 Cost of shares redeemed (421,080,916) (980,921,043) INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS (76,893,912) (168,601,328) TOTAL INCREASE (DECREASE) IN NET ASSETS (223,784,821) (590,488,029) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 2,240,136,767 2,830,624,796 END OF PERIOD 2,016,351,946 2,240,136,767 Undistributed investment income--net 1,930,891 798,315 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (SHARES): Shares sold 30,936,738 61,597,033 Shares issued for dividends reinvested 733,097 2,884,337 Shares redeemed (38,890,277) (77,675,047) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (7,220,442) (13,193,677) SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Six Months Ended June 30, 2001 Year Ended December 31, ------------------------------------------------------------------- (Unaudited) 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.20 13.28 11.52 9.93 10.82 10.42 Investment Operations: Investment income--net .03(a) .05(a) .05(a) .10 .10 .08 Net realized and unrealized gain (loss) on investments (.72) (1.92) 2.65 1.60 1.01 1.57 Total from Investment Operations (.69) (1.87) 2.70 1.70 1.11 1.65 Distributions: Dividends from investment income--net (.03) (.05) (.06) (.11) (.08) (.09) Dividends from net realized gain on investments (.02) (.11) (.88) -- (1.78) (1.16) Dividends in excess of net realized gain on investments -- (.05) _ -- (.14) -- Total Distributions (.05) (.21) (.94) (.11) (2.00) (1.25) Net asset value, end of period 10.46 11.20 13.28 11.52 9.93 10.82 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%) (6.16)(b) (14.27) 24.07 17.15 10.75 15.85 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .36(b) .71 .71 .73 .71 .73 Ratio of net investment income to average net assets .29(b) .42 .43 .82 .85 .70 Portfolio Turnover Rate 32.10(b) 79.41 58.61 109.61 201.10 220.92 ------------------------------------------------------------------------------------------------------------------------------------ Net Assets, end of period ($ x 1,000) 2,016,352 2,240,137 2,830,625 2,586,645 2,628,072 2,698,767 (A) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (B) NOT ANNUALIZED. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund 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, as amended (the "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 (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, 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 accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (including financial futures) are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. 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. (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 and premium on investments, is recognized on the accrual basis. Under the terms of the custody agreement, the fund received net earnings credits of $4,069 during the period ended June 30, 2001, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. (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 of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gain. (e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of tax The Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) able 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 $500 million redemption credit facility (the "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 based on prevailing market rates in effect at the time of borrowings. During the period ended June 30, 2001, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (a) Pursuant to a management agreement (the "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 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, 2001, the fund was charged $454,459 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, 2001, the fund was charged $75,617 pursuant to the custody agreement. (b) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $45,000 and an attendance fee of $5,000 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. (c) During the period ended June 30, 2001, the fund incurred total brokerage commissions of $1,215,028, of which $9,080 was paid to Dreyfus Brokerage Services, a wholly-owned subsidiary of Mellon Financial Corporation. NOTE 4--Securities Transactions: (a) The aggregate amount of purchases and sales of investment securities, excluding short-term securities and financial futures, during the period ended June 30, 2001, amounted to $652,531,114 and $683,232,946, respectively. The fund may invest in financial futures contracts in order to gain exposure to or protect against changes in the market. The fund is exposed to market risk as a result of changes in the value of the underlying financial instruments. Investments in financial futures require the fund to "mark to market" on a daily basis, which reflects the change in the market value of the contract at the close of each day's trading. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses. When the contracts are closed, the fund recognizes a realized gain or loss. These investments require initial margin deposits with a custodian or broker, which consist of cash or cash equivalents, up to approximately 10% of the contract amount. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Contracts open at June 30, 2001 are set forth in the Statement of Financial Futures. The Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) (b) At June 30, 2001, accumulated net unrealized appreciation on investments and financial futures was $391,683,541, consisting of $456,338,646 gross unrealized appreciation and $64,655,105 gross unrealized depreciation. At June 30, 2001, 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). NOTES For More Information 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 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call 1-800-645-6561 BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 BY E-MAIL Send your request to info@dreyfus.com ON THE INTERNET Information can be viewed online or downloaded from: http://www.dreyfus.com (c) 2001 Dreyfus Service Corporation 026SA0601