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BNY Mellon Appreciation Fund

Filed: 27 Aug 07, 8:00pm
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) 
 
Michael A. Rosenberg, 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:  6/30/07 


FORM N-CSR

Item 1. Reports to Stockholders.


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  A Letter from the CEO 
3  Discussion of Fund Performance 
6  Understanding Your Fund’s Expenses 
6  Comparing Your Fund’s Expenses 
With Those of Other Funds
7  Statement of Investments 
11  Statement of Assets and Liabilities 
12  Statement of Operations 
13  Statement of Changes in Net Assets 
14  Financial Highlights 
15  Notes to Financial Statements 
FOR MORE INFORMATION

  Back Cover 


The Fund

Dreyfus Appreciation Fund, Inc.

A LETTER FROM THE CEO

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Appreciation Fund, Inc., covering the six-month period from January 1, 2007, through June 30, 2007.

The U.S. economy produced mixed signals over the first half of 2007, causing investor sentiment to swing from concerns regarding a domestic economic slowdown stemming from slumping housing markets to worries about mounting inflationary pressures in an environment of robust global growth. However, more recent data have provided stronger signals that a “soft landing” is likely for the U.S. economy.The rate of decline in residential construction is becoming less severe, the industrial inventory slowdown is fading and capital goods orders have strengthened. What’s more, a generally rising stock market over the past six months has helped to offset any negative “wealth effect” from the weak housing market.

Should these trends persist, we expect U.S. economic growth to hover slightly below long-term averages during the second half of this year. A moderate economic growth rate and gradually receding inflationary pressures may keep the Federal Reserve Board on the sidelines and support corporate profits through year-end. As always, your financial advisor can help you position your equity investments for these and other developments.

For information about how the fund performed during the reporting period, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund’s Portfolio Manager.

Thank you for your continued confidence and support.

2


DISCUSSION OF FUND PERFORMANCE

For the period of January 1, 2007, through June 30, 2007, as provided by Fayez Sarofim of Fayez Sarofim & Co., Sub-Investment Adviser

Fund and Market Performance

Stocks generally advanced over the first half of 2007 on the strength of good corporate earnings and robust mergers-and-acquisitions activity, which more than offset bouts of volatility stemming from inflation and economic concerns. The fund’s return lagged that of its benchmark, primarily due to investors’ preference for smaller, lower-quality stocks and due to lackluster returns from energy companies during the first quarter of the year.

For the six-month period ended June 30, 2007, Dreyfus Appreciation Fund produced a total return of 4.99% .1 In comparison, the total return of the fund’s benchmark, the Standard & Poor’s 500 Composite Stock Price Index (“S&P 500 Index”), was 6.96% for the same period.2

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 the 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. 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

Stocks Posted Gains Despite Mixed Economic Data

Although U.S. stocks posted generally attractive returns for the reporting period overall, the market encountered heightened volatility at times due

The Fund 3


DISCUSSION OF FUND PERFORMANCE (continued)

to shifting investor expectations. Worries of a more severe economic slowdown alternated with concerns regarding persistent inflationary pressures. On one hand, soft U.S. housing markets appeared to constrain spending among some consumers, and defaults on sub-prime mortgages rose sharply. On the other hand, robust economic growth in many overseas markets, combined with volatile food and energy prices, helped keep the rate of inflation above the Federal Reserve Board’s “comfort zone.” In addition, energy prices remained volatile, surging higher in the spring.

Despite these factors, corporate earnings continued to grow, but at a slower pace than in previous reporting periods. In addition, mergers-and-acquisitions activity remained high as private equity firms put investment capital to work.While these influences helped drive stock prices higher, investors became less tolerant of risks, gradually turning away from the smaller, lower-quality companies that had led the market over the past several years. Instead, by the spring, they appeared to prefer the kinds of well-established, blue-chip companies in which the fund primarily invests.

Consumer Discretionary and Energy Holdings Supported Fund Performance

The fund’s holdings in the consumer discretionary sector proved to be particularly well positioned during the reporting period.Although lower-end consumers began to spend more cautiously in the slowing economy, higher-income consumers continued to boost sales from luxury goods purveyors, such as Christian Dior. Similarly, household goods retailer Target fared well, especially compared to competitors, such as Wal-Mart, that cater to a lower-income demographic base. Finally, restaurant chain McDonald’s saw its shares rebound due to the success of new, healthier menu items in U.S. markets and improved sales in Europe.

The energy sector also contributed positively to the fund’s performance as oil and gas prices rose amid concerns regarding the potential effects of political instability in Latin America and the Middle East on supply. Relatively low inventories and limited refinery also helped boost commodity prices and the fortunes of integrated oil companies, such as Exxon Mobil and ConocoPhillips.

4


Good results in these areas were offset by lagging returns in other market sectors. In the industrials sector, General Electric produced relatively anemic gains despite meeting earnings expectations. Investors apparently reacted to concerns regarding some of the company’s non-industrial businesses,including its financial and broadcast media subsidiaries.Results in the health care area were undermined by a modest decline in the stock price of Johnson & Johnson, which encountered heightened competitive pressures in some product areas.

New Investments Position the Fund for Slower-Growth Environment

Even if the U.S. economy weakens more than we currently anticipate, valuations of large companies remain low by historical standards, and we expect increasingly risk-averse investors to favor well-established companies that produce consistent earnings under a variety of economic conditions. In fact, we added a number of positions during the reporting period that we believe are likely to fare well in a slower-growth environment. Additions to the fund included semiconductor manufacturer Texas Instruments, whose chips used in consumer electronics are in high demand.Wireless technology pioneer QUALCOMM was added in anticipation of relief from legal issues and widespread adoption of its CDMA technology. Industrial companies United Technologies and Caterpillar are expected to benefit from ongoing global economic growth. Finally, Prudential Financial appears well positioned to deliver the insurance and investment products baby boomers need as they approach retirement.

July 16, 2007

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


UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)

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 January 1, 2007 to June 30, 2007. 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 June 30, 2007 

 
Expenses paid per $1,000   $ 4.93 
Ending value (after expenses)  $1,049.90 

 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 June 30, 2007 

 
Expenses paid per $1,000   $ 4.86 
Ending value (after expenses)  $1,019.98 
 
Expenses are equal to the fund’s annualized expense ratio of .97%; multiplied by the average account value over the 
period, multiplied by 181/365 (to reflect the one-half year period). 

6


STATEMENT OF INVESTMENTS
June 30, 2007 (Unaudited)
Common Stocks—99.4%  Shares  Value ($) 



Banks—4.5%     
Bank of America  1,550,000  75,779,500 
HSBC Holdings, ADR  796,700 a  73,113,159 
SunTrust Banks  622,400  53,364,576 
    202,257,235 
Capital Goods—8.0%     
Caterpillar  400,000  31,320,000 
Emerson Electric  1,752,800  82,031,040 
General Electric  5,378,000  205,869,840 
United Technologies  550,000  39,011,500 
    358,232,380 
Consumer Durables & Apparel—1.6%   
Christian Dior  547,800 a  71,342,059 
Consumer Services—1.9%     
Hilton Hotels  796,700  26,665,549 
McDonald’s  1,170,200  59,399,352 
    86,064,901 
Diversified Financials—10.8%     
American Express  1,444,100  88,350,038 
Ameriprise Financial  547,800  34,823,646 
Citigroup  3,515,933  180,332,204 
JPMorgan Chase & Co.  1,917,100  92,883,495 
Merrill Lynch & Co.  1,045,700  87,399,606 
    483,788,989 
Energy—21.1%     
BP, ADR  494,000  35,637,160 
Chevron  2,424,800  204,265,152 
ConocoPhillips  1,942,000  152,447,000 
Exxon Mobil  3,393,398  284,638,224 
Halliburton  1,248,200  43,062,900 
Occidental Petroleum  975,900  56,485,092 
Royal Dutch Shell, Cl. A, ADR  632,300  51,342,760 
Total, ADR  1,145,300  92,746,394 
Transocean  250,000 b  26,495,000 
    947,119,682 

The Fund 7


STATEMENT OF INVESTMENTS (Unaudited) (continued)

Common Stocks (continued)  Shares    Value ($) 




Food & Staples Retailing—5.2%       
SYSCO  746,900    24,640,231 
Wal-Mart Stores  1,352,500    65,068,775 
Walgreen  2,838,400    123,583,936 
Whole Foods Market  448,200 a    17,166,060 
      230,459,002 
Food, Beverage & Tobacco—16.4%       
Altria Group  3,500,700    245,539,098 
Anheuser-Busch Cos.  876,300    45,707,808 
Coca-Cola  2,396,600    125,366,146 
Kraft Foods, Cl. A  1,972,568    69,533,022 
Nestle, ADR  1,244,900    118,763,460 
PepsiCo  2,041,600    132,397,760 
      737,307,294 
Health Care Services—.9%       
UnitedHealth Group  746,900    38,196,466 
Household & Personal Products—4.3%     
Estee Lauder Cos., Cl. A  731,800 a    33,304,218 
Procter & Gamble  2,589,400    158,445,386 
      191,749,604 
Insurance—2.5%       
American International Group  687,100    48,117,613 
Berkshire Hathaway, Cl. A  400 b    43,790,000 
Prudential Financial  200,000    19,446,000 
      111,353,613 
Materials—1.0%       
Praxair  622,400    44,806,576 
Media—5.8%       
McGraw-Hill Cos.  2,141,200    145,772,896 
News, Cl. A  5,135,708    108,928,367 
News, Cl. B  239,000    5,482,660 
      260,183,923 

 8

Common Stocks (continued)  Shares  Value ($) 



Pharmaceuticals &     
Biotechnology—6.7%     
Abbott Laboratories  1,294,700 a  69,331,185 
Johnson & Johnson  1,892,200  116,597,364 
Merck & Co.  478,000  23,804,400 
Pfizer  1,507,200  38,539,104 
Roche Holding, ADR  597,600  53,192,376 
    301,464,429 
Retailing—2.3%     
Home Depot  1,095,100  43,092,185 
Target  946,100  60,171,960 
    103,264,145 
Semiconductors & Equipment—3.5%   
Intel  4,929,800  117,132,048 
Texas Instruments  1,000,000  37,630,000 
    154,762,048 
Software & Services—2.6%     
Automatic Data Processing  897,100  43,482,437 
Broadridge Financial Solutions  124,275  2,376,138 
Microsoft  2,390,200  70,439,194 
    116,297,769 
Technology Hardware     
& Equipment—.3%     
QUALCOMM  300,000  13,017,000 
Total Common Stocks     
(cost $2,608,560,729)    4,451,667,115 



 
Other Investment—.3%     



Registered Investment Company;     
Dreyfus Institutional Preferred     
Plus Money Market Fund     
(cost $12,719,000)  12,719,000 c  12,719,000 

The Fund 9


STATEMENT OF INVESTMENTS (Unaudited) (continued)

Investment of Cash Collateral     
for Securities Loaned—3.2%�� Shares  Value ($) 



Registered Investment Company;     
Dreyfus Institutional Cash     
Advantage Fund     
(cost $142,043,260)  142,043,260 c  142,043,260 



 
Total Investments (cost $2,763,322,989)  102.9%  4,606,429,375 
 
Liabilities, Less Cash and Receivables  (2.9%)  (131,799,775) 
 
Net Assets  100.0%  4,474,629,600 
 
ADR—American Depository Receipts     
a All or a portion of these securities are on loan. At June 30, 2007, the total market value of the fund’s securities on 
loan is $180,405,901 and the total market value of the collateral held by the fund is $185,275,412, consisting of 
cash collateral of $142,043,260 and U.S. Government and agency securities valued at $43,232,152. 
b Non-income producing security.     
c Investment in affiliated money market mutual fund.     

Portfolio Summary (Unaudited)      
 
  Value (%)    Value (%) 




Energy  21.1  Banks  4.5 
Food, Beverage & Tobacco  16.4  Household & Personal Products  4.3 
Diversified Financials  10.8  Semiconductors & Equipment  3.5 
Capital Goods  8.0  Money Market Investments  3.5 
Pharmaceuticals & Biotechnology  6.7  Other  13.1 
Media  5.8     
Food & Staples Retailing  5.2    102.9 
 
Based on net assets.       
See notes to financial statements.       

10


STATEMENT OF ASSETS AND LIABILITIES
June 30, 2007 (Unaudited)
  Cost  Value 



Assets ($):     
Investments in securities—See Statement     
of Investments (including securities on loan,   
valued at $180,405,901)—Note 1(c) :     
Unaffiliated issuers  2,608,560,729  4,451,667,115 
Affiliated issuers  154,762,260  154,762,260 
Cash    2,025,459 
Dividends and interest receivable    6,604,982 
Receivable for investment securities sold    4,515,416 
Receivable for shares of Common Stock subscribed  3,867,181 
Prepaid expenses    101,705 
    4,623,544,118 



Liabilities ($):     
Due to The Dreyfus Corporation and affiliates—Note 3(b)  2,290,064 
Due to Fayez Sarofim & Co.    1,002,985 
Liability for Securities on Loan—Note 1(c)    142,043,260 
Payable for shares of Common Stock redeemed  2,366,669 
Interest payable—Note 2    30,950 
Accrued expenses    1,180,590 
    148,914,518 



Net Assets ($)    4,474,629,600 



Composition of Net Assets ($):     
Paid-in capital    2,549,228,598 
Accumulated undistributed investment income—net  30,670,912 
Accumulated net realized gain (loss) on investments  51,623,704 
Accumulated net unrealized appreciation     
(depreciation) on investments    1,843,106,386 



Net Assets ($)    4,474,629,600 



Shares Outstanding     
(300 million shares of $.001 par value Common Stock authorized)  97,387,065 
Net Asset Value, offering and redemption price per share ($)  45.95 

See notes to financial statements.

The Fund 11


 STATEMENT OF OPERATIONS
Six Months Ended June 30, 2007 (Unaudited)
Investment Income ($):   
Income:   
Cash dividends (net of $1,015,732 foreign taxes withheld at source):   
Unaffiliated issuers  50,570,894 
Affiliated issuers  336,617 
Income from securities lending  364,509 
Interest  127,572 
Total Income  51,399,592 
Expenses:   
Investment advisory fee—Note 3(a)  5,980,588 
Sub-Investment advisory fees—Note 3(a)  5,809,506 
Shareholder servicing costs—Note 3(b)  7,923,925 
Prospectus and shareholders’ reports  451,274 
Interest expense—Note 2  172,372 
Custodian fees—Note 3(b)  114,421 
Directors’ fees and expenses—Note 3(c)  89,548 
Registration fees  65,175 
Professional fees  33,814 
Loan commitment fees—Note 2  7,272 
Miscellaneous  71,173 
Total Expenses  20,719,068 
Investment Income-Net  30,680,524 


Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments and foreign currency transactions  52,836,897 
Net unrealized appreciation (depreciation) on investments  125,572,309 
Net Realized and Unrealized Gain (Loss) on Investments  178,409,206 
Net Increase in Net Assets Resulting from Operations  209,089,730 

See notes to financial statements.

12


STATEMENT OF CHANGES IN NET ASSETS

  Six Months Ended   
  June 30, 2007  Year Ended 
  (Unaudited)  December 31, 2006 



Operations ($):     
Investment income—net  30,680,524  61,423,751 
Net realized gain (loss) on investments  52,836,897  167,064,768 
Net unrealized appreciation     
(depreciation) on investments  125,572,309  412,416,396 
Net Increase (Decrease) in Net Assets     
Resulting from Operations  209,089,730  640,904,915 



Dividends to Shareholders from ($):     
Investment income—net  (2,264,830)  (59,804,759) 
Net realized gain on investments  —  (172,821,722) 
Total Dividends  (2,264,830)  (232,626,481) 



Capital Stock Transactions ($):     
Net proceeds from shares sold  551,700,328  929,293,623 
Dividends reinvested  2,020,729  205,352,133 
Cost of shares redeemed  (668,114,605)  (1,623,177,782) 
Increase (Decrease) in Net Assets     
from Capital Stock Transactions  (114,393,548)  (488,532,026) 
Total Increase (Decrease) in Net Assets  92,431,352  (80,253,592) 



Net Assets ($):     
Beginning of Period  4,382,198,248  4,462,451,840 
End of Period  4,474,629,600  4,382,198,248 
Undistributed investment income—net  30,670,912  2,255,218 



Capital Share Transactions (Shares):     
Shares sold  12,400,974  22,234,797 
Shares issued for dividends reinvested  46,623  4,702,886 
Shares redeemed  (15,146,797)  (39,124,827) 
Net Increase (Decrease) in Shares Outstanding  (2,699,200)  (12,187,144) 

See notes to financial statements.

The Fund 13


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 dis-tributions.These figures have been derived from the portfolio’s financial statements.

                                                              Six Months Ended           
                                                              June 30, 2007    Year Ended December 31,   



                                                              (Unaudited)  2006  2005  2004  2003  2002 







Per Share Data ($):             
Net asset value,             
beginning of period  43.78  39.75  38.69  37.14  31.20  38.02 
Investment Operations:             
Investment income—net a  .31  .61  .53  .52  .42  .31 
Net realized and unrealized             
gain (loss) on investments  1.88  5.83  1.07  1.55  5.93  (6.81) 
Total from Investment             
Operations  2.19  6.44  1.60  2.07  6.35  (6.50) 
Distributions:             
Dividends from investment             
income—net  (.02)  (.62)  (.54)  (.52)  (.41)  (.30) 
Dividends from net realized             
gain on investments  —  (1.79)  —  —  —  (.02) 
Total Distributions  (.02)  (2.41)  (.54)  (.52)  (.41)  (.32) 
Net asset value,             
end of period  45.95  43.78  39.75  38.69  37.14  31.20 







Total Return (%)  4.99b  16.26  4.14  5.57  20.39  (17.14) 







Ratios/Supplemental Data (%):           
Ratio of total expenses             
to average net assets  .48b  .95  .92  .95  .96  .97 
Ratio of net expenses             
to average net assets  .48b  .95  .92  .95  .96  .97 
Ratio of net investment             
income to             
average net assets  .71b  1.45  1.35  1.40  1.28  .90 
Portfolio Turnover Rate  4.29b  1.00  6.81  8.23  4.73  1.77 







Net Assets, end of period             
($ x 1000) 4,474,630  4,382,198  4,462,452  4,420,163  3,982,040  3,128,482 
 
a  Based on average shares outstanding at each month end.         
b  Not annualized.             
See notes to financial statements.             

14


NOTES TO FINANCIAL STATEMENTS ( U n a u d i t e d )

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 (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. Dreyfus was a wholly-owned subsidiary of Mellon Financial Corporation (“Mellon Financial”). Fayez Sarofim & Co. (“Sarofim”) serves as the fund’s sub-investment adviser. During the reporting period, Dreyfus Service Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, served as the distributor of the fund’s shares, which are sold to the public without a sales charge.Effective June 30,2007,the Distributor became known as MBSC Securities Corporation.

On July 1, 2007, Mellon Financial and The Bank of New York Company, Inc. merged, forming The Bank of New York Mellon Corporation. As part of this transaction, Dreyfus became a wholly-owned subsidiary of The Bank of New York Mellon Corporation.

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

The Fund 15


NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

transactions, are valued at the average of the most recent bid and asked prices. Bid price is used when no asked price is available. Registered open-end investment companies that are not traded on an exchange 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 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.

The Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.

(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

16


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.

(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, if any, 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. It is the fund’s policy, that 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 is maintained at all times. Cash collateral is invested in certain money market mutual funds managed by the Manager.The fund is 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

The Fund 17


NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

fully collateralized, the fund bears 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 realized 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.

The FASB released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year.Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006. Management believes that the application of this standard does not have a material impact on the financial statements of the fund.

18


The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2006 were as follows: ordinary income $60,779,172 and long-term capital gains $171,847,309.The tax character of current year distributions will be determined at the end of the current fiscal year.

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

The average daily amount of borrowings outstanding under the line of credit during the period ended June 30, 2007 was approximately $6,108,700 with a related weighted average annualized interest rate of 5.69% .

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%  .11% 
$25 million up to $75 million  37%  .18% 
$75 million up to $200 million  33%  .22% 
$200 million up to $300 million  29%  .26% 
In excess of $300 million  275%  .275% 

The Fund 19


NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

(b) Under the Shareholder Services Plan, the fund pays the Distributor for the provision of certain services at the annual rate of .25% 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 June 30, 2007, the fund was charged $5,359,134 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 June 30, 2007, the fund was charged $863,633 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 June 30, 2007, the fund was charged $114,421 pursuant to the custody agreement.

During the period ended June 30, 2007, the fund was charged $2,044 for services performed by the Chief Compliance Officer.

The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $1,031,341, shareholder services plan fees $924,694, custodian fees $79,492, chief compliance officer fees $1,205 and transfer agency per account fees $253,332.

(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.

20


NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2007, amounted to $185,215,470 and $307,979,362, respectively.

At June 30,2007,the cost of investments for federal income tax purposes was $1,843,106,386, consisting of $1,857,294,348 gross unrealized appreciation and $14,187,962 gross unrealized depreciation.

At June 30,2007,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).

The Fund 21


For More Information

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

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 1-202-551-8090.

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, 2007, is available 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.

© 2007 MBSC Securities Corporation 


Item 2.  Code of Ethics. 
  Not applicable. 
Item 3.  Audit Committee Financial Expert. 
  Not applicable. 
Item 4.  Principal Accountant Fees and Services. 
  Not applicable. 
Item 5.  Audit Committee of Listed Registrants. 
  Not applicable. 
Item 6.  Schedule of Investments. 
  Not applicable. 
Item 7.  Disclosure of Proxy Voting Policies and Procedures for Closed-End Management 
  Investment Companies. 
  Not applicable. 
Item 8.  Portfolio Managers of Closed-End Management Investment Companies. 
  Not applicable. 
Item 9.  Purchases of Equity Securities by Closed-End Management Investment Companies and 
  Affiliated Purchasers. 
  Not applicable. [CLOSED END FUNDS ONLY] 
Item 10.  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 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 East, 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 11. 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 12. Exhibits.

(a)(1)  Not applicable. 
(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. 


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/ J. David Officer 
  J. David Officer
  President 
 
Date:  August 27, 2007 

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/ J. David Officer 
  J. David Officer 
  President
 
Date:  August 27, 2007 
 
By:  /s/ James Windels 
  James Windels 
  Treasurer
 
Date:  August 27, 2007 


EXHIBIT INDEX

(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)