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)