N-CSR 1 formncsr026.htm FORM NCSR formncsr026
    UNITED STATES 
    SECURITIES AND EXCHANGE COMMISSION 
    Washington, D.C. 20549 
 
 
    FORM N-CSR 
 
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT 
    INVESTMENT COMPANIES 
 
Investment Company Act file number 811-0523 
 
    DREYFUS FUND INCORPORATED 
    (Exact name of Registrant as specified in charter) 
 
 
    c/o The Dreyfus Corporation 
    200 Park Avenue 
    New York, New York 10166 
    (Address of principal executive offices) (Zip code) 
 
    Mark N. Jacobs, Esq. 
    200 Park Avenue 
    New York, New York 10166 
    (Name and address of agent for service) 
 
Registrant's telephone number, including area code: (212) 922-6000 
 
Date of fiscal year end:    12/30 
 
Date of reporting period:    6/30/04 

SSL-DOCS2 70134233v1

        FORM N-CSR 
Item 1.    Reports to Stockholders.     

The Dreyfus Fund
Incorporated
S E M I A N N UA L R E P O RT
June 30, 2004

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
12
  		 Statement of Assets and Liabilities
13
  		 Statement of Operations
14
  		 Statement of Changes in Net Assets
15
  		 Financial Highlights
16
  		 Notes to Financial Statements
     FOR MORE INFORMATION
Back Cover
The Dreyfus Fund
   Incorporated

The Fund

LETTER FROM THE CHAIRMAN

Dear Shareholder:

This semiannual report for The Dreyfus Fund Incorporated covers the six-month period from January 1, 2004, through June 30, 2004. 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.

Although the U.S. economy increasingly showed signs of sustainable growth during the first half of 2004, most major stock-market indices generally ended the reporting period only slightly higher than where they began. The positive effects of rising corporate earnings were largely offset by uncertainty related to the situation in Iraq, renewed inflationary pressures and potentially higher interest rates. In fact, on the last day of the reporting period, the Federal Reserve Board raised short-term rates in what many analysts believe is the first in a series of gradual increases.

To many investors, the move to a less accommodative monetary policy marks the beginning of a new phase in the economic cycle. At times such as these, when market conditions are in a period of transition, we believe it is especially important for you to stay in close contact with your financial advisor, who can help you position your portfolio in a way that is designed to respond to the challenges and opportunities of today's changing investment environment.

Thank you for your continued confidence and support.

Sincerely,

Stephen E. Canter

Chairman and Chief Executive Officer The Dreyfus Corporation

July 15, 2004

2

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, 2004, the fund produced a total return of 1.47%.1 In comparison, the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"), the portfolio's benchmark, provided a total return of 3.44% for the same period.2

We attribute these results to a mild rise in the stock market, which was supported by continuing U.S. economic growth. However, the market's greatest gains generally were concentrated among smaller companies. Even among mid- to large-cap stocks, those with smaller market capitalizations tended to outperform their larger counterparts. Because the fund focused primarily on relatively large companies, its return lagged that of its benchmark.

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.

When choosing stocks, the fund focuses on large-capitalization companies with strong positions in their industries and a catalyst that can trigger a price increase. The portfolio managers use fundamental analysis to create a broadly diversified core portfolio composed 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 3

D I S C U S S I O N O F F U N D P E R F O R M A N C E (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.

What other factors influenced the fund's performance?

The fund achieved positive returns in several market sectors, with the greatest gains driven by a small number of individual holdings.For example, the fund's relatively strong performance in the utilities sector was primarily generated by a single stock, that of electric power producer TXU Corp., which rose by over 70% largely on the news that Public Utility Commission of Texas investigations found no wrongdoing by TXU. Notably strong performers in other sectors included Countrywide Financial, a mortgage lending company that delivered reasonably good financial results despite an unfavorable interest-rate environment, and Bard (C.R.), a medical device developer that produced better than expected earnings, particularly during the first quarter of 2004.

However, the stock market's leadership tended to be dominated in the first half of 2004 by speculative stocks rather than the higher-quality companies on which the fund primarily focuses. This trend undermined the fund's performance in the technology sector, where some of the market's best performers were Internet stocks that generally failed to meet the fund's disciplined investment criteria. Despite positive contributions from some technology holdings, such as Internet security company VeriSign, the fund experienced negative returns in the sector overall, primarily due to declines in semiconductor chip and equipment makers, such as KLA-Tencor and Texas Instruments.

The trend favoring speculative Internet-related stocks also detracted from relative returns in the consumer discretionary sector, where the fund was underweight online auctioneer eBay, one of the market's leading gainers during the reporting period. Performance in the con-

4

sumer discretionary sector was also hurt by the fund's exposure to media giant Viacom Cl. B, which experienced weak advertising revenues. Finally, in the telecommunications services sector, returns were undermined by the fund's lack of exposure to AT&T Wireless, which benefited from a buyout offer during the reporting period.

What is the fund's current strategy?

As of the end of June 2004, market sentiment shows signs of shifting in favor of the kinds of high-quality companies that the fund emphasizes, including those with solid balance sheets and talented management teams.We do not, however, currently see many sector-based valuation imbalances that might lead us to strongly favor one area of the market over another. Accordingly, we have attempted to establish market-weighted positions in most sectors, where we have focused on careful selection of individual stocks. One exception is the fund's overweighted position in the energy sector, where we believe strong demand and limited supplies have created a favorable investment environment. Conversely, we recently have established underweighted positions in the consumer discretionary and financial sectors, particularly among stocks that, in our view, appear vulnerable to higher interest rates.

July 15, 2004

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, portfolio 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 5

STATEMENT OF INVESTMENTS
June 30, 2004 (Unaudited)
Common Stocks—100.0% Shares   Value ($)  
 
 
Consumer Discretionary—10.8%        
Clear Channel Communications 175,000   6,466,250  
Comcast, Cl. A 310,000 a   8,689,300  
Comcast, Special Cl. A 95,000 a   2,622,950  
Disney (Walt) 525,000   13,382,250  
eBay 45,000 a   4,137,750  
Gap 275,000   6,668,750  
Home Depot 300,000   10,560,000  
International Game Technology 100,000   3,860,000  
Kohl's 100,000 a   4,228,000  
Liberty Media 888,000 a   7,983,120  
Liberty Media International, Cl. A 44,400 a   1,647,240  
McDonald's 240,000   6,240,000  
Newell Rubbermaid 190,000   4,465,000  
NIKE, Cl. B 50,000   3,787,500  
SK Equity Fund, L.P 6.453 d   15,888,875  
Starwood Hotels & Resorts Worldwide 185,000   8,297,250  
Target 130,000   5,521,100  
Time Warner 960,000 a   16,876,800  
Toyota Motor, ADR 110,000   8,978,200  
Univision Communications 150,000 a   4,789,500  
Viacom, Cl. B 400,000   14,288,000  
      159,377,835  
Consumer Staples—11.9%        
Altria Group 355,000   17,767,750  
Clorox 90,000   4,840,200  
Coca-Cola 290,000   14,639,200  
Colgate-Palmolive 164,000   9,585,800  
ConAgra Foods 195,000   5,280,600  
Estee Lauder Cos. 100,000   4,878,000  
General Mills 110,000   5,228,300  
Gillette 300,000   12,720,000  
Kimberly-Clark 130,000   8,564,400  
Kroger 350,000 a   6,370,000  
PepsiCo 245,000   13,200,600  
Procter & Gamble 430,000   23,409,200  
Sara Lee 265,000   6,092,350  
Sysco 160,000   5,739,200  

6

Common Stocks (continued) Shares   Value ($)  
 
 
Consumer Staples (continued)        
Wal-Mart Stores 585,000   30,864,600  
Walgreen 185,000   6,698,850  
      175,879,050  
Energy—8.2%        
Anadarko Petroleum 140,000   8,204,000  
Baker Hughes 250,000   9,412,500  
BP, ADR 170,000   9,106,900  
ChevronTexaco 200,000   18,822,000  
ConocoPhillips 100,000   7,629,000  
Devon Energy 110,000   7,260,000  
Exxon Mobil 944,500   41,945,245  
Noble 160,000 a   6,062,400  
Occidental Petroleum 100,000   4,841,000  
Schlumberger 120,000   7,621,200  
      120,904,245  
Financials—17.8%        
American Express 150,000   7,707,000  
American International Group 475,886   33,921,154  
Bank of America 347,000   29,363,140  
Bank of New York 143,000   4,215,640  
Bank One 190,000   9,690,000  
CIT Group 216,000   8,270,640  
Capital One Financial 120,000   8,205,600  
Citigroup 841,000   39,106,500  
Countrywide Financial 141,999   9,975,430  
Federal Home Loan Mortgage 142,000   8,988,600  
Federal National Mortage Association 194,000   13,843,840  
Goldman Sachs Group 92,000   8,662,720  
J.P. Morgan Chase & Co. 278,000   10,778,060  
MBNA 305,800   7,886,582  
Merrill Lynch 196,000   10,580,080  
Morgan Stanley 218,000   11,503,860  
St. Paul Travelers Cos. 198,404   8,043,298  
U.S. Bancorp 290,000   7,992,400  
Wachovia 190,000   8,455,000  
Wells Fargo 263,000   15,051,490  
      262,241,034  

The Fund 7

STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)   Shares   Value ($)  
 
 
 
Health Care—13.3%          
Abbott Laboratories   159,000   6,480,840  
Allergan   54,000   4,834,080  
Amgen   119,200 a   6,504,744  
AstraZeneca Group, ADR   97,000   4,427,080  
Bard (C.R.)   126,000   7,137,900  
Becton, Dickinson & Co.   149,000   7,718,200  
CIGNA   112,000   7,706,720  
Community Health Systems   160,000 a   4,283,200  
Galen Partners II, L.P. (Units)   1.856 d   1,100,873  
Genentech   122,000 a   6,856,400  
Genzyme   97,000 a   4,591,010  
Gilead Sciences   73,000 a   4,891,000  
Hospira   270,900 a   7,476,840  
Johnson & Johnson   422,000   23,505,400  
Eli Lilly & Co.   156,800   10,961,888  
Medtronic   145,000   7,064,400  
Merck & Co.   232,000   11,020,000  
Novartis, ADR   168,000   7,476,000  
Pfizer   1,204,100   41,276,548  
Schering-Plough   405,000   7,484,400  
Teva Pharmaceutical Industries, ADR   118,000   7,940,220  
Wyeth   176,000   6,364,160  
        197,101,903  
Industrials—10.8%          
CSX   200,000   6,554,000  
Caterpillar   70,000   5,560,800  
Danaher   114,000   5,910,900  
Deere & Co.   105,000   7,364,700  
FedEx   60,000   4,901,400  
General Electric   1,570,000   50,868,000  
Honeywell International   175,000   6,410,250  
Illinois Tool Works   75,000   7,191,750  
Lockheed Martin   160,000   8,332,800  
Norfolk Southern   250,000   6,630,000  
Southwest Airlines   300,000   5,031,000  
3M   115,000   10,351,150  
Tyco International   375,000   12,427,500  

8

Common Stocks (continued) Shares   Value ($)  
 
 
Industrials (continued)        
United Parcel Service, Cl. B 92,000   6,915,640  
United Technologies 105,000   9,605,400  
Waste Management 175,000   5,363,750  
      159,419,040  
Information Technology—17.1%        
Accenture 306,600 a   8,425,368  
Altera 178,000 a   3,955,160  
Cisco Systems 1,005,003 a   23,818,571  
Computer Associates International 162,000   4,545,720  
Dell 400,000 a   14,328,000  
EMC 650,700 a   7,417,980  
Hewlett-Packard 467,645   9,867,310  
Intel 1,067,000   29,449,200  
International Business Machines 298,000   26,268,700  
KLA-Tencor 94,000 a   4,641,720  
Lexmark International 76,000 a   7,336,280  
Linear Technology 186,000   7,341,420  
Microsoft 1,431,000   40,869,360  
Motorola 265,000   4,836,250  
National Semiconductor 212,000 a,b   4,661,880  
Oracle 779,800 a   9,303,014  
QUALCOMM 103,000   7,516,940  
SAP, ADR 134,000   5,602,540  
Siebel Systems 340,000 a   3,631,200  
SunGard Data Systems 162,000 a   4,212,000  
Taiwan Semiconductor Manufacturing, ADR 359,488   2,987,346  
Texas Instruments 237,000   5,730,660  
VeriSign 432,000 a   8,596,800  
Xilinx 72,900   2,428,299  
Yahoo! 135,000 a   4,904,550  
      252,676,268  
Materials—4.0%        
Air Products & Chemicals 75,000   3,933,750  
Alcoa 200,000   6,606,000  
BHP Billiton, ADR 300,000   5,256,000  
du Pont (E.I) de Nemours 210,000   9,328,200  
International Paper 140,000   6,258,000  

The Fund 9

S T A T E M E N T O F I N V E S T M E N T S ( U n a u d i t e d ) (continued)

Common Stocks (continued) Shares   Value ($)  
 
 
Materials (continued)        
Phelps Dodge 60,000 a   4,650,600  
Placer Dome 225,000   3,744,000  
Praxair 142,000   5,667,220  
Rio Tinto, ADR 85,000   8,334,250  
Weyerhaeuser 74,000   4,670,880  
      58,448,900  
Telecommunication Services—2.8%        
BellSouth 264,400   6,932,568  
SBC Communications 306,288   7,427,484  
Sprint (FON Group) 334,500   5,887,200  
Telefonos de Mexico, ADR 229,000   7,618,830  
Verizon Communications 384,000   13,896,960  
      41,763,042  
Utilities—3.3%        
Ameren 101,000   4,338,960  
Dominion Resources 116,000   7,317,280  
Exelon 288,000   9,587,520  
FPL Group 111,000   7,098,450  
KeySpan 124,000   4,550,800  
NiSource 218,000   4,495,160  
Progress Energy 98,000   4,316,900  
Southern 250,000   7,287,500  
      48,992,570  
Total Common Stocks        
   (cost $1,192,115,924)     1,476,803,887  
   
 
Other Investments—.9% Shares Value ($)  
 
Registered Investment Companies:      
Dreyfus Institutional Cash Advantage Fund 4,192,667 c 4,192,667  
Dreyfus Institutional Cash Advantage Plus Fund 4,192,667 c 4,192,667  
Dreyfus Institutional Preferred Plus Money Market Fund 4,192,666 c 4,192,666  
Total Other Investments      
   (cost $12,578,000)   12,578,000  

10

      Principal      
Short-Term Investments—.3% Amount ($) Value ($)  
 
U.S. Treasury Bills;          
1.04%, 8/26/2004   3,000,000   2,994,360  
1.22%, 9/16/2004   2,000,000   1,994,680  
Total Short-Term Investments        
   (cost $ 4,989,928)       4,989,040  
 
Investment of Cash Collateral        
for Securities Loaned—.3% Shares   Value ($)  
 
Registered Investment Company;        
Dreyfus Institutional Cash Advantage Fund        
   (cost $4,664,000)   4,664,000 c 4,664,000  
 
             
Total Investments (cost $1,214,347,852) 101.5%   1,499,034,927  
Liabilities, Less Cash and Receivables (1.5%)   (21,509,605)  
Net Assets   100.0%   1,477,525,322  
a Non-income producing.      
b All of this security is on loan.At June 30, 2004, the total market value of the fund's security on loan is    
  $4,661,880 and the total market value of the collateral held by the fund is $4,664,000.    
c Investments in affiliated money market mutual funds.      
d Securities restricted as to public resale. Investment in restricted securities with aggregate market value of $16,989,748  
  representing approximately 1.15% of net assets (see below).      
          Net  
  Acquisition   Purchase   Assets  
Issuer Date   Price ($)*   (%) Valuation ($)**
 
 
Galen Partners II, L.P. (Units) 1/28/93-1/3/97   593,143   .07 593,143 per unit
SK Equity Fund, L.P. (Units) 2/6/92-10/30/96   933,353   1.08 2,462,246 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 financial statements.

The Fund 11

STATEMENT OF ASSETS AND LIABILITIES
June 30, 2004 (Unaudited)
      Cost Value  
 
Assets ($):          
Investments in securities—See Statement      
of Investments (including securities on loan,      
valued at $4,661,880)—Note 1(b):      
Unaffiliated issuers   1,197,105,852 1,481,792,927  
Affiliated issuers   17,242,000 17,242,000  
Dividends and interest receivable     1,286,522  
Receivable for shares of Common Stock subscribed   6,847  
Prepaid expenses     41,754  
        1,500,370,050  
 
Liabilities ($):          
Due to The Dreyfus Corporation and affiliates—Note 3(a)   937,369  
Cash overdraft due to Custodian     491,106  
Payable for investment securities purchased   16,202,358  
Liability for securities on loan—Note 1(b)   4,664,000  
Payable for shares of Common Stock redeemed   285,863  
Payable for futures variation margin—Note 4   27,357  
Accrued expenses     236,675  
        22,844,728  
 
Net Assets ($)     1,477,525,322  
 
Composition of Net Assets ($):      
Paid-in capital       1,269,012,894  
Accumulated undistributed investment income—net   2,522,363  
Accumulated net realized gain (loss) on investments   (78,697,010)  
Accumulated net unrealized appreciation      
(depreciation) on investments     284,687,075  
 
Net Assets ($)     1,477,525,322  
 
Shares Outstanding        
(500 million shares of $ 1 par value Common Stock authorized)   152,938,024  
Net Asset Value, offering and redemption price per share ($)   9.66  

See notes to financial statements.

12

STATEMENT OF OPERATIONS
Six Months Ended June 30, 2004 (Unaudited)
Investment Income ( $):    
Income:      
Cash dividends (net of $56,823 foreign taxes withheld at source):    
   Unaffiliated issuers   11,502,558  
   Affiliated issuers   147,771  
Income from securities lending 14,662  
Total Income   11,664,991  
Expenses:      
Management fee—Note 3(a)   4,866,822  
Shareholder servicing costs—Note 3(a) 523,700  
Prospectus and shareholders' reports 70,141  
Custodian fees—Note 3(a)   50,042  
Professional fees   43,974  
Directors' fees and expenses—Note 3(b) 24,935  
Registration fees   14,602  
Loan commitment fees—Note 2 3,027  
Miscellaneous   20,485  
Total Expenses   5,617,728  
Investment Income—Net   6,047,263  
 
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($):    
Net realized gain (loss) on investments 35,538,076  
Net realized gain (loss) on financial futures 1,407,630  
Net Realized Gain (Loss)   36,945,706  
Net unrealized appreciation (depreciation) on investments    
   [including ($145,384) net unrealized (depreciation) on financial futures] (21,427,035)  
Net Realized and Unrealized Gain (Loss) on Investments 15,518,671  
Net Increase in Net Assets Resulting from Operations 21,565,934  

See notes to financial statements.

The Fund 13

STATEMENT OF CHANGES IN NET ASSETS

  Six Months Ended      
  June 30, 2004   Year Ended  
  (Unaudited)   December 31, 2003  
 
 
Operations ($):        
Investment income—net 6,047,263   12,588,442  
Net realized gain (loss) on investments 36,945,706   (32,396,776)  
Net unrealized appreciation        
   (depreciation) on investments (21,427,035)   331,937,362  
Net Increase (Decrease) in Net Assets        
   Resulting from Operations 21,565,934   312,129,028  
 
 
Dividends to Shareholders from ($):        
Investment income—net (6,163,165)   (12,170,901)  
 
 
Capital Stock Transactions ($):        
Net proceeds from shares sold 11,657,915   93,287,472  
Dividends reinvested 5,179,191   10,227,030  
Cost of shares redeemed (71,843,395)   (203,240,748)  
Increase (Decrease) in Net Assets        
   from Capital Stock Transactions (55,006,289)   (99,726,246)  
Total Increase (Decrease) in Net Assets (39,603,520)   200,231,881  
 
 
Net Assets ($):        
Beginning of Period 1,517,128,842   1,316,896,961  
End of Period 1,477,525,322   1,517,128,842  
Undistributed investment income—net 2,522,363   2,638,265  
 
 
Capital Share Transactions (Shares):        
Shares sold 1,209,005   11,236,007  
Shares issued for dividends reinvested 537,839   1,215,229  
Shares redeemed (7,461,417)   (24,467,316)  
Net Increase (Decrease) in Shares Outstanding (5,714,573)   (12,016,080)  

See notes to financial statements.

14

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, 2004       Year Ended December 31,      
         
     
  (Unaudited)   2003   2002   2001   2000   1999  
 
 
 
 
 
 
Per Share Data ($):                          
Net asset value,                          
   beginning of period   9.56   7.72   9.99   11.20   13.28   11.52  
Investment Operations:                        
Investment income—neta .04   .08   .06   .06   .05   .05  
Net realized and unrealized                        
gain (loss) on investments .10   1.83   (2.27)   (1.19)   (1.92)   2.65  
Total from Investment                        
   Operations   .14   1.91   (2.21)   (1.13)   (1.87)   2.70  
Distributions:                          
Dividends from investment                        
   income—net   (.04)   (.07)   (.06)   (.06)   (.05)   (.06)  
Dividends from net realized                        
   gain on investments   —   —   —   —   (.11)   (.88)  
Dividends in excess                          
   of net realized                          
   gain on investments   —   —   —   (.02)   (.05)   —  
Total Distributions   (.04)   (.07)   (.06)   (.08)   (.21)   (.94)  
Net asset value, end of period 9.66   9.56   7.72   9.99   11.20   13.28  
 
 
 
 
 
 
Total Return (%)   1.47b   24.94   (22.15)   (10.07)   (14.27)   24.07  
 
 
 
 
 
 
Ratios/Supplemental Data (%):                      
Ratio of expenses to                          
   average net assets   .38b   .77   .76   .73   .71   .71  
Ratio of net                          
investment income to                        
   average net assets   .40b   .91   .68   .63   .42   .43  
Portfolio Turnover Rate 27.96b   55.14   49.46   60.55   79.41   58.61  
 
 
 
 
 
 
Net Assets, end of period                        
   ($ x 1,000) 1,477,525   1,517,129   1,316,897   1,863,438   2,240,137   2,830,625  
a Based on average shares outstanding at each month end.
b Not annualized.
See notes to financial statements.

The Fund 15

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"or "Dreyfus") serves as the fund's investment adviser. The Manager is a wholly-owned subsidiary of Mellon Financial Corporation ("Mellon Financial"). 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 U.S. generally accepted accounting principles, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.

The fund enters into contracts that contain a variety of indemnifications. The fund's maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.

(a) Portfolio valuation: Investments in securities (including financial futures) are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. 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, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available.When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has

16

been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the fund's Board. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR's and futures contracts. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.

(b) 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 $111 during the period ended June 30, 2004, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income.

The fund may lend securities to qualified institutions.At originations, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan will be maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager as shown in the fund's Statement of Investments.The fund will be entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction. Although each security loaned is fully collateralized, the fund would bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

The Fund 17

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

(c) Affiliated issuers: Investments in other investment companies advised by the Manager are defined as "affiliated" in the Act.

(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. . Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles.

(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 taxable income sufficient to relieve it from substantially all federal income and excise taxes.

The fund has an unused capital loss carryover of $111,385,639 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to December 31, 2003. If not applied $5,906,587 of the carryover expires in fiscal 2009, $58,361,928 expires in fiscal 2010 and $47,117,124 expires in fiscal 2011.

The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2003 was as follows: ordinary income $12,170,901. 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 $350 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

18

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, 2004, 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 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, 2004.

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, 2004, the fund was charged $350,986 pursuant to the transfer agency agreement.

The portfolio compensates Mellon Bank, N.A., an affiliate of the Manager, under a custody agreement to provide custodial services for the portfolio. During the period ended June 30, 2004, the portfolio was charged $50,042 pursuant to the custody agreement.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consists of: management fees $798,134, custodian fees $9,235 and transfer agency per account fees $130,000.

(b) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

The Fund 19

NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

(c) Pursuant to an exemptive order from the Securities and Exchange Commission, the portfolio invests it available cash in affiliated money market mutual funds as shown in the portfolio's Statement of Investments. Management fees of the underlying money market mutual funds have been waived by the Manager.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities and financial futures, during the period ended June 30, 2004, amounted to $410,365,856 and $439,026,404, 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 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.At June 30, 2004, there were no financial futures contracts outstanding.

At June 30, 2004, accumulated net unrealized appreciation on investments was $284,687,075, consisting of $305,245,644 gross unrealized appreciation and $20,558,569 gross unrealized depreciation.

At June 30, 2004, 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).

20

NOTE 5—Legal Matters:

Two class actions (which have been consolidated) have been filed against Mellon Financial and Mellon Bank, N.A., and Dreyfus and Founders Asset Management LLC (the "Investment Advisers"), and the directors of all or substantially all of the Dreyfus funds, alleging that the Investment Advisers improperly used assets of the Dreyfus funds, in the form of directed brokerage commissions and 12b-1 fees, to pay brokers to promote sales of Dreyfus funds,and that the use of fund assets to make these payments was not properly disclosed to investors.The complaints further allege that the directors breached their fiduciary duties to fund shareholders under the Investment Company Act of 1940 and at common law. The complaints seek unspecified compensatory and punitive damages, rescission of the funds' contracts with the Investment Advisers, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. Dreyfus and the Dreyfus funds believe the allegations to be totally without merit and will defend the actions vigorously.

Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the defendants in the future. Neither Dreyfus nor the Dreyfus funds believe that any of the pending actions will have a material adverse effect on the Dreyfus funds or Dreyfus' ability to perform its contracts with the Dreyfus funds.

The Fund 21

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.
200 Park Avenue
New York, NY 10166
 
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

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, by calling the telephone number listed above, or by visiting the SEC's website at http://www.sec.gov

© 2004 Dreyfus Service Corporation 0026SA0604

Item 2.    Code of Ethics. 
    Not applicable. 
Item 3.    Audit Committee Financial Expert. 
    Not applicable. 
Item 4.    Principal Accountant Fees and Services. 
    Not applicable. 
Item 5.    Audit Committee of Listed Registrants. 
    Not applicable. 
Item 6.    [Reserved] 
Item 7.    Disclosure of Proxy Voting Policies and Procedures for Closed-End Management 
    Investment Companies. 
    Not applicable. 
Item 8.    Purchases of Equity Securities by Closed-End Management Investment Companies 
    and Affiliated Purchasers. 
    Not applicable. 

Item 9.    Submission of Matters to a Vote of Security Holders. 
 
    The Fund has a Nominating Committee, which is responsible for selecting and 
    nominating persons for election or appointment by the Fund's Board as Board 
    members. The Committee has adopted a Nominating Committee Charter 
    ("Charter"). Pursuant to the Charter, the Committee will consider recommendations 
    for nominees from shareholders submitted to the Secretary of the Fund, c/o The 
    Dreyfus Corporation Legal Department, 200 Park Avenue, 8 th Floor West, New 
    York, New York 10166. A nomination submission must include information 
    regarding the recommended nominee as specified in the Charter. This information 
    includes all information relating to a recommended nominee that is required to be 
    disclosed in solicitations or proxy statements for the election of Board members, as 
    well as information sufficient to evaluate the factors to be considered by the 
    Committee, including character and integrity, business and professional experience, 

-2-

  SSL-DOCS2 70134233v1

and whether the person has the ability to apply sound and independent business judgment and would act in the interests of the Fund and its shareholders. Nomination submissions are required to be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the Committee.

Item 10. Controls and Procedures.

(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the Registrant's most recently ended fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

Item 11. Exhibits.

(a)(1)    not applicable 
(a)(2)    Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) 
under the Investment Company Act of 1940. 
(a)(3)    Not applicable. 

(b)      Certification of principal executive and principal financial officers as required by Rule 30a- 2(b) under the Investment Company Act of 1940.
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

DREYFUS FUND INCORPORATED

By:    /s/ Stephen E. Canter 
    Stephen E. Canter 
    President 
 
Date:    August 26, 2004 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By:    /s/ Stephen E. Canter 
Stephen E. Canter
    Chief Executive Officer 
 
Date:    August 26, 2004 
 
By:    /s/ James Windels 
James Windels
    Chief Financial Officer 
 
Date:    August 26, 2004 

EXHIBIT INDEX

(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT)

(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)