<PAGE>
Dreyfus
Appreciation
Fund, Inc.
Annual Report
December 31, 1996
<PAGE>
Dreyfus Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
We are pleased to provide you with this annual report on the activity of the
Dreyfus Appreciation Fund, Inc. for the twelve-month period ended December 31,
1996. For the fiscal year, the Fund provided a total return of 25.68%.* During
the same period, the Standard & Poor's 500 Composite Stock Price Index returned
22.95%.**
PORTFOLIO COMPOSITION
At the close of the year, the Fund was fully invested in equities. Industry
concentrations were in consumer non-durables, technology, health care and
financial services.
ECONOMIC OUTLOOK
The U.S. economy has expanded over a period of 70 months in the current
economic cycle. We believe the expansion has become more balanced than was the
case in the first half of 1996, when GDP growth exceeded a sustainable,
noninflationary pattern. Overall, we expect the economy to remain relatively
healthy, with an average annual GDP of about 1.5%-2.0% in the first half of
1997, and a somewhat stronger rate of growth later in the year, as lower
interest rates contribute to a pickup in demand and inventories are rebuilt. We
believe the yield curve will continue to flatten, with short-term rates
declining slightly from current levels, and the rate on the 30-year bond
breaking below 6.0%. In our view, inflation as measured by the GDP price
deflator will increase at an annual rate of 2.2% in 1997. Export growth should
pick up from current levels as our trading partners' economies improve. The
consumer, who has been fueling growth, is reliquifying balance sheets from
historically high debt levels, and bank lending has become more selective. A
sharp credit contraction reflects this trend, which is weakening demand. In a
related development, demographic trends support a continued rise in the U.S.
savings rate. Involuntary inventory accumulation also suggests weaker production
and declining employment growth in the first half of 1997. Corporate profits may
continue to improve but with some deceleration. In our view, earnings growth
will become ever more selective.
INVESTMENT STRATEGY
In the mature phase of a protracted economic cycle, corporate profit growth
comes under more and more pressure. We believe investors will increasingly favor
industry sectors which are less vulnerable to a sharp falloff in demand, and
will seek those companies which can be expected to achieve above average
earnings growth from expanding global market share. Technological innovation and
new product development will also drive sales, both domestically and abroad. To
a lesser extent but still a factor, corporate restructuring and cost cutting
will continue to foster margin expansion. Our investment strategy has led to
structuring the portfolio to seek to outperform the S&P 500 Composite Stock
Price Index in an indefinite period of extended moderate growth among the more
mature economies, and to seek to benefit from exposure to high relative growth
among the newly industrialized and emerging economies in the decades ahead.
Companies with competitive positioning, through branded products and franchises
and proprietary technologies and innovative services, should command a market
premium. In our view, the highest quality companies which have, and can attract,
world class management teams with vision, and have excess cash flow and strong
balance sheets, can take advantage of the challenges and uncertainties which
these evolving dynamics present.
<PAGE>
INVESTMENT HIGHLIGHTS
The performance of U.S. equity markets surpassed even the most optimistic
forecasts in 1996. From a long-term and fundamental perspective, it is clear
that the aggregate total return of the S&P 500 of 69.09% for 1995 and 1996*** is
well in excess of the historical trend. However, we continue to expect high
average annual total returns for the near future. Our investment strategy, keyed
to high quality growth companies which are global industry leaders and
innovators, contributed most significantly to the Fund's absolute and relative
performance.
Investor sentiment has swung in favor of the large capitalization,
multinational issues, as investment time horizons have lengthened toward
retirement needs, and in an effort to capture the highest total returns.
Individual stock selection and strategic emphasis also affected performance
favorably in 1996. As corporate profits become more selective, and consistent
earnings growth is at a premium, we expect that equity markets will reflect this
selectivity, and investors will increasingly understand that they should look at
a market of stocks, rather than the stock market in general. We expect the
two-tier profile of the market will persist, and that lower quality, smaller
capitalization companies and the more illiquid issues will underperform the
higher quality, more visible companies. The consumer non-durables sector
contributed the most to the Fund's outperforming the Index and was led by shares
of Coca-Cola, Philip Morris, Gillette and Procter & Gamble. The technology
sector was the second best group in the Fund, led by shares of Intel and General
Electric. Financial services was the third best sector in the Fund, led by
shares of Citicorp, Chase Manhattan, SunTrust Banks and Federal National
Mortgage Association.
We appreciate your investment in the Dreyfus Appreciation Fund and we will
continue to seek rewarding returns on your behalf.
Sincerely,
Fayez Sarofim Signature Logo
Fayez Sarofim
Portfolio Manager
January 21, 1997
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
** SOURCE: LIPPER ANALYTICAL SERVICES, INC.--Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S.stock market performance.
*** SOURCE: LIPPER ANALYTICAL SERVICES, INC.--Assumes the monthly reinvestment
of all dividends.
<PAGE>
Dreyfus Appreciation Fund, Inc. December 31, 1996
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS APPRECIATION
FUND, INC. AND THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX
$70,611 Dreyfus Appreciation Fund
$69,153 Standard & Poor's 500 Composite Stock Price Index*
INSERT PLOT POINTS HERE
*Source: Lipper Analytical Services, Inc.
Average Annual Total Returns
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Year Ended Five Years Ended Ten Years Ended From Inception (1/18/84)
December 31, 1996 December 31, 1996 December 31, 1996 to December 31, 1996
----------------- ----------------- ----------------- ------------------------
<S> <C> <C> <C>
25.68% 13.60% 14.84% 16.29%
<FN>
- --------------------------------
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus Appreciation Fund,
Inc. on 1/18/84 (Inception Date) to a $10,000 investment made in the Standard &
Poor's 500 Composite Stock Price Index on that date. For comparative purposes,
the value of the Index on 1/31/84 is used as the beginning value on 1/18/84. All
dividends and capital gain distributions are reinvested.
The Fund's performance
shown in the line graph takes into account all applicable fees and expenses. The
Standard and Poor's 500 Composite Stock Price Index is a widely accepted,
unmanaged index of overall stock market performance, which does not take into
account charges, fees and other expenses. Further information relating to Fund
performance, including expense reimbursements, if applicable, is contained in
the Financial Highlights section of the Prospectus and elsewhere in this report.
</TABLE>
<PAGE>
Dreyfus Appreciation Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments December 31, 1996
<TABLE>
<CAPTION>
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
Contained below is per share operating performance data for a share of Common
Stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
PER SHARE DATA: 1996 1995 1994 1993 1992
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $20.55 $15.17 $14.92 $15.15 $14.67
------ ------ ------ ------ ------
Investment Operations:
Investment income--net.............................. .25 .33 .28 .24 .17
Net realized and unrealized gain (loss)
on investments.................................. 5.03 5.42 .26 (.14) .52
------ ------ ------ ------ ------
Total from Investment Operations................... 5.28 5.75 .54 .10 .69
------ ------ ------ ------ ------
Distributions:
Dividends from investment income--net............... (.25) (.34) (.28) (.24) (.13)
Dividends in excess of investment income--net....... -- -- -- (.03) --
Dividends from net realized gain on investments.... -- (.03) (.01) (.03) (.08)
Dividends in excess of net realized gain on investments -- -- -- (.03) --
------ ------ ------ ------ ------
Total Distributions.......................... (.25) (.37) (.29) (.33) (.21)
------ ------ ------ ------ ------
Net asset value, end of period..................... $25.58 $20.55 $15.17 $14.92 $15.15
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN............................... 25.68% 37.89% 3.62% .71% 4.62%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............ .91% .92% .96% 1.07% 1.14%
Ratio of net investment income
to average net assets........................... 1.34% 2.28% 1.86% 1.66% 1.46%
Portfolio Turnover Rate............................ 4.84% 4.51% 6.58% 9.65% 2.84%
Average commission rate paid*...................... $.0633 -- -- -- --
Net Assets, end of period (000's Omitted).......... $845,497 $457,267 $233,459 $237,018 $207,627
<FN>
- -------------------------------------------------------------------------------
*For fiscal years beginning January 1, 1996, the Fund is required to disclose
its average commission rate paid per share for purchases and sales of
investment securities.
</TABLE>
See 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:
<TABLE>
<CAPTION>
Average Net Assets Dreyfus Sarofim
------------------ ------- -------
<S> <C> <C>
0 up to $25 million................. .44 of 1% .11 of 1%
$25 up to $75 million............... .37 of 1% .18 of 1%
$75 up to $200 million.............. .33 of 1% .22 of 1%
$200 up to $300 million............. .29 of 1% .26 of 1%
In excess of $300 million........... .275 of 1% .275 of 1%
</TABLE>
(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
<PAGE>
Dreyfus Appreciation Fund, Inc.
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Important Tax Information (Unaudited)
In accordance with Federal tax law, the Fund designates 100% of the ordinary
dividends paid during the fiscal year ended December 31, 1996 as qualifying for
the corporate dividends received deduction.
<PAGE>
Dreyfus Appreciation Fund, Inc.
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Fayez Sarofim & Co.
Two Houston Center,
Suite 2907
Houston, TX 77010
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 141AR9612
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN DREYFUS APPRECIATION FUND, INC.
AND THE STANDARD & POOR'S 500 COMPOSITE STOCK
PRICE INDEX
EXHIBIT A:
STANDARD
& POOR'S 500 DREYFUS
PERIOD COMPOSITE STOCK APPRECIATION
PRICE INDEX * FUND
1/18/84 10,000 10,000
12/31/84 10,687 11,374
12/31/85 14,078 15,389
12/31/86 16,705 17,702
12/31/87 17,582 18,514
12/31/88 20,494 21,590
12/31/89 26,976 27,463
12/31/90 26,137 26,960
12/31/91 34,082 37,321
12/31/92 36,676 39,048
12/31/93 40,365 39,324
12/31/94 40,897 40,749
12/31/95 56,247 56,186
12/31/96 69,153 70,611
*Source: Lipper Analytical Services, Inc.
