YEAR 2000 ISSUES (UNAUDITED)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the fund' s other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The Dreyfus Corporation is working to avoid Year 2000-related problems in its
systems and to obtain assurances from other service providers that they are
taking similar steps. In addition, issuers of securities in which the fund
invests may be adversely affected by Year 2000-related problems. This could have
an impact on the value of the fund's investments and its share price.
DREYFUS APPRECIATION FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this annual report for the Dreyfus
Appreciation Fund, Inc. for the 12-month period ended December 31, 1998. Over
this period, the Fund produced a total return of 30.85%,* which compares with a
total return of 28.60% for the Standard & Poor's 500 Composite Stock Price Index
(S&P 500).**
Portfolio Composition
At the close of the period, the Fund had 1.5% of its net assets in short-term
Treasuries, and industry concentrations in consumer staples, health care and
financials. We are maintaining the Fund's fully invested posture, and investing
the short-term cash equivalent assets on a timely basis.
Economic Outlook
In spite of 1998's global financial turmoil, positive fundamentals in the
United States economy trumped the forces of recession and deflation from
overseas. We continue to expect moderate economic growth coupled with very low
inflation for the next several years. Profit growth at corporations will likely
be achieved primarily through volume growth, new product development and
productivity improvement, not price increases. Although the risk of financial
shocks has diminished, it has not disappeared, and we want to own companies of
financial strength that can survive and perhaps take advantage of periods of
financial stress. Our investment strategy in this environment is to stay
rigorously focused on high-quality, geographically diversified global
corporations, with dominant market share in their home markets and prospects for
growth in the developing economies.
We believe that liquidity trends remain favorable, as individual investors
continue to shift assets from shorter term instruments to equities. One of the
significant lessons of the third quarter correction was the generally steady
behavior of individual and mutual fund investors in the face of bleak and
alarming headlines. We suspect that liquidity is still substantial amongst
individual investors, and that corrections will tend to be viewed as
opportunities to commit to longer-term assets such as equities. As a result, we
intend to maintain a fully invested posture in the Dreyfus Appreciation Fund.
Investment Strategey
While we are happy to report these results, we'd also like to take the
opportunity to review our investment philosophy, which guides our selection
process and the resulting composition of the portfolio. Succinctly stated, our
philosophy is guided by one basic principle: earnings growth is the ultimate
driver of stock price appreciation over the long term. We believe that large,
globally dominant and diverse companies are best positioned to grow earnings in
a consistent and predictable manner over time. By taking a long-term outlook, we
assess a company's earnings growth prospects over a period of several years,
looking for businesses with sustainable competitive advantages in growing
industries that can perform in a variety of economic backdrops. Once we find a
company that meets these criteria, we will continue to hold it as long as the
industry outlook is strong and company fundamentals are sound. As a result of
our in-depth analysis and long-term outlook, changes to the portfolio within a
year tend to be few and the turnover low. Our goal is to create a
well-diversified portfolio of companies that exhibit sustainable earnings
growth, possess financial quality and an established growth record, and offer a
reasonable valuation.
Characteristics of companies in the portfolio include dominant industry
positions, the possession of strong brand names and/or proprietary technologies,
and the ability to take strong domestic franchises and enter new geographic
markets. We believe all of these characteristics contribute to the production of
consistent and profitable earnings growth. The opportunity to expand
geographically provides an excellent source of future earnings growth as
companies roll out their products and develop their businesses in new markets.
While predominantly U.S.-based, these companies have global businesses, but the
majority of profits are derived from the U.S., Japan and western Europe;
generally, exposure to emerging markets is small, but provides opportunities for
future growth over the long term.
The implementation of the above-described equity strategy has led us to
concentrate the portfolio in the consumer staples, health care and financial
sectors. The consumer staples sector is primarily benefiting from geographic
expansion, as companies such as Coca-Cola, Gillette, Procter & Gamble and Philip
Morris Cos. introduce their branded, low-cost products to an emerging middle
class around the world. With aging populations, increasing use of prescription
drugs, and a plethora of new drug introductions, we believe the pharmaceutical
sector has excellent visibility for earnings growth over the next five to ten
years. Lastly, we expect the financial sector to produce solid earnings growth
going forward as consolidation and globalization of the industry continue,
prompted by deregulation.
Investment Highlights
As already noted, the Fund not only achieved an outstanding total return of
30.85%, but also outperformed the S&P 500 in 1998. During the year, the Fund's
overweight position in the health care sector, specifically pharmaceutical
companies, had the most positive impact on the Fund's absolute and relative
performance, led by Pfizer and Merck & Co. The attractive fundamentals of the
pharmaceutical sector, combined with several successful new drug introductions
and a lack of meaningful profit exposure to emerging markets, all worked to make
the health care sector one of the top performing in the Index. While the
consumer staples and financial services sectors were positive contributors to
performance, our overweight positions in both of these sectors undermined the
Fund' s relative performance, as both underperformed the S&P 500. Many of our
global growth companies, such as Coca-Cola and Gillette, were adversely affected
by the currency devaluations and economic turmoil that arose in southeast Asia
and Russia in the third quarter. While these dislocations have hurt their
earnings outlook over the near term, we believe these companies are using the
crisis to strengthen their businesses and better position themselves to
ultimately gain market share when economic growth resumes. The financial sector
was also disrupted by the global financial turmoil; however, we expect a
resumption of normal earnings growth in 1999. We have avoided a large presence
in the technology sector due to the rapidly changing nature of technological
products and the associated difficulty of identifying predictable earnings
growth. Because technology was the top performing sector in the S&P 500 in 1998,
the Fund's relative performance was penalized by our underweight position.
However, the technology holdings we do own, such as Microsoft, Intel and Cisco
Systems--all possessing industry leader status, strong brand names, proven track
records and sustained periods of profitability--were all positive contributors
to the Fund's performance.
We thank you for your investment in the Dreyfus Appreciation Fund, and we will
continue to seek rewarding returns on your behalf.
Sincerely,
[Fayez Sarofim signature]
Fayez Sarofim
Portfolio Manager
January 21, 1999
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.
DREYFUS APPRECIATION FUND, INC. DECEMBER 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS APPRECIATION
FUND, INC. AND THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX
Dollars
$118,588
Standard & Poor's 500 Composite Stock Price Index*
$118,129
Dreyfus Appreciation Fund, Inc.
*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, 1998 December 31, 1998 December 31, 1998 to December 31, 1998
__________________ __________________ __________________ _________________________
<S> <C> <C> <C>
30.85% 24.61% 18.53% 17.96%
</TABLE>
- ------------------------
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>
<CAPTION>
DREYFUS APPRECIATION FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Common Stocks--98.6% Shares Value
- ------------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Apparel--.8% Christian Dior . . . . . . . . . . . . . . . 150,000 $ 16,594,465
Polo Ralph Lauren . . . . . . . . . . . .(a) 650,000 12,471,875
Warnaco Group, Cl. A . . . . . . . . . . . . 180,000 4,545,000
_______________
33,611,340
_______________
Automotive--4.8% Dailmer-Chrysler . . . . . . . . . . . . . . 768,200 73,795,213
Ford Motor . . . . . . . . . . . . . . . . . 1,524,905 89,492,862
General Motors . . . . . . . . . . . . . . . 500,000 35,781,250
_______________
199,069,325
_______________
Banking--7.4% BankAmerica . . . . . . . . . . . . . . . . 1,011,466 60,814,393
Chase Manhattan . . . . . . . . . . . . . . 1,300,000 88,481,250
Citigroup . . . . . . . . . . . . . . . . . 1,627,500 80,561,250
SunTrust Banks . . . . . . . . . . . . . . . 1,000,000 76,500,000
_______________
306,356,893
_______________
Basic Materials--1.2% Dow Chemical . . . . . . . . . . . . . . . . 80,000 7,275,000
duPont (E.I.) de Nemours & Co. . . . . . . . 680,000 36,082,500
Rohm & Haas . . . . . . . . . . . . . . . . 150,000 4,518,750
_______________
47,876,250
_______________
Capital Goods--7.4% AlliedSignal . . . . . . . . . . . . . . . . 1,000,000 44,312,500
Boeing . . . . . . . . . . . . . . . . . . . 553,900 18,070,988
Caterpillar . . . . . . . . . . . . . . . . 430,000 19,780,000
Emerson Electric . . . . . . . . . . . . . . 575,000 35,973,438
General Electric . . . . . . . . . . . . . . 1,250,000 127,578,125
Minnesota Mining & Manufacturing . . . . . . 250,000 17,781,250
Rockwell International . . . . . . . . . . . 950,000 46,134,375
_______________
309,630,676
_______________
Communications Services--6.4% Bell Atlantic . . . . . . . . . . . . . . . 1,075,000 56,975,000
BellSouth . . . . . . . . . . . . . . . . . 1,750,000 87,281,250
SBC Communications . . . . . . . . . . . . . 2,250,192 120,666,546
_______________
264,922,796
_______________
Computers--7.4% Cisco Systems . . . . . . . . . . . . . .(a) 850,750 78,960,234
Compaq Computer . . . . . . . . . . . . . . 1,250,000 52,421,875
Hewlett-Packard . . . . . . . . . . . . . . 900,000 61,481,250
Microsoft . . . . . . . . . . . . . . . .(a) 835,000 115,804,063
_______________
308,667,422
_______________
Consumer Services--.5% Fox Entertainment Group . . . . . . . . . . 907,700 22,862,694
_______________
Electronics--4.3% Intel . . . . . . . . . . . . . . . . . . . 1,500,000 177,843,745
_______________
DREYFUS APPRECIATION FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- ---------------- ----------------
Energy--6.5% British Petroleum, A.D.S. . . . . . . . . . 790,000 $ 75,050,000
Chevron . . . . . . . . . . . . . . . . . . 450,000 37,321,875
Exxon . . . . . . . . . . . . . . . . . . . 1,050,000 76,781,250
Mobil . . . . . . . . . . . . . . . . . . . 660,000 57,502,500
Royal Dutch Petroleum, A.D.R. . . . . . . . 540,000 25,852,500
_______________
272,508,125
_______________
Finance--6.2% American General . . . . . . . . . . . . . . 316,000 24,648,000
Associates First Capital, Cl. A . . . . . . 1,601,788 67,875,767
Fannie Mae . . . . . . . . . . . . . . . . . 1,500,000 111,000,000
Hertz, Cl. A . . . . . . . . . . . . . . . . 350,000 15,968,750
Merrill Lynch & Co. . . . . . . . . . . . . 575,000 38,381,250
_______________
257,873,767
_______________
Food & Drugs--2.1% Walgreen . . . . . . . . . . . . . . . . . . 1,475,000 86,379,688
_______________
Food, Beverage & Tobacco--9.8% Anheuser-Busch . . . . . . . . . . . . . . . 140,000 9,187,500
Coca-Cola . . . . . . . . . . . . . . . . . 2,100,000 140,437,500
Kellogg . . . . . . . . . . . . . . . . . . 250,000 8,531,250
Nestle, A.D.R. . . . . . . . . . . . . . . . 350,000 34,387,500
PepsiCo . . . . . . . . . . . . . . . . . . 1,350,000 55,265,625
Philip Morris Cos. . . . . . . . . . . . . . 2,800,000 149,800,000
Unilever . . . . . . . . . . . . . . . . . . 100,000 8,293,750
_______________
405,903,125
_______________
Health Care--19.4% Abbott Laboratories . . . . . . . . . . . . 1,450,000 71,050,000
American Home Products . . . . . . . . . . . 1,800,000 101,362,500
Bristol-Myers Squibb . . . . . . . . . . . . 800,000 107,050,000
Johnson & Johnson . . . . . . . . . . . . . 1,325,000 111,134,375
Merck & Co. . . . . . . . . . . . . . . . . 925,000 136,610,938
Pfizer . . . . . . . . . . . . . . . . . . . 1,850,000 232,059,375
Roche Holdings, A.D.R. . . . . . . . . . . . 325,000 39,650,000
Schering-Plough . . . . . . . . . . . . . . 160,000 8,840,000
_______________
807,757,188
_______________
Household Products--6.1% Colgate-Palmolive . . . . . . . . . . . . . 560,000 52,010,000
Estee Lauder Cos. . . . . . . . . . . . . . 260,000 22,230,000
Gillette . . . . . . . . . . . . . . . . . . 1,850,000 89,378,125
Procter & Gamble . . . . . . . . . . . . . . 985,000 89,942,813
_______________
253,560,938
_______________
Insurance--3.8% Berkshire Hathaway, Cl. A . . . . . . . .(a) 1,468 102,725,000
Marsh & McLennan . . . . . . . . . . . . . . 925,000 54,054,688
_______________
156,779,688
_______________
DREYFUS APPRECIATION FUND, INC.
- ------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Common Stocks (continued) Shares Value
- ------------------------------------------------------------------------------- ---------------- ----------------
Media/Entertainment--1.7% Disney (Walt) . . . . . . . . . . . . . . . 450,000 $ 13,500,000
McDonald's . . . . . . . . . . . . . . . . . 600,000 45,975,000
Tricon Global Restaurants . . . . . . . .(a) 250,000 12,531,250
_______________
72,006,250
_______________
Photography--.4% Eastman Kodak . . . . . . . . . . . . . . . 250,000 18,000,000
_______________
Publishing--.7% McGraw-Hill Cos. . . . . . . . . . . . . . . 250,000 25,468,750
News Corp, A.D.R. . . . . . . . . . . . . . 120,000 3,172,500
_______________
28,641,250
_______________
Retail--.6% Wal-Mart Stores . . . . . . . . . . . . . . 325,000 26,467,188
_______________
Transportation--1.1% Norfolk Southern . . . . . . . . . . . . . . 1,500,000 47,531,250
_______________
TOTAL COMMON STOCKS
(cost $2,750,529,213) . . . . . . . . . . $4,104,249,598
===============
Preferred Stocks--.5%
- -------------------------------------------------
Publishing; News Corp, A.D.R.
(cost $15,964,941) . . . . . . . . . . . 800,000 $ 19,750,000
================
Principal
Short-Term Investments--1.5% Amount
- --------------------------------------------------------------------------------
------------------
U.S. Treasury Bills: 4.13%, 1/21/99 . . . . . . . . . . . . . . . $ 6,257,000 $ 6,241,702
4.20%, 1/28/99 . . . . . . . . . . . . . . . 6,266,000 6,248,393
4.38%, 2/18/99 . . . . . . . . . . . . . . . 12,360,000 12,292,762
4.33%, 3/4/99 . . . . . . . . . . . . . . . 14,436,000 14,327,340
4.44%, 3/25/99 . . . . . . . . . . . . . . . 6,834,000 6,765,612
4.48%, 4/1/99 . . . . . . . . . . . . . . . 16,103,000 15,927,477
_______________
TOTAL SHORT-TERM INVESTMENTS
(cost $61,791,742) . . . . . . . . . . . $ 61,803,286
================
TOTAL INVESTMENTS (cost $2,828,285,896). . . . . . . . . . . . . . . . . . . . . 100.6% $4,185,802,884
_______ ==============
LIABILITIES, LESS CASH AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . (.6%) $ (23,786,995)
_______ =================
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $4,162,015,889
_______ ================
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS APPRECIATION FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
_______________ _______________
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . . . $2,828,285,896 $4,185,802,884
Receivable for shares of Common Stock subscribed . . . . . . . 3,656,331
Dividends and interest receivable . . . . . . . . . . . . . . . 3,463,421
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 251,706
_______________
4,193,174,342
_______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . . . . 950,621
Due to Fayez Sarofim & Co. . . . . . . . . . . . . . . . . . . 921,319
Due to Distributor . . . . . . . . . . . . . . . . . . . . . . 850,882
Cash overdraft due to Custodian . . . . . . . . . . . . . . . . 7,657,328
Payable for investment securities purchased . . . . . . . . . . 19,130,965
Payable for shares of Common Stock redeemed . . . . . . . . . . 906,252
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 741,086
_______________
31,158,453
_______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,162,015,889
===============
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . $2,804,220,312
Accumulated net realized gain (loss) on investments . . . . . . 269,389
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions . . . . . 1,357,526,188
________________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,162,015,889
================
SHARES OUTSTANDING
(100 MILLION SHARES OF $.01 PAR VALUE COMMON STOCK AUTHORIZED) . . . . . . . . . . . . . . 98,924,127
NET ASSET VALUE, offering and redemption price per share $42.07
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS APPRECIATION FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Cash dividends (net of $686,907 foreign taxes
withheld at source) . . . . . . . . . . . . . . . . . . . . $ 45,382,127
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,910,156
______________
Total Income . . . . . . . . . . . . . . . . . . . . . . $ 48,292,283
EXPENSES: Investment advisory fee--Note 3(a) . . . . . . . . . . . . . . 8,258,087
Sub-investment advisory fee--Note 3(a) . . . . . . . . . . . . 7,913,087
Shareholder servicing costs--Note 3(b) . . . . . . . . . . . . 9,001,243
Registration fees . . . . . . . . . . . . . . . . . . . . . . . 529,646
Prospectus and shareholders' reports . . . . . . . . . . . . . 205,058
Custodian fees--Note 3(b) . . . . . . . . . . . . . . . . . . . 163,131
Professional fees . . . . . . . . . . . . . . . . . . . . . . . 55,236
Directors' fees and expenses--Note 3(c) . . . . . . . . . . . . 37,094
Loan commitment fees--Note 2 . . . . . . . . . . . . . . . . . 15,088
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 27,768
______________
Total Expenses . . . . . . . . . . . . . . . . . . . . . 26,205,438
______________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,086,845
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . . . . $ 6,832,495
Net unrealized appreciation (depreciation) on investments . . . 779,726,182
______________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 786,558,677
______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $808,645,522
==============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS APPRECIATION FUND, INC.
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
_________________ _________________
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,086,845 $ 15,471,076
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . 6,832,495 4,286,731
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . 779,726,182 317,934,827
________________ ________________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . 808,645,522 337,692,634
________________ ________________
DIVIDENDS TO SHAREHOLDERS:
From investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . (22,227,913) (15,585,302)
In excess of investment income--net . . . . . . . . . . . . . . . . . . . . . -- (98,228)
From net realized gain on investments . . . . . . . . . . . . . . . . . . . . (6,915,626) (3,671,898)
________________ ________________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29,143,539) (19,355,428)
________________ ________________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . 3,227,561,253 3,038,700,676
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,885,824 17,226,988
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,846,571,204) (2,242,123,459)
________________ ________________
Increase (Decrease) in Net Assets from Capital Stock Transactions . . . . 1,404,875,873 813,804,205
________________ ________________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . 2,184,377,856 1,132,141,411
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,977,638,033 845,496,622
________________ ________________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,162,015,889 $1,977,638,033
================ ================
Shares Shares
________________ ________________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,769,924 102,660,433
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . 569,180 538,558
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49,485,662) (75,178,590)
________________ ________________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . 37,853,442 28,020,401
================ ================
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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: 1998 1997 1996 1995 1994
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . $32.38 $25.58 $20.55 $15.17 $14.92
______ ______ ______ ______ ______
Investment Operations:
Investment income--net . . . . . . . . . . . . . . .23 .25 .25 .33 .28
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . 9.76 6.87 5.03 5.42 .26
______ ______ ______ ______ ______
Total from Investment Operations . . . . . . . . . 9.99 7.12 5.28 5.75 .54
______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net . . . . . . . (.23) (.26) (.25) (.34) (.28)
Dividends in excess of investment
income--net . . . . . . . . . . . . . . . . . . -- (.00)* -- -- --
Dividends from net realized gain
on investments . . . . . . . . . . . . . . . . . (.07) (.06) -- (.03) (.01)
______ ______ ______ ______ ______
Total Distributions . . . . . . . . . . . . . . . . (.30) (.32) (.25) (.37) (.29)
______ ______ ______ ______ ______
Net asset value, end of period . . . . . . . . . . $42.07 $32.38 $25.58 $20.55 $15.17
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . 30.85% 27.85% 25.68% 37.89% 3.62%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . . .89% .87% .91% .92% .96%
Ratio of net investment income
to average net assets . . . . . . . . . . . . . .75% .99% 1.34% 2.28% 1.86%
Portfolio Turnover Rate . . . . . . . . . . . . . . 1.40% 1.23% 4.84% 4.51% 6.58%
Net Assets, end of period (000's Omitted) . . . . $4,162,016 $1,977,638 $845,497 $457,267 $233,459
- ------------------------
* Amount represents less than $.01 per share.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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, as amended (the "Act"), as a diversified open-end
management investment company. The Fund's investment objective is to provide
investors with long-term capital growth consistent with the preservation of
capital. The Dreyfus Corporation ("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") is 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. Securities for
which there are no such valuations are valued at fair value as determined in
good faith under the direction of the Board of Directors. Investments
denominated in foreign currencies are translated to U.S. dollars at the
prevailing rates of exchange.
(B) FOREIGN CURRENCY TRANSACTIONS: The Fund does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities
of short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(C) 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. Under the terms of the custody agreement, the Fund received net
earnings credits of $15,780 during the period ended December 31, 1998 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
(D) 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 of 1986, as amended (the "Code"). To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(E) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes.
As of December 31, 1998, the Fund reclassified certain components of net
assets. The reclassifications resulted in a net increase to accumulated
undistributed net investment income of $239,296, an increase in accumulated net
realized gain on investments of $11,682 and a decrease in paid-in capital of
$250,978. These reclassifications were the result of permanent book to tax
differences. Net assets were not affected by these reclassifications.
DREYFUS APPRECIATION FUND, INC.
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (the "Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended
December 31, 1998, the Fund did not borrow under the Facility.
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 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 million up to $75 million . . . . . . . . . . .37 of 1% .18 of 1%
$75 million up to $200 million . . . . . . . . . .33 of 1% .22 of 1%
$200 million up to $300 million . . . . . . . . . .29 of 1% .26 of 1%
In excess of $300 million . . . . . . . . . . . . .275 of 1% .275 of 1%
</TABLE>
(B) Under the Shareholder Services Plan, the Fund pays the Distributor for the
provision of certain services at the annual rate of .25 of 1% of the value of
the Fund's average daily net assets. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Fund and providing reports and other information, and
services related to the maintenance of shareholder accounts. The Distributor may
make payments to Service Agents (a securities dealer, financial institution or
other industry professional) in respect of these services. The distributor
determines the amounts to be paid to Service Agents. During the period ended
December 31, 1998, the Fund was charged $7,350,533 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. During the period
ended December 31, 1998, the Fund was charged $790,403 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended December 31, 1998, the Fund was
charged $163,131 pursuant to the custody agreement.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended December 31, 1998 amounted to
$1,407,279,973 and $40,169,870, respectively.
At December 31, 1998, accumulated net unrealized appreciation on investments
was $1,357,516,988, consisting of $1,388,641,205 gross unrealized appreciation
and $31,124,217 gross unrealized depreciation.
At December 31, 1998, 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).
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, 1998, 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 and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of December 31, 1998 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, 1998, 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.
New York, New York
February 3, 1999
DREYFUS APPRECIATION FUND, INC.
- -----------------------------------------------------------------------------
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates $.067 per share as a
long-term capital gain distribution of the $.294 per share paid on December 24,
1998 and also designates $.0041 per share as a long-term capital gain
distribution paid on September 14, 1998.
The Fund also designates 100% of the ordinary dividends paid during the fiscal
year ended December 31, 1998 as qualifying for the corporate dividends received
deduction.
[reg. tm logo]
(reg.tm)
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. 141AR9812
Appreciation
Fund, Inc.
Annual Report
December 31, 1998
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, INC.
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
12/31/97 92,216 90,279
12/31/98 118,588 118,129
*Source: Lipper Analytical Services, Inc.
