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BNY Mellon Appreciation Fund

Filed: 28 Feb 05, 7:00pm
  UNITED STATES 
  SECURITIES AND EXCHANGE COMMISSION 
  Washington, D.C. 20549 
 
 
  FORM N-CSR 
 
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT 
  INVESTMENT COMPANIES 
 
Investment Company Act file number: 811-3081 
 
  DREYFUS APPRECIATION FUND, INC. 
  (Exact name of Registrant as specified in charter) 
 
 
  c/o The Dreyfus Corporation 
  200 Park Avenue 
  New York, New York 10166 
  (Address of principal executive offices) (Zip code) 
 
  Mark N. Jacobs, Esq. 
  200 Park Avenue 
  New York, New York 10166 
  (Name and address of agent for service) 
 
Registrant's telephone number, including area code: (212) 922-6000 
 
Date of fiscal year end:  12/31 
 
Date of reporting period:  12/31/04 

SSL-DOCS2 70128344v14


    FORM N-CSR 
Item 1.  Reports to Stockholders.   

Dreyfus     
Appreciation Fund, Inc.     

ANNUAL REPORT December 31, 2004


Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.

The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.

Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value


Contents
 
  THE FUND 


2  Letter from the Chairman 
3  Discussion of Fund Performance 
6  Fund Performance 
7  Understanding Your Fund’s Expenses 
7  Comparing Your Fund’s Expenses 
With Those of Other Funds
8  Statement of Investments 
12  Statement of Assets and Liabilities 
13  Statement of Operations 
14  Statement of Changes in Net Assets 
15  Financial Highlights 
16  Notes to Financial Statements 
23  Report of Independent Registered 
  Public Accounting Firm 
24  Important Tax Information 
25  Board Members Information 
27  Officers of the Fund 
FOR MORE INFORMATION

  Back Cover 


Dreyfus Appreciation Fund, Inc.

The Fund

LETTER FROM THE CHAIRMAN

 Dear Shareholder:

We are pleased to present this annual report for Dreyfus Appreciation Fund, Inc., covering the 12-month period from January 1, 2004, through December 31, 2004. Inside, you’ll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund’s portfolio manager, Fayez Sarofim, of Fayez Sarofim & Co., the fund’s sub-investment adviser.

2004 represented the second consecutive year of positive stock market performance. Unlike the 2003 rally, however, in which most stocks rose as general business conditions improved, 2004’s market performance largely reflected the strengths and weaknesses of individual companies and industries. As a result, fundamental research and professional judgment became more important determinants of mutual fund performance in 2004.

What’s ahead for stocks in 2005? No one knows for certain. Positive influences remain in place, including moderately expanding U.S. and global economies and low inflation. Nonetheless, a number of risks — such as rising short-term interest rates, currency fluctuations and generally slowing corporate earnings — could threaten the market environment.

As always, we urge our shareholders to view the stock market from a long-term perspective, measured in years rather than weeks or months. One of the best ways to ensure a long-term perspective is to establish an investment plan with the help of your financial advisor, and review it periodically to track your progress toward your financial goals.

Thank you for your continued confidence and support.

2

DISCUSSION OF FUND PERFORMANCE

Fayez Sarofim, Portfolio Manager 
Fayez Sarofim & Co., Sub-Investment Adviser 

How did Dreyfus Appreciation Fund, Inc. perform relative to its benchmark?

For the 12-month period ended December 31, 2004, the fund produced a total return of 5.57% .1 For the same period, the total return of the fund’s benchmark, the Standard & Poor’s 500 Composite Stock Price Index (“S&P 500 Index”), was 11.04% .2

Although stocks generally gained value over the reporting period, the market’s strength was concentrated primarily among stocks at the lower end of the S&P 500 Index’s capitalization range.The fund’s return was lower than the S&P 500 Index because the larger stocks on which the fund focuses tended to trail the averages. In addition, the fund’s results were hindered by a handful of company-specific disappointments.

What is the fund’s investment approach?

The fund invests primarily in large, well-established multinational companies that we believe are solidly positioned to weather difficult economic climates and thrive in more favorable environments. We focus on purchasing blue-chip stocks at a price we consider to be justified by a company’s fundamentals. The result is a portfolio of stocks in prominent companies selected for their sustained patterns of profitability, strong balance sheets, expanding global presence and above-average growth potential.

At the same time, we manage the fund in a manner particularly well-suited to long-term investors. Our investment approach is based on targeting long-term growth rather than short-term profit. Generally, we buy and sell relatively few stocks during the course of the year, helping to minimize investors’ tax liabilities and reduce trading costs.3

The Fund 3


DISCUSSION OF FUND PERFORMANCE (continued)

What other factors influenced the fund’s performance?

Despite generally strong earnings reports from large-cap companies, large-cap stocks failed to advance significantly for much of the year. Over the first 10 months of 2004, the stock market traded within a relatively narrow range, with returns constrained by uncertainty related to a fitfully growing economy, rising short-term interest rates, the U.S. presidential elections and the insurgency in Iraq. The stock market began to rally more substantially in November and December, accounting for much of the 12-month return of the S&P 500 Index.

In this challenging environment, investors generally continued to favor smaller stocks that, in their view, had greater potential for growth than large, well-established companies. As a result, the dominant multinational corporations in which the fund invests produced relatively lack-luster results.

In addition, the fund’s emphasis on consumer, financial and health care stocks hurt the fund’s relative performance. In the technology area, semiconductor manufacturer Intel suffered from the effects of unexpectedly soft demand for its products.The fund’s returns from the financials sector were held back by its investment in insurance and investment firm Marsh & McLennan Cos., which experienced turmoil related to allegations of unfair business practices. Returns from the fund’s health care holdings suffered when industry bellwethers Pfizer and Merck & Co. encountered safety-related issues affecting one of their better-selling drugs. In the consumer area, Coca-Cola was hurt by slower sales in Germany and North America.

On the other hand, the fund received strong results from its energy holdings. Integrated oil companies, including Exxon Mobil, ChevronTexaco and British Petroleum, benefited from surging oil and gas prices during the reporting period. Gains in diversified health care company Johnson & Johnson helped offset some of the weaknesses experienced by other large drug producers. In the industrials area, shares of General Electric rose as investors responded to the diversified company’s renewed focus on growth businesses, which is expected to boost

4

financial results in 2005. Food and tobacco giant Altria Group gained value when the company began to consider the possibility of separating its business units into independent entities. Finally, publishing conglomerate McGraw-Hill Cos. benefited from gains in its for-profit education businesses as well as better results from its Standard & Poor’s subsidiary.

Some changes to the fund during the reporting period included the elimination of the fund’s positions in Ford, Bell South, IBM and SBC Communications.We added ConocoPhillips and Occidental Petroleum to the fund’s holdings in the energy sector because we believe that supply-and-demand imbalances are likely to continue to support oil prices. We also established positions in food distributor Sysco, home improvement retailer Home Depot and media conglomerate Viacom.

What is the fund’s current strategy?

Although they were out of favor for much of the reporting period, we have maintained our longstanding focus on large, high-quality corporations with dominant market positions.Valuations of the largest companies in the S&P 500 Index have fallen below historical norms, which we believe makes them attractive opportunities in a moderately growing economic environment. Indeed, many of the fund’s holdings ended the reporting period with record levels of cash on their balance sheets, which can be used to grow existing businesses, enter new ones or enhance shareholder value through stock buy-backs or dividend increases.

January 18, 2005
1  Total return includes reinvestment of dividends and any capital gains paid. Past performance is no 
  guarantee of future results. Share price and investment return fluctuate such that upon redemption, 
  fund shares may be worth more or less than their original cost. 
2  SOURCE: LIPPER INC. — Reflects reinvestment of dividends and, where applicable, capital 
  gain distributions.The Standard & Poor’s 500 Composite Stock Price Index is a widely accepted, 
  unmanaged index of U.S. stock market performance. 
3  Achieving tax efficiency is not a part of the fund’s investment objective, and there can be no 
  guarantee that the fund will achieve any particular level of taxable distributions in future years. In 
  periods when the manager has to sell significant amounts of securities (e.g., during periods of 
  significant net redemptions or changes in index components) funds can be expected to be less tax 
  efficient than during periods of more stable market conditions and asset flows. 

The Fund 5


 FUND PERFORMANCE
Average Annual Total Returns as of  12/31/04       
    1 Year  5 Years  10 Years 





Fund    5.57%  (0.88)%  11.80% 

Source: Lipper Inc. 
Past performance is not predictive of future performance.The fund’s performance shown in the graph and table does not 
reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 
The above graph compares a $10,000 investment made in Dreyfus Appreciation Fund, Inc. on 12/31/94 to a 
$10,000 investment made in the Standard & Poor’s 500 Composite Stock Price Index (the “Index”) on that date. 
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 Index is a widely 
accepted, unmanaged index of U.S. 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. 

 6

U N D E R S TA N D I N G YO U R F U N D ’ S E X P E N S E S ( U n a u d i t e d )

As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Appreciation Fund, Inc. from July 1, 2004 to December 31, 2004. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

Expenses and Value of a $1,000 Investment 
assuming actual returns for the six months ended December 31, 2004 

Expenses paid per $1,000   $ 4.91 
Ending value (after expenses)  $1,034.10 

COMPARING YOUR FUND’S EXPENSES 
WITH THOSE OF OTHER FUNDS (Unaudited) 

Using the SEC’s method to compare expenses

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.

Expenses and Value of a $1,000 Investment 
assuming a hypothetical 5% annualized return for the six months ended December 31, 2004 

Expenses paid per $1,000   $ 4.88 
Ending value (after expenses)  $1,020.31 

Expenses are equal to the fund’s annualized expense ratio of .96%; multiplied by the average account value over the 
period, multiplied by 184/366 (to reflect the one-half year period). 

The Fund 7


STATEMENT OF INVESTMENTS
December 31, 2004
Common Stocks—98.2%  Shares  Value ($) 



Banking—8.1%     
Bank of America  1,950,000  91,630,500 
Federal Home Loan Mortgage  550,000  40,535,000 
Federal National Mortgage Association  1,780,000  126,753,800 
HSBC Holdings, ADR  600,000 a  51,084,000 
SunTrust Banks  675,000  49,869,000 
    359,872,300 
Capital Goods—6.1%     
Emerson Electric  950,000  66,595,000 
General Electric  5,600,000  204,400,000 
    270,995,000 
Consumer Durables & Apparel—.8%     
Christian Dior  550,000 a  37,343,807 
Consumer Staples—5.5%     
Sysco  600,000  22,902,000 
Wal-Mart Stores  1,900,000  100,358,000 
Walgreen  3,080,000  118,179,600 
    241,439,600 
Diversified Financials—9.1%     
American Express  1,600,000  90,192,000 
Citigroup  3,600,333  173,464,044 
JP Morgan Chase & Co.  1,925,000  75,094,250 
Merrill Lynch  1,050,000  62,758,500 
    401,508,794 
Energy—15.1%     
BP, ADR  2,300,000  134,320,000 
ChevronTexaco  2,600,000  136,526,000 
ConocoPhillips  800,000  69,464,000 
Exxon Mobil  5,332,598  273,348,973 
Occidental Petroleum  400,000  23,344,000 
Royal Dutch Petroleum  500,000  28,690,000 
    665,692,973 

8

Common Stocks (continued)  Shares    Value ($) 




Food, Beverage & Tobacco—15.6%       
Altria Group  4,100,000    250,510,000 
Anheuser-Busch Cos.  1,400,000    71,022,000 
Coca-Cola  3,140,000    130,718,200 
Kraft Foods, Cl. A  1,250,000    44,512,500 
Nestle, ADR  1,250,000    82,304,687 
PepsiCo  2,100,000    109,620,000 
      688,687,387 
Hotels Restaurants & Leisure—.9%       
McDonald’s  1,225,000    39,273,500 
Household & Personal Products—5.5%     
Colgate-Palmolive  1,010,000    51,671,600 
Estee Lauder Cos., Cl. A  800,000    36,616,000 
Procter & Gamble  2,800,000    154,224,000 
      242,511,600 
Insurance—4.6%       
American International Group  1,150,000    75,520,500 
Berkshire Hathaway, Cl. A  820  b  72,078,000 
Marsh & McLennan Cos.  1,700,000    55,930,000 
      203,528,500 
Media/Entertainment—5.6%       
Fox Entertainment Group, Cl. A  782,700  b  24,467,202 
McGraw-Hill Cos.  1,100,000    100,694,000 
News, Cl. A  4,200,000  a  78,372,000 
News, Cl. B  240,000  a  4,608,000 
Time Warner  1,007,500  b  19,585,800 
Viacom, Cl. B  600,000    21,834,000 
      249,561,002 
Pharmaceuticals & Biotechnology—11.2%     
Abbott Laboratories  1,500,000    69,975,000 
Johnson & Johnson  2,150,000    136,353,000 
Eli Lilly & Co.  900,000    51,075,000 

The Fund 9


S T A T E M E N T O F I N V E S T M E N T S (continued)

Common Stocks (continued)  Shares  Value ($) 



Pharmaceuticals & Biotechnology (continued)   
Merck & Co.  1,500,000  48,210,000 
Pfizer  5,775,000  155,289,750 
Roche Holding, ADR  300,000  34,837,500 
    495,740,250 
Retailing—2.6%     
Home Depot  1,100,000  47,014,000 
Target  1,300,000  67,509,000 
    114,523,000 
Semiconductors & Semiconductor Equipment—4.0%   
Intel  7,650,000  178,933,500 
Software & Services—2.3%     
Microsoft  3,750,000  100,162,500 
Transportation—1.2%     
United Parcel Service, Cl. B  600,000  51,276,000 
Total Common Stocks     
(cost $3,100,732,968)    4,341,049,713 



  Principal   
Short-Term Investments—2.0%  Amount ($)  Value ($) 



U.S. Treasury Bills:     
1.9%, 2/24/2005     
(cost $89,212,863)  89,468,000  89,213,016 

10

Investment of Cash Collateral     
  for Securities Loaned—.7%  Shares  Value ($) 




Registered Investment Company;     
Dreyfus Institutional Cash Advantage Fund     
(cost $28,134,800)    28,134,800 c  28,134,800 




 
Total Investments (cost $3,218,080,631)  100.9  4,458,397,529 
 
Liabilities, Less Cash and Receivables  (.9)  (38,234,861) 
 
Net Assets    100.0%  4,420,162,668 
 
ADR—American Depository Receipts.       
a  All or a portion of these securities are on loan.At December 31, 2004 the total market value of the fund’s securities 
  on loan is $26,569,860 and the total market value of the collateral held by the fund is $28,134,800. 
b  Non-income producing.       
c  Investment in affiliated money market mutual fund.     




 
 
 
Portfolio Summary        
 
    Value (%)    Value (%) 





Food, Beverage & Tobacco  15.6  Consumer Staples  5.5 
Energy  15.1  Household & Personal Products 5.5 
Pharmaceuticals & Biotechnology  11.2  Short-Term/   
Diversified Financials  9.1  Money Market Investments  2.7 
Banking  8.1  Other  16.4 
Capital Goods  6.1     
Media/Entertainment  5.6    100.9 
 
  Based on net assets.       
See notes to financial statements.       

The Fund 11


STATEMENT OF ASSETS AND LIABILITIES
December 31, 2004
  Cost  Value 



Assets ($):     
Investments in securities—See Statement   
of Investments (including securities on loan,   
valued at $26,569,860)—Note 1(c):   
Unaffiliated issuers  3,189,945,831  4,430,262,729 
Affiliated issuers  28,134,800  28,134,800 
Cash    2,707,454 
Dividends and interest receivable    6,443,914 
Receivable for shares of Common Stock subscribed  3,664,375 
Prepaid expenses    136,878 
    4,471,350,150 



Liabilities ($):     
Due to The Dreyfus Corporation and affiliates—Note 3(b)  2,271,236 
Due to Fayez Sarofim & Co.    1,006,953 
Liability for securities on loan—Note 1(c)  28,134,800 
Payable for shares of Common Stock redeemed  18,432,148 
Accrued expenses    1,342,345 
    51,187,482 



Net Assets ($)    4,420,162,668 



Composition of Net Assets ($):     
Paid-in capital    3,227,278,307 
Accumulated undistributed investment income—net  868,488 
Accumulated net realized gain (loss) on investments  (48,301,025) 
Accumulated net unrealized appreciation (depreciation)   
on investments and foreign currency transactions  1,240,316,898 


Net Assets ($)    4,420,162,668 



Shares Outstanding     
(300 million shares of $.001 par value Common Stock authorized)  114,258,842 
Net Asset Value, offering and redemption price per share ($)  38.69 

See notes to financial statements.
12

STATEMENT OF OPERATIONS
Year Ended December 31, 2004
Investment Income ($):   
Income:   
Cash dividends (net of $669,184 foreign taxes withheld at source)  97,458,195 
Interest  1,386,967 
Income from securities lending  211,669 
Total Income  99,056,831 
Expenses:   
Investment advisory fee—Note 3(a)  11,777,252 
Sub-Investment advisory fee—Note 3(a)  11,432,252 
Shareholder servicing costs—Note 3(b)  16,126,430 
Prospectus and shareholders’ reports  230,965 
Custodian fees—Note 3(b)  183,829 
Registration fees  141,345 
Directors’ fees and expenses—Note 3(c)  128,199 
Professional fees  58,616 
Loan commitment fees—Note 2  27,266 
Interest expense—Note 2  2,236 
Miscellaneous  94,650 
Total Expenses  40,203,040 
Less—reduction in custody fees   
due to earnings credits—Note 1(c)  (7,769) 
Net Expenses  40,195,271 
Investment Income—Net  58,861,560 


Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments and foreign currency transactions  (19,038,589) 
Net unrealized appreciation (depreciation) on investments   
and foreign currency transactions  193,679,447 
Net Realized and Unrealized Gain (Loss) on Investments  174,640,858 
Net Increase in Net Assets Resulting from Operations  233,502,418 

See notes to financial statements.

The Fund 13


STATEMENT OF CHANGES IN NET ASSETS

  Year Ended December 31, 

  2004  2003 



Operations ($):     
Investment income—net  58,861,560  43,573,434 
Net realized gain (loss) on investments  (19,038,589)  (28,231,960) 
Net unrealized appreciation     
(depreciation) on investments  193,679,447  641,172,330 
Net Increase (Decrease) in Net Assets     
Resulting from Operations  233,502,418  656,513,804 



Dividends to Shareholders from ($):     
Investment income—net  (58,753,473)  (43,629,479) 



Capital Stock Transactions ($):     
Net proceeds from shares sold  1,550,117,898  1,115,149,789 
Dividends reinvested  52,752,382  40,095,009 
Cost of shares redeemed  (1,339,496,487)  (914,570,827) 
Increase (Decrease) in Net Assets     
from Capital Stock Transactions  263,373,793  240,673,971 
Total Increase (Decrease) in Net Assets  438,122,738  853,558,296 



Net Assets ($):     
Beginning of Period  3,982,039,930  3,128,481,634 
End of Period  4,420,162,668  3,982,039,930 
Undistributed investment income—net  868,488  746,842 



Capital Share Transactions (Shares):     
Shares sold  41,406,737  33,593,113 
Shares issued for dividends reinvested  1,364,779  1,104,628 
Shares redeemed  (35,740,833)  (27,727,163) 
Net Increase (Decrease) in Shares Outstanding  7,030,683  6,970,578 

See notes to financial statements.
14

FINANCIAL HIGHLIGHTS

The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.

    Year Ended December 31,   



  2004  2003  2002  2001  2000 






Per Share Data ($):           
Net asset value,           
beginning of period  37.14  31.20  38.02  42.93  45.73 
Investment Operations:           
Investment income—net a  .52  .42  .31  .28  .29 
Net realized and unrealized           
gain (loss) on investments  1.55  5.93  (6.81)  (4.88)  .42 
Total from           
Investment Operations  2.07  6.35  (6.50)  (4.60)  .71 
Distributions:           
Dividends from investment           
income—net  (.52)  (.41)  (.30)  (.31)  (.29) 
Dividends from net realized           
gain on investments  —  —  (.02)  —  (3.09) 
Dividends in excess of net realized         
gain on investments  —  —  —  —  (.13) 
Total Distributions  (.52)  (.41)  (.32)  (.31)  (3.51) 
Net asset value, end of period  38.69  37.14  31.20  38.02  42.93 






Total Return (%)  5.57  20.39  (17.14)  (10.75)  1.80 






Ratios/Supplemental Data (%):         
Ratio of total expenses           
to average net assets  .95  .96  .97  .91  .89 
Ratio of net expenses           
to average net assets  .95  .96  .97  .91  .89 
Ratio of net investment income         
to average net assets  1.40  1.28  .90  .72  .64 
Portfolio Turnover Rate  8.23  4.73  1.77  5.03  4.28 






Net Assets, end of period           
($ x 1,000)  4,420,163  3,982,040  3,128,482  3,394,522  3,846,196 

a Based on average shares outstanding at each month end.
See notes to financial statements.

The Fund 15


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 wholly-owned subsidiary of Mellon Financial Corporation (“Mellon Financial”). Fayez Sarofim & Co. (“Sarofim”) serves as the fund’s sub-investment adviser. Dreyfus Service Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares, which are sold to the public without a sales charge.

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

The fund enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.

(a) Portfolio valuation: Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sale price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. Bid price is used when no asked price is available. Investment in registered investment companies are valued at their net asset value. When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as

16

when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR’s and futures contracts. For other securities that are fair valued by the Board of Directors, certain factors may be considered such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. Financial futures are valued at the last sales price. 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 on 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.

The Fund 17


NOTES TO FINANCIAL STATEMENTS (continued)

(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, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.

The fund has an arrangement with the custodian bank whereby the fund receives earnings credits from the custodian when positive cash balances are maintained, which are used to offset custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.

Pursuant to a securities lending agreement with Mellon Bank, N.A., an affiliate of the Manager, the fund may lend securities to qualified institutions.At origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan will be maintained at all times. Cash collateral is invested in certain other money market mutual funds managed by Dreyfus. The fund will be entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction. Although each security loaned is fully collateralized, the fund would bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner.

(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” in the Act.

(e) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gain, if any, are normally declared and paid annually but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net real-

18

ized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles.

(f) 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.

At December 31, 2004, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $868,488, accumulated capital losses $48,301,025 and unrealized appreciation $1,240,316,898.

The accumulated capital loss carryover is available to be applied against future net securities profits, if any, realized subsequent to December 31, 2004. If not applied, $264,160 of the carryover expires in fiscal 2010, $16,259,904 expires in fiscal 2011 and $31,776,961 expires in fiscal 2012.

The tax character of distributions paid to shareholders during the fiscal periods ended December 31, 2004 and December 31, 2003, were as follows: ordinary income $58,753,473 and $43,629,479, respectively.

During the period ended December 31, 2004, as a result of permanent book to tax differences primarily due to the tax treatment for foreign currency transactions, the fund increased accumulated undistributed investment income-net by $13,559 and decreased accumulated net realized gain (loss) on investments by the same amount. Net assets were not affected by this reclassification.

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $350 million redemption credit facility (the “Facility”) to be utilized for tem-

The Fund 19


NOTES TO FINANCIAL STATEMENTS (continued)

porary 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 based on prevailing market rates in effect at the time of borrowings.

The average daily amount of borrowings outstanding under the Facility during the period ended December 31, 2004, was $132,500 with a related weighted average annualized interest rate of 1.66% .

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:

Average Net Assets  Dreyfus  Sarofim 



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% 

(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, 2004, the fund was charged $10,549,775 pursuant to the Shareholder Services Plan.

20

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, 2004, the fund was charged $849,318 pursuant to the transfer agency agreement.

The fund compensates Mellon Bank, N.A., an affiliate of the Manager, under a custody agreement for providing custodial services for the fund. During the period ended December 31, 2004, the fund was charged $183,829 pursuant to the custody agreement.

The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $1,036,175, shareholder services plan fees $928,695, custodian fees $45,110 and transfer agency per account fees $261,256.

(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2004, amounted to $605,745,435 and $336,528,192, respectively.

At December 31, 2004, the cost of investments for federal income tax purposes was $3,218,080,631; accordingly, accumulated net unrealized appreciation on investments was $1,240,316,898, consisting of $1,311,502,416 gross unrealized appreciation and $71,185,518 gross unrealized depreciation.

NOTE 5—Legal Matters:

In early 2004, two purported class and derivative actions were filed against Mellon Financial, Mellon Bank, N.A., Dreyfus, Founders Asset Management LLC, and certain directors of the Dreyfus Funds and the

The Fund 21


NOTES TO FINANCIAL STATEMENTS (continued)

Dreyfus Founders Funds (together, the “Funds”). In September 2004, plaintiffs served a Consolidated Amended Complaint (the “Amended Complaint”) on behalf of a purported class of all persons who acquired interests in any of the Funds between January 30, 1999 and November 17, 2003, and derivatively on behalf of the Funds. The Amended Complaint in the newly styled In re Dreyfus Mutual Funds Fee Litigation also named the Distributor, Premier Mutual Fund Services, Inc. and two additional Fund directors as defendants and alleges violations of the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Pennsylvania Unfair Trade Practices and Consumer Protection Law and common-law claims. Plaintiffs seek to recover allegedly improper and excessive Rule 12b-1 and advisory fees allegedly charged to the Funds for marketing and distribution services. More specifically, plaintiffs claim, among other things, that 12b-1 fees and directed brokerage were improperly used to pay brokers to recommend the Funds over other funds, and that such payments were not disclosed to investors. In addition, plaintiffs assert that economies of scale and soft-dollar benefits were not passed on to the Funds. Plaintiffs further allege that 12b-1 fees were improperly charged to certain of the Funds that were closed to new investors.The Amended Complaint seeks compensatory and punitive damages, rescission of the advisory contracts, and an accounting and restitution of any unlawful fees, as well as an award of attorneys’ fees and litigation expenses. As noted, some of the claims in this litigation are asserted derivatively on behalf of the Funds that have been named as nominal defendants. With respect to such derivative claims, no relief is sought against the Funds. Dreyfus believes the allegations to be totally without merit and intends to defend the action vig-orously.Defendants filed motions to dismiss the Amended Complaint on November 12, 2004, and those motions are pending.

Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the defendants in the future. Neither Dreyfus nor the Funds believe that any of the pending actions will have a material adverse effect on the Funds or Dreyfus’ ability to perform its contract with the Funds.

22

REPORT OF INDEPENDENT REGISTERED 
PUBLIC ACCOUNTING FIRM 

 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, 2004, 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 the standards of the Public Company Accounting Oversight Board (United States).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, 2004 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, 2004, 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 U.S. generally accepted accounting principles.

 New York, New York
February 11, 2005

The Fund 23


IMPORTANT TAX INFORMATION (Unaudited)

For federal tax purposes, the fund hereby designates 100% of the ordinary dividends paid during the fiscal year ended December 31, 2004 as qualifying for the corporate dividends received deduction and also for the fiscal year ended December 31, 2004, certain dividends paid by the fund may be subject to a maximum tax rate of 15% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, $58,753,473 represents the maximum amount that may be considered qualified dividend income. Shareholders will receive notification in January 2005 of the percentage applicable to the preparation of their 2004 income tax returns.

24

BOARD MEMBERS INFORMATION (Unaudited)

Joseph S. DiMartino (61) 
Chairman of the Board (1995) 

Principal Occupation During Past 5 Years: 
• Corporate Director and Trustee 

Other Board Memberships and Affiliations:
  • The Muscular Dystrophy Association, Director
  • Levcor International, Inc., an apparel fabric processor, Director
  • Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director
  • The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director
  • Azimuth Trust, an institutional asset management firm, Member of Board of Managers and Advisory Board

No. of Portfolios for which Board Member Serves: 186

———————

Clifford L. Alexander, Jr. (71) 
Board Member (1981) 

Principal Occupation During Past 5 Years:
  • President of Alexander & Associates, Inc., a management consulting firm (January 1981-present)
  • Chairman of the Board of Moody’s Corporation (October 2000-October 2003)
  • Chairman of the Board and Chief Executive Officer of The Dun and Bradstreet Corporation (October 1999-September 2000)
Other Board Memberships and Affiliations:
  • Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director
  • Mutual of America Life Insurance Company, Director

No. of Portfolios for which Board Member Serves: 65

———————

Peggy C. Davis (61) 
Board Member (1990) 

Principal Occupation During Past 5 Years:
  • Shad Professor of Law, New York University School of Law (1983-present)
  • Writer and teacher in the fields of evidence, constitutional theory, family law, social sciences and the law, legal process and professional methodology and training
No. of Portfolios for which Board Member Serves: 26

The Fund 25


BOARD MEMBERS INFORMATION (Unaudited) (continued)

Ernest Kafka (72) 
Board Member (1981) 

Principal Occupation During Past 5 Years:
  • Physician engaged in private practice specializing in the psychoanalysis of adults and adolescents (1962-present)
  • Instructor,The New York Psychoanalytic Institute (1981-present)
  • Associate Clinical Professor of Psychiatry at Cornell Medical School (1987-2002)

No. of Portfolios for which Board Member Serves: 26

———————

Nathan Leventhal (61) 
Board Member (1989) 

Principal Occupation During Past 5 Years:
  • A management consultant for various non-profit organizations (May 2004-present)
  • Chairman of the Avery-Fischer Artist Program (November 1997-present)
  • President of Lincoln Center for the Performing Arts, Inc. (March 1984-December 2000)
Other Board Memberships and Affiliations: 
• Movado Group, Inc., Director 

No. of Portfolios for which Board Member Serves: 26

———————

Once elected all Board Members serve for an indefinite term.The address of the Board Members and Officers is in c/o The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-554-4611.

Saul B. Klaman, Emeritus Board Member

26

OFFICERS OF THE FUND (Unaudited)

STEPHEN E. CANTER, President since March 2000.

Chairman of the Board, Chief Executive Officer and Chief Operating Officer of Dreyfus, and an officer of 92 investment companies (comprised of 185 portfolios) managed by Dreyfus. Mr. Canter also is a Board member and, where applicable, an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 59 years old and has been an employee of Dreyfus since May 1995.

STEPHEN R. BYERS, Executive Vice President since November 2002.

Chief Investment Officer,Vice Chairman and a director of Dreyfus, and an officer of 92 investment companies (comprised of 185 portfolios) managed by Dreyfus. Mr. Byers also is an officer, director or an Executive Committee Member of certain other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of Dreyfus. He is 51 years old and has been an employee of Dreyfus since January 2000. Prior to joining Dreyfus, he served as an Executive Vice President-Capital Markets, Chief Financial Officer and Treasurer at Gruntal & Co., L.L.C.

MARK N. JACOBS, Vice President since March 2000.

Executive Vice President, Secretary and General Counsel of Dreyfus, and an officer of 93 investment companies (comprised of 201 portfolios) managed by Dreyfus. He is 58 years old and has been an employee of Dreyfus since June 1977.

STEVEN F. NEWMAN, Secretary since March 2000.

Associate General Counsel and Assistant Secretary of Dreyfus, and an officer of 93 investment companies (comprised of 201 portfolios) managed by Dreyfus. He is 55 years old and has been an employee of Dreyfus since July 1980.

JANETTE E. FARRAGHER, Assistant Secretary since March 2000.

Associate General Counsel of Dreyfus, and an officer of 12 investment companies (comprised of 23 portfolios) managed by Dreyfus. She is 42 years old and has been an employee of Dreyfus since February 1984.

MICHAEL A. ROSENBERG, Assistant Secretary since March 2000.

Associate General Counsel of Dreyfus, and an officer of 90 investment companies (comprised of 194 portfolios) managed by Dreyfus. He is 44 years old and has been an employee of Dreyfus since October 1991.

JAMES WINDELS, Treasurer since November 2001.

Director – Mutual Fund Accounting of Dreyfus, and an officer of 93 investment companies (comprised of 201 portfolios) managed by Dreyfus. He is 46 years old and has been an employee of Dreyfus since April 1985.

ROBERT SVAGNA, Assistant Treasurer since December 2002.

Senior Accounting Manager – Equity Funds of Dreyfus, and an officer of 27 investment companies (comprised of 107 portfolios) managed by Dreyfus. He is 37 years old and has been an employee of Dreyfus since November 1990.

The Fund 27


OFFICERS OF THE FUND (Unaudited) (continued)

RICHARD CASSARO, Assistant Treasurer since August 2003.

Senior Accounting Manager – Equity Funds of Dreyfus, and an officer of 26 investment companies (comprised of 102 portfolios) managed by Dreyfus. He is 44 years old and has been an employee of Dreyfus since September 1982.

KENNETH J. SANDGREN, Assistant Treasurer since November 2001.

Mutual Funds Tax Director of Dreyfus, and an officer of 93 investment companies (comprised of 201 portfolios) managed by Dreyfus. He is 50 years old and has been an employee of Dreyfus since June 1993.

JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.

Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (93 investment companies, comprising 201 portfolios). From November 2001 through March 2004, Mr. Connolly was first Vice-President, Mutual Fund Servicing for Mellon Global Securities Services. In that capacity, Mr. Connolly was responsible for managing Mellon’s Custody, Fund Accounting and Fund Administration services to third-party mutual fund clients. He is 47 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.

WILLIAM GERMENIS, Anti-Money Laundering Compliance Officer since October 2002.

Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 88 investment companies (comprised of 196 portfolios) managed by Dreyfus. He is 34 years old and has been an employee of the Distributor since October 1998.

28

For More Information

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. 
200 Park Avenue 
New York, NY 10166 
 
Distributor 
Dreyfus Service Corporation 
200 Park Avenue 
New York, NY 10166 

Telephone 1-800-645-6561

Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 E-mail Send your request to info@dreyfus.com Internet Information can be viewed online or downloaded at: http://www.dreyfus.com A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the 12-month period ended June 30, 2004, is available through the fund’s website at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-645-6561.

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

© 2005 Dreyfus Service Corporation


Item 2.  Code of Ethics. 

The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. There have been no amendments to, or waivers in connection with, the Code of Ethics during the period covered by this Report.

Item 3.  Audit Committee Financial Expert. 

The Registrant's Board has determined that Joseph S. DiMartino, a member of the Audit Committee of the Board, is an audit committee financial expert as defined by the Securities and Exchange Commission (the "SEC"). Mr. DiMartino is "independent" as defined by the SEC for purposes of audit committee financial expert determinations.

Item 4.  Principal Accountant Fees and Services 

(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Registrant's principal accountant (the "Auditor") for the audit of the Registrant's annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $27,500 in 2003 and $28,875 in 2004.

(b) Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor that are reasonably related to the performance of the audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item 4 were $4,500 in 2003 and $4,500 in 2004. These services consisted of (i) security counts required by Rule 17f-2 under the Investment Company Act of 1940.

The aggregate fees billed in the Reporting Periods for non-audit assurance and related services by the Auditor to the Registrant's investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant ("Service Affiliates"), that were reasonably related to the performance of the annual audit of the Service Affiliate, which required pre-approval by the Audit Committee were $288,500 in 2003 and $-0- in 2004.

Note: For the second paragraph in each of (b) through (d) of this Item 4, certain of such services were not pre-approved prior to May 6, 2003, when such services were required to be pre-approved. On and after May 6, 2003, 100% of all services provided by the Auditor were pre-approved as required. For comparative purposes, the fees shown assume that all such services were pre-approved, including services that were not pre-approved prior to the compliance date of the pre-approval requirement.

(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning ("Tax Services") were $3,237 in 2003 and $3,484 in 2004. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or

-2-
 SSL-DOCS2 70128344v14

administrative developments, (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held, and (iv) determination of Passive Foreign Investment Companies.

The aggregate fees billed in the Reporting Periods for Tax Services by the Auditor to Service Affiliates which required pre-approval by the Audit Committee were $-0- in 2003 and $-0- in 2004.

(d) All Other Fees. The aggregate fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, were $4,140 in 2003 and less than $6,000 in 2004. These services consisted of a review of the Registrant's anti-money laundering program.

The aggregate fees billed in the Reporting Periods for Non-Audit Services by the Auditor to Service Affiliates, other than the services reported in paragraphs (b) through (c) of this Item, which required pre-approval by the Audit Committee were $-0- in 2003 and $-0- in 2004.

Audit Committee Pre-Approval Policies and Procedures. The Registrant's Audit Committee has established policies and procedures (the "Policy") for pre-approval (within specified fee limits) of the Auditor's engagements for non-audit services to the Registrant and Service Affiliates without specific case-by-case consideration. Pre-approval considerations include whether the proposed services are compatible with maintaining the Auditor's independence. Pre-approvals pursuant to the Policy are considered annually.

Non-Audit Fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the Reporting Periods were $521,764 in 2003 and $592,101 in 2004.

Auditor Independence. The Registrant's Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates which were not pre-approved (not requiring pre-approval) is compatible with maintaining the Auditor's independence.

Item 5.  Audit Committee of Listed Registrants. 
  Not applicable.  [CLOSED-END FUNDS ONLY] 
Item 6.  Schedule of Investments. 
  Not applicable.   
Item 7.  Disclosure of Proxy Voting Policies and Procedures for Closed-End Management 
  Investment Companies. 
  Not applicable.  [CLOSED-END FUNDS ONLY] 
Item 8.  Purchases of Equity Securities by Closed-End Management Investment Companies and 
  Affiliated Purchasers. 
  Not applicable.  [CLOSED-END FUNDS ONLY] 
Item 9.  Submission of Matters to a Vote of Security Holders. 

The Registrant has a Nominating Committee (the "Committee"), which is responsible for selecting and nominating persons for election or appointment by the Registrant's Board as Board members. The Committee has adopted a Nominating Committee Charter (the "Charter"). Pursuant to the Charter, the

-3-
SSL-DOCS2 70128344v14

Committee will consider recommendations for nominees from shareholders submitted to the Secretary of the Registrant, c/o The Dreyfus Corporation Legal Department, 200 Park Avenue, 8th Floor West, New York, New York 10166. A nomination submission must include information regarding the recommended nominee as specified in the Charter. This information includes all information relating to a recommended nominee that is required to be disclosed in solicitations or proxy statements for the election of Board members, as well as information sufficient to evaluate the factors to be considered by the Committee, including character and integrity, business and professional experience, and whether the person has the ability to apply sound and independent business judgment and would act in the interests of the Registrant and its shareholders.

Nomination submissions are required to be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the Committee.

Item 10.  Controls and Procedures. 

(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

Item 11.  Exhibits. 

(a)(1)  Code of ethics referred to in Item 2. 
(a)(2)  Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) 
under the Investment Company Act of 1940. 
(a)(3)  Not applicable. 
(b)  Certification of principal executive and principal financial officers as required by Rule 30a-2(b) 
under the Investment Company Act of 1940. 

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 SSL-DOCS2 70128344v14

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 Dreyfus Appreciation Fund, Inc.
By:  /s/ Stephen E. Canter 
  Stephen E. Canter 
  President 
 
Date:  February 23, 2005 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By:  /s/ Stephen E. Canter 
  Stephen E. Canter 
  Chief Executive Officer 
 
Date:  February 23, 2005 
 
By:  /s/ James Windels 
James Windels
  Chief Financial Officer 
 
Date:  February 23, 2005 

  EXHIBIT INDEX 
(a)(1)  Code of ethics referred to in Item 2. 
(a)(2)  Certifications of principal executive and principal financial officers as required by Rule 30a- 
2(a) under the Investment Company Act of 1940. (EX-99.CERT) 
(b)  Certification of principal executive and principal financial officers as required by Rule 30a- 
2(b) under the Investment Company Act of 1940. (EX-99.906CERT) 

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