DREYFUS APPRECIATION FUND INC, 497, 1997-05-01

DREYFUS APPRECIATION FUND INC
497, 1997-05-01

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DREYFUS APPRECIATION FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1997

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Appreciation Fund, Inc. (the "Fund"), dated May 1, 1997, as it may
be revised from time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call the following numbers:

Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452

The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
adviser. Fayez Sarofim & Co. ("Sarofim") serves as the Fund's
sub-investment adviser. Sarofim provides day-to-day management of the
Fund's portfolio, subject to the supervision of Dreyfus. Dreyfus and
Sarofim are referred to collectively as the "Advisers."

Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.

TABLE OF CONTENTS
Page

Investment Objectives and Management Policies B-2
Management of the Fund B-7
Investment Advisory Agreements B-11
Purchase of Shares B-13
Shareholder Services Plan B-14
Redemption of Shares B-14
Shareholder Services B-16
Determination of Net Asset Value B-19
Dividends, Distributions and Taxes B-20
Portfolio Transactions B-21
Performance Information B-22
Information About the Fund B-23
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-23
Financial Statements B-25
Report of Independent Auditors B-35

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the
Fund" and "Appendix."

Portfolio Securities

Repurchase Agreements. The Fund's custodian or subcustodian will have
custody of, and will hold in a segregated account, securities acquired by
the Fund under a repurchase agreement. Repurchase agreements are considered
by the staff of the Securities and Exchange Commission to be loans by the
Fund. In an attempt to reduce the risk of incurring a loss on a repurchase
agreement, the Fund will enter into repurchase agreements only with domestic
banks with total assets in excess of $1 billion, or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price.

Commercial Paper and Other Short-Term Corporate Obligations. These
instruments include variable amount master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily changes in the amounts
borrowed. Because these obligations are direct lending arrangements between
the lender and borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary
market for these obligations, although they are redeemable at face value,
plus accrued interest, at any time. Accordingly, where these obligations
are not secured by letters of credit or other credit support arrangements,
the Fund's right to redeem is dependent on the ability of the borrower to
pay principal and interest on demand. Such obligations frequently are not
rated by credit rating agencies, and the Fund may invest in them only if at
the time of an investment the borrower meets the criteria set forth in the
Fund's Prospectus for other commercial paper issuers.

Illiquid Securities. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not readily
marketable, the Fund will endeavor to obtain the right to registration at
the expense of the issuer. Generally, there will a lapse of time between
the Fund's decision to sell any such security and the registration of the
security permitting sale. During any such period, the price of the
securities will be subject to market fluctuations. However, where a
substantial market of qualified institutional buyers develops for certain of
these securities purchased by the Fund pursuant to Rule 144A under the
Securities Act of 1933, as amended, the Fund intends to treat such
securities as liquid securities in accordance with procedures approved by
the Fund's Board. Because it is not possible to predict with assurance how
the market for restricted securities pursuant to Rule 144A will develop, the
Fund's Board has directed the Advisers to monitor carefully the Fund's
investments in such securities with particular regard to trading activity,
availability of reliable price information and other relevant information.
To the extent that, for a period of time, qualified institutional buyers
cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level of
illiquidity in the Fund's investments during such period.

Management Policies

The Fund may engage in the following investment practices in
furtherance of its objectives.

Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received for securities loaned.

The Securities and Exchange Commission currently requires that the
following conditions be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be
able to terminate the loan at any time; (4) the Fund must receive reasonable
interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection
with the loan; and (6) while voting rights on the loaned securities may pass
to the borrower, the Fund's Board must terminate the loan and regain the
right to vote the securities if a material event adversely affecting the
investment occurs.

Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.

Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and
the portfolio as a whole. Derivatives permit the Fund to increase or
decrease the level of risk, or change the character of the risk, to which
its portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.

When required by the Securities and Exchange Commission, the Fund will
set aside permissible liquid assets in a segregated account to cover its
obligations relating to its transactions in Derivatives. To maintain this
required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
Derivative position at a reasonable price. Derivatives may be purchased on
established exchanges or through privately negotiated transactions referred
to as over-the-counter Derivatives. Exchange-traded Derivatives generally
are guaranteed by the clearing agency which is the issuer or counterparty to
such Derivatives. This guarantee usually is supported by a daily payment
system (i.e., variation margin requirements) operated by the clearing agency
in order to reduce overall credit risk. As a result, unless the clearing
agency defaults, there is relatively little counterparty credit risk
associated with Derivatives purchased on an exchange. By contrast, no
clearing agency guarantees over-the-counter Derivatives. Therefore, each
party to an over-the-counter Derivative bears the risk that the counterparty
will default. Accordingly, the Advisers will consider the creditworthiness
of counterparties to over-the-counter Derivatives in the same manner as it
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested in
bidding for it.

Options--In General. The Fund may write (i.e., sell) call options with
respect to specific securities. A call option gives the purchaser of the
option the right to buy, and obligates the writer to sell, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date.

A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. The principal reason
for writing covered call options is to realize, through the receipt of
premiums, a greater return than would be realized on the underlying
securities alone. The Fund receives a premium from writing covered call
options which it retains whether or not the option is exercised.

There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen events,
at times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of order or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, the Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.

Successful use by the Fund of options will be subject to the Advisers'
ability to predict correctly movements in the prices of individual stocks or
the stock market generally. To the extent the Advisers' predictions are
incorrect, the Fund may incur losses.

Investment Restrictions

The Fund has adopted investment restrictions numbered 1 through 10 as
fundamental policies, which cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Fund's outstanding voting shares.
Investment restrictions numbered 11 through 17 are not fundamental policies
and may be changed by vote of a majority of the Fund's Board members at any
time. The Fund may not:

1. Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of the Fund's total assets may be
invested, and securities issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities may be purchased, without regard to any such
limitation.

2. Hold more than 10% of the outstanding voting securities of any
single issuer. This Investment Restriction applies only with respect to
75% of the Fund's total assets.

3. Concentrate its investments in any particular industry or
industries, except that the Fund may invest up to 25% of the value of its
total assets in a single industry, provided that, when the Fund has
adopted a defensive posture, there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities,
time deposits and certificates of deposit (including those issued by foreign
branches of domestic banks), and bankers' acceptances.

4. Invest in commodities, except that the Fund may purchase and sell
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.

5. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Fund may purchase and
sell securities that are secured by real estate or issued by companies that
invest or deal in real estate.

6. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33 1/3 of the value of the
Fund's total assets). For purposes of this investment restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.

7. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Fund
may lend its portfolio securities in an amount not to exceed 33 1/3% of
the value of its total assets. Any loans of portfolio securities will
be made according to guidelines established by the Securities and Exchange
Commission and the Fund's Board.

8. Act as an underwriter of securities of other issuers, except
to the extent the Fund may be deemed an underwriter under the Securities
Act of 1933, as amended, by virtue of disposing of portfolio securities.

9. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent the activities permitted in
Investment Restriction Nos. 5, 6 and 13 may be deemed to give rise to a
senior security.

10. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indices, and options on
futures contracts or indices.

11. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessor) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.

12. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities
it owns in its portfolio as a shareholder in accordance with its views.

13. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with writing covered put and call
options and the purchase of securities on a when-issued or forward
commitment basis and collateral and initial or variation margin arrangements
with respect to options, forward contracts, futures contracts, including
those relating to indices, and options on futures contracts or indices.

14. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and Statement of Additional
Information.

15. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if,
in the aggregate, more than 15% of the value of the Fund's net assets would
be so invested.

16. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.

17. Purchase or retain the securities of any issuer if the officers or
Board members of the Fund or the Advisers who own beneficially more than 1/2
of 1% of the securities of such issuer together own beneficially more than
5% of the securities of such issuers.

As a fundamental policy, the Fund may invest, notwithstanding any other
investment restriction (whether or not fundamental), all of the Fund's
assets in the securities of a single open-end management investment company
with substantially the same investment objectives, fundamental policies and
restrictions as the Fund.

If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.

The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interest of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.

MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below.

Board Members of the Fund

CLIFFORD L. ALEXANDER, JR., Board Member. President of Alexander &
Associates, Inc., a management consulting firm. From 1977 to 1981, Mr.
Alexander served as Secretary of the Army and Chairman of the Board of
the Panama Canal Company, and from 1975 to 1977, he was a member of the
Washington, D.C. law firm of Verner, Liipfert, Bernhard, McPherson and
Alexander. He is a director of American Home Products Corporation,
Cognizant Corporation, a service provider of marketing information and
information technology, The Dun & Bradstreet Corporation, MCI
Communications Corporation, Mutual of America Life Insurance Company
and TLC Beatrice International Holdings, Inc. He is 63 years old and
his address is 400 C Street, N.E., Washington, D.C. 20002.

PEGGY C. DAVIS, Board Member. Shad Professor of Law, New York University
School of Law. Professor Davis has been a member of the New York
University law faculty since 1983. Prior to that time, she served for
three years as a judge in the courts of New York State; was engaged for
eight years in the practice of law, working in both corporate and non-
profit sectors; and served for two years as a criminal justice
administrator in the government of the City of New York. She writes
and teaches in the fields of evidence, constitutional theory, family
law, social sciences and the law, legal process and professional
methodology and training. She is 53 years old and her address is
c/o New York University School of Law, 249 Sullivan Street, New York,
New York 10011.

JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is also
Chairman of the Board of Directors of Noel Group, Inc., a venture
capital company; and a director of The Muscular Dystrophy Association,
HealthPlan Services Corporation, Carlyle Industries, Inc. (formerly
Belding Heminway Company, Inc.), a button packager and distributor,
Curtis Industries, Inc., a national distributor of security products,
chemicals, and automotive and other hardware, and Staffing Resources,
Inc. For more than five years prior to January 1995, he was President,
a director and, until August 1994, Chief Operating Officer of Dreyfus
and Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus and, until August 24,
1994, the Fund's distributor. From August 1994 until December 31,
1994, he was a director of Mellon Bank Corporation. He is 53 years old
and his address is 200 Park Avenue, New York, New York 10166.

ERNEST KAFKA, Board Member. A physician engaged in private practice
specializing in the psychoanalysis of adults and adolescents. Since
1981, he has served as an Instructor at the New York Psychoanalytic
Institute and, prior thereto, held other teaching positions. He is
Associate Clinical Professor of Psychiatry at Cornell Medical School.
For more than the past five years, Dr. Kafka has held numerous
administrative positions and has published many articles on subjects in
the field of psychoanalysis. He is 64 years old and his address is 23
East 92nd Street, New York, New York 10128.

SAUL B. KLAMAN, Board Member. Chairman and Chief Executive Officer of SBK
Associates, which provides research and consulting services to
financial institutions. Dr. Klaman was President of the National
Association of Mutual Savings Banks until November 1983, President of
the National Council of Savings Institutions until June 1985, Vice
Chairman of Golembe Associates and BEI Golembe, Inc. until 1989 and
Chairman Emeritus of BEI Golembe, Inc. until November 1992. He also
served as an Economist to the Board of Governors of the Federal Reserve
System and on several Presidential Commissions, and has held numerous
consulting and advisory positions in the fields of economics and
housing finance. He is 76 years old and his address is 431-B Dedham
Street, The Gables, Newton Center, Massachusetts 02159.

NATHAN LEVENTHAL, Board Member. President of Lincoln Center for the
Performing Arts, Inc. Mr. Leventhal was Deputy Mayor for Operations of
New York City from September 1979 until March 1984 and Commissioner of
the Department of Housing Preservation and Development of New York City
from February 1978 to September 1979. Mr. Leventhal was an associate
and then a member of the New York law firm of Poletti Freidin Prashker
Feldman and Gartner from 1974 to 1978. He was Commissioner of Rent and
Housing Maintenance for New York City from 1972 to 1973. Mr. Leventhal
serves as Chairman of Citizens Union, an organization which strives to
reform and modernize city and state government. He is 54 years old and
his address is 70 Lincoln Center Plaza, New York, New York 10023-6583.

For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the Fund
who are not "interested persons" of the Fund, as defined in the 1940 Act,
will be selected and nominated by the Board members who are not "interested
persons" of the Fund.

The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by the Fund, and by all other funds
in the Dreyfus Family of Funds for which such person is a Board member (the
number of which is set forth in parenthesis next to each Board member's
total compensation) for the fiscal year ended December 31, 1996, was as
follows:

Total Compensation
Aggregate From Fund and
Name of Board Compensation from Fund Complex Paid
Member Fund* to Board Member

Clifford L. Alexander, Jr. $5,000 $ 82,436 (17)

Peggy C. Davis $5,000 $ 73,084 (15)

Joseph S. DiMartino $6,250 $517,075 (94)

Ernest Kafka $5,000 $ 69,584(15)

Saul B. Klaman $5,000 $ 73,584 (15)

Nathan Leventhal $5,000 $ 71,084 (15)
________________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $1,768 for all Board members group.

Officers of the Fund

MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by Dreyfus. From December
1991 to July 1994, she was President and Chief Compliance Officer of
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc. She is 39 years old.

JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by Dreyfus. From February 1992 to
July 1994, he served as Counsel for The Boston Company Advisors, Inc.
He is 32 years old.

RICHARD W. INGRAM, Vice President and Assistant Treasurer. Senior Vice
President and Director of Client Services and Treasury Operations of
Funds Distributor, Inc. and an officer of other investment companies
advised or administered by Dreyfus. From March 1994 to November 1995,
he was Vice President and Division Manager for First Data Investor
Services Group. From 1989 to 1994, he was Vice President, Assistant
Treasurer and Tax Director - Mutual Funds of The Boston Company, Inc.
He is 40 years old.

JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor and
an officer of other investment companies advised or administered by
Dreyfus. From July 1988 to August 1994, he was employed by The Boston
Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 34 years old.

MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of Funds Distributor,
Inc. and an officer of other investment companies advised or
administered by Dreyfus. From September 1989 to July 1994, she was an
Assistant Vice President and Client Manager for The Boston Company,
Inc. She is 32 years old.

MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer. Director of
Strategic Client Initiatives for Funds Distributor, Inc. and an officer
of other investment companies advised or administered by Dreyfus. From
December 1989 through November 1996, he was employed by GE Investments
where he held various financial, business development and compliance
positions. He also served as Treasurer of the GE Funds and as Director
of the GE Investment Services. He is 35 years old.

ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor since September 1995 and an officer of
other investment companies advised or administered by Dreyfus. She is
26 years old.

DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor of
Treasury Services and Administration of Funds Distributor, Inc. and an
officer of other investment companies advised or administered by
Dreyfus. From April 1993 to January 1995, he was a Senior Fund
Accountant for Investors Bank & Trust Company. From December 1991 to
March 1993, he was employed as a Fund Accountant at The Boston Company,
Inc. He is 27 years old.

MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of
the Distributor and an officer of other investment companies advised or
administered by Dreyfus. Prior to August 1993, he was employed by an
Associate Examiner at the National Association of Securities Dealers,
Inc. He is 27 years old.

The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.

The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares outstanding on April 7, 1997.

The following shareholders owned of record 5% or more of the Fund's
shares outstanding as of April 7, 1997: Charles Schwab & Co., Inc.,
Reinvest Account, Attn: Mutual Funds Account, 101 Montgomery Street, San
Francisco, California 94104-4122 -- (13.93%); Smith Barney Inc.,
00109801250, 388 Greenwich Street, New York, New York 10001-2402 -- (5.06%).

INVESTMENT ADVISORY AGREEMENTS

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."

Investment Advisory Agreement. Dreyfus supervises investment
management of the Fund's portfolio pursuant to the Investment Advisory
Agreement (the "Advisory Agreement") dated August 24, 1994 between Dreyfus
and the Fund. The Advisory Agreement is subject to annual approval by (i)
the Fund's Board or (ii) vote of a majority (as defined in the 1940 Act) of
the Fund's outstanding voting securities, provided that in either event its
continuance also is approved by a majority of the Fund's Board members who
are not "interested persons" (as defined in the 1940 Act) of the Fund or
Dreyfus, by vote cast in person at a meeting called for the purpose of
voting on such approval. The Fund's Board, including a majority of the
Board members who are not "interested persons" of any party to the Advisory
Agreement, last approved the Advisory Agreement at a meeting held on
September 17, 1996. Shareholders approved the Advisory Agreement on August
3, 1994. The Advisory Agreement is terminable without penalty, on 60 days'
notice, by the Fund's Board or by vote of the holders of a majority of the
Fund's shares, or, on not less than 90 days' notice, by Dreyfus. The
Advisory Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).

The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; Elvira Oslapas, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt and Frank V. Cahouet,
directors.

Dreyfus maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. Dreyfus also may make such advertising and
promotional expenditures using its own resources, as it from time to time
deems appropriate.

Under the Advisory Agreement, the Fund has agreed to pay Dreyfus a
monthly fee at the annual rate set forth in the Fund's Prospectus. The
investment advisory fees paid by the Fund pursuant to the Advisory Agreement
for the fiscal years ended December 31, 1994, 1995 and 1996 were $779,597,
$1,039,869 and $1,936,123, respectively.

Sub-Investment Advisory Agreement. Sarofim provides investment
advisory assistance and day-to-day management of the Fund's portfolio
pursuant to the Sub-Investment Advisory Agreement (the "Sub-Advisory
Agreement") dated December 27, 1990 between Sarofim and the Fund. The
Sub-Advisory Agreement is subject to annual approval by (i) the Fund's Board
or (ii) vote of a majority (as defined in the 1940 Act) of the Fund's
outstanding voting securities, provided that in either event the continuance
also is approved by a majority of the Fund's Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund or Sarofim, by
vote cast in person at a meeting called for the purpose of voting on such
approval. The Fund's Board, including a majority of the Board members who
are not "interested persons" of any party to the Sub-Advisory Agreement,
last approved the Sub-Advisory Agreement at a meeting held on September 17,
1996. Shareholders approved the Sub-Advisory Agreement on December 27,
1990. The Sub-Advisory Agreement is terminable without penalty, on 60 days'
notice, by the Fund's Board or by vote of the holders of a majority of the
Fund's shares, or, on not less than 90 days' notice, by Sarofim. The
Sub-Advisory Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).

Under the Sub-Advisory Agreement, the Fund has agreed to pay Sarofim a
monthly fee at the annual rate set forth in the Fund's Prospectus. The sub-
advisory fees paid by the Fund pursuant to the Sub-Advisory Agreement for
the fiscal years ended December 31, 1994, 1995 and 1996 were $457,139,
$700,539 and $1,591,123, respectively.

The following persons are officers and/or directors of Sarofim: Fayez
S. Sarofim, Chairman of the Board, President and a director; Raye G. White,
Executive Vice President, Secretary, Treasurer and a director; Russell M.
Frankel, Russell B. Hawkins, William K. McGee, Jr., Charles E. Sheedy and
Ralph B. Thomas, Senior Vice Presidents; and Nancy V. Daniel and James A.
Reynolds, III, Vice Presidents.

Sarofim provides day-to-day management of the Fund's portfolio of
investments in accordance with the stated policies of the Fund, subject to
the supervision of Dreyfus and the approval of the Fund's Board. Dreyfus
and Sarofim provide the Fund with portfolio managers who are authorized by
the Board to execute purchases and sales of securities. The Fund's
portfolio managers are Russell B. Hawkins, Elaine Rees and Fayez S. Sarofim.
Dreyfus also maintains a research department with a professional staff of
portfolio managers and securities analysts who provide research services for
the Fund and other funds advised by Dreyfus. All purchases and sales are
reported for the Board's review at the meeting subsequent to such
transactions.

All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Advisers. The
expenses borne by the Fund include: taxes, interest, loan commitment fees,
interest and distributions paid on securities sold short, brokerage fees and
commissions, if any, fees of Board members who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
Dreyfus or Sarofim or their affiliates, Securities and Exchange Commission
fees, state Blue Sky qualification fees, advisory fees, charges of
custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, industry association fees, outside auditing and legal expenses,
costs of independent pricing services, costs of maintaining corporate
existence, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders, costs of
shareholders' reports, and any extraordinary expenses.

Dreyfus has agreed that if in any fiscal year the aggregate expenses of
the Fund, exclusive of interest, taxes, brokerage and (with the prior
written consent of the necessary state securities commissions) extraordinary
expenses, but including the advisory fees, exceed the expense limitation of
any state having jurisdiction over the Fund, the Fund may deduct from the
payment to be made to Dreyfus under the Advisory Agreement, or Dreyfus will
bear, such excess expense to the extent required by state law. Such
deduction or payment, if any, will be estimated daily, and reconciled and
effected or paid, as the case may be, on a monthly basis.

PURCHASE OF SHARES

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."

The Distributor. The Distributor serves as the Fund's distributor on a
best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies. In some states,
certain financial institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.

Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares--Dreyfus TeleTransfer Privilege."

Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.

SHAREHOLDER SERVICES PLAN

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services
Plan."

Shareholder Services Plan. The Fund has adopted a Shareholder Services
Plan (the "Plan"), pursuant to which the Fund reimburses (a) the Distributor
for payments to certain securities dealers, financial institutions (which
may include banks), or other financial industry professionals, such as
investment advisers, accountants and estate planning firms (collectively,
"Service Agents"), for servicing shareholder accounts ("Servicing") and (b)
Dreyfus, Dreyfus Service Corporation and any affiliate of either of them for
Servicing.

A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Board for its review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Fund's Board, and by the
Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Advisers and have no direct or indirect financial
interest in the operation of the Plan or in the related service agreements,
by vote cast in person at a meeting called for the purpose of considering
such amendments. The Plan and the related service agreements are subject to
annual approval by such vote of the Board members cast in person at a
meeting called for the purpose of voting on the Plan. The Plan was last so
approved at a meeting held on September 17, 1996. The Plan is terminable at
any time by vote of a majority of the Board members who are not "interested
persons" and have no direct or indirect financial interest in the operation
of the Plan or in any of the related service agreements entered into in
connection with the Plan.

For the fiscal year ended December 31, 1996, $1,282,635 was charged to
the Fund under the Plan.

REDEMPTION OF SHARES

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."

Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege on
the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds ($1,000 minimum)
will be transferred by Federal Reserve wire only to the commercial bank
account specified by the investor on the Account Application or Shareholder
Services Form, or to a correspondent bank if the investor's bank is not a
member of the Federal Reserve System. Fees ordinarily are imposed by such
bank and borne by the investor. Immediate notification by the correspondent
bank to the investor's bank is necessary to avoid a delay in crediting the
funds to the investor's bank account.

Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:

Transfer Agent's
Transmittal Code Answer Back Sign

144295 144295 TSSG PREP

Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.

To change the commercial bank or account designated to receive wire
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."

Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have also selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Shares--Dreyfus TeleTransfer Privilege."

Stock Certificates; Signatures. Any certificate representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.

Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests made by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission and is a fundamental policy of the Fund which may not be changed
without shareholder approval. In the case of requests for redemption in
excess of such amount, the Fund's Board reserves the right to make payments
in whole or in part in securities (which may include non-marketable
securities) or other assets of the Fund in case of an emergency or any time
a cash distribution would impair the liquidity of the Fund to the detriment
of the existing shareholders. In such event, the securities would be valued
in the same manner as the Fund's portfolio is valued. If the recipient sold
such securities, brokerage charges would be incurred.

Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange Commission by order may permit to
protect the Fund's shareholders.

SHAREHOLDER SERVICES

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."

Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:

A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.

B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.

C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of any other funds sold without a
sales load.

D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load, and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced sales loads, the difference will be deducted.

To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.

To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions (including
over The Dreyfus Touchr automated telephone system) from any person
representing himself or herself to be the investor, or a representative of
the investor's Service Agent, and reasonably believed by the Transfer Agent
to be genuine. Telephone exchanges may be subject to limitations as to the
amount involved or the number of telephone exchanges permitted. Shares
issued in certificate form are not eligible for telephone exchange.

To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For
Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
personal retirement plans, the shares exchanged must have a current value of
at least $100.

Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of certain other funds in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the basis
of relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if his account falls below the amount designated to be
exchanged under this Privilege. In this case, an investor's account will
fall to zero unless additional investments are made in excess of the
designated amount prior to the next Auto-Exchange transaction. Shares held
under IRA and other retirement plans are eligible for this Privilege.
Exchanges of IRA shares may be made between IRA accounts and from regular
accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only
among those accounts.

Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the Fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.

Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.

Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.

Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
other funds purchased pursuant to this privilege will be purchased on the
basis of relative net asset value per share as follows:

A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.

B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.

C. Dividends and distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares exceeds
the maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads the difference will be deducted.

D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.

Corporate Pension/Profit-Sharing and Personal Retirement Plans. The
Fund makes available to corporations a variety of prototype pension and
profit-sharing plans including a 401(k) Salary Reduction Plan. In addition,
the Fund makes available Keogh Plans, IRAs, including IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs") and IRA "Rollover Accounts,"
and 403(b)(7) Plans. Plan support services also are available.

Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adopting such plans.

The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate forms.

Shares may be purchased in connection with these plans only by direct
remittance to the entity which acts as custodian. Purchases for these plans
may not be made in advance of receipt of funds.

The minimum initial investment for corporate plans, salary reduction
plans, 403(b)(7) Plans and SEP-IRAs, with more than one participant, is
$2,500, with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans, with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a
non-working spousal IRA with a minimum investment of $250.

The investor should read the prototype retirement plans and the
appropriate form of custodial agreement for further details as to
eligibility, service fees and tax implications, and should consult a tax
adviser.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."

Valuation of Portfolio Securities. Portfolio securities, including
covered call options written, are valued at the last sale price on the
securities exchange or national securities market on which such securities
are primarily traded. Securities not listed on an exchange or national
securities market, or securities in 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. Market quotations for foreign
securities in foreign currencies are translated into U.S. dollars at the
prevailing rates of exchange. Any securities or other assets for which
recent market quotations are not readily available are valued at fair value
as determined in good faith by the Fund's Board. Expenses and fees,
including the advisory fees, are accrued daily and taken into account for
the purpose of determining the net asset value of Fund shares.

New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions
and Taxes."

Management believes that the Fund qualified as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"),
for the fiscal year ended December 31, 1996. The Fund intends to continue
to so qualify if such qualification is in the best interests of its
shareholders. Such qualification relieves the Fund of any liability for
Federal income taxes to the extent its net investment income and net
realized capital gains are distributed in accordance with applicable
provisions of the Code. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency.

Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of the shares below the
cost of the investment. Such a dividend or distribution would be a return
of investment in an economic sense, although taxable as stated in the
Prospectus. In addition, the Code provides that if a shareholder holds
shares of the Fund for six months or less and has received a capital gain
distribution with respect to such shares, any loss incurred on the sale of
such shares will be treated as long-term capital loss to the extent of the
capital gain distribution received.

Depending upon the composition of the Fund's income, all or a portion
of the dividends from net investment income may qualify for the dividends
received deduction allowable to qualifying U.S. corporate shareholders
("dividends received deduction"). In general, dividend income of the Fund
distributed to qualifying corporate shareholders will be eligible for the
dividends received deduction only to the extent that the Fund's income
consists of dividends paid by U.S. corporations. However, Section 246(c) of
the Code provides that if a qualifying corporate shareholder has disposed of
Fund shares not held for 46 days or more and has received a dividend from
net investment income with respect to such shares, the portion designated by
the Fund as qualifying for the dividends received deduction will not be
eligible for such shareholder's dividends received deduction. In addition,
the Code provides other limitations with respect to the ability of a
qualifying corporate shareholder to claim the dividends received deduction
in connection with holding Fund shares.

Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains or losses. However, a portion of any gain or
loss realized from the disposition of certain non-U.S. dollar denominated
securities (including debt instruments, certain forward contracts and option
transactions and certain preferred stock) may be treated as ordinary income
or loss under Section 988 of the Code. In addition, all or a portion of any
gain realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income under Section 1276 of the Code.
Finally, all or a portion of any gain realized from engaging in "conversion
transactions" may be treated as ordinary income under Section 1258 of the
Code. "Conversion transactions" are defined to include certain forward,
futures, option and straddle transactions, transactions marketed or sold to
produce capital gains, or transactions described in Treasury regulations to
be issued in the future.

Under Section 1256 of the Code, any gain or loss the Fund realizes from
certain forward contracts and options transactions, other than those subject
to Section 988 of the Code, will be treated as 60% long-term capital gain or
loss and 40% short-term capital gain or loss. Gain or loss will arise upon
exercise or lapse of such contracts and options as well as from closing
transactions. In addition, any such contracts or options remaining
unexercised at the end of the Fund's taxable year will be treated as sold
for their then fair market value, resulting in additional gain or loss to
the Fund characterized in the manner described above.

Offsetting positions held by the Fund involving certain foreign
currency forward contracts or options may be considered, for tax purposes,
to constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
"straddles" is governed by Sections 1092 and 1258 of the Code, which, in
certain circumstances, overrides or modifies the provisions of Sections 1256
and 988 of the Code. As such, all or a portion of any short- or long-term
capital gain from certain "straddle" and/or conversion transactions may be
recharacterized to ordinary income.

If the Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles" were
governed by Section 1256 of the Code. The Fund may make one or more
elections with respect to "mixed straddles." Depending on which election is
made, if any, the results to the Fund may differ. If no election is made,
to the extent the "straddle" and conversion transaction rules apply to
positions established by the Fund, losses realized by the Fund will be
deferred to the extent of unrealized gain in the offsetting position.
Moreover, as a result of the "straddle" and conversion transaction rules,
short-term capital loss on "straddle" positions may be recharacterized as
long-term capital loss, and long-term capital gain may be treated as
short-term capital gain or ordinary income.

Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligation could under special tax rules affect the amount, timing and
character of distributions to shareholders by causing the Fund to recognize
income prior to the receipt of cash payments. For example, the Fund could
be required to accrue as income each year a portion of the discount (or
deemed discount) at which such securities were issued and to distribute such
income in order to maintain its qualification as a regulated investment
company and to avoid Federal income and excise taxes. In such case, the Fund
may have to dispose of securities which it might otherwise have continued to
hold in order to generate cash to satisfy these distribution requirements.

PORTFOLIO TRANSACTIONS

Dreyfus assumes general supervision over placing orders on behalf of
the Fund for the purchase or sale of portfolio securities. Allocation of
brokerage transactions, including their frequency, is made in Dreyfus' best
judgment and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders at the most favorable
net price. Subject to this consideration, the brokers selected will include
those that supplement the Advisers' research facilities with statistical
data, investment information, economic facts and opinions. Information so
received is in addition to and not in lieu of services required to be
performed by the Advisers and the Advisers' fees are not reduced as a
consequence of the receipt of such supplemental information.

Such information may be useful to Dreyfus in serving both the Fund and
other funds which it advises and to Sarofim in serving both the Fund and the
other funds or accounts it advises, and, conversely, supplemental
information obtained by the placement of business of other clients may be
useful to the Advisers in carrying out their obligations to the Fund. Sales
of Fund shares by a broker may be taken into consideration, and brokers also
will be selected because of their ability to handle special executions such
as are involved in large block trades or broad distributions, provided the
primary consideration is met. Large block trades may, in certain cases,
result from two or more funds advised or administered by Dreyfus being
engaged simultaneously in the purchase or sale of the same security.
Certain of the Fund's transactions in securities of foreign issuers may not
benefit from the negotiated commission rates available to the Fund for
transactions in securities of domestic issuers. When transactions are
executed in the over-the-counter market, the Fund will deal with the primary
market makers unless a more favorable price or execution otherwise is
obtainable.

Portfolio turnover may vary from year to year as well as within a year.
The Fund's portfolio turnover rate for the fiscal years ended December 31,
1995 and 1996 was 4.51% and 4.84%, respectively. In periods in which
extraordinary market conditions prevail, the Advisers will not be deterred
from changing investment strategy as rapidly as needed, in which case higher
turnover rates can be anticipated which would result in greater brokerage
expenses. The overall reasonableness of brokerage commissions paid is
evaluated by Dreyfus based upon its knowledge of available information as to
the general level of commissions paid by other institutional investors for
comparable services.

In connection with its portfolio securities transactions for the fiscal
years ended December 31, 1994, 1995 and 1996, the Fund paid brokerage
commissions of $54,450, $163,070 and $359,335, respectively, none of which
was paid to the Distributor. The above figures for brokerage commissions
paid do not include gross spreads and concessions on principal transactions,
which, where determinable, amounted to $ 0, $51,480 and $55,250 in fiscal
1994, 1995 and 1996, respectively, none of which was paid to the
Distributor.

PERFORMANCE INFORMATION

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."

The Fund's average annual total return for the 1, 5 and 10 year periods
ended December 31, 1996 was 25.68%, 13.60% and 14.84%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.

The Fund's total return for the period January 18, 1984 to December 31,
1996 was 606.11%. Total return is calculated by subtracting the amount of the
Fund's net asset value per share at the beginning of a stated period from the
net asset value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning of the period.

From time to time, advertising materials for the Fund may refer to the
fact that the Fund currently looks for successful companies with established
brands that are expanding into the world marketplace. From time to time,
advertising materials for the Fund may also refer to the clients of Fayez
Sarofim & Co., such as large corporations, states, universities and other
institutions and organizations. From time to time, advertising materials
for the Fund also may refer to Morningstar ratings and related analyses
supporting such ratings.

INFORMATION ABOUT THE FUND

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."

Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights
and are freely transferable.

The Fund sends annual and semi-annual financial statements to all its
shareholders.

On March 1, 1993, the Fund changed its name from General Aggressive
Growth Fund, Inc. to Dreyfus Appreciation Fund, Inc.

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-
of-pocket expenses. For the fiscal year ended December 31, 1996, the Fund
paid the Transfer Agent $313,234.

Mellon Bank, N.A. (the "Custodian"), Dreyfus' parent, One Mellon Bank
Center, Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's
investments. Under a custody agreement with the Fund, the Custodian holds
the Fund's securities and keeps all necessary accounts and records. For its
custody services, the Custodian receives a monthly fee based on the market
value of the Fund's domestic assets held in custody and receives certain
securities transactions charges. For the period May 10, 1996 (effective
date of the custody agreement) through December 31, 1996, the Fund paid the
Custodian $36,986.

Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Fund's Prospectus.

Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.

<PAGE>
Dreyfus Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1996

Common Stocks--103.4% Shares Value
- -------------------------------------------------------------------------------- ---------- ------------
<S> <C> <C> <C>
Aerospace & Electronics--14.3% Boeing................................... 109,450 $ 11,642,744
Emerson Electric......................... 85,000 8,223,750
General Electric......................... 360,000 35,595,000
Hewlett-Packard.......................... 275,000 13,818,750
Intel.................................... 250,000 32,734,375
Motorola................................. 80,000 4,910,000
Rockwell International................... 225,000 13,696,875
--------------
120,621,494
--------------

Apparel--1.3% NIKE, Cl. B.............................. 120,000 7,170,000
Warnaco Group, Cl. A..................... 130,000 3,851,250
--------------
11,021,250
--------------

Auto Related--3.6% Chrysler................................. 400,000 13,200,000
Ford Motor............................... 549,905 17,528,222
--------------
30,728,222
--------------

Banking--8.5% Chase Manhattan.......................... 280,000 24,990,000
Citicorp................................. 250,000 25,750,000
HSBC Holdings, A.D.R. ................... 35,000 7,560,000
SunTrust Banks........................... 275,000 13,543,750
--------------
71,843,750
--------------

Capital Goods--2.3% AlliedSignal............................. 160,000 10,720,000
Caterpillar.............................. 110,000 8,277,500
--------------
18,997,500
--------------

Chemicals--3.5% Dow Chemical............................. 80,000 6,270,000
duPont (E.I.) de Nemours & Co ........... 200,000 18,875,000
Rohm & Haas.............................. 50,000 4,081,250
--------------
29,226,250
--------------

Energy--11.1% British Petroleum, A.D.S. .............. 130,000 18,378,750
Chevron.................................. 270,000 17,550,000
Exxon.................................... 220,000 21,560,000
Mobil.................................... 140,000 17,115,000
Pennzoil................................. 10,000 565,000
Royal Dutch Petroleum (New York Shares).. 110,000 18,782,500
--------------
93,951,250
--------------

Finance--6.1% American General......................... 300,000 12,262,500
Associates First Capital, Cl. A.......... 42,500 1,875,312
Berkshire Hathaway, Cl. A.............(a) 400 13,640,000
Federal National Mortgage Association.... 300,000 11,175,000
Marsh & McLennan......................... 125,000 13,000,000
--------------
51,952,812
--------------

<PAGE>
Dreyfus Appreciation Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) December 31, 1996

Common Stocks (continued) Shares Value
- -------------------------------------------------------------------------------- ---------- ------------
Food, Beverage & Tobacco--14.7% Anheuser-Busch .......................... 140,000 $ 5,600,000
Coca-Cola................................ 850,000 44,731,250
Kellogg.................................. 130,000 8,531,250
Nestle, A.D.R. ......................... 225,000 12,037,500
PepsiCo.................................. 575,000 16,818,750
Philip Morris ........................... 325,000 36,603,125
--------------
124,321,875
--------------

Health Care--15.3% Abbott Laboratories...................... 250,000 12,687,500
American Home Products................... 290,000 17,001,250
Amgen.................................(a) 120,000 6,525,000
Johnson & Johnson........................ 500,000 24,875,000
Merck & Co............................... 325,000 25,756,250
Pfizer................................... 285,000 23,619,375
Roche Holding, A.D.R. ................... 220,000 17,132,500
Schering-Plough.......................... 28,000 1,813,000
--------------
129,409,875
--------------

Leisure Time--3.6% Disney (Walt)............................ 120,000 8,355,000
Eastman Kodak............................ 150,000 12,037,500
McDonald's............................... 225,000 10,181,250
--------------
30,573,750
--------------

Media--.9% McGraw-Hill.............................. 110,000 5,073,750
News, A.D.R. ............................ 120,000 2,505,000
--------------
7,578,750
--------------

Multi-Industry--1.5% Minnesota Mining & Manufacturing......... 150,000 12,431,250
--------------

Office & Business Equipment--1.3% Compaq Computer.......................(a) 150,000 11,137,500
--------------

Personal Care--9.4% Christian Dior........................... 70,000 11,289,017
Estee Lauder, Cl. A...................... 150,000 7,631,250
Gillette................................. 320,000 24,880,000
International Flavors & Fragrances....... 135,000 6,075,000
Procter & Gamble......................... 235,000 25,262,500
Unilever, N.V. (New York Shares)......... 25,000 4,381,250
--------------
79,519,017
--------------

Retail--2.8% American Stores.......................... 80,000 3,270,000
May Department Stores.................... 50,000 2,337,500
Wal-Mart Stores.......................... 300,000 6,862,500
Walgreen................................. 285,000 11,400,000
--------------
23,870,000
--------------
<PAGE>
Dreyfus Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments (continued) December 31, 1996

Common Stocks (continued) Shares Value
- -------------------------------------------------------------------------------- ---------- ------------
Transportation--1.6% Norfolk Southern......................... 150,000 $ 13,125,000
--------------

Utilities--1.6% Pacific Telesis Group.................... 375,000 13,781,250
--------------

TOTAL COMMON STOCKS
(cost $614,389,132).................... $874,090,795
==============

Preferred Stocks--.6%
- --------------------------------------------------------------------------------
Media; News, A.D.R.
(cost $5,123,984)...................... 300,000 $ 5,287,500
==============

TOTAL INVESTMENTS (cost $619,513,116)........................................... 104.0% $ 879,378,295
======= ==============
LIABILITIES, LESS CASH AND RECEIVABLES.......................................... (4.0%) $ (33,881,673)
======= ==============
NET ASSETS...................................................................... 100.0% $ 845,496,622
======= ==============
<FN>
Notes to Statement of Investments:
- --------------------------------------------------------------------------------
(a) Non-income producing.

</TABLE>

See notes to financial statements.

<PAGE>
Dreyfus Appreciation Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1996

<TABLE>
<CAPTION>
Cost Value
____________ ____________
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $619,513,116 $879,378,295
Cash............................................. 2,568,393
Dividends and interest receivable................ 1,327,862
Receivable for subscriptions to Common Stock..... 441,639
Prepaid expenses................................. 93,797
------------
883,809,986
------------

LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 336,813
Due to Fayez Sarofim & Co........................ 189,048
Due to Distributor............................... 80,027
Payable for Common Stock redeemed................ 33,399,138
Bank Loan payable--Note 2......................... 4,000,000
Interest payable................................. 2,082
Accrued expenses................................. 306,256
------------
38,313,364
------------

NET ASSETS..................................................................... $845,496,622
============

REPRESENTED BY: Paid-in capital.................................. $585,850,040
Accumulated undistributed investment income--net.. 123,595
Accumulated net realized gain (loss) on investments (342,192)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4.......................... 259,865,179
------------

NET ASSETS..................................................................... $845,496,622
============

SHARES OUTSTANDING............................................................. 33,050,284
(100 million shares of $.01 par value Common Stock authorized)

NET ASSET VALUE, offering and redemption price per share....................... $25.58
======
</TABLE>

See notes to financial statements.

<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Operations Year Ended December 31, 1996

<TABLE>

INVESTMENT INCOME

<S> <C> <C> <C>
INCOME: Cash dividends (net of $199,229 foreign taxes
withheld at source)............................ $ 13,209,148
Interest......................................... 1,195,146
------------
Total Income................................ $ 14,404,294

EXPENSES: Investment advisory fee--Note 3(a)................ 1,936,123
Sub-investment advisory fee--Note 3(a)........... 1,591,123
Shareholder servicing costs--Note 3(b)............ 1,966,087
Registration fees................................ 115,674
Professional fees................................ 72,537
Custodian fees--Note 3(b)......................... 59,861
Prospectus and shareholders' reports............. 41,153
Directors' fees and expenses--Note 3(c).......... 33,017
Interest expense--Note 2......................... 2,082
Miscellaneous.................................... 8,437
------------
Total Expenses.............................. 5,826,094
------------
INVESTMENT INCOME--NET.......................................................... 8,578,200

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:

Net realized gain (loss) on investments ........ $ 3,060,053
Net unrealized appreciation (depreciation)
on investments................................. 136,758,813
------------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS........................ 139,818,866
------------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $148,397,066
============

</TABLE>

See notes to financial statements.

<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Statement of Changes in Net Assets

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Investment income--net....................................................... $ 8,578,200 $ 7,205,402
Net realized gain (loss) on investments..................................... 3,060,053 (3,334,873)
Net unrealized appreciation (depreciation) on investments................... 136,758,813 96,268,609
------------- -------------

Net Increase (Decrease) in Net Assets Resulting from Operations......... 148,397,066 100,139,138
------------- -------------

DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net....................................................... (8,454,676) (7,254,131)
Net realized gain on investments............................................ -- (450,655)
------------ -------------

Total Dividends......................................................... (8,454,676) (7,704,786)
------------- -------------

CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold............................................... 955,936,798 316,317,434
Dividends reinvested........................................................ 7,839,218 7,319,942
Cost of shares redeemed..................................................... (715,488,852) (192,263,401)
------------- -------------

Increase (Decrease) in Net Assets from Capital Stock Transactions....... 248,287,164 131,373,975
------------- -------------

Total Increase (Decrease) in Net Assets............................... 388,229,554 223,808,327

NET ASSETS:
Beginning of Period......................................................... 457,267,068 233,458,741
------------- -------------
End of Period............................................................... $ 845,496,622 $ 457,267,068
============= =============
Undistributed investment income--net........................................... $ 123,595 $ 71
------------- -------------

Shares Shares
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................................. 40,260,066 17,110,923
Shares issued for dividends reinvested...................................... 301,519 362,104
Shares redeemed............................................................. (29,767,862) (10,606,835)
------------- -------------

Net Increase (Decrease) in Shares Outstanding........................... 10,793,723 6,866,192
============= =============

</TABLE>

See notes to financial statements.

<PAGE>
Dreyfus Appreciation Fund, Inc.
- ------------------------------------------------------------------------------
Financial Highlights
Reference is made to page 3 of the fund's prospectus dated May 1, 1997.

See notes to financial statements.

<PAGE>
Dreyfus Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

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.

The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.

(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 discounts 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 $275,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1996. If not
applied, the carryover expires in fiscal 2003.

NOTE 2--Bank Line of Credit:
The Fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
Fund at rates which are related to the Federal Funds rate in effect at the time
of borrowings. Outstanding borrowings on December 31, 1996, amounted to $4
million.

<PAGE>
Dreyfus Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)

The average daily amount of borrowings outstanding during the period ended
December 31, 1996 was $33,880, with related weighted average annualized interest
rate of 6.15%. The maximum amount borrowed at any time during the period ended
December 31, 1996 was $4 million.

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:

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>

(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 period ended December 31, 1996, the Fund was charged
$1,282,635 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 $313,234 during the period ended December 31, 1996.

Effective May 10, 1996, the Fund entered into a custody agreement with Mellon
to provide custodial services for the Fund. During the period ended December 31,
1996, $36,986 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.

<PAGE>
Dreyfus Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 4--Securities Transactions:

The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended December 31, 1996,
amounted to $337,477,763 and $30,074,511, respectively.

At December 31, 1996, accumulated net unrealized appreciation on investments
was $259,865,179, consisting of $261,520,106 gross unrealized appreciation and
$1,654,927 gross unrealized depreciation.

At December 31, 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.
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors

Shareholders and Board of Directors
Dreyfus Appreciation Fund, Inc.

We have audited the accompanying statement of assets and liabilities of
Dreyfus Appreciation Fund, Inc., including the statement of investments, as of
December 31, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification by examination of securities
held by the custodian as of December 31, 1996 and confirmation of securities not
held by the custodian by correspondence with others. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Appreciation Fund, Inc. at December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

New York, New York
February 3, 1997