<PAGE>
Dreyfus
Appreciation
Fund, Inc.
Semi-Annual
Report
June 30, 1996
<PAGE>
Dreyfus Appreciation Fund, Inc.
Letter to Shareholders
Dear Shareholder:
We are pleased to provide you with this semi-annual report on the
activity of the Dreyfus Appreciation Fund, Inc. for the six-month period from
January 1, l996 through June 30, 1996. During that period, the Fund provided
a total return of 11.83%.* During the same period, the Standard & Poor's 500
Composite Stock Price Index provided a return of 10.09%.**
PORTFOLIO COMPOSITION
At the close of the period, the Fund had 4.0% of its net assets in
short-term Treasuries and the balance in equities. In the equity portion of
the Fund, industry concentrations were in consumer nondurables, health care
and financial services. As market conditions permit, we plan to reduce the
position in Treasuries and commit these assets to high quality equities.
ECONOMIC OUTLOOK
The resilience of the U.S. economy in the first half of 1996 exceeded
most projections. Our outlook was for a weaker first half this year than
second; a number of factors contributing to a rapidly growing money supply,
however, fueled a rebound in growth. This was led by the consumer sector, in
the early part of 1996, taking off from the weak performance of the final
quarter of 1995. We believe growth in the second quarter was near 4.0%.
However, we continue to expect average GDP for the full year to be at
2.0%-2.5%, as we believe demand will weaken considerably in the final
quarters of this year. In our view consumption, which has been driving the
economy, will falter in the absence of excess liquidity, which was supplied
by mortgage refinancings and tax refunds earlier in the year. The
historically high level of consumer debt, and the increase in debt service as
a percentage of income, should also contribute to a significant slowdown in
spending. Capital spending, which was a major contributor to GDP growth in
1994 and 1995, has already weakened considerably in 1996, and the export
sector, although stronger than anticipated, is not capable of supporting an
extension of the current growth spurt. Inflation reports remain constructive.
However, with the economy near full employment, any pickup in wage inflation
will most likely lead to more restrictive monetary policy.
INVESTMENT STRATEGY
With an emphasis on holdings in the leading, large capitalization
U.S. multinationals, we currently believe the Fund is well positioned, with
minimal risk, to perform well in an uncertain economic and market
environment. Companies with dominant global brands, such as Coca-Cola,
Gillette and McDonald's, companies with proprietary technologies such as
General Electric and Intel and those with leading pharmaceutical products
such as Merck & Co. and Pfizer are expected to achieve above-average earnings
from expanding sales in foreign markets although demand in the more mature
markets such as the U.S. may have slowed.
In mature economies, pricing flexibility is minimal across most
industry sectors. An important exception is leading pharmaceutical companies,
which are strategically overweighted in the portfolio. Such companies are
able to raise prices more consistently due to proprietary technologies,
innovative products and industry consolidation. Few companies can expect to
maintain or grow profit margins without increasing sales in international
markets. To compete effectively, corporations must already be well represented
in new markets, with widely tested brands, products, and technologies -- and
must be led by world-class management teams and backed by strong balance
sheets and excess cash flow. Leading
<PAGE>
U.S. multinationals are the innovators and global purveyors of many
products, services and technologies that have become defined as industry and
product standards in the mature economies. These companies understand how to
adapt their products to new cultures, and how to educate new consumers to
appreciate dependability, quality and value. We expect that these basic
standards can be refined, understood and accepted on a wide scale in the
decades ahead. Our portfolio strategy is founded on identifying multinational
companies that represent such standards through their products, technologies
and services.
INVESTMENT HIGHLIGHTS
Signs of stronger economic growth and the expectation of rising
inflation pressures caused uncertainty and volatility in equity markets
during the first half of 1996. Rapid rotation among industry groups also
reflected investors' confusion as to whether the economy would overheat, or a
stable period of moderate growth would extend the current economic cycle in
an environment of low inflation. Any evidence of weaker earnings, or margin
pressure, strongly undermined the performance of individual issues. Therefore,
in spite of the Standard & Poor's 500 Composite Stock Price Index's positive
return, it was a difficult period in which to outperform the market. The
retail sector led the Index in the first half, rebounding off substantial
underperformance in 1995 and reflecting the pickup in consumer spending. In
our view, the outlook for the retail group as a whole is uncertain, and the
sector remains strategically underweighted in the portfolio. Consumer
nondurables was the fourth strongest industry group in the S&P 500 Index, and
the Fund's concentration in this area had the most positive impact on
performance. Correct issue selection, and the strategic overweighting of
certain issues, also supported the Fund's return in excess of the Index.
Shares of Coca-Cola, PepsiCo, Philip Morris Cos., Gillette and NIKE, Cl.B led
the consumer nondurable group. Performance in excess of the Index was also
helped by the appreciation of General Electric, Citicorp, Intel, American
Home Products, Johnson & Johnson, Chase Manhattan and Pfizer. Chemical shares
had the most negative impact on results during the period.
We appreciate your investment in the Dreyfus Appreciation Fund and we
will continue to seek rewarding returns on your behalf.
Sincerely,
Fayez Sarofim
Portfolio Manager
July 17, 1996
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC. Reflects the reinvestment of
income dividends and where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of stock market performance.
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Investments June 30, 1996(Unaudited)
<TABLE>
<CAPTION>
Common Stocks--95.8% Shares Value
- --------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
Aerospace & Electronics--9.3% Emerson Electric................................ 65,000 $ 5,874,375
General Electric................................ 280,000 24,220,000
Intel........................................... 200,000 14,687,500
Motorola........................................ 80,000 5,030,000
Rockwell International.......................... 110,000 6,297,500
------------
56,109,375
------------
Apparel--1.6% NIKE, Cl. B 60,000 6,165,000
Warnaco Group, Cl. A 130,000 3,347,500
------------
9,512,500
------------
Auto Related--2.8% Chrysler........................................ 80,000 4,960,000
Ford Motor...................................... 369,905 11,975,674
------------
16,935,674
------------
Banking--8.0% Chase Manhattan................................. 235,000 16,596,875
Citicorp........................................ 215,000 17,764,375
HSBC Holdings, A.D.R. .......................... 35,000 5,267,500
SunTrust Banks.................................. 240,000 8,880,000
------------
48,508,750
------------
Capital Goods--1.4% AlliedSignal.................................... 150,000 8,568,750
------------
Chemicals--4.0% Dow Chemical.................................... 100,000 7,600,000
duPont (E.I.) de Nemours & Co................... 150,000 11,868,750
Rohm & Haas..................................... 75,000 4,706,250
------------
24,175,000
------------
Energy--8.6% Chevron......................................... 190,000 11,210,000
Exxon........................................... 160,000 13,900,000
Mobil........................................... 100,000 11,212,500
Pennzoil........................................ 10,000 462,500
Royal Dutch Petroleum (New York Shares)......... 100,000 15,375,000
------------
52,160,000
------------
Finance--5.4% American General................................ 270,000 9,821,250
Associates First Capital, Cl. A................. 42,500 1,599,063
Berkshire Hathaway, Cl. A....................(a) 400 12,280,000
Federal National Mortgage Association........... 270,000 9,045,000
------------
32,745,313
------------
Food, Beverage & Tobacco--17.0% Anheuser-Busch.................................. 70,000 5,250,000
Coca-Cola....................................... 650,000 31,768,750
Earthgrains..................................... 2,800 91,700
Kellogg......................................... 130,000 9,522,500
</TABLE>
<PAGE>
Dreyfus Appreciation Fund, Inc.
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Statement of Investments (continued) June 30, 1996(Unaudited)
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- --------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
Food, Beverage &
Tobacco (continued) Nestle, A.D.R. ................................. 180,000 $ 10,260,000
PepsiCo......................................... 550,000 19,456,250
Philip Morris................................... 240,000 24,960,000
Sara Lee........................................ 50,000 1,618,750
------------
102,927,950
------------
Forest & Paper Products--.7% International Paper............................. 120,000 4,425,000
------------
Health Care--16.3% Abbott Laboratories............................. 250,000 10,875,000
American Home Products.......................... 220,000 13,227,500
Amgen........................................(a) 120,000 6,480,000
Johnson & Johnson............................... 380,000 18,810,000
Merck & Co...................................... 315,000 20,356,875
Pfizer.......................................... 210,000 14,988,750
Roche Holding, A.D.R. .......................... 160,000 12,220,000
Schering-Plough................................. 28,000 1,757,000
------------
98,715,125
------------
Leisure Time--4.1% Disney (Walt) 120,000 7,545,000
Eastman Kodak 110,000 8,552,500
McDonald's 180,000 8,415,000
------------
24,512,500
------------
Media--1.7% McGraw-Hill..................................... 100,000 4,575,000
News, A.D.R. ................................... 120,000 2,820,000
Reader's Digest Association, Cl. A (non-voting). 70,000 2,975,000
------------
10,370,000
------------
Multi-Industry--1.5% Minnesota Mining & Manufacturing................ 135,000 9,315,000
------------
Office & Business Equipment--.7% Electronic Data Systems......................... 75,000 4,031,250
------------
Personal Care--8.4% Estee Lauder, Cl. A............................. 125,000 5,281,250
Gillette........................................ 275,000 17,153,125
International Flavors & Fragrances.............. 135,000 6,429,375
Procter & Gamble................................ 200,000 18,125,000
Unilever, N.V. (New York Shares)................ 25,000 3,628,125
------------
50,616,875
------------
Retail--3.2% American Stores................................. 80,000 3,300,000
May Department Stores........................... 50,000 2,187,500
Wal-Mart Stores................................. 250,000 6,343,750
Walgreen........................................ 225,000 7,537,500
------------
19,368,750
------------
</TABLE>
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Investments (continued) June 30, 1996(Unaudited)
<TABLE>
<CAPTION>
Common Stocks (continued) Shares Value
- --------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
Transportation--1.1% Norfolk Southern 75,000 $ 6,356,250
------------
TOTAL COMMON STOCKS
(cost $403,076,945)........................... $579,354,062
------------
------------
Preferred Stocks--.7%
- ---------------------------------------------------------------------------------------
Media; News, A.D.R.
(cost $3,359,457)............................. 200,000 $ 4,025,000
------------
------------
Principal
Short-Term Investments--4.0% Amount
- --------------------------------------------------------------------------------------- ------------
U.S. Treasury Bills: 4.96%, 7/11/96.................................. $6,647,000 $ 6,637,229
4.97%, 7/25/96.................................. 754,000 751,444
4.96%, 8/1/96................................... 2,388,000 2,377,564
4.97%, 8/8/96................................... 1,610,000 1,601,370
4.99%, 8/15/96.................................. 109,000 108,308
5.04%, 8/22/96.................................. 3,211,000 3,187,046
5.03%, 9/12/96.................................. 1,980,000 1,959,250
5.10%, 9/19/96.................................. 7,953,000 7,861,302
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $24,487,263)............................ $ 24,483,513
------------
------------
TOTAL INVESTMENTS (cost $430,923,665).................................................. 100.5% $607,862,575
------ ------------
------ ------------
LIABILITIES, LESS CASH AND RECEIVABLES................................................. (.5%) $ (3,223,444)
------ ------------
------ ------------
NET ASSETS............................................................................. 100.0% $604,639,131
------ ------------
------ ------------
</TABLE>
Note to Statement of Investments;
- ------------------------------------------------------------------------------
(a) Non-income producing.
See independent accountants' review report and notes to financial statements.
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities June 30, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $430,923,665)--see statement.............................. $607,862,575
Dividends and interest receivable................................. 730,359
Receivable for subscriptions to Common Stock...................... 187,748
Prepaid expenses.................................................. 75,374
------------
608,856,056
LIABILITIES:
Due to The Dreyfus Corporation and affiliates..................... $ 228,254
Due to Fayez Sarofim &Co.......................................... 119,964
Due to Distributor................................................ 49,271
Due to Custodian.................................................. 394,699
Payable for investment securities purchased....................... 3,085,925
Payable for Common Stock redeemed................................. 121,613
Accrued expenses.................................................. 217,199 4,216,925
----------- ------------
NET ASSETS............................................................ $604,639,131
------------
------------
REPRESENTED BY:
Paid-in capital................................................... $425,599,347
Accumulated undistributed investment income--net.................. 3,950,283
Accumulated net realized (loss) on investments.................... (1,849,409)
Accumulated net unrealized appreciation on investments--Note 4.... 176,938,910
------------
NET ASSETS at value applicable to 26,313,888 shares outstanding
(100 million shares of $.01 par value Common Stock authorized).... $604,639,131
------------
NET ASSET VALUE, offering and redemption price per share
($604,639,131 / 26,313,888 shares)................................ $22.98
------
------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Operations six months ended June 30, 1996 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Cash dividends (net of $133,051 foreign taxes withheld at source)..... $ 5,754,474
Interest.............................................................. 566,558
-----------
Total Income.................................................... $ 6,321,032
Expenses:
Investment advisory fee--Note 3(a).................................... 829,016
Sub-investment advisory fee--Note 3(a)................................ 657,459
Shareholder servicing costs--Note 3(b)................................ 747,126
Registration fees..................................................... 43,720
Professional fees..................................................... 30,354
Custodian fees--Note 3(b)............................................. 28,112
Shareholders' reports................................................. 15,822
Directors' fees and expenses--Note 3(c)............................... 14,914
Miscellaneous......................................................... 4,297
-----------
Total Expenses.................................................. 2,370,820
-----------
INVESTMENT INCOME--NET.......................................... 3,950,212
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments--Note 4................................ $ 1,552,836
Net unrealized appreciation on investments.............................. 53,832,544
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 55,385,380
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $59,335,592
-----------
-----------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30, 1996
1995 (Unaudited)
------------ ----------------
<S> <C> <C>
OPERATIONS:
Investment income--net............................................... $ 7,205,402 $ 3,950,212
Net realized gain (loss) on investments.............................. (3,334,873) 1,552,836
Net unrealized appreciation on investments for the period............ 96,268,609 53,832,544
------------ ------------
Net Increase In Net Assets Resulting From Operations............... 100,139,138 59,335,592
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net............................................... (7,254,131) --
Net realized gain on investments..................................... (450,655) --
------------ ------------
Total Dividends.................................................... (7,704,786) --
------------ ------------
CAPITALSTOCK TRANSACTIONS:
Net proceeds from shares sold........................................ 316,317,434 278,263,802
Dividends reinvested................................................. 7,319,942 --
Cost of shares redeemed.............................................. (192,263,401) (190,227,331)
------------ ------------
Increase In Net Assets From Capital Stock Transactions............. 131,373,975 88,036,471
------------ ------------
Total Increase In Net Assets................................... 223,808,327 147,372,063
NET ASSETS:
Beginning of period.................................................. 233,458,741 457,267,068
------------ ------------
End of period (including undistributed investment income--net:
$71 in 1995 and $3,950,283 in 1996)................................ $457,267,068 $604,639,131
------------ ------------
------------ ------------
Shares Shares
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.......................................................... 17,110,923 12,790,252
Shares issued for dividends reinvested............................... 362,104 --
Shares redeemed...................................................... (10,606,835) (8,732,925)
------------ ------------
Net Increase In Shares Outstanding................................. 6,866,192 4,057,327
------------ ------------
------------ ------------
</TABLE>
See independent accountants' review report and notes to financial statements.
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Financial Highlights
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended
---------------------------------------------------------- June 30, 1996
PER SHARE DATA: 1991 1992 1993 1994 1995 (Unaudited)
------ ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $10.95 $14.67 $15.15 $14.92 $15.17 $20.55
------ ------ ------ ------ ------ ------
Investment Operations:
Investment income--net (1).................. .21 .17 .24 .28 .33 .15
Net realized and unrealized gain (loss)
on investments (1)........................ 3.96 .52 (.14) .26 5.42 2.28
------ ------ ------ ------ ------ ------
Total from Investment
Operations............................ 4.17 .69 .10 .54 5.75 2.43
------ ------ ------ ------ ------ ------
Distributions:
Dividends from investment
income--net (1)........................... (.20) (.13) (.24) (.28) (.34) --
Dividends in excess of investment
income--net............................... -- -- (.03) -- -- --
Dividends from net realized gain on
investments (1)........................... (.25) (.08) (.03) (.01) (.03) --
Dividends in excess of net realized
gain on investments....................... -- -- (.03) -- -- --
------ ------ ------ ------ ------ ------
Total Distributions....................... (.45) (.21) (.33) (.29) (.37) --
------ ------ ------ ------ ------ ------
Net asset value, end of period.............. $14.67 $15.15 $14.92 $15.17 $20.55 $22.98
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN......................... 38.43% 4.62% .71% 3.62% 37.89% 11.83%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................................ 1.30% 1.14% 1.07% .96% .92% .44%(2)
Ratio of net investment income to
average net assets........................ 1.69% 1.46% 1.66% 1.86% 2.28% .73%(2)
Portfolio Turnover Rate..................... 12.89% 2.84% 9.65% 6.58% 4.51% 2.57%(2)
Average commission rate paid (3)............ -- -- -- -- -- $.0573
Net Assets, end of period
(000's Omitted)........................... $80,947 $207,627 $237,018 $233,459 $457,267 $604,639
<FN>
- ---------------------
(1) Per share data for 1991 has been restated to reflect a 100% stock
dividend at the close of business on March 9, 1992.
(2) Not annualized.
(3) For fiscal years beginning January 1, 1996, the Fund is required to
disclose its average commission rate paid per share for purchases and sales
of investment securities.
</TABLE>
See independent acccountants' review report and notes to financial statements.
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Appreciation Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company. The Fund's investment objective is to provide investors
with long-term capital growth consistent with the preservation of capital.
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment adviser.
Dreyfus is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). Fayez Sarofim
& Co. ("Sarofim") serves as the Fund's sub-investment adviser. Premier Mutual
Fund Services, Inc. (the "Distributor") acts as the distributor of the Fund's
shares, which are sold to the public without a sales load.
(a) Portfolio valuation: Investments in securities are valued at the last
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market.
Securities not listed on an exchange or the national securities market, or
securities for which there were no transactions, are valued at the average of
the most recent bid and asked prices. Bid price is used when no asked price
is available. 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 on investments, is recognized on
the accrual basis.
(c) Dividends to shareholders: Dividends are recorded on the ex-dividend
date. Dividends from investment income--net and dividends from net realized
capital gain are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that net realized
capital gain can be offset by capital loss carryovers, it is the policy of
the Fund not to distribute such gain.
(d) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $3,314,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1995. The
carryover does not include net realized securities losses from November 1,
1995 through December 31, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 1996. If not applied, the carryover expires in
fiscal 2003.
NOTE 2--Bank Line of Credit:
The Fund participates in a $100 million unsecured line of credit provided
by The Bank of New York, primarily for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require the
untimely disposition of securities. Interest is payable at the Federal Funds
rate
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
plus .50% on an annualized basis. For the period ended June 30, 1996, the
Fund did not borrow under the line of credit.
NOTE 3--Investment Advisory Fee, Sub-Investment Advisory Fee and Other
Transactions With Affiliates:
(a) Fees payable by the Fund pursuant to the provisions of an Investment
Advisory Agreement with Dreyfus and a Sub-Investment Advisory Agreement with
Sarofim (together "Agreements") are payable monthly, computed on the average
daily value of the Fund's net assets at the following annual rates:
<TABLE>
<CAPTION>
Average Net Assets Dreyfus Sarofim
------------------- ----------- -----------
<S> <C> <C>
0 up to $25 million.................. .44 of 1% .11 of 1%
$25 up to $75 million................ .37 of 1% .18 of 1%
$75 up to $200 million............... .33 of 1% .22 of 1%
$200 up to $300 million.............. .29 of 1% .26 of 1%
In excess of $300 million............ .275 of 1% .275 of 1%
</TABLE>
The Investment Advisory Agreement further provides that if in any full
year the aggregate expenses of the Fund exclusive of
taxes, interest, brokerage commissions and extraordinary expenses, exceed the
expense limitation of any state having jurisdiction over the Fund, the Fund
may deduct from the fee to be paid to Dreyfus, or Dreyfus will bear, such
excess expense to the extent required by state law. The most stringent state
expense limitation applicable to the Fund presently requires reimbursement of
expenses in any full year that such expenses (excluding distribution expenses
and certain expenses as described above) exceed 2-1/2% of the first $30
million, 2% of the next $70 million and 1-1/2% of the excess over $100 million
of the average value of the Fund's net assets in accordance with California
"blue sky" regulations. There was no expense reimbursement for the six months
ended June 30, 1996.
(b) The Fund adopted a Shareholder Services Plan, pursuant to which it
reimburses (a) the Distributor for payments made for servicing shareholder
accounts ("Servicing") and (b) Dreyfus, Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus, and any affiliate of either of them for
payments made for Servicing, at an aggregate annual rate of up to .20 of 1%
of the value of the Fund's average daily net assets. Each of the Distributor
and Dreyfus or its affiliates may pay one or more Service Agents (a
securities dealer, financial institution or other industry professional) a
fee in respect of the Fund's shares owned by shareholders with whom the
Service Agent has a Servicing relationship or for whom the Service Agent is
the dealer or holder of record. During the six months ended June 30, 1996,
the Fund was charged $540,536 pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
Dreyfus, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $132,184 during the six months ended June 30, 1996.
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Effective May 10, 1996, the Fund entered into a custody agreement with
Mellon to provide custodial services for the Fund. For the period from May
10, 1996 through June 30, 1996, $7,751 was paid to Mellon pursuant to the
custody agreement.
(c) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the six months ended June 30, 1996,
amounted to $109,225,650 and $13,385,707, respectively.
At June 30, 1996, accumulated net unrealized appreciation on investments
was $176,938,910, consisting of $178,090,152 gross unrealized appreciation
and $1,151,242 gross unrealized depreciation.
At June 30, 1996, 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).
<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Review Report of Ernst & Young LLP, Independent Accountants
Shareholders and Board of Directors
Dreyfus Appreciation Fund, Inc.
We have reviewed the accompanying statement of assets and
liabilities of Dreyfus Appreciation Fund, Inc., including the statement of
investments, as of June 30, 1996, and the related statements of operations
and changes in net assets and financial highlights for the six month period
ended June 30, 1996. These financial statements and financial highlights are
the responsibility of the Fund's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the interim financial statements and financial
highlights referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
December 31, 1995 and financial highlights for each of the five years in the
period ended December 31, 1995 and in our report dated February 6, 1996, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
ERNST & YOUNG LLP
New York, New York
July 26, 1996
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Dreyfus Appreciation Fund, Inc.
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Fayez Sarofim & Co.
Two Houston Center,
Suite 2907
Houston, TX 77010
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 141SA966
