-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rkbbnq8eYagwY8k8uuCfymEOhLGabyrZfDAYu6ioa3d7Ghy8NV0j2mFfYOVhce7x E1tH00IhgZFKt7t3Oe5BrQ== 0000030146-02-000008.txt : 20020827 0000030146-02-000008.hdr.sgml : 20020827 20020827121619 ACCESSION NUMBER: 0000030146-02-000008 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020827 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DREYFUS FUND INC CENTRAL INDEX KEY: 0000030146 IRS NUMBER: 136021175 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00523 FILM NUMBER: 02749180 BUSINESS ADDRESS: STREET 1: THE DREYFUS CORPORATION STREET 2: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 BUSINESS PHONE: 2129226832 MAIL ADDRESS: STREET 1: C/O DREYFUS CORP STREET 2: 200 PARK AVENUE, 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10166 FORMER COMPANY: FORMER CONFORMED NAME: NESBETT FUND INC DATE OF NAME CHANGE: 19680607 N-30D 1 pn30d-026.txt SEMI-ANNUAL REPORT The Dreyfus Fund Incorporated SEMIANNUAL REPORT June 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. 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, 2002 through June 30, 2002. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio managers, Douglas D. Ramos, CFA, and Hilary R. Woods, CFA. The U.S. stock market confronted a number of formidable challenges during the first half of 2002. In addition to lackluster corporate earnings and the ongoing war on terrorism, investors have recently contended with questions regarding the accuracy of certain companies' financial statements. These and other influences drove the Standard & Poor's 500 Composite Stock Price Index, a widely accepted benchmark of domestic large-cap stock performance, down during the first six months of the year. Nonetheless, we are generally optimistic about the future. The economy has begun to recover, showing signs of sustained growth that should have a positive effect on corporate earnings. Recent market declines may have created attractive values in some stocks. At the same time, we believe that today's accounting scandals will likely lead to higher standards and stronger oversight of corporate behavior, which should give investors greater confidence in the future. During turbulent times like these it is important to have an investment horizon that is measured in years, not weeks or months. Remember that over the long term, stocks have historically produced higher returns than other types of investments. For investors with a long-term perspective, stocks should continue to provide considerable potential for growth. As always, we urge you to talk with your financial advisor if you have questions or concerns about the markets or your investment portfolio. For our part, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation July 15, 2002 DISCUSSION OF FUND PERFORMANCE Douglas D. Ramos, CFA, and Hilary R. Woods, CFA, Portfolio Managers How did The Dreyfus Fund Incorporated perform relative to its benchmark? For the six-month period ended June 30, 2002, the fund's total return was - -11.57% .(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 - -13.15%.(2) We attribute the fund's negative overall performance to a variety of political and economic developments, which created an unfavorable environment for most stocks. The fund succeeded in producing higher returns than those of its benchmark on the strength of relatively good individual stock selections, particularly among the telecommunications services, health care and industrial areas. What is the fund's investment approach? The fund seeks long-term capital growth consistent with the preservation of capital. Current income is a secondary goal. To pursue these goals, the fund primarily invests in common stocks issued by U.S. companies, including to a limited degree, those issued in initial public offerings. The fund may invest up to 20% of its assets in foreign securities. In choosing stocks, the fund employs a "bottom-up" approach, primarily focusing on large-capitalization companies with strong positions in their industries and a catalyst that can trigger a price increase (such as corporate restructuring or a change in management) . The portfolio managers use fundamental analysis to create a broadly diversified core portfolio comprised of growth stocks, value stocks and stocks that exhibit characteristics of both investment styles. The managers select stocks based on: * VALUE, or how a stock is priced relative to its perceived intrinsic worth; * GROWTH, in this case the sustainability or growth of earnings or cash flow; and * FINANCIAL PROFILE, which measures the financial health of the company. The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) The fund typically sells a security when the portfolio managers believe that there has been a negative change in the fundamental factors surrounding the company, the company has become fully valued, the company has lost favor in the current market or economic environment, or a more attractive opportunity has been identified. The fund may, but is not required to, use derivatives, such as futures and options, as a substitute for taking a position in an underlying asset, to increase returns or as a part of a hedging strategy. The fund may also engage in short-selling, typically for hedging purposes, such as to limit exposure to a possible market decline in the value of its portfolio securities. What other factors influenced the fund's performance? After more than a year of slowing growth, the U.S. economy showed signs of gradual recovery during the reporting period. However, most stock prices declined in the face of developments that sharply undermined investor confidence. In particular, investors were surprised by revelations of accounting-related financial difficulties at several prominent U.S. corporations. Concerns regarding the reliability of corporate financial statements, uncertainties arising from the war on terrorism, conflict in the Middle East, and the unexpected slow pace of economic recovery drove stock prices lower in seven out of the 10 industry sectors comprising the fund and the S&P 500 Index. Technology and telecommunications services stocks suffered the steepest losses, primarily because of overcapacity and low levels of corporate capital spending. Although technology declines hurt the fund and its benchmark to roughly the same degree, the fund limited its telecommunications services losses by largely avoiding the hard-hit wireless industry, as well as several other notably weak communications services providers. Similarly, in health care, the fund gained ground on its benchmark by avoiding most investments in companies that manufacture and sell brand-name pharmaceuticals, an area that suffered due to expiring patents and weak product pipelines. Instead, the fund focused on profitable health care services companies such as WellPoint Health Networks and HCA, and generic drug producers such as Teva Pharmaceutical Industries. The fund also sustained lighter losses than the benchmark among industrial companies, because we allocated a relatively high percentage of assets to investments in aerospace and defense contractors such as Raytheon. The market's relatively few gains were concentrated primarily in defensive, value-oriented areas. In particular, basic materials companies benefited from gradually rising levels of industrial demand. The fund generally matched the benchmark's rise in this area, benefiting from strong performance in paper producers such as International Paper and Weyerhaeuser, as well as gold mining concerns such as Barrick Gold. Among consumer staples, investments in beverage companies such as Coca-Cola and Anheuser-Busch Cos. helped to boost the fund's returns. What is the fund's current strategy? As of the end of the reporting period, we see growing investment opportunities in today's equity markets. Although recent developments have undermined stock prices, economic fundamentals appear promising, and recent declines have led to what we believe are increasingly attractive valuations in several areas. Specifically, we have emphasized investments in strongly positioned basic materials companies, which we believe are likely to benefit from rising levels of industrial production and constrained production. We have de-emphasized the consumer cyclicals area, which is burdened by relatively high valuations and the potential for weakening consumer confidence. We believe that, in the current environment, investor confidence remains a key factor determining market performance, with corporate governance issues of particular importance to most investors. We evaluate the financial fundamentals and accounting practices of every company we consider for investment as we build the fund one company and one investment at a time. July 15, 2002 (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, 2002 (Unaudited) COMMON STOCKS--93.3% Shares Value($) - -------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES--.9% Lamar Advertising 225,000 (a) 8,372,250 McGraw-Hill Cos. 85,000 5,074,500 13,446,750 CONSUMER DURABLES--.8% Ford Motor 225,000 3,600,000 General Motors 75,000 4,008,750 Newell Rubbermaid 165,000 5,784,900 13,393,650 CONSUMER NON-DURABLES--9.1% Anheuser-Busch Cos. 164,000 8,200,000 Coca-Cola 525,000 29,400,000 Colgate-Palmolive 160,000 8,008,000 General Mills 200,000 8,816,000 Gillette 450,000 15,241,500 Kimberly-Clark 145,000 8,990,000 Kraft Foods 280,000 11,466,000 NIKE, Cl. B 45,000 2,414,250 PepsiCo 165,000 7,953,000 Philip Morris Cos. 425,000 18,564,000 Procter & Gamble 235,000 20,985,500 Unilever, ADR 65,000 4,212,000 144,250,250 CONSUMER SERVICES--2.7% Carnival 150,000 4,153,500 Clear Channel Communications 200,000 (a) 6,404,000 Comcast, Cl. A 192,700 (a,b) 4,514,961 McDonald's 400,000 11,380,000 Starwood Hotels & Resorts Worldwide 75,000 2,466,750 Viacom, Cl. B 313,310 (a) 13,901,564 42,820,775 ELECTRONIC TECHNOLOGY--11.5% Altera 261,600 (a) 3,557,760 Applied Materials 294,000 (a) 5,591,880 Boeing 200,000 9,000,000 Cisco Systems 1,124,003 15,679,842 Dell Computer 637,000 (a) 16,651,180 EMC 381,700 (a) 2,881,835 COMMON STOCKS (CONTINUED) Shares Value ($) - ----------------------------------------------------------------------------------------------------------------------------------- ELECTRONIC TECHNOLOGY (CONTINUED) Emulex 118,700 (a) 2,671,937 Hewlett-Packard 623,645 9,529,296 Intel 1,330,000 24,299,100 International Business Machines 302,000 21,744,000 Lam Research 355,000 (a) 6,382,900 Micron Technology 500,000 (a,b) 10,110,000 Motorola 668,000 9,632,560 Northrop Grumman 40,000 5,000,000 Raytheon 300,000 12,225,000 Sun Microsystems 588,800 (a) 2,949,887 Teradyne 343,000 (a,b) 8,060,500 Texas Instruments 469,300 11,122,410 United Technologies 85,000 5,771,500 182,861,587 ENERGY MINERALS--7.0% Anadarko Petroleum 170,000 8,381,000 ChevronTexaco 45,000 3,982,500 Conoco 375,000 10,425,000 Exxon Mobil 1,300,000 53,196,000 Ocean Energy 430,000 9,318,100 Phillips Petroleum 165,000 9,715,200 Royal Dutch Petroleum, ADR 275,000 15,199,250 110,217,050 FINANCE--18.0% Allstate 549,000 20,302,020 American Express 456,000 16,561,920 American International Group 564,886 38,542,172 Bank One 275,000 10,582,000 Bank of America 250,000 17,590,000 Bank of New York 225,000 7,593,750 Citigroup 675,000 26,156,250 Federal Home Loan Mortgage 141,000 8,629,200 Federal National Mortgage Association 173,000 12,758,750 Fifth Third Bancorp 150,000 (b) 9,997,500 FleetBoston Financial 250,000 8,087,500 GE Investment Private Placement I, L.P. (Units) 1.366 (e) 1,000,000 Goldman Sachs Group 47,000 3,447,450 The Fund STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ---------------------------------------------------------------------------------------------------------------------------------- FINANCE (CONTINUED) Household International 83,000 4,125,100 J.P. Morgan Chase & Co. 220,000 7,462,400 MBNA 250,000 8,267,500 Marsh & McLennan Cos. 102,000 9,853,200 Morgan Stanley 339,000 14,604,120 PNC Financial Services Group 125,000 6,535,000 SLM 131,600 12,752,040 Travelers Property Casualty, Cl. A 491,000 (a) 8,690,700 U.S. Bancorp 150,000 3,502,500 Wachovia 100,000 3,818,000 Wells Fargo 290,000 14,517,400 XL Capital, Cl. A 117,900 9,986,130 285,362,602 HEALTH SERVICES--3.3% Express Scripts 96,000 (a) 4,810,560 HCA 439,800 20,890,500 Quest Diagnostics 36,700 (a) 3,158,035 WellPoint Health Networks 306,000 (a) 23,809,860 52,668,955 HEALTH TECHNOLOGY--9.5% Abbott Laboratories 276,000 10,391,400 Amgen 183,200 (a,b) 7,672,416 Bard (C.R.) 103,000 5,827,740 Bristol-Myers Squibb 231,000 5,936,700 Galen Partners II, L.P. (Units) 2.020 (e) 1,766,619 Johnson & Johnson 543,000 28,377,180 Medtronic 187,000 8,012,950 Merck & Co. 156,000 7,899,840 Pfizer 1,245,500 43,592,500 Pharmacia 319,000 11,946,550 Teva Pharmaceutical Industries, ADR 119,000 7,946,820 Wyeth 229,000 11,724,800 151,095,515 INDUSTRIAL SERVICES--1.5% Baker Hughes 250,000 8,322,500 Nabors Industries 100,000 (a) 3,515,000 Schlumberger 205,000 9,532,500 COMMON STOCKS (CONTINUED) Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIAL SERVICES (CONTINUED) Waste Management 100,000 2,605,000 Yorktown Energy Partners, L.P. (Units) .26 (e) 56,365 24,031,365 METALS & MINING--.3% BHP Billiton, ADR 450,000 5,310,000 NON-ENERGY MINERALS--1.9% Alcan 100,000 3,752,000 Alcoa 205,000 6,795,750 Barrick Gold 320,000 6,076,800 Phelps Dodge 90,000 3,708,000 Weyerhaeuser 150,000 9,577,500 29,910,050 PROCESS INDUSTRIES--2.6% Air Products & Chemicals 200,000 10,094,000 Dow Chemical 250,000 8,595,000 duPont (E.I.) deNemours 255,000 11,322,000 International Paper 90,000 3,922,200 PPG Industries 75,000 4,642,500 Rohm & Haas 60,000 2,429,400 41,005,100 PRODUCER MANUFACTURING--4.9% 3M 70,000 8,610,000 Caterpillar 100,000 (b) 4,895,000 Danaher 75,000 4,976,250 Deere & Co. 85,000 4,071,500 Dover 175,000 6,125,000 Emerson Electric 60,000 3,210,600 General Electric 1,150,000 33,407,500 Honeywell International 235,000 8,279,050 Illinois Tool Works 50,000 3,415,000 76,989,900 RETAIL TRADE--6.8% Dollar Tree Stores 175,000 (a) 6,896,750 Gap 300,000 4,260,000 Home Depot 206,000 7,566,380 Lowe's Cos. 100,000 4,540,000 May Department Stores 50,000 1,646,500 The Fund STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) COMMON STOCKS (CONTINUED) Shares Value ($) - ----------------------------------------------------------------------------------------------------------------------------------- RETAIL TRADE (CONTINUED) SK Equity Fund, L.P. (Units) 8.515 (e) 30,051,710 Safeway 110,000 (a) 3,210,900 Sears, Roebuck & Co. 110,000 5,973,000 Staples 215,000 (a) 4,235,500 Target 75,000 2,857,500 Wal-Mart Stores 550,000 30,255,500 Walgreen 180,000 6,953,400 108,447,140 TECHNOLOGY SERVICES--6.4% AOL Time Warner 700,000 (a) 10,297,000 Accenture, Cl. A 436,600 (a,b) 8,295,400 Adobe Systems 235,000 6,697,500 Anthem 66,000 (a) 4,453,680 Electronic Data Systems 82,000 3,046,300 First Data 214,000 7,960,800 Microsoft 933,000 (a) 50,493,960 Oracle 1,040,800 (a) 9,856,376 101,101,016 TRANSPORTATION--1.1% CSX 175,000 6,133,750 FedEx 90,000 4,806,000 Norfolk Southern 166,000 3,881,080 Southwest Airlines 200,000 3,232,000 18,052,830 UTILITIES--5.0% AT&T 625,000 6,687,504 BellSouth 346,400 10,911,600 Devon Energy 60,000 2,956,800 Duke Energy 260,800 8,110,880 Exelon 128,000 6,694,400 Liberty Media 638,000 (a) 6,061,000 SBC Communications 491,288 14,984,284 TXU 173,000 8,918,150 Verizon Communications 329,100 13,213,365 78,537,983 TOTAL COMMON STOCKS (cost $1,369,522,664) 1,479,502,518 Principal SHORT-TERM INVESTMENTS--7.2% Amount ($)/Shares Value($) - ---------------------------------------------------------------------------------------------------------------------------------- REGULATED INVESTMENT COMPANIES--6.8% Dreyfus Institutonal Cash Advantage Fund 35,781,898 (c) 35,781,898 Dreyfus Institutonal Cash Advantage Plus Fund 35,781,898 (c) 35,781,898 Dreyfus Institutional Preferred Plus Money Market Fund 35,781,897 (c) 35,781,897 107,345,693 U.S. TREASURY BILLS--.4% 1.76%, 7/5/2002 3,000,000 (d) 2,999,430 1.72%, 8/29/2002 1,000,000 (d) 997,370 1.68%, 9/12/2002 2,000,000 (d) 1,993,380 5,990,180 TOTAL SHORT-TERM INVESTMENTS (cost $113,335,474) 113,335,873 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $1,482,858,138) 100.5% 1,592,838,391 LIABILITIES, LESS CASH AND RECEIVABLES (.5%) (8,371,864) NET ASSETS 100.0% 1,584,466,527 (A) NON-INCOME PRODUCING (B) ALL OR A PORTION OF THESE SECURITIES ARE ON LOAN. AT JUNE 30,2002, THE TOTAL MARKET VALUE OF THE FUND'S SECURITIES ON LOAN IS $6,378,362 AND THE TOTAL MARKET VALUE OF THE COLLATERAL HELD BY THE PORTFOLIO IS $6,639,550. (C) INVESTMENTS IN AFFILIATED MONEY MARKET FUNDS (SEE NOTE 3(C) IN THE FUND'S NOTES TO FINANCIAL STATEMENTS). (D) PARTIALLY HELD BY THE BROKER IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN FINANCIAL FUTURES POSITIONS. (E) SECURITIES RESTRICTED AS TO PUBLIC RESALE. INVESTMENT IN RESTRICTED SECURITIES WITH AN AGGREGATE MARKET VALUE OF $32,874,694 REPRESENTING 2.1% OF THE ASSETS (SEE BELOW).
The Fund STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED) Net Acquistion Purchase Assets Issuer Date Price ($)* (%) Valuation ($)** - ------------------------------------------------------------------------------------------------------------------------------------ GE Investment Private Placement Partners I, L.P. (Units) 5/28/91--9/13/95 3,215,664 .06 732,064 per unit Galen Partners II, L.P. (Units) 1/28/93--1/3/97 874,564 .11 874,564 per unit SK Equity Fund, L.P. (Units) 12/6/92--10/30/96 946,303 1.90 3,529,267 per unit Yorktown Energy Partners, L.P. (Units) 3/5/91--9/15/95 1,362,713 .00 216,788 per unit (*) AVERAGE COST. ** THE VALUATION OF THESE SECURITIES HAS BEEN DETERMINED IN GOOD FAITH UNDER THE DIRECTION OF THE BOARD OF DIRECTORS. SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF FINANCIAL FUTURES June 30, 2002 (Unaudited) Market Value Unrealized Covered by (Depreciation) Contracts Contracts ($) Expiration at 6/30/2002 ($) - ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL FUTURES LONG Standard & Poor's 500 306 75,742,650 September 2002 (3,160,225) SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited) Cost Value - -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 1,482,858,138 1,592,838,391 Receivable for investment securities sold 6,909,586 Dividends and interest receivable 1,517,637 Receivable for shares of Common Stock subscribed 48,394 Prepaid expenses 38,458 1,601,352,466 - ------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 1,063,022 Cash overdraft due to Custodian 302,788 Payable for investment securities purchased 14,364,387 Payable for shares of Common Stock redeemed 742,520 Payable for futures variation margin--Note 4 145,350 Accrued expenses 267,872 16,885,939 - ------------------------------------------------------------------------------- NET ASSETS ($) 1,584,466,527 - ------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 1,496,624,946 Accumulated undistributed investment income--net 1,700,607 Accumulated net realized gain (loss) on investments (20,679,054) Accumulated net unrealized appreciation (depreciation) on investments [including ($3,160,225) net unrealized (depreciation) on financial futures] 106,820,028 - ------------------------------------------------------------------------------- NET ASSETS ($) 1,584,466,527 - ------------------------------------------------------------------------------- SHARES OUTSTANDING (500 million shares of $1 par value Common Stock authorized) 179,879,755 NET ASSET VALUE, offering and redemption price per share ($) 8.81 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INCOME: Cash dividends (net of $82,683 foreign taxes withheld at source) 10,877,312 Interest 199,711 TOTAL INCOME 11,077,023 EXPENSES: Management fee--Note 3(a) 5,757,194 Shareholder servicing costs--Note 3(a) 613,826 Custodian fees--Note 3(a) 66,936 Professional fees 47,505 Directors' fees and expenses--Note 3(b) 38,681 Prospectus and shareholders' reports 24,344 Registration fees 14,704 Loan commitment fees--Note 2 5,930 Miscellaneous 105,667 TOTAL EXPENSES 6,674,787 INVESTMENT INCOME--NET 4,402,236 - -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments: Long transactions 3,184,022 Short sale transactions 121,475 Net realized gain (loss) on financial futures (6,235,821) NET REALIZED GAIN (LOSS) (2,930,324) Net unrealized appreciation (depreciation) on investments [including ($3,152,275) net unrealized (depreciation) on financial futures] (211,640,810) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (214,571,134) NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (210,168,898) SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Six Months Ended June 30, 2002 Year Ended (Unaudited) December 31, 2001 - -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 4,402,236 12,419,827 Net realized gain (loss) on investments (2,930,324) (4,598,671) Net unrealized appreciation (depreciation) on investments (211,640,810) (230,369,311) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (210,168,898) (222,548,155) - ------------------------------------------------------------------------------ DIVIDENDS TO SHAREHOLDERS ($): From investment income--net (4,713,792) (11,457,466) In excess of net realized gain on investments -- (4,040,350) TOTAL DIVIDENDS (4,713,792) (15,497,816) - ------------------------------------------------------------------------------ CAPITAL STOCK TRANSACTIONS ($): Net proceeds from shares sold 124,086,856 471,724,789 Dividends reinvested 3,949,776 13,070,018 Cost of shares redeemed (192,125,895) (623,447,123) INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS (64,089,263) (138,652,316) TOTAL INCREASE (DECREASE) IN NET ASSETS (278,971,953) (376,698,287) - ------------------------------------------------------------------------------ NET ASSETS ($): Beginning of Period 1,863,438,480 2,240,136,767 END OF PERIOD 1,584,466,527 1,863,438,480 Undistributed investment income--net 1,700,607 2,246,649 - ------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS (SHARES): Shares sold 12,567,915 44,277,731 Shares issued for dividends reinvested 420,936 1,326,107 Shares redeemed (19,589,335) (59,147,225) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (6,600,484) (13,543,387) SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Six Months Ended June 30, 2002 Year Ended December 31, ----------------------------------------------------------------------------- (Unaudited) 2001 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 9.99 11.20 13.28 11.52 9.93 10.82 Investment Operations: Investment income--net .02(a) .06(a) .05(a) .05(a) .10 .10 Net realized and unrealized gain (loss) on investments (1.17) (1.19) (1.92) 2.65 1.60 1.01 Total from Investment Operations (1.15) (1.13) (1.87) 2.70 1.70 1.11 Distributions: Dividends from investment income--net (.03) (.06) (.05) (.06) (.11) (.08) Dividends from net realized gain on investments -- -- (.11) (.88) -- (1.78) Dividends in excess of net realized gain on investments -- (.02) (.05) -- -- (.14) Total Distributions (.03) (.08) (.21) (.94) (.11) (2.00) Net asset value, end of period 8.81 9.99 11.20 13.28 11.52 9.93 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%) (11.57)(b) (10.07) (14.27) 24.07 17.15 10.75 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .37(b) .73 .71 .71 .73 .71 Ratio of net investment income to average net assets .25(b) .63 .42 .43 .82 .85 Portfolio Turnover Rate 21.02(b) 60.55 79.41 58.61 109.61 201.10 - ----------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 1,584,467 1,863,438 2,240,137 2,830,625 2,586,645 2,628,072 (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 $10,067 during the period ended June 30, 2002, 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, if any, 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, 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 pro- The Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) visions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. The fund has an unused capital loss carryover of $5,848,526 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2001. If not applied, the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2001 was as follows: ordinary income $11,457,466 and long-term capital gains $4,040,350. The tax character of current year distributions will be determined at the end of the current fiscal year. 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, 2002, 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, 2002, the fund was charged $429,381 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, 2002, the fund was charged $66,936 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) Commencing June 13, 2002, pursuant to an exemptive order from the Securities and Exchange Commission, the fund invests it available cash balances in affiliated money market funds as shown in the fund's Statement of Investments. Management fees are not charged to these accounts. The fund derived $88,848 in income from these investments, which is included as interest income in the fund's Statement of Operations. NOTE 4--Securities Transactions: The following summarizes the aggregate amount of purchases and sales of investment securities and securities sold short, excluding short-term securities and financial futures, during the period ended June 30, 2002: Purchases ($) Sales ($) - -------------------------------------------------------------------------------- Long transactions 356,799,870 507,600,856 Short sale transactions 4,136,000 -- TOTAL 360,935,870 507,600,856 The fund is engaged in short-selling which obligates the fund to replace the security borrowed by purchasing the security at current market value. The fund would incur a loss if the price of the security increases between the date of the short sale and the date on which the The Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED) fund replaces the borrowed security. The fund would realize a gain if the price of the security declines between those dates. Until the fund replaces the borrowed security, the fund will maintain daily a segregated account with a broker or custodian, of permissible liquid assets sufficient to cover its short position. At June 30, 2002, there were no outstanding securities sold short. 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 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, 2002 are set forth in the Statement of Financial Futures. At June 30, 2002, accumulated net unrealized appreciation on investments, was $109,980,253, consisting of $218,360,485 gross unrealized appreciation and $108,380,232 gross unrealized depreciation. At June 30, 2002, 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) 2002 Dreyfus Service Corporation 026SA0602 -----END PRIVACY-ENHANCED MESSAGE-----